He shifts focus after recent emphasis on the economy and the bailout plan.

NEWPORT NEWS, VA. -- As the presidential campaign entered its final month, Democrat Barack Obama issued a sharp assault on Republican John McCain's healthcare proposal today, arguing it would lead to higher taxes for working families and knock as many as 20 million people out of their current insurance plans.

Obama's comments, along with four television ads that his campaign is airing in battleground states today, marked a new focus after recent campaigning on the economy as the just-passed $700-billion bailout package moved through Congress.

McCain campaign spokesman Tucker Bounds accused Obama of "lying to voters."

"John McCain will improve the tax code so that middle-class paychecks aren't used to pay government bureaucrats, but instead will pay for the access to healthcare Americans deserve," Bounds said.

McCain's healthcare plan would eliminate tax breaks on employer-sponsored healthcare benefits and instead give Americans tax credits to seek their own plans in the private market. Individuals would get a $2,500 tax credit and families would get a $5,000 credit.

Obama called the plan "radical" several times today.

The McCain campaign argues its plan would reduce the amount most Americans spend on healthcare by creating more competition for insurance plans and better coverage options.

"John McCain trusts the judgment of the American people," senior policy advisor Doug Holtz-Eakin said in a conference call responding to Obama's speech. "He's willing to put money in their hands because they know what's best."

But campaigning in heavily contested Virginia at a park overlooking the James River, Obama argued that McCain's plan amounted to "pulling an old Washington bait-and-switch."

"It's a shell game. He gives you a tax credit with one hand -- but he raises your taxes with the other," Obama said.

"A $5,000 tax credit. That sounds pretty good," Obama said. But he noted that a survey by the Kaiser Family Foundation showed that the average cost of a family healthcare plan is more than $12,000. "So where would that leave you? Broke," Obama said.

A number of analysts have concluded McCain's plan to tax employer-sponsored health benefits would mean younger workers may abandon such plans to find less expensive ones on the open market -- meaning employers could end up with a pool of higher-risk workers. "Many employers will drop their healthcare plans altogether," Obama predicted.

"Under the McCain plan, at least 20 million Americans will lose the insurance they rely on from their workplace," he said, citing a recent analysis of McCain's plan in the publication of Health Affairs.

But Obama did not mention that the same analysis found 21 million could gain coverage under the Republican nominee's plan.

Holtz-Eakin called the Democrat's assertion that employers would stop providing insurance patently false. Employers would still be able to deduct health insurance costs, and they would still be competing to attract quality employees, he said.

"Their incentive will be unchanged," Holtz-Eakin said.

John Holahan, director of the nonpartisan Health Policy Center at the Washington-based Brookings Institution, said that Obama's wording about the 20 million workers was technically correct but that analyses of McCain's plan have shown "the net effect is more or less a wash, or a small gain."

Obama's charge about taxes rising under McCain's plan is true for some people, Holahan said. His understanding is that McCain's tax credit would be pegged to the consumer price index; healthcare costs traditionally have risen more quickly.

"After five to 10 years, the current tax deduction is going to be worth more than the current value of the credit," Holahan said. "Depending on your income, you could be worse or better off."

Holtz-Eakin said Obama's claim was false. Most employees who receive coverage from their employers would have money left over from the tax credit to use in flexible spending accounts, he said.

For example, workers in the 10% tax bracket who receive $12,000 worth of employer coverage would have a $1,200 tax liability on their coverage -- and $3,800 left for their health accounts. Those in the top tax bracket would have a $4,200 liability, leaving $800 for the flex account, he said.

"It is the case there may be some people at the very top who have a liability greater than their health tax credit," he said. But "under the current system . . . we are having the middle class pay taxes and subsidize the gold-plated coverage of the most affluent in America."

Holtz-Eakin said the McCain plan also levels the playing field for those who currently buy their health insurance on the market.





By Maeve Reston and Seema Mehta, Los Angeles Times, October 4, 2008