Short answer: No. The exchange, which offers subsidies for low- and moderate-income people, was designed to provide new options for people who don’t have access to health insurance. Senator McCain’s health plan clearly reflects a belief that we need to put as our first priority getting at the things that make health care so expensive and frustrating for consumers rather than, as he would put it, promising everyone a painless access to a system that isn’t working. But McCain’s market proposals would create a more vibrant individual health insurance market and reenergize what has become a smaller portion of the business.
His focus here is on making individual health insurance lower in cost so people can buy it. Creating one national health insurance policy form, which would save insurers the need to comply with insurance regulators in each of the states, would make things more efficient. Providing tax credits of $2,500 to individuals and $5,000 to families as an incentive to buy health coverage.
Apparently, McCain would also attempt to do away with many of the state benefit mandates that are often pointed to as a cause of higher health insurance costs by giving consumers a federal policy option. The President called for ending the longstanding tax exemption consumers get on any health insurance benefits paid for by their employer. McCain makes the common sense suggestion here to deliver care in more efficient places.
McCain would also end the employer tax exemption—meaning that if an employer spends the average $12,000 a year on family health insurance, the worker would now have a tax bill on the portion of the $12,000 of benefits paid for by the employer. McCain would give each single person a $2,500 tax credit and a $5,000 tax credit for a family who had health insurance. If a person is in a 15% tax bracket, a $15,000 tax deduction is worth only $2,200 off their taxes toward their health insurance bill.
President Bush’s 2008 budget numbers actually showed a lower cost program in the long run for the government as health care inflation out-striped his new deductions. With the average cost of employer-provided family health insurance at $12,000 a year, a $5,000 tax credit will often come up way short—especially for higher age people and those who don’t have the benefit of an employer contribution. High deductibles and HSA plans will help but families who don’t have employer contributions should be prepared to pay at least a few thousand extra dollars. Again, the big question is how does McCain see his individual health insurance market working.