DOCTORS ENDORSE MCCAIN:

October 13, 2008

Fraser Forum 09/08 35

Reforming the US health care system,  John C. Goodman

Health care reform seems poised to take centre stage in the upcoming presidential election in the United States. Not surprisingly, American presidential hopefuls Barack Obama and John Mc-

Cain have proposed radically different approaches to health care reform. Of the two, it is McCain’s proposal that would completely replace the current system with a fairer, more efficient one, providing a much better chance of insuring the uninsured and controlling health costs.

The Obama plan A key goal of Barack Obama’s health proposal is “universal coverage.” Yet, in contrast to Hillary Clinton, Obama’s plan would not require individuals to purchase coverage, other than for their children. Although Obama’s plan would create new ways for people to obtain health insurance, based on reasonable assumptions the number of uninsured would rise, not fall.

Taxing labor

Obama’s plan would subject all employers to a “pay-or-play” mandate, imposing a tax on those who do not provide health insurance for their employees. Following a recent Commonwealth Fund analysis that many believe reflects Obama’s objectives (Schoen et al., 2008), employerswould be forced to pay at least 75% of the premium for a minimum benefits package. Failing that, employers would have to pay an additional 7% payroll tax of up to $1.25 per hour per employee. Basic economics implies that such a payroll tax would be almost completely borne by workers. Thus, Obama’s criticism of Hillary Clinton applies to himself as well: he would try to force people to buy something they cannot afford, and then tax t hem when they don’t buy it, leaving them worse off than before. Encouraging employers to drop health insurance coverage Those who do not get insurance through an employer would be able to buy it through a National Health Insurance Exchange. Under the Commonwealth proposal, the subsidized premium would be limited to 5% of income for lowincome families and 10% for everyone else. Given an average cost of employerbased coverage of about $12,000 for a family (KFFHRET, 2007), families with incomes of up to about $63,000 would be better off if their employers dropped their current health plan and paid them higher wages instead, paid Obama’s payor- play tax (along with income and payroll taxes), and let employees use their additional after-tax income to buy their own insurance in the Exchange.

 Encouraging the healthy to be uninsured

Why pay expensive premiums for health insurance if you do not have any health problems? Insurers participating in the  Exchange would be required to sell policies to all comers (guaranteed issue), and charge the healthy the same premium they charge the sick (community rating).

This would give people a perverse incentive\ to avoid buying insurance and paying premiums until they get sick.

Encouraging others to overinsure

Obama’s plan would require health plans to include a package of minimum benefits, but apparently there would be no maximum. Once people reached their maximum premium limit, the marginal cost of buying additional coverage would be zero, creating perverse incentives for people to over-insure at the taxpayers’ expense.

for full article, click the link below

http://www.fraserinstitute.org/commerce.web/product_files/ReformingUSHealthCareSystem.pdf