If this month’s National Health Care Shout Out shows nothing else, it shows that health policy is as much “values writ large” as it is “science into practice”.
But all the noise may be masking the essential political problem in reform: How to transfer health care resources from the “health haves” --- including insurers, providers, wealthier patients and yes, even tax payers --- to the “health have lesses”.
One way is to get to the heart of the politics here and to speak directly to likely voters concerned about their own health care bills. One “All-American” way to do it: with some quick cash. One obvious vehicle: tax policy.
There’s been lots of policy chatter about how the government will cover the $1 trillion + or - $400 million cost of its increasingly maligned efforts to reform health care. The chatter already includes changes in federal tax policy, albeit primarily in relation to employer provided health coverage so far.
But leading reformers seem not to have dwelled much on the cost concerns of likely voters, who probably care about health reform less because business or government cannot afford it. (Although they do care about that, just as they care about the poor and the uninsured and all the rest).
To repeat for emphasis: Likely voters are probably most keenly interested in reform because even though they are insured themselves, they worry that they themselves may soon be unable to afford their share.
If that is so, Congressional proposals produced thus far provide real reason for voters’ skepticism about reform.
Except for the poor or near poor (<300%FPL), Congress seems to feel individuals can afford 10 to 12% of their incomes for their share of health insurance premiums each year in addition to out of pocket costs up to $10,000 per family, with only limited and wildly uneven tax relief.
Existing federal tax codes provide uneven tax help for individuals based on the source of their coverage.
It is true that employees
and their employers share a heavily subsidized ride courtesy of Uncle Sam when
it comes to premiums. Such
payments are not taxed at all. The
CBO estimates this to be worth a full 30% of the cost of insurance.
Additionally, workers and their employers willing to submit to the cumbersome, private bureaucratic schemes of Health Savings Accounts or Flexible Savings Accounts can get even more tax relief for a limited amount of funds (usually about $2000/year)
Beyond that, and for the self employed or those buying their own coverage, including those on Medicare purchasing Med Supps, there is no help save itemizing deductions. To take these deductions from one’s federal tax bill, individuals or families must incur qualifying medical expenses (excluding already tax free premium shares paid through employer sponsored plans) totaling at least 7.5% of income before any deductions can be taken. After that, health care costs are not tax credits, only deductions from income. This means a taxpayer recovers only her marginal tax rate on claimed expenses; seldom more than 35 pennies on the dollar, and that only on the share above 7.5% of her income spent on health care.
Against this backdrop, leading national reform proposals contain three significant possibilities for tax treatment of health benefits. The first is to impose a stiff tax penalty on those who can afford to, but do not choose to purchase health coverage. The second is to limit or eliminate employers’
tax exemption on premium payments. The third is to penalize employers who do not offer coverage
to employees.
While some of this may be necessary to promote coverage, to pay for reform or for other reasons, none of it is exactly comfort for the likely voter’s angst over their personal finances when it comes to health care.
Instead of real, tangible and immediate relief for the likely voter’s personal health care cost crisis, the policy wonks along the Potomac are offering 10 year projections of federal budget neutrality, cost studies and the promise of their intentions to “bend the curve” on health care costs. Are we sure what that even means?
Contrast this with the Bush Administration’s tax cuts. For most of this first decade of this new millennium Americans were treated to the rapid reward of federal tax policy changes as massive corporate and wealthy individual tax cuts were passed in bills that provided a few hundred dollars of federal tax relief, in the form of ready to cash IRS checks, to millions of ordinary taxpayers. They arrived just ahead of the very next election. Not in 10 years; virtually NOW.
Some $240 billion/year in federal tax breaks is now enjoyed by employers who use it to help pay for employee coverage. No more than about 5% of that amount seems to be going to individual taxpayers directly. A wide range of our nation’s health policy advisors, including the venerable Robert Wood Johnson Foundation, seem to agree that federal employer health insurance tax policies are now inflationary and regressive, and that tax treatment of individual health expenses is unfair.
I do not suggest that federal income tax relief be made the center of health reform. Controlling costs and improving value by increasing health and achieving universal access should be.
But none of these objectives will be attained unless some sort of reform clears Congress. I hope beleaguered health reformers seize this moment to level the health tax paying field for likely voters, and to put some tangible benefits on the table for them. NOW! This is one way to make reform as American for its appeal to instant gratification as the drive through at Micky D’s.