Most of the media seem to be parroting the line about Gephardt’s new initiative being a Big Bold Health Care Plan. Having conducted a mini-study of it, I can say pretty confidently that it’s really a Big Bold Government Expansion Plan involving massive cash transfers masquerading as a health care plan. Most of it isn’t really about health care at all.

Here are four key points touted by the Gephardt camp: (1) Convert the current tax deduction for health insurance to a 60% tax credit, roughly doubling the economic benefit for covering the existing pool of insured employees. Extending coverage, supposedly the point of Gephardt’s plan, actually requires businesses to shell out money on their own, detracting from the “stimulus” Gephardt says will take place. (2) Do essentially the same thing for businesses who don’t currently provide health insurance, refunding 60% of business health care costs but leaving employees to potentially pick up the tab for the remaining 40%. This arrangement is mandatory, and provides two thirds of the reduction in the uninsured rate Gephardt says will result. (3) A $175 billion transfer to states and localities to cover 60% of their health insurance costs. If you’re wondering what this has to do with covering the uninsured, you’re asking the wrong guy. (4) Relatively inexpensive one-off changes to programs like SCHIP and COBRA.

A central rationale used to defend the plan is that it will result in a more efficient distribution of business resources, away from health insurance (which will be picked up by the Feds) and toward higher wages and investment. But going by its own description, the plan itself is highly inefficient in how it claims to bring these results about. Since most businesses in America do provide health insurance (87% of Americans are covered), the subsidy to businesses that already provide insurance is likely to be the most expensive element of the plan – even with the revenue offset from scrapping the current deduction. The trouble is that this only extends coverage to 6 million – far less than the mandate for businesses that don’t cover today, at an even greater cost. And because the health effects of this $1 trillion-plus corporate tax cut are ancillary and dependent on business’ willingness to pay for extra coverage out of their own pockets, the real number of newly insured could be a lot less.

In a policy note, Gephardt adviser Kenneth Thorpe writes that businesses who already offer health insurance can be expected to be cover half of their remaining uninsured, although the actual projections of the newly insured in the plan assume many more will get covered. Thorpe even assumes that over 50% of those who currently say they don’t want health insurance will opt in. Huh? Even Gephardt is justifying this business-only tax cut (wait’ll Red Meat Howard sinks his teeth in to that) purely on the basis of “economic stimulus” and even though the repeal of the Bush tax cuts would actually lead to a tax increase and no stimulus.

Gephardt’s initiative actually resuscitates one of the more unsavory aspects of the Clinton plan – the employer mandate. Actually, it’s worse than that, because what Gephardt is actually proposing works out to an employee mandate. Businesses would get reimbursed for 60% of insurance costs, but Gephardt’s plan doesn’t require them to pay a penny above that, forcing employees to foot as much as 40% of the bill. True, there would be subsidies of up to 25% of that premium for those below the poverty line — but that’s less than the 60% deal he’s giving business for each incremental health care dollar spent. And even though businesses would only be paying 40 cents on the dollar to cover their employees’ shortfalls, that’s money a business is forced to spend that they weren’t before. The Gephardt camp’s claims that the coercive elements of the plan come without a cost are patently false. That cost that will be borne mostly by employees.

Let’s take a real world example. You own a limited partnership with five employees that doesn’t offer health insurance (say that a few already get insurance through their spouses, and you simply can’t get a good deal on the rest, or perhaps they’re part-time employees). You pay taxes at the 39.6% top marginal rate and a President Gephardt has just cancelled your tax cut (most small businesses pay taxes as individuals, not as corporations). Depending on your situation, your employees would be forced to pay up to 40%, and you face a dilemma: pay part of it out of your own pocket, even though you didn’t get a very good deal and even though you didn’t receive any of Gephardt’s promised “stimulus” – or make your employees pay even though none qualify for subsidies. For small businesses like yours, the Gephardt plan is a raw deal. You’d be far better off with an association health plan, a voluntary arrangement where small businesses band together to achieve the insurance buying power of a big corporation.

Gephardt says this approach wouldn’t be bureaucratic or intrusive. But the mind dances at the regulatory jujitsu you’d need to force universal-coverage-by-proxy down people’s throats. What if businesses use the tax credit to buy cheap health insurance that leaves half of its employees uncovered? Does the government then step in? What if employees can’t afford the insurance deal they’re being offered, one that the plan strongly implies they’d be obligated to accept? What about part-time employees, or people who, for whatever reason, decline insurance? What constitutes a proper use of the tax credit? Being forced to answer these questions in a political setting is what ultimately produces Orwellian 1,400 page documents like the Clinton Health Security Act, and Gephardt’s latest device is no exception.

Then there’s the $175 billion 3-year transfer to the states – a huge part of the proposal – which does nothing to promote expanded health coverage and seems little more than a revenue gravy train that would fuel irresponsible government spending in flush economic times – the kind that’s gotten Gray Davis in so much trouble.

A close examination of Gephardt’s “universal” health plan reveals that the vast majority of the “relief” it provides to the uninsured occurs within a very small slice of the program’s total cost. And it’s just those parts of the plan that are the most badly botched, imposing unworkable mandates that fall squarely on the very employees who would already get burned the most by canceling the individual and small business rate cuts.