Universal Health Care or John Care

With the Democratic presidential race winding down, the presidential campaign can again focus on the real issues facing the country. At the top of the list, alongside ending the Iraq War, is providing universal health care.

The reform of the country's health care system is not only essential for ensuring people have access to high quality health care, it is also increasingly important for the country's economic well-being. The inefficiency of the health care system is imposing an ever-greater strain on the economy.

The United States already pays more than twice as much per person for health care as the average in other wealthy countries. This gap grows larger year by year. Just as an ever-growing tax burden can strangle an economy, so can an ever-growing burden of health care costs. We won't have to worry about tax burdens any time soon - among wealthy countries, we rank near the bottom - we do have to be very worried about the impact of health care costs.

Senator McCain has told us his plan. He wants to eliminate the employer-based system that insures most workers. Under "John Care," employers' payments for health insurance would no longer be tax deductible; these payments would be taxed as ordinary income. Instead, McCain would give each person a $2,500 tax credit they could use to buy their own insurance.

Under this plan, most employers would stop haggling with insurers and just tell workers to get their own insurance. While healthy workers might do O.K. under the McCain plan, people with serious illnesses, the ones who most need insurance, would have a very difficult time getting affordable insurance.

The basic problem is, insurers don't like to insure unhealthy people. They lose money on people who see doctors frequently, get expensive drugs and medical procedures, and spend time in hospitals. Insurers will only insure unhealthy people if they can charge them a premium that will be high enough to cover their expected costs.

When employers buy insurance, the insurer gets a pool of workers that includes both healthy and unhealthy people. When we break up these pools, the insurers get to just insure the healthy people. Senator McCain has promised to talk to the insurance industry, but unless he can convince them to stop trying to make money, his plan will lead to higher health care costs for millions of people and will leave millions more uninsured.

This is clearly not the direction we need to go. Senator Obama has proposed a plan that is intended to move toward universal coverage. At the center of his plan is the restructuring of the private insurance system, including a requirement that insurers agree to take everyone at the same price, regardless of their health. Such a requirement is an important step toward making insurance affordable to people with health problems.

At least as important in Senator Obama's plan is the creation of a Medicare-type public plan that would be open to everyone in the country. Such a plan is likely to be far more efficient than private sector plans since it won't have to waste money on marketing, high paid executives and dividends for shareholders. A Medicare-type public plan would also have the power to force the pharmaceutical industry and the medical supply industry to take sharp discounts compared with the prices they currently charge patients.

If Senator Obama carries through on this commitment, then the United States will be able to bring its health care costs under control. Also, every person in the country will soon have access to affordable health care.

However, getting from here to there will not be simple. The insurance, pharmaceutical and medical supply industries stand to lose big time in this story. The medical system's waste is their profit. These powerful industries will buy politicians, experts, news stories - they will do whatever it takes to protect their profits.

The structure of the Medicare prescription drug benefit is a testament to the power of these lobbies. The rational way to have added drug coverage to Medicare would have been simply to increase the subsidy for the program and have it also cover prescription drugs. Instead, Congress created stand-alone prescription drug plans - something that does not exist in the private sector - and prohibited Medicare from offering its own plan or from bargaining directly with the pharmaceutical industry.

This plan was a great way to increase the profits of the insurance and pharmaceutical industry, but it was an absolutely ridiculous way to provide Medicare beneficiaries with prescription drug coverage. While everyone knows this fact, even the Democratic Congress has been unable to pass legislation to fix this absurd system.

There is reason to believe important progress can be made in reaching universal coverage during an Obama administration. But no one should ever underestimate the enormous obstacles this effort will face.

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer (www.conservativenannystate.org). He also has a blog, "Beat the Press," where he discusses the media's coverage of economic issues. You can find it at the American Prospect's web site.

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