Today on NRO, John McCain sets out his health care proposal. To my inexpert eye, the proposal seems to incorporate the best learning on this subject from the last several years. (I am curious to know what our resident economists think.)
The centerpiece of the proposal is individualized tax credits, which would supplement the credits currently granted to employers who insure their employees. A taxpayer who chooses the individual credit would be free to choose an insurer, to whom the credit would be paid on the taxpayers behalf. The system is designed to increase competition, with its attendant increase in quality and decrease in cost, while also increasing access.
Tax credits, which directly reduce tax liability, are more valuable than tax deductions, which reduce taxable income and thus only indirectly reduce tax liability. However, neither a credit nor a deduction is much use to someone who pays no taxes. Many of the poorest Americans have no tax liability. It is not clear how McCain's tax credit might benefit them. On the other hand, the poorest Americans are often eligible for Medicaid, and have their basic health care needs covered through that federal welfare program.
Kudos to McCain for a promising proposal. The man looks more conservative by the week.
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2 comments:
As I understand McCain's proposal, he would extend tax credits to Americans instead of the current tax break for employment-based coverage. This would allow Americans to access health insurance outside the workplace where they can really own it, control it, and keep it from job to job. This would also expand competition and drive down costs.
Also, I believe the credits would be refundable so even those Americans with no tax liability would get funds to purchase health insurance. I normally don't like refundable tax credits (i.e. welfare) but in this case it probably makes sense. We're already subsidizing health care. We should do it in a way that empowers people to make their own health care decisions rather than allowing employers, health insurers, or government bureaucrats to interfere.
Like you, I'm impressed with McCain's plan. It's bold, principled, and it could reverse our nation's slide toward socialism.
It's difficult to discern from McCain's op-ed, but I had the sense that he intends to leave employer credits in place and to permit employees to choose between employer credits and individual credits.
I didn't realize that the credits will be refundable. That's certainly not ideal.
At least this is a start, and it's not a socialized, single-payer system.
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