Moral hazard vs. adverse selection: McCain vs. Obama

I you think the main problem with our health care system is that patients consume medical care without regard to its costs because it is paid for with other peoples' money, then Senator McCain has a plan for you.

"The key to real reform is to restore control over our health-care system to the patients themselves," the Arizona Republican said during a visit to the Cleveland Clinic earlier this year. ...

At the heart of his plan is a tax credit -- $2,500 for individuals, $5,000 for families -- that anyone could use to buy their own insurance. Workers could use the tax credit to pay the premiums of their employer's plan, or they could use it to pay for another insurance plan of their choice.

If, on the other hand, you think that too few consumers are covered by existing plans, then Senator Obama's coverage guarantee is for you.

But it has had a troubled history in several states that tried it for people seeking coverage through the insurance market. Some states, such as Kentucky and South Dakota, eventually dropped the guarantee after insurers left. In the few states where guaranteed coverage continues, monthly premiums generally are much higher for younger, healthier people than in nearby states.

DISCLAIMER: I support McCain