More of the Same; Obama's Health-Care Distortions

The Washington Times (Washington, DC), October 9, 2008 | Go to article overview

More of the Same; Obama's Health-Care Distortions


Byline: Gary Andres, SPECIAL TO THE WASHINGTON TIMES

Sen. Barack Obama lambasted Sen. John McCain this past week on the issue of health care and taxes.

In stump speeches, new ads and in Tuesday's debate, the Democratic nominee admonishes: But here's what he won't tell you: McCain would make you pay taxes on your health benefits, taxing your health care for the first time ever, raising costs for employers who offer health care so your coverage could be reduced or dropped completely. Yet Mr. Obama is leaving out a critical part of the McCain plan: a central detail that provides significant tax relief for the middle class, addresses deficiencies in America's health-care system, and means no change in tax expenses for employers providing health insurance.

Mr. McCain's health-care plan does indeed propose having employees pay tax on employer-provided health benefits, but that's only half of his idea. Let's say you're a middle-class family of four earning $80,000 per year, and your company provides a $12,000 health insurance plan (which is the same as what members of Congress receive through the Federal Employee Health Benefits Program, according to data prepared by the Senate Republican Policy Committee). Under Mr. McCain's proposal, this family would now pay income taxes on their $12,000 health insurance benefit, resulting in them owing $3,000 more in taxes if they were in the 25 percent bracket.

But here's the part Mr. Obama leaves out. Mr. McCain also proposes a $5,000 credit to offset any new tax liability. In the case of the family referenced above, they get a health-care plan, enough money to pay the additional $3,000 in taxes, plus an extra $2,000 in their pockets - not a bad deal for the middle class. So the Obama ads are both incomplete and misleading.

Mr. McCain's idea also underscores another needed reform - showing people that employers don't really pay for health benefits; workers do, in the form of lower take-home pay. Clarifying the question of who really finances health care will help realign incentives, reduce costs and spur needed reforms.

Experts agree that employees pay for their health care through lower wages. For example, in an article in the March Journal of the American Medical Association, titled Who Really Pays for Health Care? Ezekial J. …

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