Health care reform

An Arizona ballot initiative that would have prevented health care reform proposals such as the one that passed in Massachusetts (and failed to pass in California) has been defeated. Early returns had shown that Prop 101 was too close to call, but supporters of the initiative all but conceded defeat yesterday. Other good news for would-be reformers: In Wisconsin, a non-binding referendum on whether the legislature should enact health care reform passed easily. The measure said that the reform should guarantee health care coverage for all that is as good as what state lawmakers receive. But no method of achieving such an outcome was specified.

I have written about this topic before - policymakers lament trying to find dollars to help get more people health care, yet millions of workers reap overly generous tax benefits when their employer pays all or part of their health care coverage.  These generous tax benefits represent dollars from the federal and state budgets that could be used for other purposes. And, the problem is even worse because having so many insured employees not directly involved in how much their health care coverage costs tends to make them get too much health care at times, which drives up costs for everyone.

Here are prior posts:

• Health Care Spending versus Extending 2001/2003 Tax Cuts - Tough Issues
• Tax Reform and Health Care Reform

On 7/31/08, the Senate Finance Committee held a hearing on Health Benefits in the Tax Code: The Right Incentives.

Each of the three witnesses commented on the exclusion for employer-provided health insurance. Joint Committee on Taxation Chief of Staff Edward Kleinbard noted:

We hear lots of talk about tax reform and lots about health care reform, but rarely hear about the two together. While there are proposals to change the exclusion for employer-provided health care, such as President Bush's proposal to remove it and provide a standard deduction for health insurance, they typically don't consider either the entire health care or tax reform picture.

There are significant dollars in the tax code that should be on the table in reforming health care. All of the government dollars should be in the picture in looking at how to fund any change, such as universal coverage. The largest federal tax expenditure is the one where employees are not required to include in taxable income the value of the health insurance their employer provides to them. The estimated cost of this expenditure in 2007 was $134 billion.  There are other health care tax breaks as well such as the itemized deduction for medical care and health savings accounts.