In contrast to the you-can-have-it-all-without-sacrifice approach of the President, Jonathan Gruber states the case pretty clearly today in a Boston Globe op-ed:
"Fundamental cost control is simply incompatible with unrestricted consumer choice."
"The premiums that all employers and most employees pay are exempted from both income and payroll taxation, unlike wages. This shields firms and employees from reaping the financial benefits of lowering insurance costs."
"Health care reform can be financed by reforming the tax exclusion, and can also include stronger regulatory reforms on the supply side. Just capping the tax exclusion at the average cost of employer-sponsored insurance, so that individuals pay tax only if they have plans that cost above average, could raise as much as $500 billion over the next decade to finance reform."
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7 comments:
Mr. Levy, I'm curious to know your opinion of Professor Herzlinger's ideas for health reform, specifically the consumer driven model she expounds upon in her book "Who Killed Healthcare". She has some good ideas, but I'm still mixed on both her delivery and message...
Paul,
Interesting thoughts, not sure if I completely agree with his assessment, especially on the taxation aspect. While most consumers do benefit from the tax exemption of their premiums, I think we all see the need for cost controls in this area. Lower taxes are nice, but health care costs are growing quickly enough to trump any benefit.
On a completely unrelated note - It seems that all public discussions of this topic tend to ignore one of the most critical aspects of this debate: reimbursement codes and strategies. There is ample opportunity to address a portion of the rapidly-inflating healthcare costs by looking at this often-hidden aspect of drug and device pricing.
Regards,
J
I'll leave it to Dr. Gruber to talk about tax policy. But let's not forget that lots of other countries have much better cost control than the US and more consumer choice of provider...they achieve this through regulation of prices and control of supply, with much lower consumer cost-sharing at the point of service than we have in the United States. The consumer "skin in the game" in these health care systems is generally progressive taxation, not regressive cost-sharing. These countries know that cost-sharing of even relatively small amounts is a barrier to needed care for low and moderate income people, and that decisions by physician and not consumers determine most health care spending. So they put the cost controls where they make sense and will make a difference.
But for those who are determined to go down the misguided "consumer directed"/skin in the game design of health benefits, let's talk about some fairer designs. How about thinking about varying cost sharing by income? At a median individual income of about $63,000 in Massachusetts, a $1000 deductible is about 1.6% of pre-tax income. So, the equivalent deductible for, say a hospital executive who makes $1 million a year,is about $16,000. An insurance company executive who earned $3 million would have a deductible of about $48,000. How does this "skin in the game" sound to them?
Personally, I hope that President Obama read David Goldhill's article "How American Health Care Killed My Father" - The Atlantic (September 2009). I recommend this article to the Anonymous fan of single payer who finds consumer-based models misguided. I may not agree entirely with Mr. Goldhill's proposed solutions, but I know that government is better at regulation and oversight than it is at running any enterprise efficiently. Our government money collection and distribution systems are by nature inefficient and narrowly focused.
The tax treatment at issue is the favorable tax treament of company paid-benefits for BOTH the companies and individuals.
Every single payer system in the world is facing the same fast-rising costs as we. This cannot be fixed with progressive tax and deductible schemes, or with cost controls like underpaying fees (Medicare) and rationing care (Canada, e.g., you get a staple, but you must pay for a stitch.)
Nationalizing health insurance regulation, establishing universal care policy standards, and creating ONE risk pool can effect cost savings through competition for a fixed premium. Health Insurance should be about protection from catastrophe, amortizing some health care fixed costs, and encouraging healthy habits, not a carte blanche for the healthcare industry.
A little bit off-topic, but check out this post on the Health Care Blog from today:
Winners and Losers - Strategy in a Post-Reform Worl
By BILL KRAMER
(I couldn't seem to copy the link).
It has some interesting things to say about the changes in business management which will be required of most players after a bill is passed.
I hope he is right, but only time will tell.
nonlocal MD
The only thing is that for the most part a lot of us do not know exactly what this bill contains, and everyone is interpreting it to their own favor. Sounds like court case where every attorney employes all method of logic to win a case. Actually this shouldn't be about winners or losers it should in honest mind be what is good for us both rich and poor where everyone wins. What happened to win - win situation.
That skin in the game sounds fine to me anonymous, but so does Dr. Gruber's point. The current tax treatment is EXTREMELY regressive. That million dollar executive is getting a $25,000 health plan and since it is tax deductible that amounts to about a $10,000 health insurance subsidy for him. Joe Paycheck works for the employer who gives no insurance, so he gets no subsidy at all. We are the only nation in the world that effectively gives rich people thousands of dollars to buy insurance and gives nothing to the working poor to do so. Changing that one feature would improve coverage AND reduce costs.
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