In the Future We'll All Have 15 Minutes of Fame and 15 Minutes of Health Care

John McCain's health care plan will continue to give Americans the option of employer-based coverage and every family will receive a direct refundable tax credit of $2,500 for individuals and $5,000 for families to offset the cost of insurance. In order to pay for the insurance tax credit that he proposes, McCain will tax the money spent by employers on our health care. Currently, the 140 million of us who get health care for ourselves and our families through our jobs do not pay taxes, either income or payroll, on this part of our compensation.

By ending that tax exclusion, McCain's plan actually would lower taxes for people making around $100,000 or less per year. But that only illustrates that the plan wouldn't pay for itself because it cuts certain taxes more than it raises others. In last Thursday's debate, Governor Palin said that McCain's health care reform proposal is budget neutral. How?

Well, in order to keep the plan budget neutral, McCain will cut Medicare and Medicaid spending. This was confirmed last Sunday by Douglas Holtz-Eakin, McCain's senior policy adviser. The nonpartisan Tax Policy Center, a Washington think tank, estimates that the McCain plan would cost the government $1.3 trillion over 10 years and allow approximately 5 million more people to get insurance.

Without the tax credit that McCain wants to get rid of and with your new right to find your own insurance, why will your employer offer a health care plan? They probably won't. Paul Fronstin, a senior research associate at the Employee Benefit Research Institute, put it this way: "You'll start to get a cycle where people at the margin start to leave employer coverage for individual coverage. At some point employers will start to ask: Why am I doing this if my workers don't value it anymore? If I don't need to be competitive in the labor market, why should I do it?"

I have heard a rumor that McCain's plan will charge your employer an additional $9,000 if they do not offer a health care plan (I cannot find mention of this anywhere in his campaign literature), but that wouldn't make any sense because every single business that does not provide health care would have to be charged that amount for every employee. Don't McCain and Palin love small business owners who currently don't provide health care?

Anyway, now you have to go out and buy insurance because your employer dropped their health care coverage. You have $5000 (maybe $14,000 if you're lucky) to get a policy for you and your family. McCain thinks that by having this many people flood the insurance market that it will become a pure and perfect market. Unfortunately, those only exist in theory (if you don't believe me, please see stock market).

These are the six criteria for a pure and perfect market:

1. Every industry must have hundreds of firms and potential entrants, each firm with tiny shares of the overall market.
2. Potential entrants must have equal and virtually cost-free access to the industry.
3. Each firm must be completely devoid of any power to influence the price of his product or to alter his market share.
4. The products and services of each firm must be virtually indistinguishable from those of other firms.
5. Profits are non-existent; if they exist there is an imperfection because prices would be too high.
6. Every firm, consumer and investor must have cost-less and "perfect information" about the state of prices, production, employment and markets as well as of each others' intentions.

These unobtainable criteria doom McCain's plan to certain failure. Health care prices will soar (they are already three times the national inflation) and coverage will suck. Wealthy people will have great health care and the rest of us will have to get by on what we can afford. And if you have pre-existing conditions, good luck getting someone to insure you. Thanks goodness for Medicare and Medicaid...oh, wait...at least your death will be painful in your squalid little apartment or van down by the river.