McCain's $5000 healthcare credit

[Krom]

I don't really get what he is trying to say, but from what I have heard I think it sounds like an extraordinarily bad idea. So I figured I would ask the right wing extremists here for their ultimate spin input on how wonderful the McCain plan is. Because seriously, I caught the virus that was 'going around' this February and it ended up costing me $5000 and that's even counting that I do have health insurance! My experience with the \"health care\" system this year has left me with only one conclusion: It would have been easier to just roll over and die. One week of being sick, 6 liters of IV fluids, 24 hours in the hospital, months of bills and deductibles and co-pays and crap that saps the life out of you.

My parents health insurance through my dads job costs $1700 USD a month and that is an average costing plan. My mom recently dislocated a rib (we think) and she hasn't gone to the doctors to have it checked on because of the amount of co-pays and deductibles on the insurance plan. How exactly is the McCain plan going to help us?

[CDN_Merlin]

WOW. That's insane.

[Jesus Freak]

Sorry to hear about the health issues. Health care is definitely a big issue that most people will have to deal with at some point in life, either in their own or in the life of a loved one. I don't think McCain's tax credit is enough. Health care is just too expensive.

[Grendel]

My mom recently dislocated a rib (we think) and she hasn't gone to the doctors to have it checked on because of the amount of co-pays and deductibles on the insurance plan.

Yikes -- a chiropracticer should be able to reset it or at least tell you if it's something different for not too much money. It really should be X-rayed to make sure it's not a pneumothorax (same symptoms, I got diagnosed w/ bruised ribbs once when it really was a PT).

[Will Robinson]

This is worth the read.
McCain's plan will need some additional funding on top of what he already has included so he can cover pre-existing condition patients but his plan actually works to change the system without finding a much worse way to break it, without giving the government control so they can make their friends and fellow politicians rich and ultimately break us all like they did with the federally funded bad mortgage experiment/disaster!

Problem is, like it is with most responsible solutions, it requires some sacrifice and thus will be much harder to get people to vote for it...no free rides.

Why McCain has the best health-care plan
His is the only one of the candidate proposals that has a chance of getting medical costs under control. An argument for some free-market sanity.
By Shawn Tully, editor-at-large

(Fortune Magazine) -- Fellow Americans, choose your revolution. One way or another, we're getting a new health-care system. The old one is obviously broken. The U.S. now has 47 million uninsured, and costs are out of control. The Department of Health and Human Services predicts that if things continue as they are, health spending will almost double by 2017 to $4.3 trillion, or one-fifth of GDP, vs. 16% today.

The crisis has gotten so severe that fixing the system is no longer a partisan issue. Everyone understands that something has to change, and fast. In this presidential race, both sides are proposing radical fixes that would totally transform the way health care is delivered and paid for in America. Both the Democrats and the Republicans embrace the same goals: John McCain, Barack Obama, and Hillary Clinton are all putting forth ways of making health care affordable for every American and stopping a disastrous escalation in costs. Both sides also envision a world where employers play a much smaller role in medical benefits. The differences, of course, are in the way each candidate intends to reach those laudable goals. In essence, McCain wants to create a kind of national insurance market that shoves more decision-making power into the hands of consumers; the Democrats are aiming for a Medicare-like federal superprogram. (We'll stick with the \"Democrat\" label in this story. The nominee status was still unclear at presstime, and, intraparty sniping notwithstanding, the Clinton and Obama plans are extremely similar.)

So far, the press and public haven't paid much attention to the implications of these dueling visions. This stuff is complicated, and the most revolutionary provisions are buried deep in jargon-filled position papers. But parsing the plans is worth the work: This issue is crucial to America's economic future, and the differences between McCain and the Democrats are profound.

Who has the best plan? Both have huge flaws, but on balance McCain's is better.

McCain's main pillar is the elimination of a tax break that employees receive if their employer provides their health care. That may not sound like a shocker, but it is. The exclusion dates from World War II, when the federal government imposed controls on wages, but allowed companies to compete for workers by offering tax-free health benefits in lieu of pay. The law is largely responsible for the nightmarish patchwork of corporate-provided medical plans we enjoy so much today. Employees and their unions demanded richer and richer packages, and employers complied, since they could buy far more benefits for their employees than workers could buy with after-tax dollars on their own. Americans have paid a steep price, however, by sacrificing their raises as corporate insurance bills exploded, never more so than now.

McCain suggests that we junk all that. Say you're earning $100,000 a year and your company provides about $9,000 toward your $12,000 family premium, which is about average. Today you're taxed only on the $100,000. Under McCain's plan, you'd also pay on the $9,000. That could mean an extra $3,000 or so in federal taxes alone. To compensate for the extra levy, McCain would provide a $2,500 federal tax rebate for individuals and $5,000 per family, meaning a family would simply subtract $5,000 from its tax bill, the equivalent of a big cash payment.

Here's where it gets interesting. Employers would no longer be able to buy more health care with $9,000 of their employees' money than the workers could buy on their own. The raison d'être for corporate health benefits would vanish. Employers have another compelling reason to pass the ball to the employee: While wages are rising around 3% ayear, their health-care costs are growing at three times that rate. \"I predict that most companies would stop paying for health care in three to four years,\" says Robert Laszewski, a consultant who works with corporate benefits managers. Hence, an employer that pays $9,000 for your benefits would simply pack an extra $9,000 a year into your paycheck. (Why? Because in a competitive labor market, companies would have to hand over that cash to employees or risk losing them.) So you'd have $6,000 after tax, plus the $5,000 family credit, to buy insurance. That's $11,000 in new cash that employees can set aside for health care.

So what types of policies would they buy? Employees (and their families) with corporate plans - about 150 million Americans - would probably rush toward high-deductible, low-premium insurance, and use what's left over to pay cash for routine procedures. They would couple those high-deductible policies with Health Savings Accounts, which allow families to put away up to $5,800 ayear, before taxes, for medical expenses. Those plans cost about $10,000. That's not a huge saving from the typical $12,000 corporate plan, but it's a start. More than four million Americans already have HSAs, and the McCain plan would make portable, high-deductible plans the product of choice for a new generation of healthcare consumers.

Besides eliminating the employer exclusion, McCain's plan boasts another nice feature. It would allow consumers to choose an insurance plan that suits their stage of life. If you're young and healthy, for example, you probably want the cheapest plan you can get. If you're 45 and have four dependents, maybe you want something a bit more expensive and generous. Nine states, including New York, California, and Texas already require that as many as 50 benefits be covered, a list that ranges from in vitro fertilization to mental health services to prescription drugs. These requirements increase the cost of insurance; they're a major reason young people have dropped their coverage. Under the McCain plan, insurers in any state would be free to offer the plans with a vast variety of deductibles, co-pays and benefits. UnitedHealthcare and Blue Cross/Blue Shield plans already provide a menu of packages tailored to groups as varied as Gen Xers and retirees.

The problem with McCain's approach - and it is a huge problem - is that McCain ventures so far toward total laissez-faire liberty that he risks leaving the poor and sick behind. Here's why. Perhaps his most drastic proposal is allowing the same insurance products to be sold across state lines. That seems to make sense, and maybe it does: Look what interstate banking has done for pricing and choice in financial services. But in health care, the upheaval would be so brutal that it scares even the most ardent free-marketer. Many states have some form of what policy wonks call \"community rating.\" Under pure community rating, insurers must charge all customers the same premium no matter whether they're 20 or 55, or whether they have cancer or are models of good health. McCain is targeting community rating for good reason. It forces the young and healthy to pay far more than their actual cost by making them subsidize the elderly and sick. Like the mandated benefits, it's pushed millions of Americans in their 20s to drop their health insurance.

But under the McCain plan, states with no restrictions - Pennsylvania, for example - could sell policies for 25-year-olds that cost around $1,200 a year, one-third the price in New York. Young New Yorkers would drop their plans in favor of Pennsylvania providers, forcing New York insurers to jack up premiums for people in their 50s or early 60s, who need those rich, community-rated plans that cover as many procedures as possible - but who no longer benefit from the excessive premiums paid by the youngsters. It gets worse. Anyone with cancer, diabetes, or other pre-existing conditions will see their premiums multiply too.

To his credit, McCain does have a plan for relatively young, low-income Americans who can't afford insurance. \"We would increase the tax credit according to income so that poor families could buy insurance,\" says Douglas Holtz-Eakin, McCain's policy director. But McCain sorely lacks a plan for people in their 50s without corporate benefits, and Americans with pre-existing conditions, who would be brutally stripped of coverage if insurance crosses state lines. \"For his plan to work, McCain has to tell us how he would deal with the old and sick,\" says Jon Gruber, an MIT economist. \"If McCain doesn't tax the healthy to pay for pre-existing conditions, as happens under community rating, he has to tax the taxpayer. That means his plan will require huge subsidies he's not talking about.\"

NOW FOR THE DEMOCRATS. The core of their plan is a \"pay or play\" option for employers. Large companies would have the choice of either providing benefits for workers or dropping their coverage. If they chose the latter, they would pay a mandatory payroll tax to support a new government-administered system. That system would have two parts: a Medicare-like public program, and a menu of private options similar to the generous plans available to U.S. government employees today. Workers who are self-employed or lack insurance would go straight into one of these two options. Low-income Americans would receive federal subsidies to purchase the premiums.

In practice, the system would quickly swell the ranks of Americans with government-paid health care. Remember, health-care costs are rising far faster than wages, so companies have a strong incentive to pay the tax and erase that rapidly growing burden from the books. It's also likely that the government plan will offer better benefits than many, or perhaps most, corporate plans. In fact, the Democrats call for rich standard benefits packages based on the plan offered to federal employees. Those packages would have deductibles of just $300 and offer prescription drugs, mental health benefits, and \"spinal manipulations\" (i.e., chiropractic services), among a cornucopia of other benefits. As a result, the federal plan, potentially packed with new benefits pushed for by lobbyists for various medical specialties, will quickly cause an exodus from employer plans.

The standard benefits package isn't just a bad idea because it will substantially raise the cost to taxpayers. It will also make it virtually impossible for Americans to buy insurance tailored to their needs. Suppose you're one of those 25-year-olds. You probably don't want to spring for a full-blown plan that covers old-age diseases like Alzheimer's and would rather save some money and go with a low-premium, high-deductible plan. But the Democrat approach requires that any competing plans be \"actuarily equivalent\" (Clinton's term) to the federal employee plan - which translates as a generous minimum standard for health insurance. \"With that mandate, you rule out high-deductible plans,\" says Gruber. \"It would make it very difficult to design one that would qualify.\"

The Democrat proposals have some additional drawbacks. First, the Dems want to heavily regulate the insurance industry by limiting everything from profits to marketing expenses. If the earning power of insurers is determined by federal regulators, their pricing will be too, and thus they will evolve into the equivalent of public utilities. Would you rather have medical prices set by fiat or by nationwide market competition?

Second, the Democrat plan exacerbates the fundamental problem in the American health-care system, which is that no one has any incentive to care about price. (How much is that MRI center charging for your ankle scan? Who cares? Just hand over the $50 co-pay and never you mind.) Creating a huge new medical superstructure would shift far more spending to third-party providers, chiefly the federal government, giving consumers even less incentive to concern themselves with the price of an MRI - or any other service, from an elective wart-removal procedure to a life-saving heart bypass. \"The Clinton and Obama plans would enormously increase total health-care spending, but disguise the extra costs by shifting them to taxpayers,\" says John Sheils of the Lewin Group, a research firm that does statistical modeling for health-care plans.

Despite all that, the Democrats' plan probably beats McCain's if you're scoring on political viability. Their program doesn't involve anything that smacks of a cut in benefits, and it's just easier to win with largesse.

But on economic merits, McCain wins. For all its problems, at least it puts the consumer in charge. Would that create a world where we're forced to dicker with heart surgeons? No. It will create a world where health care is treated as the precious resource that it is, rather than a costless entitlement; where nationwide competition pushes down the price of catastrophic care and consumers focus their attention and budgets on what's really crucial to their health. That's an important first step. The price of health care is never going to get under control until patients get what they deserve: the right to be customers too.

REPORTER ASSOCIATE Christopher Tkaczyk contributed to this article.

From here

[Foil]

...she hasn't gone to the doctors to have it checked on because of the amount of co-pays and deductibles on the insurance plan.

Just in case your parents don't know:

Health-insurance deductibles aren't like auto-insurance deductibles; they apply once/year, not once/incident. So if the cost of your health care in February exceeded the deductible, there won't be any more deductible to meet for your mom's care. (I'm assuming it's a family policy here.)

[Herculosis]

...she hasn't gone to the doctors to have it checked on because of the amount of co-pays and deductibles on the insurance plan.

Just in case your parents don't know:

Health-insurance deductibles aren't like auto-insurance deductibles; they apply once/year, not once/incident. So if the cost of your health care in February exceeded the deductible, there won't be any more deductible to meet for your mom's care. (I'm assuming it's a family policy here.)

Actually, that depends on the plan. Most plans that I've seen have separate deductibles for each covered individual with a max deductible cap on the family. It's common to have the max line up with 3 individuals. So, in a year, if an individual has hit the individual deductible, any changes they incur will be paid, but another individual in the family will still have to meet their own.

[dissent]

wait a minute! I thought we were having trouble NOW with the wildly escalating costs of just the Medicare entitlement plan. Now the Dems want to put pretty much everybody on government run health care??

Obama thinks health care is a right.

No problem; and we'll simplify the income tax form at the same time,

New Form 1040-EZ (well EZ for us anyway)

How much did you make last year?

Ok, well send it in.

And thanks for being a great American patriot.

[Herculosis]

So I figured I would ask the right wing extremists here for their ultimate spin...

No problem. Always willing to help out a frustrated left-wing wack-job.

Will's article is great, and goes on to explain some of the directional changes that might occur to spur competition, etc., but McCain's plan basically comes down to two new elements.

1. Families get a $5000 tax credit.
2. Health insurance benefits from you company are now taxable.

So, let's take my own case. Under my company's plan, the premium for my family is about $1,100 per month. I pay 20% and the company pays 80%. Right now, my own 20% is tax deductable, and the rest I get from the company I don't pay taxes on either.

Under the new plan, the entire $13,200 ($1,100 x 12 months) would be added to my taxable income (probably right on my paychecks). So, at 28% Fed + 7% State, I'd have to come up with $4,620 in taxes. However, I STILL get the $5000 credit. So, I'd actually be $380 ahead.

Other than that, nothing would change for me. I'd have the same plan.

Now, consider a family that doesn't have insurance. They wouldn't have any taxes added because they're not getting it from their employer. But, they would still get the $5000 tax credit. $5000 goes a lot further than $0 to purchase some kind of coverage.

Also, and again in my own case, my company has a deal that if I opt out of coverage, they'll pay me 60% of what the premium WOULD have cost. We do that because it's still an overall 20% savings to the company, and its enough money to get people to opt for coverage on a spouse's plan.
So, in addition to NOT having to pay my 20% of the premium, I could stop coverage and the company would pay me $7920 instead.

So, now I would have $7920 from the company, plus the $2640 I saved by not paying my 20%, plus the $5000 tax credit. That's a total of $15,560, which could maybe buy me a better, individual policy for my family. If I could get a better plan on my own, I would definitely do it. (Competition)

[Krom]

Health-insurance deductibles aren't like auto-insurance deductibles; they apply once/year, not once/incident. So if the cost of your health care in February exceeded the deductible, there won't be any more deductible to meet for your mom's care. (I'm assuming it's a family policy here.)

Yeah, deductibles go away for the year after you use them up but fixed co-pays (what kept my mom away) never go away unless you hit some mythical 100% coverage level. It is a family plan but it only covers my mom and my dad. I have my own personal individual insurance because I was dropped from the family plan years ago for being too old.

In the case of my personal insurance, the deductible is $500 straight up and the co-pay is 20% of the first $5000 (so $1000) and then it goes to "100% coverage" for the rest of the year. Of course this is wildly deceptive because 100% coverage of the two or three things they will actually cover, and it also has to be inside their "network" of hospitals or you pay half of the first $10,000 before you get full coverage. The policy shows what they cover, because it would require several volumes to list everything they don't cover. Deductibles are split into different categories, as are co-pays so you can be forced to pay more than once, coverage is spotty at best, there is generic "we can reject any claim for any reason" wording in the contracts, etc.

Also allowing free market forces to fix the growing cost problem is the same naive wishful thinking that got us into this current banking crisis. Do you honestly think insurance companies are letting hospitals charge whatever they want for something? You are talking about insurance companies here, if you think the government is evil you obviously haven't been at the mercy of an insurance company before. Why do you think I said it would have been easier to just roll over and die? Granted the current system does greatly encourage corruption on both sides, but I'd be more willing to trust Hitler with medical care than I would free market corporations. Faceless evil corporations, "executives", and "shareholders" have ruined our economy so many times now, and you still want to trust our health care system to them? What we have learned of free market is that they will raise the price to as high as it can possibly go as long as the market will bear it, and then when it cracks they will ask the government (aka taxpayers) to bail them out.

*************************************************************

No problem. Always willing to help out a frustrated left-wing wack-job.

Will's article is great, and goes on to explain some of the directional changes that might occur to spur competition, etc., but McCain's plan basically comes down to two new elements.

1. Families get a $5000 tax credit.
2. Health insurance benefits from you company are now taxable.

So, let's take my own case. Under my company's plan, the premium for my family is about $1,100 per month. I pay 20% and the company pays 80%. Right now, my own 20% is tax deductable, and the rest I get from the company I don't pay taxes on either.

Under the new plan, the entire $13,200 ($1,100 x 12 months) would be added to my taxable income (probably right on my paychecks). So, at 28% Fed + 7% State, I'd have to come up with $4,620 in taxes. However, I STILL get the $5000 credit. So, I'd actually be $380 ahead.

Other than that, nothing would change for me. I'd have the same plan.

Now, consider a family that doesn't have insurance. They wouldn't have any taxes added because they're not getting it from their employer. But, they would still get the $5000 tax credit. $5000 goes a lot further than $0 to purchase some kind of coverage.

Also, and again in my own case, my company has a deal that if I opt out of coverage, they'll pay me 60% of what the premium WOULD have cost. We do that because it's still an overall 20% savings to the company, and its enough money to get people to opt for coverage on a spouse's plan.
So, in addition to NOT having to pay my 20% of the premium, I could stop coverage and the company would pay me $7920 instead.

So, now I would have $7920 from the company, plus the $2640 I saved by not paying my 20%, plus the $5000 tax credit. That's a total of $15,560, which could maybe buy me a better, individual policy for my family. If I could get a better plan on my own, I would definitely do it. (Competition)

Lets plug this into my dads plan.

[edit: numbers are wrong, see my reply below] The premium for my dads plan is $1700 USD/mo, IIRC the village (*my dad is a clerk treasurer of a village) pays the whole thing, or $20,400 a year.

Under the new plan the entire $20,400 gets added to my dads taxible income (25% + ~5% state = 30%) so in the end my dad will have to come up with an additinal $6120 in taxes. With the help of the $5000 credit it reduces it to $1120 in additional tax he will have to pay... So this helps us?

[Herculosis]

I'd be amazed if you're correct on his paying the whole premium, and in a government job? If that's the case, he could do better on his own I think.

[Krom]

I just called him up, a few corrections to make: The village covers 80%, so its 80/20. If he dropped it, he would get nothing extra. And he is in the 15% tax bracket not the 25%.

Time to redo the math.

20% of 20,400 = $4080, so he would make about $75 more a month.

[Grendel]

so he would make about $75 more a month.

That will cover inflation nicely for the next few months..

[Will Robinson]

What McCains plan is trying to accomplish, besides getting more people covered is to reduce the cost to employers so they can be more competitive. I've been hearing for years how Japanese companies can build things cheaper than American companies because the unions have these expensive benefits in the labor contracts, including keeping the employees covered long after they leave the factory! Remove the health insurance costs from the product and the American companies become a whole lot more competitive.
This plan is supposed to serve both parties as well as it can be done. It needs to be effective in the part where it creats competition among insurers so the prices comes down a bit, I don't know how all that will work out.

The democrats plan is supposed to serve the politician by fooling the average voter into thinking the new health insurance with the small co pay and small deductible isn't costing him much at all and it makes the unions happy so they keep taking union dues out of workers pay and contribute to democrat politicians...meanwhile the cost to the taxpayer and the consumer goes up up up.

[Spidey]

When are people going to wise up and realize that Health “Insurance” is the biggest reason Health “Care” is so expensive. (no it’s not the machine that goes “bing”)

Let the market bear on the costs and watch them come down to earth. But it won’t happen, because…

1. The Government is the biggest part of the problem.( Medicare, Medicaid, insurance lobbyists…etc)
2. Most people are brainwashed on the subject, and can’t even tell the difference between insurance and care anymore, because of all the double speak.
3. Too many reasons to list.

Health Insurance was originally given by big business as a perk, but the price of ordinary care was still reasonable. Then Government started to get in the insurance business, and now we have the condition where the hospitals and doctors only have to treat a fraction of people in need, and still make 10 times the profit than if they were treating the entire group.

I don’t really have the time to prove my concept here, but ask yourself this…why does it cost $1200 a night to stay in the hospital (just the room) and $60 in the hotel across the street? (hint) the market bears on hotel prices

And yes, I understand the need for catastrophic coverage, and that would be reasonable if all the mundane coverage would be removed.

Also, when they succeed in socializing health insurance, every person born in America will have a price tag of at least $500,000 over their lifetime to pay to the fat cats, whether they ever need care or not.

And believe me, I understand just what it would take to make Health “Care” affordable again, but most people would rather take poison first. (because of the brainwashing) After developing Diabetes Mellitus, I did a lot of homework on this issue.

I say, if the government wants to provide health care, let them build clinics, heh, but that’s not the plan…is it? (directly providing health care would be less costly, than paying for the added fat layer)

So, enjoy your gilded cage….(sorry, that was uncalled for)

Nuff Said

[Krom]

I don’t really have the time to prove my concept here, but ask yourself this…why does it cost $1200 a night to stay in the hospital (just the room) and $60 in the hotel across the street?

$1200 a night? I suppose if you just spend only the night. The rate I ended up paying was about $4200 for one day, or $175 an hour. And out of that I spent all of about 20 minutes actually interacting with anyone, the rest of the time I was asleep.

[Will Robinson]

I say, if the government wants to provide health care, let them build clinics, heh, but that’s not the plan…is it?...

Actually that was one of the things I heard McCain mention in that last debate. At the time I thought he was just listing stuff for the sake of listing stuff but maybe both of you have a point...preventive maintenance to reduce the number of expensive hospital stays.
*************************************

Krom,
I had a similar experience in the hospital a few years back. My wife insisted I go to the doctor because I was laid up on the couch for a few days with misc. symptoms.

Long story short:
Doctor didn't know what I had, he took Xrays and every test he could, sent me to the hospital with the Xrays and other test results in hand to the hospital for one test he couldn't perform in his office...something about a possible infection of the lining of my heart!

Said he would call ahead and they could have me in and out in a few hours, promised me no admission to the hospital was necessary.

10 hours later after many tests I'm leaving the Xray room as a doctors assistant approaches me with the Xrays I brought them in her hand, she says "Oh, glad I caught you, we don't need more Xrays we already looked at the ones you brought"
I said "No, they already took a bunch more Xrays"
She says "Oh, too bad we don't need them".
My next stop was waiting in the hall for hours to get a CAT scan...

After another 24 hours they let me go home with no clue what is wrong. The doctor said "I guess it's just a virus, we'll just have to let it run it's course."
I was kind of pissed off at that point and said "Doc, on your license it says you are licensed to practice medicine doesn't it?"
She said "Yes"
I said "You guys take that literally don't you? The practice part I mean."

I started getting the bills a few days later including the one from the hospital for taking the Xrays the docotor said she wouldn't need and a doctors bill for looking at the Xrays she never looked at.
My wife's employee insurance covered a little over half leaving me with around $5000 due. There were double charges for lots of the tests and supplies, just flat out duplicate procedures, I refused to pay.

About a year later after going back and forth with them I settled by paying $1200 in exchange for a letter stating I was paid in full and they wouldn't mess with my credit report.

Now when my wife tells me to go to the doctor I ask her if she has $5000, she says no and I say don't worry I've got life insurance....

We have a family catastrophic policy with a $5000 deductible (actually it has gone up to almost $6000 in a year) I figure if one of us gets something terrible that the doctors can actually figure out it will be worth not losing our house over. Costs about $450 a month for a family of four.

[Ferno]

you spin me right round baby, right round!