The problem with this proposal is not that individuals will ultimately be taxed but rather in its opacity it is unlikely to get people to make more cost concious decisions vis-a-vis their health insurance. If you were to eliminate the employer exclusion or cap it then at least a portion of the employer contribution would be taxed as income. One, the employee would have visibility as to the amount they are foregoing in wages as a result of health care. Two, the employee would then have an incentive to obtain less generous coverage. Going back to the Rand Study we know that increased cost sharing has a neglible impact on health outcomes while drastically reducing health expenditures. The important exceptions to this finding were those who were lower income and had chronic diseases such as hypertension. These finding should be the basis for health care reform. But instead there is an obsession with first dollar coverage and a public plan whose purpose is ill defined.
Thursday, August 13, 2009
More Health Care
Apparently the Senate Finance Committee big proposed revenue source is a 35% levy on insurance companies premiums for plans above $21k. This is daft on so many levels. One, this utterly ignores tax incidence. As Diane Lim Rogers notes, you can't tax things, you can only tax people. Conceivably insurers will stop selling "cadillac" plans but more likely insurance companies will simply pass on the cost of taxes on to the consumer. Outside of providing a paltry revenue source this doesn't do much.