Friday, March 07, 2008

Furman on Health Care

Jason Furman has an excellent paper on health care reform. His basic proposal is to eliminate the health care tax exemption (i.e. treat Employer Sponsored Health Care as taxable income) and provide progressive refundable tax credits (the tax credit decreases as you move up the income ladder). He approaches the paper from the perspective of the incentives our tax treatment of health care creates. So while he does a decent job of getting into some of the weeds too, such as automatic or default enrollment v. mandate or talking about to create risk pools for non-group purchasers, federal re-insurance, etc., the paper is really looking at the bigger picture of how this would impact health care spending.

I think the approach Furman outlines is essentially correct. Before we look at coordination, delivery and performance, we need to address the incentive structure. At present, the tax code provides a substantial incentive for upper income folks to spend but doesn't do much at all for lower income folks. This needs to be turned on its head.

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