Zaroc Stone
2008-08-07 21:39:25 UTC
McCain's Health Care Plan: Gut Employer-Based Insurance
By Trudy Lieberman , Columbia Journalism Review. Posted August 3, 2008.
McCain's health care plan has dangerous implications for Americans. But
you'd never know if from media coverage. [Part one of two] This is the first
entry in a series examining John McCain's health proposals and how they have
been covered in the press.
A few years back, I attended a meeting at the Rayburn Building on Capitol
Hill to hear conservative think tanks, including the Galen Institute and the
Heritage Foundation, argue that employer-provided health insurance ought to
be eliminated. The audience -- mostly Hill staffers, industry reps,
lobbyists, and journalists -- asked a lot of questions as health care
specialists made economic and political arguments about why the tax
exclusion for the value of employer-paid health insurance had to go. It
would be the first step in ending employer-sponsored coverage. I remember
two things from the meeting -- the free chicken sandwiches everyone
devoured, and how unthinkable such an idea would be. Were they crazy?
Like so many once-unthinkable ideas which have come from conservative think
tanks over the last two decades, like privatizing Medicare or creating
health savings accounts, this one began to worm its way into Beltway
consciousness. Oregon Sen. Ron Wyden and Rep. Bob Bennett of Utah even took
the bold steps of writing bills that would wipe out employer-provided
coverage in favor of a system where individuals buy their own policies
through state-run pools.
Given this history, it was hardly surprising when John McCain made the
attack on employer-provided insurance his health-care centerpiece. He would
eliminate the tax exclusion workers get for health benefits their employers
provide; in other words, he would require workers to pay income taxes on the
value of their health insurance, while companies would still get to deduct
the costs for providing that coverage. In its place, McCain would offer
families a tax credit of $5000 -- and individuals a credit of $2500 -- to
buy their own insurance. (They'd get the credit even if they didn't pay
taxes.) So far, the press has failed to examine what's at stake here for
workers and their bosses -- that, in the long run, employer coverage could
disappear, and that, in the short run, they may have to pay taxes on some
portion of their health benefits, no matter who wins in November. In effect,
it's an unspoken tax increase which has yet to surface in campaign
conversation.
Too many stories have, in one or two lines, described the tax exclusion
proposal as a "radical" notion peddled by some policy research shops, and
let it go at that. But there are a lot of angles to explore here: the
political angle, the economic angle, the business angle, and the people
angle. For example, instead of just mentioning the tax credit, reporters
could explain why a $2,500 credit might buy more insurance in the individual
market for a young, healthy 26-year-old than for a 56-year-old with a couple
of chronic conditions. Premiums in the individual market, where McCain hopes
to send refugees from employer group plans, are based on age. Older people
pay more, so a flat credit might not buy as much for them. And just how far
will the credit go, anyway, considering that family policies now cost
upwards of $12,000 a year?
Earlier last month, an Associated Press story moved beyond the standard
treatment, and, in seventeen paragraphs, attempted to explain McCain's
central thesis. The story, a workmanlike effort, nibbled around the edges of
the economic and the business issues. But the AP and others need to do more.
The AP posed one of the relevant questions, asking just how many employers
would drop coverage for their workers. It answered the question by quoting
Washington experts, who explained how young, healthy workers might be
tempted to leave the employer group and buy their insurance in the
individual market. If that happens, those left in the employer group would
be older (and, likely, sicker), causing premiums to skyrocket even more than
they do now. To use insurance jargon, "a death spiral" results.
Paul Fronstin, a senior research associate at the Employee Benefit Research
Institute, put it this way: "You'll start to get a cycle where people at the
margin start to leave employer coverage for individual coverage. At some
point employers will start to ask: Why am I doing this if my workers don't
value it anymore? If I don't need to be competitive in the labor market, why
should I do it?"
Business voices might have given the story more oomph. There are plenty
around. Instead of talking to business owners, the AP quoted a rep from the
conservative American Enterprise Institute, who predicted that employers
would not drop coverage "en masse" because health insurance remains an
important tool for attracting and retaining good employees. Frank McArdle,
who manages the Washington research office for Hewitt Associates, a benefits
consulting firm, told me that "fundamental change is something that scares a
lot of employers. Some small employers say they wouldn't survive the
transition." The business community has weighed in, and it isn't keen on the
idea of destroying the bedrock of American health care -- just yet. U.S.
Chamber of Commerce President Thomas Donohue has said that, "if you've got
177 million people covered today, I wouldn't give that away too soon."
Last month, the National Coalition on Benefits, a blue chip business group
that helped kill the Clinton plan fifteen years ago, re-emerged. The group,
whose members include Donohue's organization, General Motors, the Business
Roundtable, and the Blue Cross and Blue Shield Association, wrote a letter
to Sen. Wyden and Rep. Bennett blasting their plan, which allows employers
to continue offering coverage but lets employees buy private coverage
through the state-run pools. The Coalition wrote that, even though business
could still offer insurance, "we expect that the source for most health
coverage would soon be under the new system of state-sponsored health
insurance choices, not through employers." Because the Coalition was so
influential last time around, their words (and the meaning behind those
words) are worth media scrutiny.
Wyden's plan may not go anywhere, but McCain's tax exclusion might. Here's
where the political story comes in. As McArdle told me, "there's quiet
interest in Congress for capping the exclusion. If you talk to individual
members, you will hear them say privately there should be a limit on the
exclusion." Although making the total value of the benefit taxable is
probably not in the cards, politicians on both sides of the aisle are
considering making some portion taxable. Currently, the exclusion costs the
federal treasury some $160 billion in foregone revenue. For a Congress on
the pay-as-you-go plan -- that is, for every new program, an old one must be
cut -- the tax exclusion is a juicy revenue source that could be used to
shore up Medicare or finance the tax subsidies for the poor that candidates
have been promising. There are a lot of equity issues here to examine.
So journalists, go for it and tell your audiences about the far-reaching
consequences of all this. With taxes high on the agenda for the new
Congress, the public deserves to know whether a tax increase will be in
their future.
By Trudy Lieberman , Columbia Journalism Review. Posted August 3, 2008.
McCain's health care plan has dangerous implications for Americans. But
you'd never know if from media coverage. [Part one of two] This is the first
entry in a series examining John McCain's health proposals and how they have
been covered in the press.
A few years back, I attended a meeting at the Rayburn Building on Capitol
Hill to hear conservative think tanks, including the Galen Institute and the
Heritage Foundation, argue that employer-provided health insurance ought to
be eliminated. The audience -- mostly Hill staffers, industry reps,
lobbyists, and journalists -- asked a lot of questions as health care
specialists made economic and political arguments about why the tax
exclusion for the value of employer-paid health insurance had to go. It
would be the first step in ending employer-sponsored coverage. I remember
two things from the meeting -- the free chicken sandwiches everyone
devoured, and how unthinkable such an idea would be. Were they crazy?
Like so many once-unthinkable ideas which have come from conservative think
tanks over the last two decades, like privatizing Medicare or creating
health savings accounts, this one began to worm its way into Beltway
consciousness. Oregon Sen. Ron Wyden and Rep. Bob Bennett of Utah even took
the bold steps of writing bills that would wipe out employer-provided
coverage in favor of a system where individuals buy their own policies
through state-run pools.
Given this history, it was hardly surprising when John McCain made the
attack on employer-provided insurance his health-care centerpiece. He would
eliminate the tax exclusion workers get for health benefits their employers
provide; in other words, he would require workers to pay income taxes on the
value of their health insurance, while companies would still get to deduct
the costs for providing that coverage. In its place, McCain would offer
families a tax credit of $5000 -- and individuals a credit of $2500 -- to
buy their own insurance. (They'd get the credit even if they didn't pay
taxes.) So far, the press has failed to examine what's at stake here for
workers and their bosses -- that, in the long run, employer coverage could
disappear, and that, in the short run, they may have to pay taxes on some
portion of their health benefits, no matter who wins in November. In effect,
it's an unspoken tax increase which has yet to surface in campaign
conversation.
Too many stories have, in one or two lines, described the tax exclusion
proposal as a "radical" notion peddled by some policy research shops, and
let it go at that. But there are a lot of angles to explore here: the
political angle, the economic angle, the business angle, and the people
angle. For example, instead of just mentioning the tax credit, reporters
could explain why a $2,500 credit might buy more insurance in the individual
market for a young, healthy 26-year-old than for a 56-year-old with a couple
of chronic conditions. Premiums in the individual market, where McCain hopes
to send refugees from employer group plans, are based on age. Older people
pay more, so a flat credit might not buy as much for them. And just how far
will the credit go, anyway, considering that family policies now cost
upwards of $12,000 a year?
Earlier last month, an Associated Press story moved beyond the standard
treatment, and, in seventeen paragraphs, attempted to explain McCain's
central thesis. The story, a workmanlike effort, nibbled around the edges of
the economic and the business issues. But the AP and others need to do more.
The AP posed one of the relevant questions, asking just how many employers
would drop coverage for their workers. It answered the question by quoting
Washington experts, who explained how young, healthy workers might be
tempted to leave the employer group and buy their insurance in the
individual market. If that happens, those left in the employer group would
be older (and, likely, sicker), causing premiums to skyrocket even more than
they do now. To use insurance jargon, "a death spiral" results.
Paul Fronstin, a senior research associate at the Employee Benefit Research
Institute, put it this way: "You'll start to get a cycle where people at the
margin start to leave employer coverage for individual coverage. At some
point employers will start to ask: Why am I doing this if my workers don't
value it anymore? If I don't need to be competitive in the labor market, why
should I do it?"
Business voices might have given the story more oomph. There are plenty
around. Instead of talking to business owners, the AP quoted a rep from the
conservative American Enterprise Institute, who predicted that employers
would not drop coverage "en masse" because health insurance remains an
important tool for attracting and retaining good employees. Frank McArdle,
who manages the Washington research office for Hewitt Associates, a benefits
consulting firm, told me that "fundamental change is something that scares a
lot of employers. Some small employers say they wouldn't survive the
transition." The business community has weighed in, and it isn't keen on the
idea of destroying the bedrock of American health care -- just yet. U.S.
Chamber of Commerce President Thomas Donohue has said that, "if you've got
177 million people covered today, I wouldn't give that away too soon."
Last month, the National Coalition on Benefits, a blue chip business group
that helped kill the Clinton plan fifteen years ago, re-emerged. The group,
whose members include Donohue's organization, General Motors, the Business
Roundtable, and the Blue Cross and Blue Shield Association, wrote a letter
to Sen. Wyden and Rep. Bennett blasting their plan, which allows employers
to continue offering coverage but lets employees buy private coverage
through the state-run pools. The Coalition wrote that, even though business
could still offer insurance, "we expect that the source for most health
coverage would soon be under the new system of state-sponsored health
insurance choices, not through employers." Because the Coalition was so
influential last time around, their words (and the meaning behind those
words) are worth media scrutiny.
Wyden's plan may not go anywhere, but McCain's tax exclusion might. Here's
where the political story comes in. As McArdle told me, "there's quiet
interest in Congress for capping the exclusion. If you talk to individual
members, you will hear them say privately there should be a limit on the
exclusion." Although making the total value of the benefit taxable is
probably not in the cards, politicians on both sides of the aisle are
considering making some portion taxable. Currently, the exclusion costs the
federal treasury some $160 billion in foregone revenue. For a Congress on
the pay-as-you-go plan -- that is, for every new program, an old one must be
cut -- the tax exclusion is a juicy revenue source that could be used to
shore up Medicare or finance the tax subsidies for the poor that candidates
have been promising. There are a lot of equity issues here to examine.
So journalists, go for it and tell your audiences about the far-reaching
consequences of all this. With taxes high on the agenda for the new
Congress, the public deserves to know whether a tax increase will be in
their future.