McCain's Proposal It Will Increase Taxes, Cause Some Employers To Drop Worker Health Plans

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Democratic presidential nominee Sen. Barack Obama (Ill.) on Friday released a new advertisement about health care that includes clips from the recent vice presidential debate between Democratic vice presidential nominee Sen. Joseph Biden (Del.) and Republican vice presidential nominee Alaska Gov. Sarah Palin, the New York Times reports (Nagourney/Zeleny, New York Times, 10/5).

The ad begins with the text, "What she said," followed by a clip from the debate in which Palin says that Republican presidential nominee Sen. John McCain (Ariz.) is "proposing a $5,000 tax credit for families so that they can get out there and they can purchase their own health care coverage." The ad continues with the text, "What she didn't say," followed by a second clip from the debate in which Biden says, "Do you know how John McCain pays for his $5,000 tax credit? He taxes as income every one of you out there, every one of you listening who has a health care plan through your employer." The ad continues with the text, "Taxing health benefits for the first time ever," followed by a third clip from the debate in which Biden says, "Taxing your health care benefit. I call that the 'ultimate Bridge to Nowhere." The ad concludes with the text, "The McCain health tax: What they can't explain."

The McCain campaign criticized the ad as "dishonest and false" and called the comments from Biden "blatant falsehood." McCain spokesperson Tucker Bounds in a statement said, "It's a lie for the Obama campaign to say John McCain's health care plan taxes health care, when the McCain plan clearly provides the equivalent tax break for every American" (Rhee, "Political Intelligence," Boston Globe, 10/3).

Obama Discusses Health Care at Event in Virginia

Obama on Saturday during a campaign event in Newport News, Va., criticized the McCain health care proposal, which he said would prompt employers to drop health insurance for employees and leave millions of U.S. residents without coverage (New York Times, 10/5). According to Obama, the proposal is "so radical, so out of touch with what you're facing and so out of line with our basic values" (Katz, New York Daily News, 10/5).

The proposal amounts to "pulling an old Washington bait-and-switch," Obama said, adding, "He gives you a tax credit with one hand -- but he raises your taxes with the other." He said that, although the proposal would provide refundable tax credits of as much as $5,000 for families to purchase health insurance, family coverage on average costs $12,680 annually, according to the annual employer survey conducted by the Kaiser Family Foundation and Health Research and Educational Trust (Reston/Mehta, Los Angeles Times, 10/5). Obama said that "like those ads for prescription drugs, you've got to read the fine print to learn the rest of the story" about the proposal (McCormick, Chicago Tribune, 10/5). He also criticized a proposal by McCain to allow residents to purchase health insurance across state lines. Obama said, "Insurance companies will rush to set up shop in states with the fewest protections for patients" (Los Angeles Times, 10/5).

In addition, Obama detailed his health care proposal, which he said would hold pharmaceutical companies and health insurers "accountable for the prices they charge and the harm they cause" to help reduce costs (AP/Washington Times, 10/5). On Sunday during a campaign stop in Asheville, N.C., Obama criticized the McCain proposal as "radical" (Morrill, Raleigh News & Observer, 10/6).

Response
During a conference call in response to the comments by Obama on Saturday, McCain senior policy adviser Douglas Holtz-Eakin said, "John McCain trusts the judgment of the American people," adding, "He's willing to put money in their hands because they know what's best."

In addition, the claim that employers would drop health insurance for employees under the McCain health care proposal is "patently false," Holtz-Eakin said. He said that the incentive for employers "will be unchanged," as they could continue to deduct health insurance costs and would compete to attract employees. He acknowledged that "there may be some people at the very top who have a liability greater than their health tax credit" but added that, "under the current system ... we are having the middle class pay taxes and subsidize the gold-plated coverage of the most affluent in America." Holtz-Eakin also criticized the comments that Obama made about the proposal by McCain to allow residents to purchase health insurance across state lines as "cynical" and "deceitful" (Los Angeles Times, 10/5).

Republican National Committee spokesperson Alex Conant said, "Barack Obama is lying about John McCain's plan to provide more Americans with more health care choices. Obama's plan only offers more government, while McCain's plan offers more choices" (AP/Washington Times, 10/5).

Entitlement Spending

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The Wall Street Journal on Monday examined how McCain as president would make large reductions in spending for Medicare and Medicaid to make the refundable tax credits provided under his health care proposal "budget neutral."

According to the Journal, "statements made by his campaign have implied that the new tax credits he is proposing to help Americans buy health insurance would be paid for with other tax increases." Holtz-Eakin on Sunday said that McCain would fund the tax credits in part with reductions in spending for Medicare and Medicaid. However, Holtz-Eakin did not specify the source of the reductions in spending. He said, "It's about giving them the benefit package that has been promised to them by law at lower cost" (Meckler, Wall Street Journal, 10/6).

The Omaha World-Herald on Sunday examined the effect that the Obama and McCain health care proposals would have on Nebraska and Iowa residents (O'Connor, Omaha World-Herald, 10/5).

Editorials, Opinion Pieces

Summaries of two recent editorials and several opinion pieces that addressed health care issues in the presidential election appear below.

* Chicago Sun-Times: "Even before President Bush signed the historic Wall Street bailout bill Friday that will, at least initially, add $2,300 in government debt for every American," Obama and McCain had announced health care and other proposals that "threatened to run up the federal deficit," and with the "bailout pushing the federal debt limit to more than $11.3 trillion (with new tax breaks, to boot), one question becomes more pressing than ever: How will the next president make ends meet?" a Sun-Times editorial states. "Both candidates have largely dodged the issue," the editorial states, adding, "The job for Obama and McCain is to help this nation get a grip on reality" (Chicago Sun-Times, 10/6).

* Denver Rocky Mountain News: Neither Obama nor McCain has addressed the "entitlement crunch" that will result without "structural reforms in Medicare, Medicaid and Social Security," a Rocky Mountain News editorial states. According to the editorial, the problem will require "either crippling tax increases that will smother economic vitality or painful benefit cuts that will hit low- and middle-income retirees hardest." McCain "has a better handle on it than Barack Obama, especially regarding Social Security," but both "candidates' Medicare and Medicaid proposals are less specific, and harder to evaluate, with one exception -- Obama wants to sign up a lot more people for both programs," the editorial states. The editorial adds, "Perhaps the only way to keep these programs from growing out of control is to dramatically increase premiums for high-income Medicare patients -- or fully convert Medicare to a voucher program, giving patients the means to purchase their own health coverage and no other subsidies." However, neither Obama nor McCain "is going that far" or "talking about raising the retirement age," the editorial states (Rocky Mountain News, 10/5).

* Craig Yorke, Kansas City Star: The McCain health care proposal, which "focuses heavily on insurance costs, ... is a poor idea" because "few of us know enough to bargain effectively with insurers and because insurance works best when it spreads risks over large groups (as Medicare does)," Yorke, a retired neurosurgeon, writes in a Star opinion piece. According to Yorke, "McCain ignores our biggest costs -- which those insurers simply pass on to us -- like drug prices, administrative complexity and overtreatment." He adds that the proposal "throws billions at a fundamentally broken system" and "shifts costs but doesn't add value." Obama "starts with a bigger goal -- to insure everyone -- and works backward to pay for it," an indication that Obama "sees a bigger problem and ... can see a better solution," Yorke writes, adding, "Obama's plan doesn't address all our problems, but its scope does match the issue's gravity" and makes the "moral imperative of universal coverage a political imperative for us all" (Yorke, Kansas City Star, 10/5).

* New York Post: Obama has "ties to the far left" that "are an objective threat to the nation's already wobbly economy," and McCain should and "tell the truth about Obama, his allies and their economically perilous plans" for health care and other issues, a Post editorial states. According to the editorial, Obama has proposed increases in spending and taxes, in part to finance a "bureaucracy-first, government-run health care program ... with all kinds of new mandates concerning the insurance you must have and the doctors you can see." The editorial concludes that because "the clock's ticking ... McCain needs to move fast -- for his own sake and the nation's" (New York Post, 10/6).

* Paul Krugman, New York Times: "McCain wants to destroy the health insurance of nonelderly Americans," columnist Krugman writes in a Times opinion piece. According to Krugman, the current employer-sponsored health insurance system, through which most U.S. residents obtain coverage, "does a fairly effective job of protecting those it reaches, but it leaves many Americans out in the cold." In response to the problems, Obama has announced a health care proposal that would "sharply reduce the number of uninsured," Krugman writes. McCain, however, "wants to blow up the current system by eliminating the tax break for employer-provided insurance," and "he doesn't offer a workable alternative," Krugman writes. He writes that the "McCain plan makes no sense at all, unless you have faith that the magic of the marketplace can solve all problems." He adds that "McCain does," citing an article published under McCain's name that states, "Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation." Krugman concludes, "I agree ... the McCain plan would do for health care what deregulation has done for banking. And I'm terrified" (Krugman, New York Times, 10/6).

* Steve Ford, Raleigh News & Observer: "If you or anyone in your family figures on ever becoming sick or injured or stands to benefit from preventive medicine -- in other words, if you're a human being -- then there should be no mystery why the issue of health care hovers over American politics," but the major presidential "candidates seem to have difficulty getting traction with it," columnist Ford writes in a News & Observer opinion piece. He writes, "The symptoms of a health care financing and delivery system in deep trouble are hard to miss," adding, "Paying for the care that helps us cope with the conditions and illnesses that bear down on us with every breath we take becomes more and more of a challenge." According to Ford, because the "situation worsens incrementally, we tend to grumble and adjust," but the "adjustments erode our bank accounts while doing nothing to improve our health." He adds, "Our medical system may be capable of astounding feats, using the most advanced technologies, drugs and procedures, but we're not as healthy a population as all that wizardry suggests we should be." Ford writes, "We don't need miracles -- just a commitment to making sure that in the world's richest country, no one goes without a decent level of affordable care" (Ford, Raleigh News & Observer, 10/5).

Reprinted with permission from kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, and sign up for email delivery at kaisernetwork.org/email . The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation. © 2007 Advisory Board Company and Kaiser Family Foundation. All rights reserved.

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