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!