One lingering question surrounding John McCain's health care proposals had been how he would pay for his ambitious reform. Well now the campaign has answered that -- sort of.
You'll recall that McCain's initiative (summarized by his campaign here, compared to Obama's plan as part of Inc.com's special election coverage here, and dissected by the Agenda for its impact on small businesses here) would eliminate the income exclusion for employer-sponsored health benefits, replacing it with a universal tax credit to buy health care coverage, worth $2,500 for individuals and $5,000 for families. The McCain campaign has insisted that the proposal would be revenue-neutral for the government, meaning that the new taxes on the employer-paid health benefit would offset the cost of the credit. (Vice-presidential nominee Sarah Palin said so again last week at her debate with Sen. Joe Biden.) Yet the Tax Policy Center, a nonpartisan think tank affiliated with the Brookings Institution and the Urban Institute, has concluded, based on the fragmentary information available, that McCain's plan could cost the Treasury $1.3 trillion over ten years.
So who would cough up the dough? Medicare and Medicaid, the government programs that provide health care to the elderly and low-income people. That's according to the Wall Street Journal, which finally cornered McCain senior policy adviser Douglas Holtz-Eakin on the subject. Holtz-Eakin told the Journal that the campaign always intended to at least partially fund the program by shifting money from health entitlements, not withstanding the occasional public pronouncements to the contrary. But Holtz-Eakins couldn't specify how a McCain Administration would make those cuts, except to say that it would (in the Journal's words, "improve the programs and eliminate fraud" and not, it would seem, trim benefits. "It's about giving them the benefit package that has been promised to them by law at lower cost," Holtz-Eakin told the paper.
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