NCPA - National Center for Policy Analysis


May 19, 2009

The Obama administration is now open to taxing health care benefits.  There is talk that the reform could include punishments against employers who don't follow new government mandates to provide and pay for coverage, or used as yet another way to raise taxes while locking in the current system's flaws, says Grace-Marie Turner, president of the Galen Institute.

The reason the Obama administration is considering the change is it's the only place the White House and Congress can find enough money to pay for the overhaul agenda they're planning, says Turner:

  • The $634 billion Obama has set aside as a "down payment" for health care reform in his stimulus package and budget just isn't enough, according to John Rother of the American Association of Retired Persons.
  • He estimates the 10-year cost to be about $1.5 trillion, an estimate some analysts think is on the low end for a plan that commits the nation to covering everybody.
  • That is more than twice the amount Obama has set aside in his budget, and there already is fierce criticism of his proposals for raising the $634 billion, which include reducing the federal tax deductions for home mortgage interest and charitable contributions and limiting payments to Medicare Advantage plans.

If the goal truly is to help the uninsured, then we should target resources directly to them.  Make sure those eligible for public programs are enrolled and give them more options for coverage, and provide new subsidies for the uninsured to purchase private insurance.  We certainly don't have to turn our entire health sector inside-out, says Turner:

  • The first step should be to set a limit on how much income workers can protect from taxes in the form of health benefits.
  • We should set it high so few are affected, to give people and companies time to adjust.
  • The revenues collected should go to provide direct tax credits to help the uninsured purchase private coverage.

This policy would have two advantages, explains Turner:

  • It would make the cost of health insurance more visible to workers so they can become partners in managing their care and spending, thus reducing inflationary pressures.
  • And it would provide money to the uninsured to help them buy the coverage that works best for them.

Source: Grace-Marie Turner, "Obama Lacks Funding for Health Care Overhaul," Heartland Institute, June 1, 2009.


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