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The $700 billion federal bailout bill has shown Americans the folly of eliminating government oversight and expecting fat cat execs to regulate themselves. Yet Republican presidential hopeful John McCain foolishly persists in positioning deregulation at the crux of his plan to “reform” health care. McCain’s plan holds serious implications for the health of all Americans, and especially for readers here. Fat? You can be denied health insurance under John McCain’s proposed plan. History of eating disorders? You, too, can be denied even if you’re long recovered.

Here’s why: McCain’s plan would alter the current system of mostly employer-subsidized health insurance by creating tax incentives for people to move to market-based individual insurance plans. He supports eliminating government subsidies to employers who offer health insurance plans and instead giving each single person a $2,500 tax credit and a $5,000 tax credit for a family. As presently structured, this tax break does not adjust for the rising cost of medical insurance, so over time, it’s become less and less valuable. And considering that the average cost of employer-provided family health insurance is $12,000 a year, a $5,000 family tax credit will come up far short — especially for older people and those who don’t have the benefit of an employer contribution.

Nor will this help the 47 million Americans who lack health care, a statistic McCain repeatedly downplays the gravity of. Some 25 million more are underinsured, meaning their benefits aren’t sufficient to meet their needs. Combined, almost one fourth of Americans don’t have adequate health benefit and this number is set to increase under McCain’s plan. As Ezra Klein notes, McCain’s health care plan would actually price out more than 20 million people who currently have health insurance plans. And this is a conservative estimate.

But wait — there are even more problems with McCain’s plan.

Employers don’t offer health insurance to employees out of the kindness of their soul-sucking corporate hearts — they have a tax incentive to do so. In fact, the employer tax breaks in place in the current system are a key reason why employers offer insurance to their employees. Take away that tax incentive, as John McCain proposes we do, and fewer employers will offer health insurance to employees or will offer very expensive plans that few employees can afford to take. And non-group plans? Are really expensive and typically offer less coverage than traditional group plans. Try to purchase the same group plan you enjoy now on the individual market and chances are, you’ll pay a lot more for it. As one health scholar has noted:

Administrative expenses are twice as high in nongroup markets as in group markets. The costs are higher because insurers in this market spend considerable resources on medical underwriting, and economies of scale are lost. It is much more expensive to sell insurance to millions of individuals one individual at a time than it is to sell to a much smaller number of employer groups, each comprising thousands of employees. For a typical family that moves from group to individual coverage, therefore, the move to nongroup insurance will raise premiums for an identical policy by more than $2,000 per year. Shifting people into the nongroup market would not save money for most Americans. Rather, it would lead to increased spending on administrative costs and a decrease in the portion of health spending that actually goes to providing care.

There’s another virtue to group health care plans: risk-pooling. As John Cohn explains:

Government regulations stipulate that, in order to qualify for the existing tax break, companies must offer similar benefits to high- and low-wage employees. And in group plans, companies (more or less) have to make coverage available to everybody, even people with pre-existing medical conditions. The result is a situation where, thanks to the large numbers of people covered, large numbers of relatively young and healthy people are paying into the system–enough to cover the costs of those few people with really expensive-to-treat medical problems.

In the free market, insurance carriers try to avoid people who have pre-existing conditions by charging them extravagant rates, excluding coverage of their illnesses or refusing to provide coverage at all. A recent study found that one-third of such people buying or looking into nongroup coverage were denied coverage or charged more because of a pre-existing condition. Nearly half found it difficult or impossible to find the coverage they needed, and more than two-thirds found it difficult or impossible to find affordable coverage. In John McCain’s health care world, health insurance companies could cherry-pick healthier customers while denying coverage to anyone they deem a financial risk. And they use sophisticated techniques to help gauge this “risk,” as this MSNBC story reveals:

[Health insurance companies] can tap into databases that reveal your past prescriptions and use “predictive modeling” — a complex, computerized algorithm — to estimate how likely it is that your medical bills will exceed the amount you pay in premiums. Every insurer has its own list of medical conditions for which it may charge higher premiums (have you ever been treated for anxiety, an eating disorder, an ulcer, fibroids or even irritable bowel syndrome?) or, in some cases, nix coverage.

An Aetna field guide for underwriters, for example, lists 71 serious conditions — including insulin-dependent diabetes and cystic fibrosis — for which it typically refuses coverage automatically. More than 50 others are not excluded by rote but might affect coverage decisions, depending on your case history. HealthNet, another insurer, notes that migraine sufferers are sometimes covered. If you haven’t taken a prescription medication in a year or visited the emergency room in two years, you get a preferred rate. But if you have, you will either be charged a higher premium or declined altogether.

As Klein points out, “All this will cost us $1.3 trillion over 10 years, and set the rules so that more of the expense falls on the sick and less rests on the healthy” (Emphasis mine). So, how does John McCain propose paying for his pricey health care plan? Oh, by slashing funding for Medicare and Medicaid that serve seniors, poor families and the disabled. Read Cohn’s substantive commentary on the proposed cuts here.

As Cohn questions it: “Fewer people with health insurance. Weaker insurance for those who already have it. This is McCain’s solution to the anxiety over rising medical bills?” It’s certainly not the kind of health reform we can afford to believe in.

On the issue of health care (and many others), this blog author wholeheartedly endorses Democratic candidate Barack Obama. Obama’s health care plan — download a 9-page PDF version of the plan overview on Obama’s website — isn’t perfect, but it bodes better for more Americans than McCain’s plan. Obama seeks to expand health care coverage while yet falling short of a government-mandated universal coverage plan. Large employers that do not offer meaningful coverage or make reasonable contributions to employee health care coverage costs will be required to contribute a percentage of payroll costs towards a national plan (small businesses are exempt). This new public program would look a lot like Medicare but would cover those under age 65 who do not have access to an employer plan or who do not qualify for Medicaid or SCHIP. It would also be open to small employers who do not offer private plans. All children will have coverage, and the ages of children covered under parents’ plans will increase to age 25. The plan is expensive, no doubt. The Obama campaign estimates it will cost between $50 and $65 billion a year when fully phased in, but Obama is confident that it will be paid from savings in the system and from discontinuing the Bush tax cuts for those making more than $250,000 per year. For more information on Obama’s health care plan (including criticism of it), read The Health Care Blog’s summation of it here.

Updated: Paul Krugman at the New York Times has a great editorial out on the shortcomings of McCain’s health care plans in contrast to Obama’s.