What the Candidates Aren’t Telling You About Their Health Care Plans

If you have employer-provided health insurance, McCain will tax you; but most people will get it all back and then some through a new tax credit. If you’re working and uninsured, Obama will tax you and he won’t give it back. Although McCain attacks Obama’s tax cuts for people who don’t owe any taxes as “welfare,” he is promising even more of this type of welfare than Obama is. Although Obama claims he only wants to raise taxes on the rich, his pay-or-play tax on people who lack health insurance will be three times the levy he threatens to impose on the investor class. Neither plan is paid for. Neither will create universal coverage. And you won’t find any of this at either candidate’s Web site.

What follows is material I have gleaned from statements the candidates’ representatives have made to the media and from private communications they have apparently made to the economists who have modeled their plans.

Obama Secret: If your children are uninsured, he will tax you. Obama will require parents to insure their children. And there is only one way that anyone anywhere has discovered to make a mandate work: people who don’t comply must pay a fine. (Jail terms, stockades, cattle prods, etc. have all been ruled out.) Parents will have to (a) pay a tax, (b) pay insurance premiums for their children or (c) enroll them in free government insurance plans. Options (a) and (b) will lower the family’s discretionary income.

Obama Secret: If you are working and uninsured, Obama will tax you. Obama will impose a pay-or-play tax on employers of uninsured adults, similar to the tax on parents of uninsured children. The tax is estimated at 6% of wages (Lewin Group) or 7% (University of Minnesota economist Roger Feldman and his colleagues). Although employers will pay the tax or write the premium checks, the burden will fall on the employee. Economists are almost unanimous on the incidence: Payroll taxes and fringe benefits are paid at the expense of cash wages. Feldman estimates the total size of this pay-or-play tax will be $179 billion — about three times the size of the tax Obama once threatened to impose on wealthy investors. Note: this is from a candidate who repeatedly says only the rich will face higher taxes.

Obama Secret: He has taken back almost all of the threat to fund health care reform by rescinding the Bush tax cuts for the rich. Obama’s Web site continues to say that he will pay for health reform by repealing Bush’s tax cuts for people earning $250,000 or more. Yet in an August editorial in the Wall Street Journal, Obama economic advisors promise that the new tax rate for capital gains and dividends will not exceed 20%.

Obama Secret: If you don’t get health insurance from an employer, you will likely be in a plan paying cut-rate fees to providers. In speeches and commercials, Obama promises that people who get insurance outside of their place of work will have the same insurance available to Congress. What he doesn’t say: these plans will pay much lower provider fees than federal employee health plans pay. This means that enrollees in the new plans will have second-class access. Lewin assumes these plans will pay 25% below market rates. One simulation has the plans paying 40% under market. In addition, Lewin estimates that 17 million people will be newly added to Medicaid — where they will become the least desirable patients in the eyes of providers, because Medicaid pays the lowest rates of all.

Obama Secret: You are more likely to lose your employer coverage under Obama than under McCain. Lewin estimates that 9.4 million people would lose their employer-based coverage under McCain, but the number would be 13.9 million under Obama. In other words, for every two people who lose employer coverage under McCain, three people would lose coverage under Obama! Feldman estimates that employer-based coverage would actually increase under McCain, while a whopping 60 million would lose their employer plans under Obama.

McCain Secret: Your employer-provided health benefits will be taxed. The Obama commercial is correct. McCain will tax your health insurance and you won’t find this at his Web site. What the Obama commercial deceptively omits: McCain will give you an offsetting tax credit. McCain says almost everyone would gain from the change in tax regimes. But if the reform is revenue neutral, everybody can’t gain. (See below.)

McCain Secret: Everyone will get a tax credit that is refundable — payable even if you owe no taxes. McCain has criticized Obama’s “tax cuts” for people who owe no taxes as “welfare.” But his own refundable tax credit ($2,500 for individuals and $5,000 for families) probably contains more such “welfare” than Obama’s tax proposals.

McCain and Obama Secret: These plans are nowhere near paid for. In fact, they don’t even come close. Lewin estimates the ten-year cost at $2.1 trillion for McCain and $1.1 trillion for Obama. But this doesn’t count Obama’s pay-or-play tax as a cost to the federal government, even though it is a cost to taxpayers. Feldman puts the cost in excess of $2 trillion for McCain and $6 trillion for Obama.

Note: McCain’s plan — patterned after Sen. Tom Coburn’s (R-OK) bill — was originally designed to be revenue neutral. Had it followed the Coburn bill, it still would be. [link] But McCain has since decided to keep the payroll tax exclusion for employer-provided health insurance (at a cost of more than $1 trillion over ten years!), along with other current and new tax and spending subsidies.

McCain and Obama Secret: Neither plan would produce universal coverage. Lewin estimates that the number of uninsured would drop by 21.1 million under McCain and 26.6 million under Obama. Feldman estimates a 27.5 million drop under McCain, compared to a 25.5 million drop under Obama. Both studies are sensitive to assumptions, but it’s probably fair to say that either plan would cut the number of uninsured in half. However, Lewin concludes that the impact of both plans maxes out between 2011 and 2012; and beyond that, the number of uninsured will continuously rise! The reason: neither plan has a realistic method of controlling costs.

Comments (10)

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  1. Joe S. says:

    The best kept secret is that the national news media is not telling us what we need to know about these plans.

  2. Ken says:

    Sounds like McCain should have stuck with the Coburn plan. Then Sen. Coburn and others could have explained it. As it stands, nobody is explaining McCain’s health plan.

  3. Vicki says:

    It appears that they are both promising the moon and neither has any idea how to pay for it.

    How can I find out more about the Coburn plan?

  4. Roger Beauchamp says:

    One of the most frank and honest assessments of the two proposals I have read!

  5. Richard Walker says:

    Robert Carroll has an op-ed in the Wall Street Journal today on the McCain tax credit.

  6. Gail Wilensky says:

    Well done piece.

  7. John Goodman says:

    Turns out, Obama’s advisors favored the McCain approach before they became Obama advisors. See Saturday’s Wall Street Journal editorial.

    At the National Journal blog, the question this week was whether we need to reform our system of tax subsidies for private health insurance. The postings [here] are almost all from the right. Aside from some hemming and hawing here and there, the left has been completely silenced on this question.

    Too bad.

  8. Devon Herrick says:

    To learn more about Sen. Coburn’s health care reform proposal, see

  9. Ron Masters says:

    The most impressive issue is the conclusion that neither candidates’ plan as presently proposed approaches universal coverage. Regardless the purchasing mechanism, the tax credit is obviously superior, we are but half way around the track. Additionally, a insurance companies will be required to accept many who previously were unacceptable due to health issues, a bitter pill that has yet to be sold to the industry. Assuming the insurance industry takes that “pill” then we would see an increase in covered citizens, but long term what should be the realistic expectation of the medical community to control costs?

  10. […] John Goodman takes both plans to task (my thanks to Ron Masters for bringing this one to my attention). […]