Thursday, September 18, 2008

McCain's Healthcare Plan

I've mentioned before that though McCain's domestic policy is notable for its absence, his notion of ending the exclusive tax benefits of employer-provided healthcare and instead providing tax credits for people to buy their own policies is actually reasonable. But it's received a lot of criticism from various people, with the concern being that people will see their employer insurance cut.

But here's Obama economist Furman on the impact of ending the tax exclusion:

Virtually any way of replacing the health exclusion with tax credits or tax deductions is likely to increase coverage. The current exclusion provides an incentive to go from no insurance to some insurance and from some insurance to more insurance. A reformed system would eliminate the incentive to go from some insurance to more insurance, and put much or all of those dollars into increasing the incentive to go from no insurance to some insurance. The direct effects of the tax incentive would be reinforced by the indirect effects on health spending. Over time, these effects on health spending could be quite large – lowering premiums and further increasing the demand for health insurance.

Furman goes on to describe how other policy, such as pooling mechanisms, can combine with this one to fully insure everyone. Some of these policies are included in the Obama plan, and it seems to me that intersecting the two candidates' plans is better than either individually.

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