McCain would cut Medicare to pay for health tax credits

John McCain would make “major reductions to Medicare and Medicaid” to save enough money to finance tax credits for people who buy health insurance, the Wall Street Journal reported.

That would mean up to $1.3 trillion in cuts to the health programs over ten years, according to independent analysts quoted by the Journal.

McCain has proposed giving tax credits -- $2,500 to individuals, $5,000 to families – to help offset the cost of buying insurance.  To pay for this he would require individuals who get employer-provided insurance to pay income tax on the value of that benefit – something they get tax free now.  For example, a CWA member who gets a family policy worth $12,000 a year as part of contractual benefits would be taxed as if she had an extra $12,000 in income.  Those with the best benefits would end up paying more in taxes, those with thinner or no benefits would see a tax reduction.

Even imposing income tax on benefits, however, isn’t enough to pay for McCain’s proposed credits. A nonpartisan analysis found McCain’s plan is short $1.3 trillion over 10 years.  Some have assumed he would pay for them by adding to payroll (Social Security and Medicare) taxes.  But his top economic advisor told the Journal he wouldn’t do that.  Instead, the advisor said, he would get the money by “eliminating Medicare fraud and by reforming payment policies to lower the overall cost of care.”

So, you don’t have to worry about McCain increasing your payroll taxes, and you don’t have to worry about McCain increasing the deficit with his health plan.  You merely have to worry about him cutting more than a trillion dollars from Medicare and Medicaid, the programs that protect the elderly and the poor.

And you still have to worry about income taxes on your benefits.  And you still have to worry that – as many experts predict – employers will drop health benefits when the tax preference is taken away.

Even business groups haven’t been supporting McCain’s plan. “Officials, with organizations like the U.S. Chamber of Commerce, the Business Roundtable and the National Federation of Independent Business, predicted in recent interviews that the McCain plan, which eliminates the exclusion of health benefits from income taxes, would accelerate the erosion of employer-sponsored health insurance and do little to reduce the number of uninsured from 45 million,” the New York Times reported.