Holtz-Eakin Backs Away From McCain’s ‘Key To Real Reform,’ Proud Of One-Size-Fits-All Tax Credit

During an appearance on CNBC’s Squawk Box today, Sen. John McCain’s (R-AZ) senior policy adviser Douglas Holtz-Eakin disingenuously argued that the McCain’s health care plan would “buttress” “the traditional source of health insurance” and proudly proclaimed that under McCain’s plan, Warren Buffet and his secretary would receive the same health care subsidy:

This is actually not a plan that relies on the individual market, it relies on the traditional source of health insurance, which is employers. And it would buttress that by taking the traditional subsidy, that exclusion from tax, for private health insurance and spreading it more fairly. Instead of only getting it in the employer market, you would get it regardless of your source of insurance. And you get the same amount whether you’re rich or poor, $5,000 for every working family.

Watch it:

Holtz-Eakin’s claim that McCain’s plan does not rely “on the individual market” is surprising. In fact, when McCain outlined his plan in April, he stressed the importance of giving Americans the “choice” to opt out of the employer-based system and buy insurance in the individual market:

The key to real reform is to restore control over our health-care system to the patients themselves… When families are informed about medical choices, they are more capable of making their own decisions, less likely to choose the most expensive and often unnecessary options, and are more satisfied with their choices….Americans need new choices beyond those offered in employment-based coverage. Americans want a system built so that wherever you go and wherever you work, your health plan is goes with you. And there is a very straightforward way to achieve this.

As the Wonk Room has previously pointed out, rather than building on the “traditional source of health insurance,” McCain’s plan would tear it down. By equalizing the tax treatment of employer based coverage with insurance bought in the individual insurance market, the McCain plan would remove the employer’s incentive to provide coverage and could potentially unravel the current system. Here is why:

– McCain would entice healthy workers to buy cheaper but less substantive insurance in the individual market place.

– The exodus of healthier workers from employer-pools would increase the average health care costs for sicker employees who can’t find coverage in the individual market, forcing them to opt out entirely.

In fact, the Tax Policy Center estimates that by 2013, 16 million Americans would lose the health benefits they get from their employer and the number of uninsured would increase to 55 million, 8 million more than are uninsured today.

The one-size-fits-all tax cut offered by McCain, along with numerous other factors, will contribute to the increase. Under McCain’s plan, a chronically ill older patient, who require more care or more expensive care, would obtain the same amount for health care as a younger, healthier, or wealthier American.

Sicker or poorer Americans would not be able to stretch McCain’s $5,000 per family, $2,500 per individual tax credit to cover substantive insurance policies which meet their health needs.