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)
VIVIAN J. PAIGE | All Politics is Local 
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.