The Obama "distribute the wealth" tax cut for 95 percent of Americans is really a $1,000 welfare check to 50 million Americans who currently pay no income tax. Imagine instead, using that $50 billion to fund health care for the uninsured. The "McCaincare" voucher system does that. Why didn't the Democrats think of it?
Of the 46 million uninsured Americans, about 10 million are regularly uninsured, according to the U.S. Census Bureau. The vast majority are temporarily uninsured, either because insurance is too expensive, their employers don't offer it, they are young and healthy, they are illegal residents, or they prefer self-pay (e.g., the Amish).
The vast majority of the uninsured are temporarily unemployed. Health savings accounts solve this problem because they stay with the owner. If you lose your job, your HSA stays with you, allowing you to pay health expenses and continue payment of premiums. And under McCaincare, it is funded by a voucher, a $5,000 tax credit for families and $2,500 for individuals. McCain vouchers, in combination with health savings accounts, would provide universal health care coverage and control cost, tackling challenges from the health care mess.
Under McCaincare, companies large and small will probably offer health savings accounts. Health savings accounts are a combination of insurance, out-of-pocket expenditure, and personal savings. Health savings accounts are increasingly popular in America and are proven successful in South Africa and Singapore, according to the National Center for Policy Analysis. Six million Americans currently have health savings accounts. Large employers such as Medtronic, Raytheon, Textron and the University of Minnesota have HSA programs. Small employers will offer their employees HSAs because they are cheap to set up and the McCain voucher would fund it.
Under McCaincare, your employer will continue to provide a health care benefit. Simply put, employers have an interest in a healthy, productive work force. Employers will continue to enjoy the FICA tax exemption for their contributions toward the purchase of your health insurance. The changes under McCaincare will include increased choices of health care plans and a different tax treatment.
Your 1040 form will change. Your health dollar benefit will appear on a new line designated "other income." This will result in a higher tax that will be offset by the McCain tax credit. You will net a positive advantage, unless you are in the highest tax bracket. This corrects that regressive taxation in which the high wage earner receives a larger tax deduction than the low wage earner. This plan is more fair.
By not supporting vouchers and HSAs, "Obamacare" maintains the current unfair regressive taxation on health care benefits. The reason is hidden: Obama's real plan is to introduce government-sponsored health care. He will offer government-supplemented plans to compete against private insurance. Private insurers will not be able to compete with the U.S. government. The end result is a single-payer system.
Under McCaincare your employer may offer new insurance options, including plans from other states. Some of these plans will cost less because they will not be subject to mandates. Mandates may require that your health care plan include coverage of certain benefits, providers or beneficiaries. Mandates raise the cost of health plans by 20-50 percent, and Missouri has 39 such mandates, according to a report by the Council for Affordable Health Insurance. Our legislators busily increase that number by about 4 percent per year. Obamacare adds another mandate, the so-called employer mandate, forcing every employer to provide health care coverage. This places another burden on small companies that are struggling to survive and drives up the cost of health care for everyone.
Health savings accounts introduce powerful incentives into the health care system by empowering patients to be thrifty and elect a healthy lifestyle that keeps their money in the bank. The HSA accumulates money during healthy years and pays out money to cover illness. It can be used to pay for long-term care currently not covered by Medicare. At death, the HSAs are passed to the heirs. A study of employee health claims at a large manufacturing company found that 95 percent of employees would retain at least 20 percent of their HSA contributions and 80 percent would retain over half of their HSA contributions, according to a report by the National Center for Policy Analysis. That is money that could cushion future medical needs in retirement.
The notion that HSAs are only for the rich has been debunked. The Urban Institute found that "on average, lower wage workers would benefit from switching to HSA/catastrophic plans," and the vast number of patients would be financial winners, according to a report by the National Bureau of Economic Research.
Health savings accounts also reduce the administrative cost for small expenses. It typically costs about $25 just to process a health care claim. By reducing the number of claims, a physician organization in Washington state reported saving their cash-paying patients 50 percent or more on the dollar, according to a report from the National Center for Policy Analysis. No claim needs to be filed when you simply pay with your HSA debit card.
The HSA restores the patient as a medical care decision maker. As the patient gains individual responsibility, the central planner and gatekeeper roles are diminished.
There is a clear choice on health care on Election Day. McCaincare offers responsible freedom of choice and compassion for the medically needy. Obama and Pelosi will target HSAs for extinction, perpetuate the current system, and eventually rob Americans of the incentive to rein in health care cost.
Dale Vaslow is the president of the Boone County Medical Society. His columns also appear in the group's monthly newsletter, Prescriptions.