McCain Obama Health Care Debate

A major beef between John McCain and Barack Obama is their differing health care plans. Both sides say that the other candidates plan leads employers to drop coverage for their employees. Employer sponsored health insurance covers over 170 million American workers.

McCain argues that since Obama would give people the chance to sign up for insurance through a government-run exchange, employers would channel their workers into the exchange. That would mean more Americans subject to government regulations.

Obama meanwhile, argues that the McCain plan would lead employers to drop coverage because he changes the tax treatment of health benefits. No longer would workers be required to get insurance on the job in order to qualify for a tax subsidy.

McCain’s economic adviser Douglas Holtz-Eakin argues that many would stay in employer coverage, partly because of a key policy decision the McCain camp made in designing its plan. In trade for the new, generous tax credit, McCain would subject the value of health benefits to the income tax, meaning workers would have to pay taxes on the value of whatever health insurance employers provide. But neither employers nor workers would have to pay Social Security taxes on those benefits. That’s a change from a very similar plan offered by President Bush last year.
But that decision is not without consequences either. Because McCain would create a new tax break and not completely get rid of the existing tax breaks, his plan would cost $1.3 trillion over 10 years.

By contrast, Obama’s plan would cost $1.6 trillion over 10 years but eventually get insurance to an additional 34 million people.