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Mack the Quack

The disaster that is McCain's health policy.

When John McCain wants to sound like Teddy Roosevelt, he bashes the corporations that run U.S. health care with a vim and vigor that even a modern- day progressive could admire. He has railed against the tyranny of the HMOs who hold their customers "hostage." In January, during a Republican debate--a Republican debate!--he complained about the "power of the pharmaceutical companies." And, on more than one occasion, he has backed this rhetoric with action. He has formally proposed allowing the reimportation of drugs from Canada, and he even joined with Ted Kennedy and John Edwards to champion a "Patients' Bill of Rights."

For a time, stretching from the late Clinton years to the early Bush era, this put McCain in the vanguard of the health care debate. But that debate has changed significantly since then, from simply protecting consumers to overhauling the entire system. So the question is: What type of reform would he be willing to swallow in this much more ambitious moment? Probably the best clue comes from the reform plan he unveiled back in October, but has gotten little attention since. That proposal suggests he'd act less like TR than William Howard Taft--and even a little like George W. Bush.

McCain, of all people, should be sensitive to the way America's health care system fails some of its most vulnerable citizens. He is a three-time survivor of melanoma, the potentially deadly skin cancer. Although he was last treated for cancer six years ago--and although he takes all the right precautions, dutifully donning sunscreen whenever he's outside--he's still at a higher-than-normal risk of getting cancer again.

This sort of history doesn't seriously affect people who get their insurance from big-time employers. In any large organization of relatively random people--say, the employees of the federal government, of which McCain happens to be one--insurers know that most of the people will be healthy, which means premiums from those folks will be sufficient to cover the relatively few with serious medical problems.

But if McCain were, hypothetically, to shop for insurance on his own, he would discover that insurers were far less accommodating. Cancer, even one in remission, would qualify as one of those infamous "preexisting conditions." The insurers might offer him an exorbitantly priced policy or exclude coverage of anything related to cancer. Or they simply might refuse him coverage outright.

Either way, the very last thing McCain should want is to expose even more people to this sort of scrutiny--since, almost certainly, it'd leave even more of them uninsured. But it's entirely possible--some would say likely--that's what McCain's reforms would do.

The main thrust of his plan is to change the tax treatment of health benefits, which sounds arcane but could actually have far-reaching effects. At the moment, if you get your insurance through your employer, you can pay for the premiums with pre-tax dollars. In effect, a dollar your employer gives you for health insurance is worth more to you than a dollar in regular wages. If you buy insurance on your own, directly from a carrier, you get no such benefit. This distinction, which the federal government created back in the 1940s, goes a long way to explaining why, today, most working people with health insurance get it from their jobs.

Some conservatives have long argued for ending this tax preference, so that people have more options for insurance (today many employers offer limited, if any, choice) and grow more sensitive to how much their health care costs. They've also argued for related reforms, like allowing people to buy insurance across state lines--something that is now prohibited. President Bush has embraced these ideas, and, now, so has McCain. If it all works out like the wonks at the American Enterprise Institute say, a newly functioning market for health insurance will emerge: People will stop loading up on benefits they don't need or can't afford, instead shopping for bargains and demanding that insurers give them better care (whether in the form of better doctors, more aggressive primary care, whatever) at lower prices.

But there are good reasons to think that's not how it will work out. Absent a substantial restructuring of the insurance industry, the people with preexisting medical conditions--including melanoma survivors--would still struggle to find decent coverage outside of the workplace. So it's quite possible that only relatively healthy people would opt into the individual market. Once these more robust specimens fled employer groups, however, the cost of insurance for those remaining behind would go up--since insurance becomes more expensive without the contributions of relatively healthy people to offset the costs of those with high medical bills. And, as the cost of the employer insurance went up, even more people would start dropping it (or their companies might simply stop offering it). Appearing on ABC's "This Week" recently, McCain told George Stephanopoulos that "I want the families to make the choice." But, for Americans who are sick or poor or both, the McCain plan could mean fewer insurance choices than they have now--or no choice at all.

This is quite a contrast to the approach Hillary Clinton and Barack Obama are now touting. Although the Clinton and Obama plans differ in some crucial details, most notably whether to require that all legal residents carry insurance, both plans would allow people to obtain insurance regardless of preexisting medical conditions. They would do so by giving everybody access to a purchasing cooperative through which both private plans and a new public insurance program would be available. The plans would have to meet minimum standards and benefits, along the lines of what federal employees get. In other words, while Clinton and Obama would let people buy insurance on their own, they would take steps to make sure decent insurance was available to these people. McCain would do the former, but not the latter.

Clinton and Obama would also help people pay for this newly available coverage. By requiring corporations to provide coverage or pay a fee to the government, then tapping monies reclaimed from the expiring Bush tax cuts, Clinton and Obama would provide direct financial assistance to less affluent Americans. They would also use some of the money to bolster Medicaid and the State Children's Health Insurance Program, so those programs remained available for people too poor to afford even heavily subsidized coverage.

McCain, to his credit, understands that simply equalizing the tax deduction wouldn't help a lot of low-income people, since they don't pay much--if anything--in income taxes. So, in the one key (and laudible) break with conservative orthodoxy, McCain has said he would offer his new tax break as a refundable credit. Credits, by definition, are available to everybody. Better still, their value doesn't change depending on the tax bracket. Somebody making $100,000 could claim it, but so could somebody making just $30,000--for the very same value.

The McCain campaign says this will help a lot of people. And they are probably right. The trouble is that McCain's tax break--worth $5,000 to a family--still won't be enough for many others. In areas of the country where the cost of living is high, it would be less than half the cost of the average policy. As campaign officials freely admit, this means the plan won't come even close to universal coverage. Nor is it clear how serious McCain is about pushing for that amount. Unlike the Democrats, whose campaigns published detailed plans complete with cost projections and financing options, McCain's "plan" is really more a set of principles and talking points. He doesn't even bother to say how much his subsidy would cost in the end.

That's not to say that McCain has no important insights into reform. While McCain mouths all the platitudes about the inherent superiority of U.S. health care, he understands that we waste all sorts of money on care that is either unnecessary or counterproductive. To thwart this, he has embraced an idea known in wonkier precincts as "pay-for-performance" (the McCain campaign doesn't like to use that phrase, but that's how many people refer to it). Today, Medicare pays for outpatient work (doctor visits, many tests, and so on) based on the procedure. With hospital care, it's a little more complicated, but even there the rewards frequently flow to those who provide the most care rather than those who provide the best care. Under McCain's vision, Medicare would start focusing payments more on the patient's overall condition--paying, say, a fixed sum for every patient with certain types of heart disease. It would also reward doctors and hospitals that avoid medical errors.

This might seem like a lot of micromanaging for a self-described conservative. And it is, especially relative to other Republican plans. But, at the same time, it's also micromanaging without the proper information. While the Democrats also have proposed variations on pay-forperformance, they would set up new government-chartered research institutes to develop guidelines for the best medical care. The idea is to first establish the best way of treating disease and then to reward doctors and hospitals when they adhere to those guidelines. Both Democratic candidates would also provide incentives for better care of chronic disease. Whether or not this actually saves a lot of money in the long run--there's a raging debate about that in academia--it would certainly make people healthier.

For McCain, these steps apparently go too far in the direction of government-regulated health care. But perhaps McCain should consider his own experience. After the war, McCain would have been eligible for medical care from the Veterans Administration. As a member of Congress, he can get insurance through the federal employees' plan; when he turned 65, he became eligible for Medicare. It may have escaped McCain's notice, but those are all government programs. And, if that care is good enough for him, then why not everybody else?

Jonathan Cohn is a senior editor at The New Republic.