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John McCain’s health care plan has never really made any sense. Even a top McCain adviser seems confused about it, leading him to make an embarrassing confession that people are better off without it. A frequent criticism of McCain’s health plan is that it will cause many employers to discontinue offering coverage, forcing more people into the individual market. Those who are older or have any preexisting medical conditions would have a hard time finding affordable coverage, and the tax credit will fall far short of what coverage will cost, assuming they can find any.

CNN reviewed the health care plans of both candidates in an article which includes some of the criticism of the plan followed by a response from the McCain campaign:

Experts, however, fear that eliminating the tax advantage of employer-based coverage would prompt younger, healthier workers to leave their office plans. If that happened, costs for the remaining workers could skyrocket. Companies may drop coverage altogether.

“If companies know their employees have the tax credit, it relieves them of the burden of providing coverage,” said Sara Collins, who directs a health insurance program at the Commonwealth Fund. McCain’s plan “moves people out of the employer system and to the individual market.”

Some 74% of companies said that eliminating the tax exclusion would have a “strong negative impact on their workforce,” according to a September survey by the American Benefits Council.

Estimates vary, but the Tax Policy Center estimates that 20 million people would lose their employer-based coverage by 2018. Roughly the same number would gain insurance through other means. But, overall, McCain’s plan would do little to reduce the number of uninsured.

Also of concern, experts say, is the fact that the $5,000 tax credit would be indexed to inflation. As a result, it would not keep up with the swiftly rising cost of health care, which was soaring as much as 13% a year in the middle of this decade.

McCain advisers counter these concerns. Changing the tax treatment wouldn’t hurt the employer-sponsored system and would allow more of the uninsured to buy their own coverage, they say. Also, his advisers say a McCain administration would keep an eye on the credit to make sure it didn’t lag behind the cost of coverage, while also working to lower the rate of medical inflation.

Younger, healthier workers likely wouldn’t abandon their company-sponsored plans, said Douglas Holtz-Eakin, McCain’s senior economic policy adviser.

“Why would they leave?” said Holtz-Eakin. “What they are getting from their employer is way better than what they could get with the credit.”

Take a careful look at the last sentence. Holtz-Eakin is saying that younger, healthier workers would be better off with their current coverage than to take advantage of McCain’s health care plan. This is true as the tax credit is far less than insurance coverage costs. They are admitting the plan does not help younger, healthier workers. McCain’s plan is even worse for older, less healthy individuals who would not receive affordable coverage in the individual market. If younger people can do better without the credit, this would be even more true for older or less healthy individuals who would have even less of their insurance costs covered by the tax credit. If the plan is bad for young, healthy, old, and unhealthy individuals, what is the point in it? It would be better than nothing for those without any coverage, but the tax credit still would not be enough to pay for insurance and fails to provide the benefits of Obama’s plan.

This admission resulted in much discussion around the blogosphere. Anna Marie Cox has an advantage over many of us in having a father who is an actuary who has evaluated McCain’s plan. Cox posted this excerpt from a previous discussion of the plan:

Only about 60% of employers provide health care coverage. McCain’s program removes the incentive for employers to provide it so I expect a lot of them will stop providing it. More Americans will be on their own, those with preexisting conditions will not get insurance. And it provides no incentive for employers to start covering employees. For small businesses, the situation is worse – only about 45% provide health benefits.

The intial post reviews McCain’s plan in more detail, also pointing out the limitations for those who lack insurance:

A family with no employer health care pays an average of more than $12000 per year for insurance because individual plans are more expensive (or go without and experience about the same out of pocket heath expenses on average with a lot more variance). They get the tax credit too, so a family gets a $5000 but it still costs them $7000 per year. This may bring coverage into reach for some families, but certainly not all.

Obama also made note of this gaffe from McCain’s advisers:

“Why would they leave?” Holtz-Eakin asked. “What they are getting from their employer is way better than what they could get with the credit.”

In a speech at James Madison University, Obama said Holtz-Eakin’s remarks showed McCain’s proposals would only make the health care coverage problem worse.

“We were offered a stunning bit of straight talk — an October surprise — from his top economic adviser, who actually said that the health insurance people currently get from their employer is — and I quote — ‘way better’ than the health care they would get if John McCain becomes president,” Obama says in the speech. “Now this is the point I’ve been making since Senator McCain unveiled his plan.

“It took until the last seven days of this election for his campaign to finally admit the truth. But hey, better late than never.”