McCain Is Right On Health Care
By Star Parker
May 5, 2008
A gold star to John McCain for his just released plan for reforming American health care.
Analysts will pick apart details and surely will find shortcomings. But directionally, McCain's approach is on the money. Contrary to the vaporous rhetoric of change offered by the Democrats, he has proposed real structural health care reform.
The plan boldly takes on key problems in how we deliver health care that have contributed to out-of-control cost escalation. According to a recent University of Minnesota study, health insurance premiums have increased over recent years ten times faster than personal incomes, and by 30 percent from 2001 to 2005.
The key salvo is aimed at the central pillar of our health care system -- tax-subsidized employer provided health care. About 70 percent of Americans get their health care where they work.
The McCain plan offers a $5,000 tax credit to families and $2,500 to individuals to purchase health care on their own. This would end the inherent inequity of some getting tax-free health care from their employers, but those on their own or working for small businesses having to purchase it with after tax dollars.
It levels the field and relocates the focus of health-care-purchase freedom and responsibility to where it should be -- on individuals.
McCain would further enhance competition and consumer power by ending the 50 separate state fiefdoms and allow the health care market to be open nationwide.
Let's recall that employer provided health care is a happenstance of history. Firms started offering it as a benefit as a way to attract workers during the wage and price controls of World War II. Tax-free health care benefits subsequently were formally codified as part of the IRS code.
Aside from the inequities, the employer-based system has been an engine for driving up costs.
One, the higher your income and tax bracket, the more you're subsidized for your health care. Two, with a third party picking up the costs, consumer power and responsibility is short circuited.
In what other marketplace would you have the equivalent of a doctor prescribing a test and the patient not even thinking to ask if it is really necessary or how much it costs? And, even if they asked, the doctor would have no idea.
We've got a situation now where firms like Wall Street investment bank Goldman Sachs, former employer of our current Treasury Secretary Hank Paulson, offers sex change operations as part of their tax-sheltered health care plan.
David Gratzer of the Manhattan Institute points out that the individual out-of-pocket portion of health expenditures dropped from 42 percent in 1960 to 14 percent in 2002. Over the same period, as individuals became increasingly divorced from their own health care realities, per capita health care spending more than quintupled.
Sens. Hillary Clinton and Barrack Obama can't grasp that our perverse health care economics result from over-centralization and bureaucratization, so they propose even more. They put more responsibility on employers and give government an even stronger role to define what health care is and how much it should cost. They propose to lower costs through subsidies financed by massive tax increases.
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