John McCain’s health care plan would make it possible for many millions of Americans who lack insurance to get coverage. It would give people more control over their health policies, so that they no longer had to worry about their employers’ coverage decisions. Putting patients in financial control would reduce prices and inefficiencies, thus increasing wages.
The key feature of McCain’s plan is to end the tax penalty for individually purchased insurance. Instead of getting a tax exemption for employer-based coverage, people would get a tax credit good for either individually-purchased or job-based coverage. That tax credit would not rise with the price of the coverage, either, so there would be a new incentive to shop around.
The sharpest criticism of the plan, voiced especially by John Edwards’s wife Elizabeth, is that it would leave people with “pre-existing conditions” in the cold. McCain would not require insurers to provide cheap coverage to these people on the individual market. If the change in tax policy led companies to drop their coverage, some of these people could even find themselves worse off than before McCain’s plan.
It is a serious problem, but its scope should not be exaggerated. In the long run, McCain’s plan is actually better than the status quo for people suffering from high-cost conditions. In an employer-based system, a person with a severe illness is in trouble any time he switches jobs or his employer switches plans. (Or he loses his job, or the family member with coverage switches jobs, etc.) Ending the tax subsidy for employer-based coverage would make it easier for people to buy cheap, renewable policies that would protect them for the long term — so long as they bought it before they got cancer, HIV, or other expensive diseases.
The McCain tax credit of $5,000 is large enough to help even some people with pre-existing conditions, and it would be on top of wage increases they would get as employers ended their health plans. McCain understands that additional subsidies will probably be necessary for these people. We will reserve judgment on that question until he develops a more detailed proposal.
What does not make sense is to regulate the insurance market so that these subsidies for a needy subset of the population are hidden throughout a system that is therefore rendered expensive for everyone. That is the solution of Clinton, Obama, and both of the Edwardses, and McCain is right to reject it.