John McCain has finally released a healthcare plan. But is it any good?

First, before getting into the details, let’s look at what McCain is trying to achieve. He wants a system that does not rely on employer controlled health insurance but allows each individual to choose a fully portable plan that fits their specific needs rather than having to carry a plan chosen by their employers and tied to their employment. Additionally, McCain wants insurance payments to be based on quality of care rather than on quantity of procedures performed. And, lastly, he wants a government subsidized safety net for the sickest Americans.

I find McCain’s goals to be excellent. I have long believed that our health insurance industry needs to be divorced from employer-controlled programs in order to allow more fluidity in the modern workforce and to allow individuals the freedom to purchase coverage tailored to their actual needs. This, in my mind, is a much better vision than one which believes the average citizen is either too irresponsible or too ignorant to make their own choices and needs employers and government agencies to dictate the kinds of coverage they should have.

So, how does McCain intend to achieve his vision? Well, unfortunately, it’s based on a leap of faith, even though the particulars themselves are straightforward:

* Eliminate the employer tax break on providing health insurance. Provide a tax credit of $2,500 to individuals and $5,000 to families who purchase their own coverage.

* Work with states to create Guaranteed Access Plans to cover the sickest Americans unable to afford and/or secure health coverage on the open market.

* Implement a grab-bag of other initiatives including expanding Health Savings Accounts, re-importing pharmaceuticals, increasing federal funding for research into chronic disease, allowing walk-in clinics in retail outlets (a horrible idea, btw, but that’s another post), streamlining operations and billing, reforming malpractice torts and a few other minor tweaks.

The magic bullet here is the tax credit coupled with ending the employer tax break. The desired effect is to push more individuals into the open market. Insurers are expected to react by providing far more affordable plans because, instead of just competing for large accounts, insurers will be competing for one consumer at a time. This in turn will spur an innovation in how insurance payments are made. Because the patients will have more choice and thus more power, health insurers and providers will have the incentive to base payments on quality of care (which is what the patient is actually buying) rather than quantity of procedures performed (which has created the current problem of providers and insurers playing cat-and-mouse games with billings and payments).

In short, McCain’s plan expects the free-market to be at its best: more competition equaling better products at a lower price.

From a purely market perspective, McCain’s reasoning is sound. However, we’re not dealing with luxury goods here. We’re dealing with our health. What if the market does not respond as McCain hopes and instead of having a freer more affordable system we end up with even more people who, despite the new tax credit, can’t find affordable insurance? The GAP programs will be state-by-state and may or may not be able to provide an adequate safety net.

McCain’s plan is audacious and will scare the bejeezus out of anyone who either doesn’t trust market forces or doesn’t trust average Americans to make informed decisions on healthcare. Hillary Clinton has already raised the specter of hordes of uninsured whose employers stopped offering insurance because of McCain’s plan.

However, McCain’s plan has the advantage of creating a system of choice rather than one of mandate. Plus, a truly open, competitive insurance market would ultimately create more advantages for more people than would any system conceived by a handful of government experts and insurance executives. The problem lies in figuring out how we transition to McCain’s visionary world of healthcare without accidentally creating those hordes of uninsured. How do we make sure the often moribund insurance industry actually develops the kinds of diverse and affordable plans necessary to cover the vast majority of Americans? How do we keep these companies from just sitting back and counting on the government to take care of those who can’t afford the current collection of highly limited and often prohibitively expensive plans available to individuals?

As a vision, McCain’s plan gets an A. As a practical policy roadmap, it’s a grade of Incomplete. McCain is asking too much if he thinks most of us are willing to take it on faith that his tax code changes will inspire a vastly improved system. We need more details as to how we will actually transition from our current byzantine system to one of greater choice and more sensible care. McCain’s advantage is that he’s on the road of personal choice while the Democrats are on the road of government mandates. But he’s still lagging way behind on providing specifics. Until he shores up this plan, what he’s proposing will seem too risky for many Americans.

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