McCain-Palin on Health Care: Tearing Apart the Risk Pool

Bumped up from the Forums. - Jeff

At the Republican convention, Sarah Palin mocked Barack Obama for his work as a community organizer. We shouldn’t be surprised, since community organizers seek to empower communities and bring people together. McCain and Palin are essentially community disorganizers. Take their approach to health care.

Community in its broadest sense refers to “a group linked by a common policy” (http://www.merriam-webster.com/dictionary/community). Employer-based health insurance (EBI), the means by which most people who have coverage receive it, is organized around a community of interest. As Ron Brownstein puts it: “The old and sick are subsidized by the young and healthy, who are then subsidized as they age” (http://www.nationaljournal.com/njmagazine/politicalconnections.php). This policy of community, or “risk-sharing,” ensures that everyone pays the same amount and protects us all.

McCain and Palin would tear this community apart. Under their approach, EBI would count as taxable income for employees. To offset this, McCain would offer individuals a $2500 tax credit (families would receive $5000), which they could use to buy insurance, but this would likely not be enough to replace lost EBI coverage.

If health benefits were taxable, many people, particularly younger and healthier workers, would seek less expensive, but generally inferior, coverage in the unregulated, nongroup insurance market. This would leave older and less healthy individuals in EBI, causing costs there to skyrocket and leading many employers to drop their employee coverage. Officials from the U.S. Chamber of Commerce and the Business Roundtable have warned that McCain’s approach “would accelerate the erosion of employer-sponsored health insurance” (http://www.nytimes.com/2008/10/07/us/politics/07health.html?em).

The result, as Brownstein notes, would be to fragment the risk pool and undermine the community of interest on which health insurance depends. McCain’s plan “repudiates the essence of insurance, which aims to spread risk not only across the population but across an individual's lifetime” (http://www.nationaljournal.com/njmagazine/politicalconnections.php). Rather than bring us together, it would divide us based on age, health status, and income.

Barack Obama's approach stands in sharp contrast to the McCain-Palin approach. Obama would ban preexisting condition exclusions and promote expansion of the risk pool. Individuals who are satisfied with their current coverage could keep it. Those wanting new coverage or lack insurance could buy into a plan similar to the one offered to members of Congress. Premiums, co-pays, and deductible would be affordable, and individuals, families, and small businesses needing assistance would receive it. Rather than destroy EBI, Senator Obama would build on it to expand coverage to everyone.