Obama Reversing Course on McCain’s Proposal

Published June 1, 2009

During the 2008 presidential campaign, one of the most contentious areas of disagreement between then-Sen. Barack Obama (D-IL) and his opponent, Sen. John McCain (R-AZ), was over whether to tax employer-sponsored health care benefits.

Now Obama, who as a candidate opposed such a tax, has announced he is considering imposing one on Americans who receive coverage through their place of employment.

‘Height of Hypocrisy’

James Capretta, senior fellow for health care policy at the Washington, DC-based Ethics and Public Policy Center, was amazed by the Obama administration’s decision to embrace a policy it had denounced during the campaign.

“The effectiveness of the coordinated attack on the McCain health plan is surely one of the main reasons for Obama’s victory in November,” Capretta said. “Well, guess what? Not five months later, having secured the presidency, President Obama has changed his tune.”

Diana Furchtgott-Roth, health care policy fellow at the Hudson Institute and a contributing editor at RealClearMarkets.com, was equally astonished.

“This is the height of hypocrisy,” Furchtgott-Roth said. “He attacks McCain for proposing to tax health benefits, and then he proposes the same thing himself!”

McCain’s Plan Now Practical

Furchtgott-Roth believes the post-election Obama warmed to McCain’s proposal because of its practicality. It would have taxed health care benefits as income but allowed individuals to claim exemptions while giving them more control over their health care dollars.

“I like the original McCain health care reform plan, which would have been transferring the tax benefits of health care coverage to the individual rather than the employer,” Furchtgott-Roth said. “What we need to do is get the employer out of the business out of providing health insurance.

“Car insurance, fire insurance, flood insurance—these other insurance markets work fine when the consumer is chased by competitive insurance companies, but in health care it is different,” Furchtgott-Roth explained.

Calling for More Competition

“We need to change that, and McCain’s plan would have,” Furchtgott-Roth said. “There is a special tax credit that the employer is given for providing health benefits. However, we can get rid of the employer providing health benefits through abolishing that special tax credit and transferring it to the individual.

“Transferring the tax credit to the individual would create more competition among insurance companies supplying services, effectively letting the individual shop around for coverage,” Furchtgott-Roth added. “We must get suppliers chasing customers in health insurance, and this proposal would do that.”

Thomas Cheplick ([email protected]) writes from Massachusetts.