According to the AP (via Yahoo):
The Republican presidential nominee-in-waiting has proposed that everyone buying health insurance get a refundable tax credit, $2,500 for individuals and $5,000 for families. At the same time, he would treat employer contributions toward health insurance like income, meaning workers would have to pay income, but not payroll, taxes on it.
The article discusses that the proposal, if enacted, would have a detrimental effect on employer-provided health care plans. Seems that younger, healthier employees would opt out of those plans and choose individual plans, leaving older, sicker workers in the employer plans.
I think the employer plans are doomed for another reason: the taxation of the employer contribution. Employee benefits such as these have been tax free for as long as I can remember, provided certain criteria is met. To have employees pay taxes on the benefit is, to me, an inducement for them to leave the employer system.
Who benefits from this? Why, that would be the insurance companies. The cost of individual insurance is significantly higher than that of group plans, mainly because of the risk. When writing a group policy, insurance companies are able to spread the risk amongst the group members, but when writing an individual policy, only the risk of that insured is considered.
Another point: it appears from reading McCain’s website that the tax credit he proposes will not apply to individuals who have employer-sponsored health insurance. Another incentive for employees to leave those plans.
If, by some chance, John McCain is elected, we have to make sure that the Democratic-controlled Congress doesn’t buy this garbage. It’s truly a dumb idea.
(thanks, spotter)
57 Comments
I think the overall GOP plan is to remove as much employer exposure to health care costs as possible, while making sure that the gov’t doesn’t pick up any of it. That way, the US corps can better compete with the EU corps (who generally don’t have to pay health care costs). The end result is that corp profitability is further enhanced by shifting more costs to the individual.
Any government-sponsored health-care plan encourages employers to drop their plans. Medicaid has done the same thing. Many employers allow retirees to purchase health insurance through the company plan, but only until age 65, when Medicaid takes over.
Oddly enough, we are again looking for a government solution to a problem that the government caused. It was government’s freezing of wages in a tight labor market that resulted in the companies’ offering health insurance as a benefit. This, along with the ridiculous idea of taxing corporate income, has, as MB noted, significantly reduced the competitiveness of U.S. companies. (Of course, the people pay for the insurance one way or another. They pay through higher taxes, lower wages, or higher prices. And with so many people having stock through 401(k) plans, they pay through lower corporate profits.)
Now, part of your analysis is faulty, Vivian, and by your own words contradict yourself:
With higher risk comes higher payouts, and thus less profit to the insurance companies. If you can find some data that shows that insurance companies have higher profit margins (not just gross income) from individual policies, such data would better illustrate your point.
The problem with corporations’ providing health insurance is that employees have few, if any, options. Employers choose policies that fit them, not the employees. If individuals get to shop for insurance, they can choose a policy that fits their needs and economic situation. They can choose a low-cost, high deductible policy, or a high-cost, low deductible policy. An older couple can opt out of prenatal coverage, while a Catholic couple might want lots of it and no AIDS coverage.
Though it is easily demagogued, and thus a losing campaign issue, McCain’s proposal is a half step in the right direction.
The Problem with US health care is that it is paid for mostly by employers, who get to choose the policies to suit his needs. The only reason your employer makes that choice for you is the overwhelming tax advantage employer based groups have over other groups, paying for your health insurance with pretax dollars with money that is not taxable to the employer either.
Think of your last dealings with your health insurer or HMO. Would you put up with that from your auto insurer? Of course not, you’d be on the phone to the Gecko or Good Hands to change your insurer before the ear piece was cold. But with your health insurance, you can’t, because you don’t get to choose. Free markets only work when people can choose.
If instead, all group plans were paid for with pretax dollars, you could choose between plans offered by your employer, your church, your professional organization, your bowling league, your political party or whatever. With each of us having several plans to choose from, insurers would have to start treating us better to keep our business, just as you or I must do in our businesses.
There are better ways to do what McCain wants to do, but breaking us free of the monopoly of employer sponsored plans by treating all plans the same for tax purposes is a good thing that would go a long way to control costs and improve service.
Don, just changing the taxation will not change the fact that the employers are contributing to the payments, making employer-sponsored plans a much better deal.
Mouse - first of all, it’s not Medicaid that kicks in at age 65 - it’s Medicare. Historically, age 65 was considered retirement age, thus the cutoff for eligibility for company-sponsored plans and the availability of Medicare. However, if you think that folks on Medicare are not also paying for health insurance, think again. Many of them have opted to take supplemental policies, since Medicare does not cover everything.
Don - employees already can choose to participate in an employer-sponsored plan or not. If they don’t, they get a tax deduction for it. No, it’s not an “above the line” deduction, but it is there.
(As for pre-tax - your use of the term is a curious one and not the norm in terms of usage. Employee benefits are tax deductible by the employer, generally not considered “pre-tax.” ) Regardless, are you advocating that all employee benefit-type deductions be tax deductible? If so, what about such things as life insurance, which currently are not deductible by the individual?
because this is such a “dumb idea”, what kind of health care plan would you endorse?
The awful truth.
Alternatively “my opinion” which is just as awful.
American industry can not afford to compete with global industry that can employ numerous workers that do not demand healthcare expenses be included in the costs of production. Foreign workers are already willing to work for less, and they do not expect to live forever at the cost of the corporation.
If America wants to provide a health care solution, it can not come at the expense of industry. Those that live here must pay, not those that employ people here must pay.
So, to review - pieces of paper are more important than human beings. If human beings stand in the way of pieces of paper, we will discard them.
It would be funny that those voting for the politicians pushing these policies are going to be the ones suffering the most in this race to bottom. Well, funny if it weren’t so sad.
VJP- Pretax may be an awkward term form the employer side, but if you think of the employer contribution as part of the employee’s compensation, that is what it is, a part of his pay that he pays neither income nor payroll tax on, thus pretax.
Just for the ease of use, if an employee’s health insurance costs $500 a month, and the employee has $100 deducted from his pay and the other $400 is paid by the employee, then if he chooses to buy his insurance from another source, he has $100 less FICA with which to buy it. The $400 is just gone.
If instead the employer was putting that $400 into a healthcare savings account, for his employee, along with q $100 payroll deduction under the same tax rules, but the employee could use that fund to buy the employers group plan or other insurance, elsewhere, then other groups could compete on an equal footing. The cost to the employer is the same, the tax impact on both is the same, but the employee could purchase insurance that cost him more or up to $100 less, as he chose, from his church or some other group.
Right now, because under the current tax situation, those other groups cannot compete and do not exist. But in life insurance, for example, there are competing plans. The Knight of Columbus, for example, sells life, disability and other insurance plans other than health.
So, we have competition in the life insurance field, but not in healthcare.
Thanks, Vivian, I always get those names confused.
Anyway, I was not implying that people on MediCARE don’t buy supplemental insurance. I was only giving an example of how the existence of a government program gives incentives to companies not to continue a similar benefit.
“[Employees] already can choose to participate in an employer-sponsored plan or not. If they don’t, they get a tax deduction for it.”
I’m not familiar with this deduction. I have seen it for the self-employed, but “you cannot deduct any insurance costs for any months you were eligible to participate in a group health insurance plan through your or your spouse’s employer.”
I was aware that Bush had proposed such a deduction, but did not know it had passed. I was certainly not aware that one could take such a deduction if one were eligible for an employer-sponsored plan. That must then invalidate the bit about the self-employed in the above paragraph — that they cannot take the deduction for those periods in which they could have had employer-sponsored health insurance.
“pieces of paper are more important than human beings. If human beings stand in the way of pieces of paper, we will discard them.”
You’ve completely lost me, MB. What pieces of paper are you talking about?
Vivian, I think I’ve got a comment stuck in the spam filter, and “criteria” is plural.
Thanks! That was FAST!
Health insurance is deductible as a medical expense, Mouse. It’s only an above-the-line deduction for those deemed self-employed.
Prior to the implementation of Medicare in 1965, did companies offer health insurance to retired employees? I honestly don’t know.
Don - we do have competition in healthcare, not just as robust. (Your example doesn’t work, though, because health savings accounts don’t work that way. Health savings accounts are for paying medical expenses, not health insurance.) But that doesn’t get to my question - why should health insurance premiums be pre-tax? And why not life insurance?
As for what plan I would endorse, rlewis - I think the only answer to the health care problem in this country is a single-payer system. But I’m also a realist - that ain’t happening.
A brief history of health care insurance in the United States.
Ah, but only that part of medical expenses that exceeds 7.5% of one’s AGI is deductible, right? For anyone who can afford to forgo the employer-sponsored plan, that must be quite a big lump of money. Family catastrophic insurance through IEEE is about $40 per month with a $25,000 deductible. A family-of-four 80/20 plan with a $1000 deductible is about $3400 per year. Assuming no other medical expenses, that family-of-four would have to have an AGI of no more than $46k to make ANY of that tax-deductible.
MB, read the article, but I don’t see what that’s got to do with “pieces of paper.”
The biggest “piece of paper” problem with a single-payer system is, of course, the Constitution. There is simply no power articulated in Article I, Section 8 that gives Congress the power to do such a thing.
A lot of tax deductions have floors, ie, minimum requirements, before you get any tax benefit for the item. (Casualty and theft losses, employee business expenses, investment expenses - three items that quickly come to mind.) That doesn’t make it “not deductible” any more than having deductions less than the standard make those items not deductible.
If you have a $25,000 deductible, you are eligible for a health savings account. And an HSA is an above-the-line deduction.
Mouse, I regard any conversation with you as an absolute waste of time. So if you’re ever wondering if I’m talking to you - I’m not. I was responding to Vivian’s wondering if any companies offered health insurance to retired employees prior to 65.
I just found this (pdf) and it says:
I agree we need a single-payer system. The above discussion on economics would be quite edifying if real people weren’t living and dying by these decisions.
Yes, MB, you do have a difficult time making your case to anyone who can debate logically, don’t you?
I wonder how health care costs track with the availability of insurance to retired citizens. And then I wonder if there would be some way to allocate that rise (exponential, I’m guessing) among actual costs, research, and profit-taking. Something tells me that a broken leg or arm didn’t have the same financial impact on an uninsured person in 1958 as it would in 2008.
VJP “Don - we do have competition in healthcare, not just as robust. (Your example doesn’t work, though, because health savings accounts don’t work that way. Health savings accounts are for paying medical expenses, not health insurance.) But that doesn’t get to my question - why should health insurance premiums be pre-tax? And why not life insurance?”
Vivian- One of the things you are required to buy in an HSA is a high deductible health care plan. It is where your first dollar goes.
I don’t care if Life Insurance is pretax. The problem is that employer sponsored group health care plans have such an advantage, solely as a result of our tax system, over groups formed outside the workplace that such plans no longer exist.
You either take away the deductibility of employer plans or give it to any group plan, either way would work, though I am always an advocate of lower taxes. The point is that the tax advantage employer plans have makes them the only group plan available and means the insurance companies compete to please the employers, not the insured. That prevents market forces from driving quality and service.
It also prevents people from having “lifetime healthcare insurance”
I have a disability policy that costs me $276 every six months. I have had it since I was 25. When I was young, it was expensive for my age, but now, at 59, it is a bargain. It can’t be canceled as long as I pay the premium. I could have gotten a cheaper policy at 25, but every five years the premium would have gone up. It would be prohibitively expensive now. I chose the lifetime option and paid more then to pay less now.
You can’t buy health care insurance like that, with a level premium for life, because employers have no reason to offer it since you might change jobs. If we could buy our own insurance and keep it all our life, we could pay ahead like that and have an affordable plan as we aged. The marketplace provides all sorts of wonderful options when it is allowed to work.
But it can’t work when government effectively subsidizes one choice to the exclusion of others.
Oh, if you get your single payer system, I won’t be in it. I’ll make cabinets instead.
So will just about every other capable person in health care, any of us could make a good living doing something else if our choice is to work for a hostile monopoly.
Don, as a small business owner, do you offer coverage to your employees? Many of the uninsured in this country work for small firms where no coverage is available. Their only alternative is private insurance. And that’s part of the reason why the number of uninsured continues to increase. The other part? Well, according to this study (pdf) large firms are actively encouraging their employees to enroll in public programs, like SCHIP.
Try to see the problem through another prism other than taxes, Don. And I totally disagree with your premise that employer-sponsored plans are the only ones available. If that were the case, private insurance would not exist.
And you still haven’t answered my question: why should health insurance be pre-tax? And if health insurance, why not life insurance? If you are going to be consistent, then it only makes sense that we extend tax deductibility to any employer-sponsored plan (life, disability, etc) if an individual pays for it.
HSAs, by the way, are available for singles with an $1100 deductible and families with a $2200 deductible, neither of which I consider “high” deductibles. (The fact that Americans have gotten spoiled with $100 or $200 deductibles is another whole issue.)
I’d also like to add that the “free market” (such as it’s ever existed in the US) is what got us to the point we are, with healthcare. I know that its against the religion of many to take facts into account and consider new approaches, but just maybe that’s what we should be doing.
Yes, MB, the free market got us the best health care in the world, I’d hate for socialism to screw it up.
Anon E Mouse,
The free market got us the best health care in the world for those who can afford to pay for it.
I once had a long discussion with an Australian Doctor (via the internet) who claimed that here in America we spend the most money with the worst outcome when we are compared to all the other major developed nations. I am not sure of the basis for study that he claimed showed this. Perhaps it included those who quickly succumb to threats to their health because they can not afford the healthcare.
Personally I do believe that we need to do something. But instead of jumping in whole hog, perhaps we should go slowly. I would be in favor of government providing some certain level of health benefits (a basket of benefits) to every citizen that did not include expensive procedures such as heart surgery and the like. If you want coverage for the expensive stuff, you better have supplemental health coverage.
Since opponents of single payer seem to fear (perhaps with justification) that it will lead to rationing and long lines at health care providers, they would be free to purchase supplemental insurance that would help them avoid the lines and the rationing.
Then we could sit back and see how it works. If it does not turn out to be an expensive bureaucratic nightmare we can expand coverage. If it first needs some fine tuning before it is expanded we could do that. If it ends up being an unworkable mess it could be completely abandoned as well with less pain then if we had jumped in whole hog from the start.
However to receive my firm support, any plan will have to be fiscally responsible. Taxes will have to be implemented or raised to pay for it.
To receive my enthusiastic support, taxes implemented will need to be targetted at the citizens living here, and not aimed at getting businesses that employ here to pay for it. If “everybody” wants it then “everybody” should be willing to pay for it.
The problem with McCain’s plan is that it does not address universal coverage and it does not address cost.
The first thing we need to address is universal coverage. Everyone needs to be in the pool, and that will help us address cost. This is ultimately why Hillary’s plan trumps Obama’s and McCain’s. Because coverage is mandated, it ensures universal coverage. Once everyone is in the pool, then risk can be more evenly spread across all participants. This should have an immediate effect of reducing premiums for all. Right now part of the problem is people with insurance have to pay higher costs to hospitals to cover those receiving treatment who do not have coverage.
As far as a single-payer system, I like the idea from a cost reduction perspective. You would achieve the benefit of reducing overlapping bureaucracies akin to what is achieved in corporate mergers. Humana, Aetna, Kaiser, CareFirst, etc… are all just private bureaucracies, and there is nothing special about what they do. Each has actuaries to set premiums, accounts receivable to collect premiums, and claims processing (essentially AP) to pay claims (or deny service to boost profits as the case may be) (I am simplifying, of course). All of that is duplicated in each of these private bureaucracies, and you could save a ton of money on administrative costs by consolidating all of these bureaucracies into one. What gets my goose about arguments against single-payer are these notions that: 1. Oh no! your claims would be handled by a government bureaucrat; and 2. It would lead to rationing. Well, on 1, your claims are already handled by a bureaucrat, just one who works for a private company (not accountable to anyone other than their management and shareholders). On 2, our current system rations health care, it does so by ability-to-pay.
But you don’t have to a single payer system to acheive low-cost, better outcome health care. Germany doesn’t have a single-payer system, but their insurance companies are barred from making profits. In these types of systems, you generally have a community risk pool that people in employer plans or paying for other plan pay into through their premiums. People unemployed or unable to afford other plans fall into this default community risk pool that covers their health care. These systems also generally include collective bargaining arrangements to control cost.
Who knows whether we will get a good system out this next administration or just a crazy bolt-on like Medicare-D? There are a lot of lobbyists and a lot of money that is in favor of keeping the system the way it is: a mess. If we don’t do anything now, the next time this will come up is when Medicare and Medicaid payments balloon to take up all of our discretionary spending. When we can’t continue to spend a ridiculous amount of money to keep Raytheon, LockheedMartin, Boeing, and other defense contractors in business, the sh*t will really hit the fan.
tx2vadem,
I am going to launch into a rebuttal based upon one single statement. Hopefully I will not ignore all of your points while I do so.
You said:
“On 2, our current system rations health care, it does so by ability-to-pay.”
My understanding is that every system of single payer involves some system of rationing. Would it be wrong that the most healthy get head of the line priveledges? But getting them in and getting them out, we get them to get back to helping us pay for the economy that pays for everyone elses medical care.
Would it be wrong to put a limit on how much money we are willing to give you an additional 10 seconds, 10 minutes or even 10 days to live? How about putting a limit on how much money is spent on YOU if the same amount of money could have benefitted a far larger number of people better if it had been otherwise spent? Is your life paramount or is the greater good paramount?
How about introducing that those most productive are those most worthy of medical care? Should deadbeats receive the same level of care as those who provide fountains of benefits for society?
Just curious if you have given this issue some serious thought beyond “what’s in it for me”.
“Would it be wrong to put a limit on how much money we are willing to give you an additional 10 seconds, 10 minutes or even 10 days to live?”
Should we not ask that of the family and friends? If they are not willing to shell out the money to prolong someone’s life, why should the rest of us?
“How about introducing that those most productive are those most worthy of medical care?”
That is how things are now. People in a capitalist society are generally compensated in proportion to their productivity. Thus, the more productive have better insurance and more money to cover the extras.
“Should deadbeats receive the same level of care as those who provide fountains of benefits for society?”
That is the socialist ideal. To each according to his need, from each according to his laziness.
Little David,
I wasn’t giving any thought to what’s in it for me. I make a good living and I am currently insured in a good plan. Even if my premium goes up, I’ll still be able to pick up the tab. If what’s in it for me was the consideration, given my economic position, age, and current health, I’d say we should do absolutely nothing to change the current system. And it looks to me from your line of questioning, that you are the one more concerned with “what’s in it for me?”
The questions you are asking are philosophical ones. They are based on an assertion that some lives are worth more than others. And if taken to their logical extreme, why not ask why we should not kill the unproductive members or relatively lower producing members or unhealthy members of our society outright because they cost money? A waiter on average makes $18k a year. Agents for Artists, Performers, and Athletes make on average $82k a year. Does this mean agents are more productive? Does this mean they should get faster, better access to health care? Is their job more critical to our economy? Are their lives more important? Should people with non-critical conditions receive faster service because they are healthier than those with critical conditions?
All systems ration because there is not an unlimited supply of anything. Price and profit motive are currently determining the disposition of supply. If you require a treatment for cancer and the insurance company denies your claim, supply has been rationed. The basis for this ration is profit motive at the insurer. Single-payer systems save money by reducing administrative costs; that savings can be used to ensure that the quality of health care is not degraded for anyone. Money is also saved in that there is no need to pay shareholders. And the system itself is no different than a regular insurance system. For regular insurance, you are a part of a risk pool. You may be getting more benefit out of it because you need treatment for whatever reason, while some other premium payer might be paying much more in than they get out because of their health. The more people you have in the pool, the more you can spread the risk, the less the cost of premiums for everyone. As I said earlier, there are other ways to accomplish this. The reason I like single-payer is administrative simplicity.
The Commonwealth Fund also does a lot of surveys of different health care systems. I encourage you to take a look at those.
“How about introducing that those most productive are those most worthy of medical care? Should deadbeats receive the same level of care as those who provide fountains of benefits for society?”
Truly an argument worthy of the twisted logic of Antonin Scalia. Three points:
1. Health insurance is supposed to cover those who are sick. That’s what we’re trying to insure against. In its present form, it’s not really insurance, because it disappears when you become sick, and unable to pay for it. We’re not rationing medical care, as you contend, we are permitting insurance companies to get away with, for lack of a better word, murder.
2. You assume that value to society can be measured in money. Money is certainly A measure of value, but it’s not the ONLY measure of value, and it’s certainly not the BEST measure of value in this context. For proof, just look at your own callous, hackneyed argument, and consider it being applied to your mother, your father, your brother, your sister, your child, or you.
3. Deadbeat? Have you ever heard of the disabled? The poor? The sick? You know, the ones that you’re supposed to visit and comfort? Do you have any idea what the lifetime chances are of you turning into one of these people someday? Every day I meet people who would have agreed with you until the “deadbeat” became them or their loved one. I’m not saying there are no deadbeats, just that their prevalence among the disabled population is vastly overestimated.
Vivian,
We have been in union plants throughout Virginia already showing that this plan would tax your health care. It is not only the employer part of your health care that gets taxed it is your individual part of the premium. An example of this is that if I make $40,000 a year and the company pays $10,000 a year and I contribute $2000.00 a year then my taxable income I would have to claim would be $52,000 a year. that is completely bogus.
Anon, you act like this benefit is because the company is being nice to you. this benefit was won through blood, sweat and tears. The companies that offer it only do it as an enticement to get employees to work for them. My company does not offer this benefit from the kindness of their heart they do so because they are forced to by a written contract. their choice is to either offer it or lose 8,000 talentes skilled tradesmen. Of course I also have the ability to tell the company if you don’t come to an agreement on health care the 8,000 employees will simply walk off the job and go on strike. It is imperative that we find a way to take health care off the negotiating table and it would benefit all parties. the company would have a higher profit margin and the union would be able to concentrate on other things besides being tied down with health care.
Many companies do not offer their employees health care.
Gene - The situation you describe, of being taxed on the money that goes to your health care is already the case for those who are not eligible for an employer sponsored plan. That is the problem. Either everyone should be taxed on that money, or no one.
I prefer no one. (Giving government more money is the same as giving an addict more crack.) That’s why I want to see voluntary association group plan premiums handled as pretax for everyone.
There is just no good reason for some people’s insurance to be pretax while others must pay for it with after tax money.
Gene,
You would not get an ADDED tax for the $2000 you contribute. Currently, that $2000 is pre-tax money. So you are earning $40k, paying $2k for insurance, and so only $38k is taxable.
You would, however, be taxed on the $10k the company pays. This is currently the way things are for life insurance above a certain amount. They call it “imputed income.”
Now, your discussion of the unions’ demanding health insurance is an interesting one. (Of course, many non-union comapanies also offer the benefit.) You are quite correct that companies do not offer health insurance out of kindness. It is economics. They could simply pay you $10k more, and let you go buy your own health insurance. However, as things now stand, that income would be taxable, while your company’s insurance payments are not. Furthermore, individual policies are more expensive, because of the risks. So it is more economical for the company to pay for most of your health insurance.
They could, of course, have you pay 100% of the premium, and pay you a higher salary to compensate. This runs into another problem: people with families tend to be more responsible. If they did that, family-type workers would pay more for insurance. With the company’s paying the bulk of the insurance, single workers essentially subsidize family workers.
Another reason companies don’t do this is that we think we are not paying for the insurance, the company is. It is an illusion. Companies earn a certain amount based on your labor. That income goes to three places — profit, investment, and expenses. Both your salary and your insurance are expenses. The company does not care whether it pays you or the insurance company. But YOU do. If you were paid the money, and then had to turn around and pay for insurance, you would think you were paying for it. But if the company simply reduces what they pay you to pay for the insurance, you think the company is paying for it.
“It is imperative that we find a way to take health care off the negotiating table and it would benefit all parties. the company would have a higher profit margin and the union would be able to concentrate on other things besides being tied down with health care.”
Who’s going to pay for the government health-care program? Taxpayers are. That means you, just as you are now.
Now, if we go to a socialist health-care system like Obama wants, I expect that companies will start offering “supplemental” insurance to cover the rationing that the public system will be forced implement, and people will continue complaining that those with insurance get better care. Of course they do — they’re paying for it. People with money can get better food, too. People with money can buy safer cars. People with money can install alarm systems to protect their families.
This is not necessarily true, Mouse. Not all companies have pre-tax health plans. In fact, most small businesses don’t.
What are the criteria for a company’s health plan to be pre-tax? Why are small companies more likely to have a plan that is not?
The companies have to adopt what is known as a Section 125 plan. There was a time when adopting such plans was relatively inexpensive - that is, of course, no longer the case.
Let me guess — government fees?
Nope. Administrative costs, just like all employee benefit plans. At one point, there were some off-the-shelf, prototype plans available at a relatively low cost but that no longer seems to be the case.
Odd, why would the Section 125 plan policies have so much more admin costs than non-pre-tax policies?
Precisely because they are pre-tax. Any kind of qualified plan has certain rules that have to be met in order to be considered qualified. The administrative costs are associated with those tests to make sure that the rules are being complied with.
If the item uses after tax dollars (aka non-qualified plans), the tests don’t apply.
And so were back to the root cause — government insanity.
Not really. It is rooted in fairness. The rules are designed to make sure that employers don’t discriminate in favor of highly compensated or key employees. That’s the price to be paid for deductibility.
The alternative is non-qualified plans - and no tax deduction. Or, like in the case of group term life insurance, the company-paid premiums for coverage in excess of a certain amount are considered income to the employee.
“That’s the price to be paid for deductibility.”
Are we talking about deductibility (corporate taxes) or pre-tax premiums (personal taxes)?
Anon,
To your earlier point, we already have “socialist” health care programs; they are called Medicare, Medicaid and the most socialist of them all: the VA. We have unemployment insurance. We have Old Age Survivorship and Disability Insurance (OASDI), otherwise known as Social Security. Do you want us to scrap all those programs too and go back to the Gilded Age of American History? If so, the Republicans aren’t for you. You should be voting Libertarian.
Every industrialized country in the world, except us, considers health care a basic right of its citizenry. And they ensure that all their citizens have access to it through some government mechanism. And all of these countries have lower Mortality-amenable-to-health-care rates than we do; we have the highest. In previous history here, government had no involvement in health care, and we see how well the free market took care of that problem. Free markets are not the best mechanism of providing public goods (which is also why we have public highways, and the only reason we have transcontinental railways is because the government so heavily subsidized it).
Mouse - the answer is both. Non-qualified plans are not pre-tax nor are they deductible by corporations.
tx2vadem - you are correct.
tx2vadem,
First, I consider Medicare, Medicaid, and Social Security to be unconstitutional. The SCOTUS decisions declaring them constitutional are laughable. (Writing under threat of court-stacking, the SC had to come up with some bravo sierra in the written decision, since logic was not available.)
Second, under the current system, the Libertarians have no chance of winning. So the logical course of action is to work in the party that more closely matches one’s political philosophy, and try to steer it the way you want it to go. The socialists have done exactly that, and with great success, in the Democratic Party.
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“Every industrialized country in the world, except us, considers health care a basic right of its citizenry.”
So what? You have the right to own a gun, too. Should the government (i.e., taxpayers) buy you whatever gun you want? You have the right to an abortion, too. Should others be forced to pay for your abortions? You have the right to travel freely in this country. Should others be forced to buy you a car or a train ticket?
I agree with the statement that, “health care [is] a basic right.” However, that does not allow one person to take from another to acquire it, any more than a person without a gun may steal one from someone who has two, just because he has a “basic right” to have a gun. One has a “basic right” to life, but one cannot steal from another, no matter how rich he is, to buy food, nor can one break into another man’s house for shelter.
Being a “basic right” means only that the government cannot take it away from law-abiding citizens, not that the government (the taxpayers) must provide it to you.
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“Free markets are not the best mechanism of providing public goods (which is also why we have public highways, and the only reason we have transcontinental railways is because the government so heavily subsidized it).”
We’re not talking about public goods, but private goods — an individual’s health care. Individuals can buy health insurance, can pay for an operation, can buy medication, etc., and do so all the time.
The Constitution is very specific: “The Congress shall have Power… to pay the Debts and provide for the common Defence and general Welfare of the United States.” Congress has no more power or obligation to provide for my personal welfare than it has to pay my personal debts or provide for my personal defense.
So, Vivian, if it were not for our insane income tax system, more small companies could provide health insurance for their employees.
Anon,
Don’t know if you missed this, but Republicans were the ones who added the largest benefit to Medicare since it was created: Medicare-D. So much for working within the party, huh? But I would love for you to change the party platform and run candidates that are for dismantling those programs and are very vocal about it.
Do you know what the US was like prior to Teddy Roosevelt’s administration? That was unfettered capitalism, and what did our society look like? How did the average American live? That’s the ideal you want to return to?
What I meant was for the public good, not public goods. That was my mistype.
There are 47 million Americans without health insurance. Premiums are so prohibitively high that many small employers can’t provide it to their employees. And the cost of treatment is so high that not everyone can afford it. So, you are mistaken in claiming that individuals (implying all individuals) can pay. There are a substantial number that just show up to emergency rooms, receive treatment, and then don’t pay. The consequence for the rest of us is higher medical expense to cover them. Not to mention we have poorer health outcomes as a society despite being the wealthiest country in the world. And we pay the most per capita for health care, it consumes more and more of our GDP every year. That can’t continue. Free markets aren’t fixing that problem. The private industry, the AMA, insurance companies, giant multi-national pharmaceuticals, that you view as omnibenevolent or able to best solve this problem, have done nothing but make the problem worse.
I mean under your Draconian ideal, we would never have eradicated small pox. Because governments were the primary mover there, not the private industry. We can go back to pre-1910 American society as you wish, and mortality rates will be astronomically higher. You’ll just have to avoid travelling outside your gated upper-crust community lest you catch a communicable disease.
Oh! And to your last post to Vivian about the tax system, we could eliminate the income tax code and small employers wouldn’t necessarily up the benefits they provide their employers. More likely income disparity would shoot up and even more people would be without health care.
OK, I’ll ask again. No one ever answers, but I’ll keep tying.
I am a health care provider. Please explain to me how you or anyone else acquires a RIGHT to my labor? I was under the impression that we had abolished slavery.
And, yes, if you can compel me to provide that labor at less-than-market prices it is still at least partial slavery.
Tex,
I am aware of Part D. I have already said that I do not agree with the Republicans on all positions. I do not expect you to agree with the Democrats on all positions, either. Still, the Republicans, in general, at least give lip service to more things that I agree with than the Democrats do. We have two choices, bad and worse.
It was Franklin, not Theodore, who implemented the New Deal. In any event, was Europe so much better — armed to the teeth and about to start a World War (from which we saved them)? How was the Socialist Utopia, the USSR? How were China and Japan? Right, they were at war, too. Well, the USSR and China kept going down that path of socialism of which Democrats are so fond, and how did they fare? How’s socialist North Korea doing?
As for the “47 million Americans without health insurance,” let us first say that the very Census Report from which that number comes says that that number is an overestimate. Furthermore, 20% of them were NOT Americans: http://www.nchc.org/facts/coverage.shtml
Some of those people simply chose not to buy insurance. If you go to the first reference, Table 6, you will see that 14.4% of people with household incomes between $50k and $75k were uninsured, and 8.5% with household incomes over $75k were uninsured. Are you telling me they cannot afford insurance?
“There are a substantial number that just show up to emergency rooms, receive treatment, and then don’t pay.”
So they DO get treatment!! Yes, hospitals are required to treat people who cannot pay, which amounts to de facto catastrophic coverage. Isn’t that what you want?
“Not to mention we have poorer health outcomes as a society despite being the wealthiest country in the world.”
You keep saying that. Provide some data to support your position.
“I mean under your Draconian ideal, we would never have eradicated small pox.”
Only because of your misunderstanding. Widespread vaccinations are a General Welfare — even those who are not inoculated get a benefit from reduced exposure to the disease, just as those who do not have a CCW license or a gun are safer because of those who do. However, you have yet to show that a single-payer system would be such a boon to the General Welfare of the United States. In fact, the V.A. system is just such a single payer system. How’s that working?
You assume that ALL economic progress in the last century has been the result of socialism. If that were the case, the Soviet Union, China, VietNam, and North Korea would have the highest standards of living in the world. Instead, we do.
“[We] could eliminate the income tax code and small employers wouldn’t necessarily up the benefits they provide their employers (sic).”
I will assume you meant “employees.” Well, why would they not? If the profit margins go up instead, the competitive market will induce some companies to lower their prices to get a larger market share, hence greater net profit. (Lower margins, but more sales.) Thus, the employees, as consumers, get an indirect benefit in lower prices. Or, to entice better workers, companies can raise salaries. The company that gets the better employees will get still higher profits, and win again. Basic Economics.
Don, being intentionally obtuse really doesn’t get you anywhere (tho’ it puts you in the company of others, here). I’m a lawyer. You have the right to legal representation if you’re arrested and can’t afford a lawyer. Guess what - you don’t have any right to *my* labor. Are you truly incapable of conceiving of the process by which that right is secured?
And slavery? Really? Don’t be stupid.
There are several differences, MB:
(1) In a legal proceeding to which one is entitled to a public defender, the state has a paid lawyer prosecuting, so the state is required to pay for a public defender. The state does not afflict us with diseases and maladies the way it afflicts us with lawyers.
(2) “Guess what - you don’t have any right to *my* labor.” Exactly. Public defenders choose that line of work, just as some doctors choose to work in public health clinics. One cannot simply go to any lawyer and demand representation without paying. If fact, even if you can pay, he can refuse to represent you. Private lawyers are not forced to serve as public defenders. Hospitals, even private ones, are are forced to provide services without compensation. The difference is choice vs. force.
(3) Even with the availability of public defenders, many people choose private representation. Under the Clinton health-care plan, and under the single-payer systems of many countries, paying a private doctor for service is illegal.
MB - Are you, or any other lawyer, compelled, as a condition of practicing your craft, to provide wills and trusts to the indigent? Real estate transactions? My rights to a public defender(if i were indigent) are more on a par with providing obstetric services to indigents, but nothing else.
What is being proposed is to take control of all health care, and allow no alternative employer but government for health care providers.
No one has proposed a total takeover of your profession by government nor has anyone proposed that you work for whatever “the people” want to pay you, regardless of the true market value of your services.
The day that Universal Health Care passes Congress, I will make preparations for another profession. I had thought about cabinet making, but perhaps I will instead read for the Bar. I don’t see your profession being nationalized any time soon.
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