Republican Wacky Math on Health Insurance

I apologize for going off-topic and getting all political but some things are more important than technology right now. And in this post I'm responding to another blog that's nominally related to technology and society: the Diagnosis blog at The New Atlantis. They don't have comments so I thought I'd rant here.

The New Atlantis publishes some good work occasionally, but at times they stray too far into (their right-wing) politics. In a post last week called Biden's Phony Health Care Argument, The New Atlantis's "health care policy expert" James Capretta tried to set the record straight on Joe Biden's statements about McCain's health insurance plan during the VP debate — the plan where McCain wants to give you $5000 to go buy your own health insurance (actually $5000 for families, $2500 for individuals). Biden pointed out that employers are paying $12000 per person on average, leaving a $7000 gap for you to make up on your own.

Here is the first part of Capretta's argument:

Where’s the additional $7,000 going to come from?

Here’s how it would really work.

Suppose a worker gets $50,000 in cash wages and $12,000 in health insurance.

now, he pays federal income taxes on the wages but not the health
insurance. Let’s assume, for reasons of simplicity, that the tax rate
he is paying is a flat 25% on his wages. He therefore pays $12,500 in
federal income taxes. His after-tax, after-health-care income is

Now, under the McCain plan, his employer keeps paying
the premium, which is now counted as income to the worker. He therefore
pays federal income taxes on $62,000, or $15,500.

But he also
gets a tax credit of $5,000 for health insurance, which means that, all
in all, he owes $10,500 in federal taxes, or $2,000 less than he does
today. His after-tax, after-health-care income is $39,500.

Ignore the fancy tax math — it's irrelevant here. Capretta is figuring out the best case scenario — you get the tax credit and your employer still pays for your insurance. That's not very likely, given how employers will have every reason to drop health insurance coverage once McCain sets them free.

What about the other case then? Capretta:

If the worker decides to buy his insurance in the open market instead
of through the employer, the result will be the same. His employer is
indifferent to how he pays his worker as long as total costs are the
same. So instead of paying premiums, the employer pays his worker
$62,000 in cash wages and does not pay anything toward insurance. The
worker again owes $15,500 in taxes on this compensation, and he also
must buy health insurance costing $12,000. So, his pre-tax income is
$62,000, he owes $12,000 in health insurance premiums, and he owes
$10,500 in federal taxes (after claiming his credit). His after-tax,
after-health-care income is the same: $39,500 ($62,000 – $12,000 –
$10,500), or $2,000 more than today. 

First off, I love the illusion of choice — "if the worker decides" — as if everyone will have that luxury. Second, he's assuming your employer will give you a $12000 raise! Is he serious?

That second sentence is quite a howler: "His employer is indifferent to how he pays his worker as long as total costs are the same." Ha! Employers are struggling to pay health insurance costs. They want this plan because it will offload their costs to others.

Capretta also deceives by ignoring the rising cost of health insurance. For many companies it's increasing by double digits every year, I believe. Will McCain's tax rebate keep pace? How about those fantasy raises?

I'm not sure if The New Atlantis is just repeating Republican talking points on this or if this is their original analysis. My guess is the former, given how McCain and others are saying that "if you do the math," his plan will benefit you. This is some kind of math… more like nonsense and deception.

I'm no health policy analyst and I confess I don't know all the details of either candidate's plan. Nor do I think Obama's plan goes far enough, but it's clearly the better choice. More than that — it's the only choice that isn't insane.

In my fantasy world I envision a president Obama with an overpowering mandate to clean up the current messes and enact some truly rational, liberal, people-centered policies. One of which would be single-payer health care or something like it. I've been reading this new fantasy book: 10 Excellent Reasons for National Health Care (see also Physicians for a National Health Program). It's fantasy in the US, of course, but not in the rest of the civilized world.NationalHealthCare

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