Nalysis fo John McCains Proposal for Health Care Reform


In the current presidential campaign, the two candidates offer markedly different proposals for reforming the U.S. health care system. For this assignment you are asked to evaluate the implications of the McCain proposal. I specifically want you to focus on what I perceive as the three key aspects of his proposal:

1.The current implicit tax subsidy provided for employer-based coverage would be eliminated. That is, for a worker receiving health coverage through his/her employer, the premium would be treated as part of the worker s  income and taxed (under the personal income tax) the same way that wages are taxed. In place of this subsidy, consumers would receive a refundable tax credit if they obtain health insurance, regardless of whether the insurance is obtained through one s employer or purchased on one s own (i.e. in the  nongroup market ). The size of the credit would be $5000 for persons purchasing family coverage, and $2500 for persons purchasing individual coverage.

2.The nongroup market for health insurance would be  deregulated by permitting the purchase of policies across state lines. Currently, insurance purchased in a given state must adhere to the insurance regulations that are legislated in that state. In some states, insurers are restricted from charging different premiums for the same health plan when sold to different consumers (i.e.  community rating laws). States also vary in whether they mandate coverage for different types of medical expenses. The document posted here indicates the types of  coverage mandates that exist in various states: CAHI_Mandates_2004.pdf

3.Finally, the federal government would provide funding for states to each administer a Guaranteed Access Plan. Similar types of  GAP plans already exist in several states. The idea behind these plans is to provide coverage (at subsidized premiums) to persons unable to afford coverage in the nongroup market due to pre-existing conditions.

Focusing on these three aspects of the McCain plan, your task is to analyze the implications of these proposals (if enacted) as they pertain to the markets for health insurance and medical care. Specifically, the following types of questions should be addressed:

” How will rates of insurance coverage be affected?

” How will this affect the source of coverage?

” How will this change the types and level of coverage that consumers have?

” How will premiums be affected?

” How will medical spending be affected?

” How will the answers of these questions vary for different types of consumers?

” How will the implications evolve over time?

Obviously, the answers to these questions are not entirely knowable. If you think the implications of the McCain plan are ambiguous in some respects, explain why.