Stanley Feld M.D.,FACP,MACE
Last week I listened to a speaker defending John McCain’s health plan. He defended the $5000 tax credit for a family of four. Most people know what a tax credit means but would be puzzled by its direct effect on healthcare. The tax credit means one can deduct $5000 dollars from one’s taxable income.
If the average insurance policy for a family of four is $12,000 a year, how does the tax credit translate into an effective healthcare reform? My answer is very poorly! The real message is abstract and can also be a trick to help employers abandon providing healthcare insurance for their employees.
The claim is the tax credit levels the playing field for the self employed and the employed whose employers provide healthcare insurance for them with pretax dollars. The employer pays for the employee’s healthcare insurance. The employee does not pay income tax on the money spent for healthcare insurance and the employer is able to deduct the premium cost from gross revenue. As healthcare premiums have increased rapidly many employers can not afford the benefit and either stop providing healthcare insurance or healthcare insurance that provides fewer benefits.
Presently if someone was self employed he would buy healthcare insurance with post tax dollars. Therefore, a healthcare premium of $12,000 year for healthcare insurance paid for with post tax dollars would require that he earn $17,142.85 in pre-tax dollars. (12000= 1x-.3x x =12000/.7= $5142.85) John McCain’s tax credit makes up the $5,000 difference. The consumer would have to pay the $12,000 premium with $7,000 post tax dollars or $10,000 pre tax dollars The fallacy in McCain’s tax credit plan is that consumers might not be able to afford the $12,000 per year to allocate that much money for healthcare insurance. The plan would be an advantage to employers and not employees. It would get employers out of providing healthcare insurance for their employees. Additionally, it would not level the pre tax and post tax difference that exists today.
Total pre-tax payment of the healthcare insurance dollar is only one step in the repair of the healthcare system. It is not a healthcare plan. Consumers must have control of the healthcare dollar not the healthcare insurance companies. My ideal medical savings account, real price transparency, support for chronic disease management,malpractice reform, patient and physician incentives to prevent chronic disease, and instant physician payment to eliminate non value added administrative cost must be added simultaneously for healthcare reform to make any progress. A consumer driven healthcare system is the only way to create a competitive marketplace.
John McCain’s plan opens the door for employers to abandon this important employee benefit without adding any value or efficiency to the healthcare system. It also eliminates the purchasing power of employers in negotiating healthcare insurance.
If Mr. McCain becomes president he might sneak in as a stand alone item of healthcare reform (an important element of the total package of health care reform), a law that will result in a disadvantage to employees covered with insurance by their employer. It will create an advantage the employer and the healthcare insurance industry.
A lot of smart people are thinking about the healthcare problem. It is time to think about it in terms of the constitution. We are a nation that whose government is chosen by the people for the people and not isolated vested interests. In the season that candidate are begging us for our vote we need to demand our needs be addressed.