McCain’s Promise to Cut Medicare Premiums

In reading McCain’s position on taxes I came across this little gem,

Lower Medicare Premiums: Seniors face a growing threat from higher Medicare premiums that tax away their Social Security and retirement savings. John McCain has proposed comprehensive, pro-market health care and Medicare reforms to reduce health care costs and control increases in premiums — while delivering high-quality health care.

Let me see…we have Medicare a program that currently has a hideous looking fiscal outlook. The short fall for Medicare is astronomical with numbers in the tens of trillions of dollars. And yet, here is McCain not only promising to lower Medicare premiums he is going to do so while at the very least maintaining quality. How, beats me. I’ve been looking around his site, but all I keep getting are campaign speech videos that are heavy on rhetoric, but light on details.

Further, in the two videos I’ve watched McCain talks about how health care costs are the problem. He is right on that one. However, lowering premiums doesn’t strike me as a very good solution, at least by themselves, for addressing the problem of rising costs. This is especially true for Medicare where spending is in the hundreds of billions of dollars. One general result of economics is that the cheaper you make something (in this case lower the premium) the more people will consume that something. And a fact of life is that resources are limited and somehow these resources will have to be rationed, either by the government, the market or both.

Personally I think that we need more of the market in health care. Still government can help. One way is in removing the asymmetry in the tax status of health care benefits paid by employers vs. what an individual might buy. This could also help with making insurance more portable. For example, a tax credit for health insurance could result in more people purchasing health care individually and not through their employer. In such situations health insurance issues would not stand in the way of switching employers.

FILED UNDER: Campaign 2008, Economics and Business, Health, US Politics, , , , ,
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.


  1. Dave Schuler says:

    There are lots of asymmetries in healthcare, not just between companies and individuals but between large companies and small companies. Our current system is a substantial subsidy to large companies that are more capable of and likely to self-insure. Indeed, the decision to self-insure is one of the things that big companies are complaining about. The faster costs rise the poorer their decision was.

    And there’s more than one way to achieve symmetry. You’ve outlined one way. I think the more likely approach will be to limit the deductability of healthcare by employers, just as it is for individuals. My own preference would be to have benefits, including employer-provided healthcare, declared as income.

  2. Paul says:

    Sigh, so much for straight talk. And I thought McCain was going to turn Medicare into a profit center so we could afford to pay for those 100 more years in Iraq. (If McCain gets the nomination, be ready to hear that “100 years” quote mush more than we heard “I was for the $87 billion before I was against it”. Probably about 100 times more).