October 16, 2008

Joe the Plumber and McCain's Health Plan

We now know more than we ever wanted to know about Joe the Plumber (who, it turns out does not actually have a plumber's license.)

I am, personally, puzzled by the fact that the McCain campaign has made this guy the poster boy for the working class. We have some plumbers in our extended family, including one who runs his own business, and though they too often work 10 hours a day--that comes being in with the plumbing business--their income is far under that $250,000 level where a 3% tax increase Obama is suggesting would kick in.

That the Republicans consider a taxable income of $250,000 to be even "middle class" suggests to me just how out of touch they are with the financial realities of the lives of the true middle class. To have a taxable income of $250,000 you have to have a gross income of at least $300,000. If you are a small business owner who can deduct expenses, you would need to have a gross income somewhere near $380,000.

But since McCain wants us to consider Joe Not-Really-A-Plumber as an important part of this election, it is worth taking a moment to consider what happens to Joe under Senator McCain's proposed health plan.

Right now, despite his much vaunted dream of buying a business, Joe is an employee. Under McCain's plan, the cost of the health insurance his employer gives him now will become a part of his taxable income. The tax exclusion McCain has touted means that a portion of the cost of the policy will be excluded from taxes. $2,500 for an individual or $5,000 for a family.

But any amount of insurance he is getting from an employer that costs more than that is going to be taxed as income. Since most employer-sponsored family plans cost about $12,000, the day McCain's plan becomes law, Joe will have $7,000 more taxable income.

If Joe really does make $250,000, he is already in the 33% tax bracket. So under McCain's plan he will have to pay an additional $2,300 in tax on his existing health benefit.

Now Joe's whole objection to the Obama tax plan was the additional tax he'd be paying on his taxable income over $250,000 would make it impossible for him to buy the business of his dreams.

Sot it looks like Joe is not too good at math, because it is clear he's going to be paying a lot more new taxes under McCain's plan, with that newly taxable health benefit which raises his taxes no matter what he earns, than he is under Obama's plan which only raises taxes 3% on the taxable income he earns that is over $250,000.

And of course, none of this even gets into the issue of what happens to Joe's income stream if he, Mrs. Joe, or Joe Jr. are diagnosed with any form of diabetes. Nothing in McCain's plan guarantees that he or his employer will be able to find affordable insurance that covers pre-existing condition or that covers things like the pump or CGMS Joe Jr. might need.

The Chamber of Commerce and Business Roundtable, two highly conservative business lobbying groups, have both stated that they believe McCain's health plan to be deeply flawed and likely to increase the number of the uninsured, not lower it.

Rather than repeat the reasons why, I'll give you the link to the article that reports on why they feel this way:


New York Times: Business Cool Towards McCain's Health Coverage Plan


One last thought: McCain has claimed a couple times during the debates that the best thing about his plan that it will allow people to buy insurance across state lines.

Well, crossing state lines to buy insurance sounds like a great idea, until you realize that the affordable plans that actually cover what people need to get covered almost always are HMO or PPO plans. These plans are able to save money and lower costs by limiting the doctors, pharmacies, and hospitals you can use to those in a certain geographic area with whom they have negotiated hefty discounts.

And that's why out of state plans are not a solution: If Joe buys into the excellent plan I can buy in Massachusetts (which will cost about $12,500 for his family and still have some hefty deductibles he'll have to meet) he will have to cope with the fact that the plan obliges him to use doctors or visit hospitals in the Western part of Massachusetts which might be a bit of a drive from his home in Central Ohio.

If he buys a cheap plan sold in TX where there is, in effect, no regulation of health insurers, he may be able to see a local Ohio doctor, but he better be sure he or his family do not have any preexisting conditions because the plan won't pay for treatment for any condition that they can in any way link to a preexisting condition. And he better realize that the way they define "preexisting condition" in TX can be very broad.

Years ago, when I was running a Forum for computer consultants I heard from one man who had bought a Texas plan marketed to the "self-employed" that would not pay for the expenses of his wife's stroke simply because she had been diagnosed with mitral valve prolapse, a usually benign condition that affects 17% of all young women which has never been shown to cause stroke.

And I myself years ago was stupid enough to buy a health policy from a company that sells mainly to the self-employed. The premium was quite affordable. Unfortunately when I had claims, though the policy said it would pay 80% of my claims, the company refused to pay more than 50% of any claim I submitted.

I later learned, by reading an article about that company in the Wall Street Journal, that it remained profitable by pursuing a policy of refusing to pay claims in full knowing that most policy holders could not afford to go to court to force payment. That company, Golden Rule, is still in business and still marketing to small business owners.

That is why a simplistic solution like letting people cross state lines to buy insurance is not going to solve the health insurance crisis.

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Update 2:52 PM: The NYTimes reports that Joe the not-a-Plumber is not only not a licensed plumber, though he is working as a plumber in a town where a valid license is required, he's fraudulently claiming to be a member of a union he isn't a member of, he hasn't paid the taxes he already owes, and he is registered to vote under another name than the one he uses in daily life.

Once again, it is clear McCain doesn't have staffers able to check out anyone's background before making them the centerpiece of his campaign.

New York Times: Joe in the Spotlight

McCain may have ruined this poor schnook's life, by cynically and very clumsily trying to use him to score political points. Shame on him!

18 comments:

tmana said...

On the flip side... I have a PPO plan through a national provider (United Healthcare) which has network physicians and specialists throughout the United States. Because it is through my most recent employer (I'm still on COBRA), it covers pre-existing conditions. The plan has a reasonable deductible for a single person -- about an average deductible for a family. Which is to say that this sort of coverage is possible under a free market system. You just have to look for it, or be lucky enough to have an employer who looks for it.

Anna said...

I'm not wild about Obama's health plans either (whose idea of preventive medicine is more and earlier testing, which leads to more expensive tests and treatments in the long run, instead of *truly* preventive care - like nutrient rich traditional diets instead of low fat highly processed industrial foods - that promote good health, strong bodies and properly functioning immune systems, thereby avoiding most illnesses and the need for extensive testing in the first place), but McCain is truly out of touch with reality on most of his proposals, including his "fix" for rising health care costs.

Wonder if Joe has plumber butt* - maybe that qualifies him to claim a plumber occupation, but counts as a pre-existing condition by an insurance company?

* I realize plumber's aren't the only ones with excessive butt cleavage, btw.

Jenny said...

Unfortunately, once the COBRA period expires, you are likely to be dropped from your current excellent health plan.

At that point, you may suddenly understand why so many people believe there is a serious health insurance crisis in this country.

People with employer paid health insurance often have no clue until the day when they lose that employer plan have to go out shopping.

Been there. Done that. What a nightmare.

Scott said...

Although I am only lukewarm to Obama because I think a) he's promised more than he'll be able to deliver and b) his plans are lacking a lot of specifics we as voters will need to truly evaluate. Still, Obama's plan is light-years ahead of McCain's and he has modified major parts to look a lot more like former primary rival Hillary Clinton's plan. But the time for "discussion" in Washington has long since passed; they have discussed for the past 15 years and done absolutely nothing about the problem. We need to try something, and if it doesn't work, fix it, but how much longer does our government think we can continue to "investigate" and "debate" proposals?

Marina Martin said...

I have been a type one diabetic for 15 years and I'm frustrated to read opinions like yours. I have almost always been self-employed and even when given the option have always chosen to pay for my own health insurance. I don't want to be restricted to options provided by an employer.

Your methodology for determining that buying health insurance across state lines is bad is flawed. Competition would encourage various insurers to offer better benefits to attract more customers from other states - it would not encourage fewer benefits. If Texas has lousy laws, then more Texans would buy insurance out of state. Currently, Texans have no choice BUT to buy premiums under Texan law.

I live in Washington state and have fantastic coverage through Regence Blue Cross, with a nationwide network of doctors, a $500 deductible, and extensive coverage of diabetic and non-diabetic expenses alike. I pay $203/month for individual coverage. With McCain (who I do not love, but like much more than Obama) anyone in the country could get this plan, and diabetics would have *greater* access to affordable healthcare.

Anonymous said...

Two hundred dollar a month coverage for individuals with a pre-existing condition? I'm from Washington State, and I can tell you that the previous person is either not telling the whole story or not aware of the whole story. Brother pays over $800 a month because of pre-existing conditions. and that was an improvement over what he paid previously. ROBLL

Jenny said...

Age has a lot to do with people's rates. If someone is in their 20s, their rate may be reasonable.

Hit 40, and rates rise very fast. By 60 they are exorbitant.

When we hit 65 and qualify for medicare some things get better, but some get worse. For example, I've been told by one Type 2 who is using insulin that there is a limit of 100 a month for test strips.

Anonymous said...

marina martine fails to recognize the advocacy provided by state government when something goes wrong. As we saw with credit cards, banking industry, etc., if an out-of-state policy fails to meet expectations, where does the policy holder turn for redress. Is he going to drive to the state where he obtained insurance and petition the state's AG or Consumer Rights Department? Good luck. If he seeks redress within his own state, it is also reasonable to expect that no advocacy will be available. "American independence" has a lot going for it . . . but in the matter of obtaining health insurance, McCain's plan (in re: interstate competition) is tragically flawed.

Renate said...

@marina. How on earth did you get coverage, and at that price, from Blue Cross? They denied me outright, when I was self employed, and cited the diabetes diagnosis as the reason.

Anonymous said...

I don't think raising taxes is the answer and I don't think throwing money at problems is the answer. The real problem with type 2 diabetes is education, most notably PE in schools. Maybe if the school system in the state I grew up in took PE seriously, I would not be obese nor would I be going blind from retinopathy. Maybe if prevention was the issue and not treatment after the fact, I would not be crippled by neuropathy. The last time I checked,(at least without coke bottle glasses) the federal government has proven to be commpletely incompetent in handling money. (See the bailout.) What's more, my diabetes is my problem not my neighbor's.

Jenny said...

The republican's keep yammering on about raising taxes, but the only taxes getting raised are on people like Cindy McCain who have 5 mill in taxes.

MY taxes (property taxes) have been raised A LOT over the last 8 years because the Feds under the Repubs did NOT keep funding a lot of things that helped out our schools, roads, cops, etc, and now we are funding them out of our very small rural communities property taxes.

And my insurance premiums are twice what they were when Bush took office because I am paying for all the uninsured who go to the emergency room every time I go to a hospital and because I'm paying for all the medicare patients who see my doctor and whose medicare only pays him $25 an appointment.

People don't understand that SOMEONE has to pay for this stuff, and if it doesn't come from direct income taxes it will come from some other, less fair source.

And the people who get most hurt here are the people with enough assets to own a middle class house and retirement savings and hence have property taxes and enough assets that if they aren't insured but go to the ER, they will be billed many thousands of dollars they must pay or go bankrupt and lose their retirement saving.s

John C. said...

You're sure only people like Cindy McCain will be paying more taxes? Obama voted to raise taxes on people earning $46,000 per year.

Somebody does have to pay for all this spending that both Democrats and Republicans keep adding. You are correct. Why are you unhappy that YOU have to pay taxes for roads, schools, and cops, but think that all the Republicans should be happy paying taxes for Barney Frank's and Chris Dodd's health care?

Jenny said...

The claim that Obama voted to raise taxes on people making more than $42K has been thoroughly debunked. The Republicans are so desperate that their only remaining strategy appears to be to keep repeating things that aren't true, knowing that there will always be a few people who don't read or research who will be taken in.

Note to anyone considering commenting: I am not publishing any further comments that do not respond to the points made in the post about the competing health care plans.

Rad Warrier said...

One reason I returned to Canada from US is health care. Even with the 'best' (people told me it was one of the best) group health insurance my employer provided, I had to 'co-pay' for any medicine I purchased (I remember that the co-pay varied according to the nature of the medicine), and pay $20 (if I remember right) for every first visit to a specialist. I had to make co-payment of $250 for the unnecessary colonoscopy I underwent (just because I was over 50). Of course health care was just a minor reason for coming back to Canada - the most important reason was housing. I would have had to shell out $900,000 for a house in eastern Massachusetts similar to the new one I bought here in south western Ontario in Canada for $300,000. No wonder the house prices went burst later in the US. And if ever Canadian health care gets worse, I have always the option to return to India where health care is far less costly, and the quality far better than in the so called "developed" countries.

Anna said...

Admittedly, I'm no tax expert; heck I still even do our household income taxes with TurboTax, not a team of tax attorneys and CPAs. But some tax news caught my attention yesterday. Cindy McCain took a big cut in her earnings in 2007, apparently due to investment losses.

Cindy McCain's recently released 2007 tax records show about a 26% tax rate on earnings, with over $500,000 in deductions alone. 26%, that isn't a particularly high rate for someone with her earnings, which under any reasonable definition, put her firmly in the "wealthy" category. Many middle class people pay a much higher percentage of their earnings than Cindy McCain's 26% rate.

To give some perspective, our good but very middle class level earnings are several times less than her total tax *deductions", let alone not earning anywhere near what she does. I guess owning 7 homes is good for one's tax deductions if nothing else. While I don't begrudge Mrs McCain her wealth, I have a hard time accepting that she pays a lower federal rate than people who also work hard and still have to make hard decisions about how to fund their retirement, their children's education, and their healthcare, and only one home.

So, Mrs. McCain keeps a larger percentage of her earnings than many (most?) ordinary middle class households. I'd say she is keeping a higher percentage of that money she earns. Somehow I have a hard time thinking that Cindy McCain will suffer very much if her tax rate was a bit higher (would she even have to reduce her luxury condo burden by one or two?), but a 28% or higher tax rate, which is common on a middle class family does indeed cause some noticeable pinching.

Anonymous said...

I am a volunteer Emt two of my daughters are nurses. My wife is an emergency room nurse. Jenny is right about the condition of healthcare in this country. Without a major change in the way we funding healthcare in this country even the wealthy will have a hard time accessing care. Doctors that I talk to say that they have to see two patients for every one that they get paid for. Hospitals say they get paid 60 to 70 percent of what they bill and that number is going down. Because of the fixed costs of running hospitals and clinics, those of us that can pay are paying for the ones that can't. The bills will keep rising which means that the premiums will keek rising which puts more people in the uninsured group because they can not afford it. It is only a matter of time before we are also out of reach. People making 10 dollars an hour can't afford heath ins. One solution I have heard is to treat only those that can pay. Very few health care professionals could handle letting anyone die at the emergency room door. Those that could, you don't want treating you. In the 15 years that I have been in EMS, I have never had to talk anyone having an active heart attack until about 18 months ago. Now I have had to do it quite often. These are not unemployed uninsured people. It is easier to treat in a clinic than in the back of an ambulance when it is critical.

Teresa said...

"Marina Martin said...
I have been a type one diabetic for 15 years and I'm frustrated to read opinions like yours. I have almost always been self-employed and even when given the option have always chosen to pay for my own health insurance. I don't want to be restricted to options provided by an employer.

Your methodology for determining that buying health insurance across state lines is bad is flawed. Competition would encourage various insurers to offer better benefits to attract more customers from other states - it would not encourage fewer benefits. If Texas has lousy laws, then more Texans would buy insurance out of state. Currently, Texans have no choice BUT to buy premiums under Texan law.

I live in Washington state and have fantastic coverage through Regence Blue Cross, with a nationwide network of doctors, a $500 deductible, and extensive coverage of diabetic and non-diabetic expenses alike. I pay $203/month for individual coverage. With McCain (who I do not love, but like much more than Obama) anyone in the country could get this plan, and diabetics would have *greater* access to affordable healthcare.
8:41 PM, October 16, 2008"

FYI
This coverage is no longer available. Lowest Ded is 1500, see here http://www.regence.com/WARBS/products/medical/regence-hsa-comprehensive-1500-individual.jsp

rates are here http://www.regence.com/docs/WA/rates/hsaHealthplanCompRates0808.pdf

Anonymous said...

For those who asked, the Washington State plan I have is here:

http://www.regence.com/WARBS/products/medical/regence-breakthru-70-1000-deductible.jsp

My plan is $203 a month for a $500 deductible, but since August the lowest deductible they offer is $1,000 - for $147 a month, which still ends up being pretty close. It's a bit higher if you're a smoker or if you're older, but a type one diabetic qualifies for a "normal" person's rate.

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