Understanding McCain’s Health Plan

John McCain’s plan to reform the American health care system has been getting ripped a new one by Barack Obama and his surrogates. Joe Biden described a laughable distortion of the plan during his debate with Sarah Palin last Thursday, and the Obama campaign followed up with an equally dishonest ad to ensure the fabricated details would linger in the minds of voters.

Part of the problem is that even McCain supporters don’t seem to understand his health care plan well enough to defend it adequately. Even the official campaign Web site doesn’t do a great job of laying out the nitty gritty.

That’s why this concrete example of how the plan would work is required reading.

Suppose a worker gets $50,000 in cash wages and $12,000 in health insurance.

Right now, he pays federal income taxes on the wages but not the health insurance. Let’s assume, for reasons of simplicity, that the tax rate he is paying is a flat 25% on his wages. He therefore pays $12,500 in federal income taxes. His after-tax, after-health-care income is $37,500.

Now, under the McCain plan, his employer keeps paying the premium, which is now counted as income to the worker. He therefore pays federal income taxes on $62,000, or $15,500.

But he also gets a tax credit of $5,000 for health insurance, which means that, all in all, he owes $10,500 in federal taxes, or $2,000 less than he does today. His after-tax, after-health-care income is $39,500.

Continue reading at The New Atlantis to understand how McCain’s plan would work if this same employee opted to buy his insurance directly from an insurer in the open market. The McCain campaign would be well advised to add similar examples to the official Web site.

Published by Jenn Q. Public on October 6, 2008 at 6:39 am

Filed Under Election 2008, Health care, John McCain

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