Once again, I was traveling last week, so I get to read the USA Today (belong to the hotel’s frequent stayer program gets the benie of a free paper) that Congressman Pete Stark (D-CA) is not too enamored of President Bush’s newest healthcare initiative.
Simplistically, it says that if you receive healthcare benefits from your employer, it will be taxed above a certain level ($7K for singles, $15K for families). The other side of the argument is that those folks who are not covered by their employers or who are self employed that purchase their own receive no tax benefits like the first group. Thus, this initiative is trying to level the playing field (treating both classes of citizens the same).
Now, most people have absolutely no clue how much their healthcare actually costs. For example, while I know what my deductibles are when I use my insurance for a doctor’s visit or a prescription and how much is taken out of my paycheck for my contribution, I could not tell you the actual cost – I am quite sure that my employer is paying a hefty part of it. Here in Gilford, the School District employees are covered, for a family, on a plan that costs $18K/year (and the taxpayers pick up the entire amount, thanks to the School Board – see here for the discussion).
From a related story in USA Today, here are some stats:
Health insurance offered through jobs would become taxable income. But insured workers’ taxable income would be reduced by a deduction of $15,000 for a family plan or $7,500 for an individual. Currently, the average family health plan offered by employers costs $11,500 for families and $4,300 for singles, a Kaiser Family Foundation survey says. Only people with insurance worth more than the deduction would pay more tax.
•People who buy their own insurance would get the same deductions: $15,000 for families, $7,500 for singles, lowering their taxable income by that amount — even if their health plans did not cost that much. Currently, only the self-employed who buy their own insurance get a tax deduction.
•The administration says more than 100 million workers — out of about 175 million — who now get their insurance through their jobs would see their tax bills go down.
So, what does Rep. Pete Stark (D-CA)think? Since he chairs the subcommittee of the House Ways and Means Committee that would consider it, he controls whether or not it would get any hearings…..and he has said he won’t even bother.
Thus, he puts himself into the spot of not rectifying a problem that government created in the first place!
You see, it was during WW II that FDR’s administration put in wage freezes. This put employers in the unenviable position of trying to compete for workers but having nothing in their quivers to use to persuade them to "work for us and not the other guys down the street". After all, higher pay is a tool that normally works, but not having that available, what’s next to use? Well, business is nothing but innovative, and so they did….and offered healthcare insurance as a "tease" to entice people to come to work for them. Even now, 60 years later, it is used as an attraction "to come work for us" versus any legal social compact.
And why should they? Companies make or provide "widgets" – they are not in the healthcare field. And when they have become enmeshed in such (think GM, Ford), their products become uncompetitive in the marketplace due to this "cost of doing business" that is totally unrelated to production costs.
Thus, government is responsible for this mess of activating the current problem of healthcare costs and payments that we see today. Remember, the model before WW II was that people assumed responsibility for their own costs, and indeed, costs were much lower then than they are now (with a commiserate lower level of healthcare and outcomes being obvious – as time has marched on, so has the quality and efficacy of our healthcare system….and costs).
So, the end result is the assumption that employers always have been, and thus always should be, responsible for providing healthcare for their employees. And yet, people do not wish to recognize that in today’s environment, because of how healthcare is paid for, that people are not good judges of their actual healthcare costs which exacerbate the problem.
Look at it this way – if you were on a "gas" insurance plan, and your copay was only $5 / fill up, would you really care how much a gallon of gas would cost? Of course not!
Anyways, I digress…back to Rep. Stark’s Op Ed in USA Today
President Bush is to be commended for finally recognizing the needs of 47 million Americans denied health care for lack of insurance. His proposal would do little to help them.
In a few years it would raise taxes for 160 million workers who receive group health insurance benefits.
The president’s plan would limit the tax deduction to $7,500 for an individual’s health insurance premium. The high rate of medical inflation would soon cause an income tax increase for most Americans.
And this is the ENTIRE point! The problem with healthcare costs is that they have become delinked from the actual consumer. Again, if one is not paying the bill, why worry about the cost? By bringing it back towards the model that existed before WWII, people will start to be more cognizant of the actual costs and start to use their power to consume more intelligently.
Employers would cancel group plans.
This may be possible….but again, ask yourself "why are employers responsible?" Really, think about this – why should anyone else be responsible for my healthcare costs? Again (and again and again), employers do not want to be in the healthcare industry – they only want good employees and will offer those things that will entice them to come to work for them.
I just don’t understand this groupthink that believes that employers MUST provide it, just because government actions forced them into it.
Workers could buy individual policies, which have higher costs and more limited access than group plans do.
I agree here – individual policies do cost more. However, stop thinking that people are stupid and cannot shop intelligently with their own money. If Rep. Stark would take the lead in removing they layers and layers of regulations, the costs would decrease. And remember, if the average cost is $11K per family, employers would be forced by market pressures to give that to employees as higher salaries.
The suggestion that employers would pass on the group insurance savings in higher wages does not pass the smirk test.
You can just see the total disregard that this long time government employee has for the marketplace. He offers NO prove for this assertion, does he? This is just one reason why I think term limits is a good idea – ensconsed in the public sector and surrounded by lobbyists, this shows how one can easily lose touch with actual economic reality.
Granted, the Bush plan would make the tax code more equitable. But so would eliminating the mortgage interest deduction. Who is to say home equity adds more to life quality than adequate health care?
Surprisingly enough, I agree here too! Why NOT make the tax code more equitable? You don’t have to do it all at once, little chunks are permissible!
Actually, I’m in favor of the big bang theory of this area too – see the Fair Tax which makes this whole argument irrelevant.
There are many offsetting inequities in the Bush plan:
•Tax deductions are regressive and provide much greater benefit to the wealthy than to the poor. In Bush’s plan, a high-income person who is currently uninsured would receive nearly $6,000, while a low-income individual would receive $1,200.
Always the class warfare argument thrown up to stop even a little bit of progress. Stop using the absolute amounts – think of the percentages!
•The individual insurance market discriminates against those who are sick or at risk of becoming so. Currently, employers cover both healthy and sick, spreading risk to reduce costs. Individuals, however, would be at the mercy of insurance companies that use family history, genetic indicators, age, occupation and illness as reasons to jack up rates — or exclude coverage altoge
ther. Millions of Americans would therefore see their premiums increase substantially.
Only if you do not change the regulations and allow individuals to pool their risks together. Again, this is an area of Federal and State meddling in the marketplace that has made this so. Change the laws to allow this pooling, and this objection melts away.
Much like Iraqi weapons of mass destruction, "gold-plated" health insurance is a figment of the president’s imagination. The problem with our health system is not that Americans can afford to use too much health care; it’s that too many can’t afford any.
Give me a flippin’ break…go back to the original problem – people don’t pay actual healthcare costs. There are no incentives to shop for the lowest costs. Prices are not posted by doctors, clinics, pharmacies, or hospitals. By changing the model to such that people are required to be more responsible for themselves (in a good way, as opposed to being dependent on the insurance companies and employers), this will change.
Oh yeah, let’s not forget government regulations too (have I said that enough yet? Naw!!!!)
Bush’s proposal would destroy the very system through which the vast majority of people get their coverage today and fail to replace it with an alternative means of obtaining quality care. It doesn’t deserve Congress’ consideration.
This is indicative of that old "we’ve always done it like this" mentality – old, moribund, and decaying. It is inertia – unwillingness to change from the status quo.
And an unwillingness to recognize that this, along with HSA (Health Saving Accounts that are portable across employers and accrue across years), can help be a start of reforming the system.
Competition is the greatest thing to assure higher quality and lowered costs – after all Congressman Stark – please tell me where it has failed?
