John McCain's 'Underwear Gnome' Health Care Plan Will Leave You Feeling Naked

There's an episode of the animated show "South Park" in which the young protagonists stumble upon a netherworld inhabited by gnome-like creatures whose sole purpose in life is stealing people's dirty underwear.

Curious, the boys investigate and uncover the underwear thieves' master plan, which goes like this:

Step 1: Collect Underwear

Step 2: ?

Step 3: Profit!

At first glance, John McCain's health care plan makes about as much sense. The policy -- typically light on details to avoid getting tripped up by those pesky factual analyses health care advocates are always waving around -- is focused on using the "miracle of the free market" to control costs by giving individuals more choices.

Step one: Increase Americans' "freedom" and "choice." Step three: Profit!

Missing is step two. There's a brief but vague mention of a greater emphasis on preventing chronic illness and an equally fuzzy paragraph on improving information technology, and McCain says he "will look" to re-importing pharmaceuticals, but there's very little meat to the section on controlling costs. McCain does slip in a proposal for "tort reform" to stop "endless, frivolous lawsuits" -- a favorite conservative myth that has been long debunked in academic literature (when one includes jury awards, legal fees and insurance costs, lawsuits account for less than one-half of 1 percent of U.S. health care spending -- a drop in the proverbial bucket).

But the problem is ultimately a matter of perception. Most of us think a health care policy should improve Americans' well-being, control spiraling costs and provide access to care for the close to 50 million citizens who lack coverage today. But McCain's plan is designed to improve the health of corporate America's bottom line at the expense of working individuals and families. The goal is to shift the burden of an incredibly overpriced and inefficient health care system from employers and the government onto the backs of working people themselves -- to have them carry the load while doing very little to lighten it.

It's a continuation of the kind of compassionate conservatism that political scientist Jacob Hacker has dubbed "The Great Risk Shift." Hacker defines it simply as "the growing transfer of economic risks and responsibilities from employers and governments onto workers and their families."

When one understands what the intent of the plan is, it's actually pretty well designed.

McCain would start by eliminating the 60-year-old tax exemption on health benefits provided by employers. Like most Republican "ownership society" proposals, there's a carrot: He'd give individuals $2,500 and families $5,000 in refundable tax credits -- basically paying them to go it alone.

The problem with this aspect of McCain's plan is not the ideology as much as the math. According to research by the Kaiser Foundation -- considered the premier source for data on health care costs -- the average cost of employer-based health care plans is around $4,500 for an individual and $12,000 for a family. Of that $12,000 to cover a family, employers in 2007 paid an average of around $9,000.

(click for larger version)

As Don Pedro at Economists for Obama points out, middle-class families with health insurance from their employers -- say, for example, a married couple making between $63,000 and $128,000 -- would certainly have more choice. They could choose to pay an extra $2,250 each year in taxes to stay on their employer-sponsored plan (that's for couples in a 25 percent tax bracket, so it's a quarter of $9,000), or they could take their $5,000 tax credit and buy their own plan, at an average cost of around $9,000 for comparable coverage (that's the cost for comparable plans purchased on a non-group basis, according to AHIP's Center for Policy and Research, the insurance industry's research arm), which would effectively increase their out-of-pocket medical expenses by around $4,000. But Pedro only looked at marginal tax rates, ignoring the fact that those benefits would also be subject to payroll taxes. So add another $600 to that IRS bill.