The Respectfully Republican Conversation

Rosemary - go to JohnMcCain.com, Issues, Healthcare, and then the green button after the second paragraph that says Read More

What he says is that he's eliminating the tax deduction, but as Madalyn points out, employers only give their employees health insurance because of these deductions.  If they don't have an incentive they won't do it.  Also, even with the incentive, the largest companies, usually considered the safest ones for benefits, are cutting back every year on health benefits.  You can be sure they will use this plan as a way of getting out of the health care business, which they all hate anyway.

Actually, if you think about it, it is very true blue American.  You must remember that those people whose companies don't provide health care benefits are actually paying for your benefits, since if you were paying for your own, as they are, the government would be getting more tax revenues from your company.  So technically, McCain is fair in his proposal, but  . . . we're talking health care here and fair is keeping people healthy and paying for their care when they're not!  If I remember correctly, employer-based health programs because of the tax incentives offered didn't come into being until after WWII.

Roesemary--note the "will reform the tax code."  I'll be back with an analysis I posted recently of the two plans, from a health care think tank.  See you shortly.

Okay--here is a fairly easy to understand description of the two plans.  Obviously, neither is great.  Both have inherent problems.  What you have to realize is that once the tax code is reformed, employers are very likely to stop offering health insurance to employees.  They will now have the excuse to say, well you can get it on your own, but obviously that's not easy to do.  And in your case, Rosemary, I'm not sure why you're assuming you won't have to pay the $240.00.

By Mary Charmichael

Barack Obama and John McCain have put forth radical-and radically different-proposals to change the way Americans do, or don't, get health insurance. Is it really possible to make sure everyone's covered? Are the candidates even trying for that? And what lessons can we learn from Massachusetts, which has embarked on its own experiment with universal health care? NEWSWEEK's Mary Carmichael spoke with Katherine Swartz, a professor of health policy and economics at Harvard who studies insurance and recently published an in-depth analysis of the McCain plan:

CARMICHAEL: McCain wants to take away the tax break workers get on health insurance at their jobs, and instead give people who buy their own insurance $2,500 in tax credits. Families would get $5,000. What do you make of this idea?
SWARTZ: The positive part is that it would reduce favoritism in the tax system. If you're unemployed, or if you're with a small employer who doesn't provide health insurance, you don't get any special treatment [taxwise] on insurance now. The bad part is that the tax credit could make it harder for low-income people to get insured. In the current system, a lot of low-income people with jobs are getting insurance they could never afford on their own.

The credit is supposed to help.
But you have to purchase health insurance to get the tax credit, and low-income people still may not be able to do that. For a family, insurance premiums in the nongroup markets are typically above $700 a month, and that's with a deductible of at least $5,000. We're talking $8,400 a year in premium payments, but the tax credit is only for $5,000. You still have to pay $3,400, plus the deductible, before the insurance covers medical expenses. Also, the type of coverage on the individual market typically does not cover as many services as group policies. If you buy your own policy, when you get sick, you are going to pay more out of pocket.

Can you explain McCain's plan to help out people with previously existing conditions by expanding "high-risk pools"?
We've had state-sponsored high-risk pools for several decades, but they cover fewer than 200,000 people. They were set up so insurance companies could essentially cede people who they predicted would have very high health-care costs. At one point McCain said he would subsidize high-risk pools with between $7 billion and $10 billion a year. That would cover maybe 3 million people, which is not much of a dent in the 47 million people without insurance now.

How many people would be insured under McCain's proposals, compared to today?
My colleagues and I have predicted that around 21 million people in the first year would lose access to health insurance because their employers would stop offering it. About 21 million higher-income people would take the tax credits and buy their own insurance. So it would be a wash in the first year. We worry that within five years, more employers would stop offering insurance, and we'd end up with more people uninsured than there are now.

Now let's look at Obama's plan. What exactly is an insurance exchange?
The one he's proposing looks a lot like the Health Connector we have in Massachusetts. It acts as a clearinghouse where people can buy insurance policies that are essentially given the Good Housekeeping Seal of Approval by the state. In the Obama plan, there's a minimum set of benefits every plan has to offer, and if your income is below some threshold yet to be specified, you would get a subsidy. Small businesses could also use this exchange to provide health insurance. This has worked very well in Massachusetts.

And his national health plan?
It's basically one more choice offered in the exchange. It sets a floor for what kinds of services the other plans would have to offer. Here's where we have to start thinking about the total cost. If the national plan is quite generous in terms of services covered, the proposal's cost will be more than the campaign is estimating.

In Massachusetts, costs have already gotten out of control.
Costs are higher than expected, but that's partly because the original projections underestimated the number of uninsured people who were eligible for subsidies. It's also partly because health-care costs are rising-and that's the case everywhere.

Obama would also require insurers to cover people with pre-existing conditions. Wouldn't insurers raise premiums?
Yes, premiums may be higher. I think people need to consider the alternative-if patients are closed off from coverage, they still go to the ER, and we all pay for that.

Does the Obama plan actually provide universal coverage?
No. It requires that children be covered, but there's no mandate for other individuals. Some adults would continue to be uninsured-roughly 6 percent of the nonelderly, compared with 17 percent now, so many more people would have insurance than do now.

Obama's plan is very ambitious. How on earth can we pay for it?
Given the federal deficit, that's a problem for both plans. McCain's plan is not cheap either. I think it will be hard for either candidate to do much in the next few years.

Madalyn -that is incorrect. Employers will still get to deduct the cost of healthcare that they provide employees so there will not be an incentive to drop workers. This is from JohnMcCain.com McCain Health Care Plan Preserves Employer Coverage: The McCain health plan builds on the employer-based system. Employers will have the same incentive to provide health insurance as they do today since they will continue to deduct the cost of health insurance they provide to employees. Nothing will change. In addition, payroll taxes will be protected from taxes under the McCain plan. Millions of American families with employer sponsored coverage in all tax brackets with the same coverage as a "Members of Congress" will now come out ahead with additional funds going into a portable health savings account.

The tax credit makes it confusing. The chart explains how much over the cost of insurance you would end up with in the various tax brackets. If you are in the 10% tax bracket you would get $3,800 dollars, 15% $3,200; 25% $2,000; 28% $1,640; 33% $1,040; 35% $800. This money could be put into a health savings account to pay for any deductibles, co-pays, etc. 

Obama's 95% Illusion

It depends on what the meaning of 'tax cut' is.

One of Barack Obama's most potent campaign claims is that he'll cut taxes for no less than 95% of "working families." He's even promising to cut taxes enough that the government's tax share of GDP will be no more than 18.2% -- which is lower than it is today.

It's a clever pitch, because it lets him pose as a middle-class tax cutter while disguising that he's also proposing one of the largest tax increases ever on the other 5%. But how does he conjure this miracle, especially since more than a third of all Americans already pay no income taxes at all? There are several sleights of hand, but the most creative is to redefine the meaning of "tax cut."

For the Obama Democrats, a tax cut is no longer letting you keep more of what you earn. In their lexicon, a tax cut includes tens of billions of dollars in government handouts that are disguised by the phrase "tax credit." Mr. Obama is proposing to create or expand no fewer than seven such credits for individuals:

- A $500 tax credit ($1,000 a couple) to "make work pay" that phases out at income of $75,000 for individuals and $150,000 per couple.

- A $4,000 tax credit for college tuition.

- A 10% mortgage interest tax credit (on top of the existing mortgage interest deduction and other housing subsidies).

- A "savings" tax credit of 50% up to $1,000.

- An expansion of the earned-income tax credit that would allow single workers to receive as much as $555 a year, up from $175 now, and give these workers up to $1,110 if they are paying child support.

- A child care credit of 50% up to $6,000 of expenses a year.

- A "clean car" tax credit of up to $7,000 on the purchase of certain vehicles.

Here's the political catch. All but the clean car credit would be "refundable," which is Washington-speak for the fact that you can receive these checks even if you have no income-tax liability. In other words, they are an income transfer -- a federal check -- from taxpayers to nontaxpayers. Once upon a time we called this "welfare," or in George McGovern's 1972 campaign a "Demogrant." Mr. Obama's genius is to call it a tax cut.

The Tax Foundation estimates that under the Obama plan 63 million Americans, or 44% of all tax filers, would have no income tax liability and most of those would get a check from the IRS each year. The Heritage Foundation's Center for Data Analysis estimates that by 2011, under the Obama plan, an additional 10 million filers would pay zero taxes while cashing checks from the IRS.

The total annual expenditures on refundable "tax credits" would rise over the next 10 years by $647 billion to $1.054 trillion, according to the Tax Policy Center. This means that the tax-credit welfare state would soon cost four times actual cash welfare. By redefining such income payments as "tax credits," the Obama campaign also redefines them away as a tax share of GDP. Presto, the federal tax burden looks much smaller than it really is.

The political left defends "refundability" on grounds that these payments help to offset the payroll tax. And that was at least plausible when the only major refundable credit was the earned-income tax credit. Taken together, however, these tax credit payments would exceed payroll levies for most low-income workers.

It is also true that John McCain proposes a refundable tax credit -- his $5,000 to help individuals buy health insurance. We've written before that we prefer a tax deduction for individual health care, rather than a credit. But the big difference with Mr. Obama is that Mr. McCain's proposal replaces the tax subsidy for employer-sponsored health insurance that individuals don't now receive if they buy on their own. It merely changes the nature of the tax subsidy; it doesn't create a new one.

There's another catch: Because Mr. Obama's tax credits are phased out as incomes rise, they impose a huge "marginal" tax rate increase on low-income workers. The marginal tax rate refers to the rate on the next dollar of income earned. As the nearby chart illustrates, the marginal rate for millions of low- and middle-income workers would spike as they earn more income.

Some families with an income of $40,000 could lose up to 40 cents in vanishing credits for every additional dollar earned from working overtime or taking a new job. As public policy, this is contradictory. The tax credits are sold in the name of "making work pay," but in practice they can be a disincentive to working harder, especially if you're a lower-income couple getting raises of $1,000 or $2,000 a year. One mystery -- among many -- of the McCain campaign is why it has allowed Mr. Obama's 95% illusion to go unanswered.

As far as we know NOTHING will change when it comes to health insurance.  Where the heck is the money going to come from.

I have posted time and time again that we had EXCELLENT healthcare through Bell South..probably paid a bit more per month, but the precription plan was probably cheaper ($8.00 generic for 90 day and $15 name brand for 90 days) and our copayment was $15 and deductible was $200 each.  After AT&T bought out Bell South we have copays and our deductible is $2500 for both of us.  We get no prescription plan until that deductible is met.  We choose to pay more in premiums because I was afraid of cancer returning and by paying $355 month for both of us instead of $200 when we reached our out of pocket the insurance would pay 100%.  I worked out the math over and over and thought I'd better not take any chances.  However, I believe that will change when we sign up again. 

I can say that this higher deductible with no prescription plan until that deductible has been met has just about done us in.  Arimidex cost $742 for 90 days and it comes out of our pocket.  So, as I have said over and over..I HATE OUR NEW INSURANCE!  But, with this new insurance we can have an HSA.

In reality, I cannot see how the government can give us too much help with all that's going on with our economy and all the BAILOUT money being used.  They've been robbing Peter, James, John, Timothy, Matthew, Andrew, Phillip, to pay Paul (and I believe I heard they had robbed from Judas Iscariot).  Or was it Judas Iscariot that has been robbing form the Social Security "savings."  And we want our government to run our healthcare.

If I understand the mortgage tax credit correctly, I intend to take out a mortgage on our house which has none now.  That is, if I have a mortgage of $100,000, will I get a refundable tax credit of $1,000. Doesn't this encourage people to game the system?

Anne,

As I began this, employers vie for good employees.  They offer benefits.  There is no reason to believe since we found out that McCain's plan keeps those tax breaks for employers to offer health care, to assume they'll stop offering that benefit.  It will still behoove them to do it.  If they want people working for them from Harvard, Princeton and Yale, they're going to offer the world.  And they can't offer one employee one thing without making it available to all. 

No one is offering a free ride on health insurance payments.  Neither is Obama. 

Now I have to figure out where BinVa sees McCain's plan as adding to an individuals tax burden.  Where are you seeing that Bin?

Rosemary, I was thinking the same thing, but I have no college education..LOL  Reading McCain's plan I saw nothing about taking away the tax breaks from Employers.  But then I am pretty dense. 

Shirley

Let's be real about this, no matter who is sitting in the White House come January 21st, the health care changes won't look anything like either of the plans currently being proposed.  They will be changed and tweaked through the House and the Senate before they are ever even voted on, forget about being signed into law. 

The gist of the choice we have in the election is do we want to substitute a tax credit for everyone in exchange for counting an employer's contribution to an employee health care plan as income for that employee, OR do we want a government run plan?  Don't sweat the details...they are guaranteed to change long before either plan becomes law.

Bren,

Unless he's working lots of overtime, the poor guy in the furniture factory isn't part of the middle class now with an income of less than $21K a year.  I doubt that he would be in the 30% tax bracket with deductions for himself, (a wife?) and two kids, and even if for the sake of example he were, 30% of $3600 is $1080, which leaves him with a net gain of $3920 to pay the deductibles and co-pays that he already has in his current plan which he will hopefully keep.

Changing the subject for a moment.  And, you gals are fast posting.

I found the video where Obama is talking to a plumber about taxes.  The plumber was concerned that raising taxes would hurt him.  He must have a small business.

Spread the Wealth Around

http://www.youtube.com/watch?v=RuSMS17shAc

LISTEN...Bob Beckel slipped and almost said re-distribute the wealth. Watch about 1:45 minutes..listen...Beckel says, "what's he's trying to do is redistribute the wealth.." and then he changed it to "tax burden."  C'mon!  How stupid do these people think they are.  And, like Beckel said, some people ( 35% I think) do not pay taxes.  So, how can Obama be giving 95% of the people a tax cut and only 5% will be paying MORE taxes.   

A struggling plumber says that Obama's tax plan will effect him negatively. Obama then says that wealth redistribution is good for the country.

"It's not that I want to punish your success. I just want to make sure that everybody that is behind you, that they have a chance for success too." - Barack Obama   And he tells the plumber.."I think that when you spread the wealth around it's good for everybody." 

We have a preferred provider HMO. We pay about $280 a month for family coverage. We have no co-pays or deductibles for office visits. I paid nothing out of pocket for surgery, office visits, tests, etc. They have never denied me a test that the doctor said that I needed. Everyone else in the family is very healthy. Up until 5 years ago I was also very healthy - then it went downhill - first they thought I had kidney cancer - had to have my kidney removed - that got me my own insurance company nurse who would call me once a month and check to see how I was doing - I had some back pain - she made sure I got PT - (I ended up not having kidney cancer just a very rare benign tumor that looks just like kidney cancer). Two years later I ended up with breast cancer. Again they had a nurse who would call me to make sure I had everything I needed.  For prescriptions, I pay a $5 co-pay for generics, $15 a month for Arimidex and $35 for drugs not on their formulary (the only one that I have been prescribed is Nexium - which I try to live without - I tried and failed other acid blockers - but luckily Pepcid seems to work - that and avoiding lots of food which helps in the weight department too).

Shirley - I posted an editorial from the Wall Street Journal today talking about his 95% of the people getting a tax cut - only they are really not tax cuts they are tax credits - you get them even if you don't pay taxes! It is welfare in disguise. It will not encourage people to earn more and get better jobs because you will lose the credits. 38% of workers don't pay any taxes now! So these 38% will get a bigger "refund" from the IRS only it won't be a refund because they paid no taxes. It will be a redistribution of wealth from those who worked their butts off to get where they are to those who sit on their butts. This coming from a guy who gave a pittance to charity! He really cares about the little guy.

BinVa - if you are working at a minimum wage job you are probably not making more than $15,000 a year which puts you in the 10% tax bracket. With McCain's plan you have to be in a really high tax bracket (38% - making over 300K) not to come out ahead.

McCain said that the ee would be taxed for his health benefits by the employer .. whatever it is that the employer is paying for the ee's benefits.  That would be considered as income.  In HR when we are courting, say an engineer for $100k, the benefits pkg, including healthcare is figured as part of his "income" when hiring.  We would say ... and with that healthcare you are actually making $120k a year.  McCain said the ee will be taxed on what the employer pays, thereby giving the employer a tax break and the ee having to pay taxes on it like income. 

Yep .. that poor guy making $10 an hour sure isn't the middle class.  And he's every guy left where I live.  What jobs are left in this area would no doubt cut employer backed insurance and go with the $5,000 family credit.  The only good jobs here are the govt/social service agencies helping the $10 an hour guy and his family.  And we know the govt/social service agencies aren't going to cut out their medical insurance. 

I agree ... all those Harvard/Yale types looking for jobs probably won't have to worry about their future employers not having company medical insurance policies.

How much per year can one make in order to qualify for Medicaid?