With the specter of a serious recession looming, many Americans fear unemployment and loss of health coverage. Economists anticipate that the unemployment rate will jump from 6 percent up to 8 or 9 percent. Because most working people are entirely dependent upon their employer for health benefits, thousands will likely be forced onto state Medicaid rolls after they lose their jobs. Many will be grateful for any help with medical bills, but Medicaid is a poor way to take care of their needs.
With the specter of a serious recession looming, many Americans fear unemployment and loss of health coverage. Economists anticipate that the unemployment rate will jump from 6 percent up to 8 or 9 percent. Because most working people are entirely dependent on their employer for health benefits, thousands will likely be forced onto state Medicaid rolls after they lose their jobs. Many will be grateful for any help with medical bills, but Medicaid is a poor way to take care of their needs.
It pays providers much less than private health insurance does, so doctors and hospitals are unable to cover the costs of treating patients dependent on the state. Access to care is often poor. A better solution lies at the heart of John McCain’s health proposal.
Federal law gives corporations a tax break when they buy health insurance for their employees. The workers themselves get no such tax break, which leaves them with little choice of health plan. After loss of a job, it’s possible to keep the employer’s plan for up to 18 months, courtesy of the Consolidated Omnibus Budget Reconciliation Act or COBRA. This COBRA, however, bites workers in two ways.
One, they have to pay out of pocket, with after-tax dollars. Two, the premium is certain to stun them with sticker-shock. Nationally, the average employer-based family plan costs about $12,000 annually, of which employees only pay $3,000. Because the employer pays the rest, it’s invisible to the workers, and we’re not prepared to pay the full amount when we get the first premium under COBRA. As a result, more and more Americans are forced into government dependency for health care.
Barack Obama’s plan does not alter the unequal tax treatment. McCain’s reform, on the other hand, solves the inequality problem by giving individual American workers, not corporations, a tax break for health benefits.
Instead of employers spending $9,000 a year on health benefits that they choose, they’ll give that money to workers. That doesn’t mean that employers won’t offer health benefits if their workers decide that they like things just as they are. It just means that workers and firms both have more flexibility.
This includes the option of keeping the same health plan as one moves from job to job, and from state to state. This addresses one of the major problems of American health care: fragmentation.
The average person born between 1957 and 1964 held 11 jobs between the ages of 18 to 42. Two-thirds of the jobs they had between ages 38 and 42 lasted less than five years, and almost one third lasted less than a year. This has a significant effect on the number of uninsured Americans.
A full 90 million were uninsured at some point in 2006 and 2007. Almost half, however, were uninsured for fewer than eight months. In 2002, one fifth of uninsured workers were “ineligible” for their employers’ plans, but 42 percent of those had just not completed their waiting period for coverage.
McCain’s reform brings social justice to how we pay for health benefits. Barack Obama, who aims to extend government control of health care, misleadingly charges that McCain wants to tax these benefits. In fact, McCain’s $5,000 tax credit will leave working-class Americans with more money to buy health insurance.
A 20-percent marginal tax rate takes $12,000 down to $9,600. But adding the tax credit gives you $14,600 to spend on health insurance. Plus, workers will know exactly how much their policy costs, because their employer won’t be hiding most of it.
Obama also misleads Americans by claiming that McCain’s plan will abandon people with pre-existing conditions. In fact, job-based health insurance abandons these people, because once they’ve fallen through the cracks in our fragmented system, they find it harder to get health insurance. It would be better for them to keep the same health plan they had before they got sick.
A sick economy does not have to result in more sick Americans. McCain’s health reform will provide an important safety net for the tough times to come.
John R. Graham is director of Health Care Studies at the California-based Pacific Research Institute.