Back in December I wrote down some details of my free market healthcare reform plan. It appears that McCain has endorsed aspects of my plan. John Goodman (advisor to McCain) in today’s WSJ:
Under the McCain plan, no longer would employers be able to buy insurance with pretax dollars. These payments would be taxable to the employee, just like wages. However, every individual would get a $2,500 credit (and every family would get $5,000) to be applied dollar-for-dollar against taxes owed.
The McCain plan does not raise taxes, nor does it lower them. Instead, it takes the existing system of tax subsidies and treats everyone alike, regardless of income or job status. All health insurance would be sold on a level playing field under the tax law, regardless of how it is purchased.
The impact would be enormous. For the first time, low- and moderate-income families would get just as much tax relief as the very rich when they purchase health insurance. People who must purchase their own insurance would get just as much tax relief as those who obtain it through an employer. Whereas Mr. Obama would continue the current practice of giving the vast bulk of federal help to the rich (through tax subsidies) and the poor (through spending programs), the McCain tax credit would give the most new tax relief to the middle class.
The McCain plan would also encourage all Americans to control costs. The tax credit would subsidize the core insurance that everyone should have. It would not subsidize bells and whistles (marriage counseling, acupuncture, etc.) as the current system does. Since employees and their employers will be paying for additional coverage with aftertax dollars, everyone will have an incentive to compare the value of extra health benefits to the value of other things money can buy. When they eliminate health-care waste, they would get to keep every dollar they save.
The McCain tax credit would be refundable. People could apply $2,500 per person or $5,000 per family to the purchase of health insurance, even if they do not owe any income taxes. Families would not have to wait until April 15 the following year to get their credit. They could obtain the subsidy at the time the insurance is purchased.
The credit would also be transferable. Insurance companies and other intermediaries would be able to help families obtain their credit and apply it directly to health-insurance premiums.
The McCain health plan would allow people to buy insurance across state lines — thus creating a competitive, national market for health insurance. It would provide additional federal money for people who have been denied coverage because of a pre-existing condition, making it easier for people who have lost their insurance to obtain new coverage. It would also encourage Medicare to become a smarter, more efficient buyer of care.
The McCain plan will not solve all our health-care problems. But it has a far better chance of positively reforming the system than any other plan that has been proposed in this campaign season.