Reforming the U.S. Health Care System

Policy Backgrounders | Health

No. 149
Monday, April 26, 1999
by John C. Goodman & Merrill Matthews


XII. Funding Reform

"This program can be funded with money currently used for tax subsidies and health spending programs."

A. Using Savings From Ending The Current Tax System

  1. Currently, the United States spends more than $100 billion on tax subsidies for employer-provided health insurance, with much of the money subsidizing wasteful overinsurance and rewarding higher-income families who would have purchased insurance without the subsidy.
  2. Moving to a tax credit system will allow employers and employees to avoid many wasteful practices without losing tax benefits.
  3. As employers and employees shift to more economical health plans, employer tax-deductible expenses for health insurance will fall and taxable wages will rise.
  4. The extra taxes the federal government collects from the larger taxable wage base will be a source of funding to insure the currently uninsured.

B. Using Savings From Reductions In Current Spending Programs

  1. Federal and state spending on health programs for the uninsured currently exceeds $1,000 for every uninsured person in America.
  2. If all of the uninsured suddenly became insured, this would free up more than $40 billion a year in current spending.
  3. Savings made possible by scaling back spending programs (as their need diminishes) will be a source of funds to finance the tax credit and the Safety Net program.

"We don't need more spending on health care; we need to use government money more wisely and more fairly."

C. Achieving Budget Neutrality

  1. America does not need to spend more money on health care -- $1 trillion a year is ample money to meet the nation's health care needs.
  2. The goal of health reform should be to redirect government subsidies and government spending so that those dollars are used more wisely and more fairly.

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