The Schrug

Take a look at John McCain’s proposal for health care reform:

While still having the option of employer-based coverage, every family will receive a direct refundable tax credit – effectively cash – of $2,500 for individuals and $5,000 for families to offset the cost of insurance. Families will be able to choose the insurance provider that suits them best and the money would be sent directly to the insurance provider. Those obtaining innovative insurance that costs less than the credit can deposit the remainder in expanded Health Savings Accounts.

If I’m the insurance industry, this just says to me “oh, look — free money. Now we don’t have to worry as much how to keep premiums down because everyone can pay for it.” So for a year or two everyone’s offering plans that come in with premiums around $2,500 per person. (No mention of exclusions, co-pays, and deductibles, by the way.) But what happens as health care costs continue to go up and the premiums are forced higher? Whether the tax credit gets increased or people have to dip deeper into their wallets to make up the difference, either way we end up right back where we started.

You think market forces will keep premiums down? They haven’t yet. Why will they with McCain’s plan?

I actually agree with a lot of the ideas stated on McCain’s health care page, but any system that continues to rely on the current system — dominated by for-profit health insurance plans — is doomed to fail.