Taxing Health Care – Tiresome but Persistent

June 6, 2009

The old saw, “The devil is in the details” does not seem to apply in the discussion on taxing health care benefits.  While there appears to be a certain momentum behind this idea, the details of the consequences (other than raising revenue) are barely discussed.

mad_hatterJonathan Cohn, a writer I generally admire, gives high praise to a new report by the Center for Budget Priorities, arguing that this report should prompt people like me to rethink our opposition to the idea.

So perhaps their latest message will get through to liberals and liberally inclined interest groups that oppose tinkering with the tax exclusion for health benefits. The title of their new report says it all: “Limiting the Tax Exclusion for Employer-Sponsored Insurance Can Help Pay for Health Reform: Universal Coverage May Be Out of Reach Otherwise.”

I recently detailed  the devils that I was concerned about.  The CBP attempts to address some of them.  So let’s take a closer look at their arguments, using the reports own headings.

The Exclusion is the nation’s costliest tax subsidy.

Duh?  Health care is one of the fastest growing expense items in the federal budget.  It is also one of the fastest growing cost items for private business.  Which costs less, the loss of tax revenue or paying the full freight for the health care now provided by the private sector?

Am I missing something?  A tax subsidy is how the federal government provides incentives to the private sector to do what it doesn’t want to do itself.  The real issue is this.  Does the private sector do a good job of providing health care to the public?  If yes, continue the subsidy.  If no discontinue the subsidy and let the government take over that responsibility.  But don’t take away the tax subsidy and expect the private sector to continue their responsibility for providing health care.  That’s a bit like getting off the toilet, and then, well you get my drift.

The exclusion is poorly targeted. It increases health care spending

Yes, it is poorly targeted.  Go back to item one.

The point that it increases health care spending is an argument that appeals to some.  But to support it you would have to show that the rich with health insurance use more health care than the poor with health insurance.  And also show that somehow that difference is explained mostly by the preferential tax treatment.  I don’t see that argued at all; let alone successfully.

Exclusion Can Be Reformed Without Eroding Employer-Sponsored Insurance

Very doubtful.  But this is a topic all by itself.  But what about eroding the income of middle class tax payers?   Where is that discussion? After all, where is this pot of money coming from?

Our experience and the experience of others with the taxation of domestic partner health benefits tells us that taxing the benefits of just one person, not the family, of a middle class ($30k – $50k) wage earner reduces take home pay by $30 to $50 dollars per week.  Let me repeat that.  Taxing health care benefits of middle class tax payers will reduce take home pay by at least $30 to $50 PER WEEK.

Some writers dismiss this argument without even describing it.  Just an off hand comment that “labor hates it.”  It seems no one else is sticking up for the middle class on this point.

Structuring a limit on tax exclusion

This section goes part way to addressing some of the arguments I raised in my previous post.  But the CPB arguments step through the looking glass, as do their arguments about eroding employer sponsored insurance, with this statement:

If properly designed, a limit on the tax exclusion could be administered equitably and without large compliance burdens for employers or workers.

Perhaps I have just a bit too much experience with the phrase “without large compliance burdens.”  Or maybe I just feel that our health care system spends far too much on administrative expenses.  We should find ways to spend less, not dismissing ever mounting marginal increases in administrative “compliance burdens” that have absolutely nothing to do with the delivery of health care.

Charley James of the LA Progressive offers the best response.

The Kennedy plan is relatively simple; the emerging Baucus plan sounds as if it is being written by Jackie Mason.

First, you take health plans that are tax free now and you make some of them taxable, but not all of it, and not for everybody. But who? We don’t know who! Then, a new tax deduction puts money in the pocket of the people who we don’t know who they are so they can take it out again and buy what they had for free in the first place. Next, the money the states use to pay for medical care for people who don’t have health insurance could be used to pay for people who don’t have health insurance which means they can’t get good health care. But we don’t know who they are, either. Well, maybe we know, but we’re not sure, so we won’t say. Then, three million people who don’t have any health insurance will have money from the tax deduction they didn’t want, to buy health insurance on their own if they have enough income to take advantage of a $15,000 deduction and can actually can buy a policy that provides coverage. There might be six people in America who can do this. So we’re taking money from here, and moving it over there, and then back to here, which where it was in the first place and now let’s have some tuna because I’m exhausted.

Taxing health care benefits is a bad solution on top of a bad idea – employer sponsored health care.  Give the money currently spent on health care by employers to the employees, then tax it.  Then let the governement provide health care.


The Baucus Plan: Reform or Bailout?

May 23, 2009

On Friday, I received an e-mail from someone who had just visited with several Capitol Hill staffers on health care reform. He was discouraged with the general response that health care reform was done – there was no room for new ideas.

He was promoting EMBRACE, the plan offered by the Healthcare Professionals for Healthcare Reform

Even more discouraging was the perception that Congress had a busy agenda and they were just eager to get this issue behind them.  In addition, he was disheartened by the lack of provider unity on this topic.

He made the comment in his e-mail, “This isn’t health care reform, it’s insurance reform.”

I beg to differ. It is not insurance reform; it is an insurance industry bailout. It is a status quo bailout. Read the rest of this entry »

Healthcare Reform – Why a public plan Option?

April 25, 2009

Some things I don’t understand!

I just don’t quite get the “public plan option” idea.

I read Jacob Hacker’s proposal for a public plan option again.  Professor Hacker is a scholar with his heart in the right place, a rare combination.  He gained my immense respect after I heard him speak about his book, The Great Risk Shift, a couple of years ago.

Professor Hacker makes a compelling case that a public plan is not only administratively more efficient than private plans, but that they have a convincing record of introducing large scale quality initiatives and payment reforms into the marketplace.

He then goes on to describe the dismal record of private insurers in comparison to public plans.

So why are the private plans an option if the public plans are superior?

That’s what I don’t get! Read the rest of this entry »

The COBRA Maze

April 18, 2009

Today, April 18, 2009, is COBRA Subsidy Notice Day -the deadline imposed by the American Recovery and Reinvestment Act to send COBRA notices to those involuntarily terminated after September 1, 2008.

Not exactly the same as Paul Revere’s ride, the event 234 years memorialized by Henry Wadsworth Longfellow’s poem and remembered in Massachusetts with Patriot’s Day.  With apologies to Hank, I offer this little ditty to memorialize the event occurring this year..

Listen my public and you shall cuss
About the COBRA part of the stimulus
Twas the eighteenth of April in twenty O nine
When out was tossed a feeble life line

Those who imagine that a “government run” health care system might mean more bureaucracy should spend some time familiarizing themselves with COBRA.

Certainly since the ARRA law was signed on February 19th and the regulations and additional “guidance” were released on March 30th, there has been ample opportunity.  Our office has been flooded with solicitations for seminars and webinars, and guidance form assorted professional organizations.

It is a sad reflection on the values of our society that an event as disruptive as job loss is compounded by the loss of health insurance.  COBRA was designed to alleviate that somewhat by permitting people to continue on their employer’s plan as long as they paid the full cost.  Very few – only those with expensive on going treatments – take advantage of it.  Read the rest of this entry »

Docs talk about health care reform – sort of

March 18, 2009

Two weeks ago, The Annals of Internal Medicine posted three articles on health reform and invited readers to comment.  The three articles highlight the perspective of physicians, more specifically internists who generally fit into the category of primary care physicians.  As one commenter notes, the three articles read like committee reports.

There are some pretty heavy hitters among the authors to the three reports so I offer my comments with some trepidation.  Bottom line, they miss the mark.  I have this image of trying to land an airplane when the altimeter is 10,000 feet too high.  The plane just doesn’t seem to touch down.

Except for the details outlined in the EMBRACE program, there is little to disagree with, it is just as if the the wheels just don’t reach the ground.

Read the rest of this entry »

COBRA – Stimulus or Bureaucracy?

March 14, 2009

Does Congress really think they are doing anyone a favor with the new COBRA subsidy provision in the recently enacted stimulus package? capitol_art_160_20080314161058

Why can’t they make it simple?

Conservatives who fear “socialized” medicine because it will make medicine more bureaucratic should acquaint themselves with COBRA regulations. Litigation over COBRA keeps lawyers and judges busy all over the country.  And what does any of it have to do with the delivery of care?

What is COBRA anyway?  The Consolidated Omnibus Budget Reconciliation Act of 1986 was one of those huge (thus the word omnibus) budget bills that included everything from tobacco price supports to fishing fees for foreign fishing vessels.   But it will be remembered because Title X (of XX) included provisions to permit those who lose their health insurance under an employer sponsored health plan to continue their health insurance under certain conditions (called qualifying events) and provided they pay the full cost of the coverage.

Because, the person without coverage is also usually without a job, and because the person must pay the full cost (actually 102%) of the coverage, very few people elect the coverage and those that do are more likely chronically ill individuals.  In insurance parlance, that’s called adverse selection.  The plan sponsor will usually end up paying more than they receive in premiums.

So what did Congress and President Obama do with COBRA? 

The new law makes the cost of COBRA premiums slightly more affordable.  Normally, a 65% discount would seem pretty attractive.  But the average cost of one of our family plans exceeds $1,000.  $350 – 450 per month for a family with one less breadwinner is still a stiff price. images_2 Imagine selling a Lamborghini at 65% off!  $70,000 for a $200,000 car is a huge bargain.  But for someone without a job?

The new law allows those terminated between September 1,2008 and February 17, 2009 and who initially declined their COBRA election, another opportunity to elect the coverage at the reduced rate.  And they can begin their coverage March 1 instead of the date of the qualifying event.

Unlike regular COBRA, the subsidy is limited to those who are “involuntarily” terminated and their family members.  The plan sponsor can rely on the employees’ attestation that they were involuntarily terminated. Read the rest of this entry »

The Stimulus – The Good, the Ugly, and the Bad

February 14, 2009

The Good

It looks like the stimulus package is on its way to becoming law.

The Good news is that health care safety net provision have survived somewhat intact.  The additional support for Medicaid and for COBRA continuation coverage are still in the package.  In addition the features of health care stimulus that encourage the development of the electronic medical record and research on the comparative effectiveness of treatments were only slightly modified.

The Ugly

The way those on the right react to these provisions is ugly.   I commented on this last week.  Not only do they see impending doom with each additional patch on our leaky health survival raft;  they have a way of turning long standing truths on their head and interpret liabilities of the current maze into positives.

Last week I pointed out right wing reactions to “comparative effectiveness research” and the electronic medical record.  Recently the Washington Times outrageously equated comparative effectiveness research with Nazism.  Most people reading or listening to the scares on this topic would assume the Office of the National Coordinator for Health Information Technology is some new and sinister bureaucracy.  In fact, the office was created by executive order of President George W. Bush in 2004.  This was pointed out by Keith Olbermann on MSNBC’s Countdown.   Read the rest of this entry »