John McCain has finally released a healthcare plan. But is it any good?

First, before getting into the details, let’s look at what McCain is trying to achieve. He wants a system that does not rely on employer controlled health insurance but allows each individual to choose a fully portable plan that fits their specific needs rather than having to carry a plan chosen by their employers and tied to their employment. Additionally, McCain wants insurance payments to be based on quality of care rather than on quantity of procedures performed. And, lastly, he wants a government subsidized safety net for the sickest Americans.

I find McCain’s goals to be excellent. I have long believed that our health insurance industry needs to be divorced from employer-controlled programs in order to allow more fluidity in the modern workforce and to allow individuals the freedom to purchase coverage tailored to their actual needs. This, in my mind, is a much better vision than one which believes the average citizen is either too irresponsible or too ignorant to make their own choices and needs employers and government agencies to dictate the kinds of coverage they should have.

So, how does McCain intend to achieve his vision? Well, unfortunately, it’s based on a leap of faith, even though the particulars themselves are straightforward:

* Eliminate the employer tax break on providing health insurance. Provide a tax credit of $2,500 to individuals and $5,000 to families who purchase their own coverage.

* Work with states to create Guaranteed Access Plans to cover the sickest Americans unable to afford and/or secure health coverage on the open market.

* Implement a grab-bag of other initiatives including expanding Health Savings Accounts, re-importing pharmaceuticals, increasing federal funding for research into chronic disease, allowing walk-in clinics in retail outlets (a horrible idea, btw, but that’s another post), streamlining operations and billing, reforming malpractice torts and a few other minor tweaks.

The magic bullet here is the tax credit coupled with ending the employer tax break. The desired effect is to push more individuals into the open market. Insurers are expected to react by providing far more affordable plans because, instead of just competing for large accounts, insurers will be competing for one consumer at a time. This in turn will spur an innovation in how insurance payments are made. Because the patients will have more choice and thus more power, health insurers and providers will have the incentive to base payments on quality of care (which is what the patient is actually buying) rather than quantity of procedures performed (which has created the current problem of providers and insurers playing cat-and-mouse games with billings and payments).

In short, McCain’s plan expects the free-market to be at its best: more competition equaling better products at a lower price.

From a purely market perspective, McCain’s reasoning is sound. However, we’re not dealing with luxury goods here. We’re dealing with our health. What if the market does not respond as McCain hopes and instead of having a freer more affordable system we end up with even more people who, despite the new tax credit, can’t find affordable insurance? The GAP programs will be state-by-state and may or may not be able to provide an adequate safety net.

McCain’s plan is audacious and will scare the bejeezus out of anyone who either doesn’t trust market forces or doesn’t trust average Americans to make informed decisions on healthcare. Hillary Clinton has already raised the specter of hordes of uninsured whose employers stopped offering insurance because of McCain’s plan.

However, McCain’s plan has the advantage of creating a system of choice rather than one of mandate. Plus, a truly open, competitive insurance market would ultimately create more advantages for more people than would any system conceived by a handful of government experts and insurance executives. The problem lies in figuring out how we transition to McCain’s visionary world of healthcare without accidentally creating those hordes of uninsured. How do we make sure the often moribund insurance industry actually develops the kinds of diverse and affordable plans necessary to cover the vast majority of Americans? How do we keep these companies from just sitting back and counting on the government to take care of those who can’t afford the current collection of highly limited and often prohibitively expensive plans available to individuals?

As a vision, McCain’s plan gets an A. As a practical policy roadmap, it’s a grade of Incomplete. McCain is asking too much if he thinks most of us are willing to take it on faith that his tax code changes will inspire a vastly improved system. We need more details as to how we will actually transition from our current byzantine system to one of greater choice and more sensible care. McCain’s advantage is that he’s on the road of personal choice while the Democrats are on the road of government mandates. But he’s still lagging way behind on providing specifics. Until he shores up this plan, what he’s proposing will seem too risky for many Americans.

  • mw

    Good analysis. I have not looked at his plan in detail (or for that matter Clinton’s or Obama’s). I just think that whatever actually ever makes it through Congress will be so radically different than any of these plans, I cannot get myself motivated to spend the time on them.

    One question – I am a free market proponent, but it seems to me that the biggest single problem with any insurance “market” based solution, is that insurance companies do not want to provide coverage at any cost for people with pre-existing conditions. The reason is simple, they know they are going to lose money on those clients, so they do not want to cover them. I know many people, who, if coverage was not mandated by the government, post employee based care, or post COBRA, could not get any coverage from an insurance company at all. How does the McCain plan propose to address this group of people?

  • djthedj

    Why would anyone believe that McCain or any other republican would actually take the tax breaks away from business? He’ll just add billions to the debt like every lying republican has before him. Man, how many times do they have to do this before you blithering sheep stop believing them?

  • Alan Stewart Carl

    mw —

    Well, that’s part of the leap of faith. The idea is costs will decrease due to greater focus on prevention (and effeciencies he hopes to spur). The problem, of course, is that costs are only partially determined by insurers. Providers still have a role to play and some proceedures are ghastly expensive.

    McCain wants to create the GAP initiatives in all 50 states to catch those who are very ill, but he’s relying on each state to come up with their own system (good for innovation, bad for residents of poor states).

    This is my big problem with the plan. There’s clearly a big hole between the system we have and the system he wants — but he doesn’t explain what the transition will look like or how we can ensure things will progress as planned and not just end up more screwed up.

  • Pdx632


    I would be interested to hear, even briefly, why you dislike “retail” clinics. I have experience with them as a patient and have found them to be wonderful. I suffer from chronic ear infections and used to have to go to an urgent care clinic. They charged $135 for a 60 second exam. The clinic in my grocery store only charges $35. The care seems to be equivalent and they are open during hours that fit with workers.

    Look forward to your reply.

  • Jim S

    Insurance companies are for-profit publicly held corporations. As such not only must they make a profit but they must make enough of a profit to make Wall Street investors happy. This also applies to the large hospital chains, companies that make medical devices and pharmaceutical companies. No matter what McCain proposes if it depends on these players in the system to rein in what they are charging their respective customers it will fail miserably. In addition he proposes a $5000 tax credit for individuals to be able to afford his hypothetical portable insurance policies. About ten years ago when I was paying for my own insurance a comprehensive policy equivalent to what I have gotten through employers cost more than that for a healthy married couple under 40. This is after 10 years of double digit percentage increases every single year even when the rate of inflation for actual medical costs was well under that. Every word McCain says about how his plan will do this and that and the other thing is unworkable.

  • Americaneocon

    “However, McCain’s plan has the advantage of creating a system of choice rather than one of mandate.”

    More to that effect here:

  • Our Paul

    Start with data that is accepted and beyond dispute: The current United States Health Care system produces poorer health care outcomes, is more expensive, and less satisfying when compared with all other industrialized countries. Period, no argument, the data is irrefutable. Individual countries differ in their approaches, but all except the United States have at their central core government sponsored universal health care coverage.

    We have one form of Universal Health care, but it is only available to folks over the of sixty five: Medicare. Once again, when selective Health Care outcomes are investigated, the health status of individual improves after the age of sixty five.

    Now then, if your interest is quality health care with the best possible outcomes and increase satisfaction with the health care system, you have to identify the strategies that work, or suffer the consequences of tinkering around the edges.

    But, you have to simplify to find the root of the problem. Why do we pay two times more for medication that any other country in the world? Senator McCain’s solution, re-importation, is just shipping jobs over seas. This time it is the pharmacists.

  • mw

    OFF TOPIC – Alan/Justin – How do you break up a long post with the “Read the rest of this entry” link – as you do with this post. I can’t figure it out.

  • Justin Gardner

    You just hit the More button and it puts a single tag in there. Everything after that is below the fold.