And now comes a health care overhaul potentially more radical than anything Hillary Rodham Clinton ever dared.
No Rose Garden speech celebrated the extraordinary idea. It is tucked into a concise chapter of the voluminous report of President Bush’s tax revision commission, a panel the White House created to help jump-start Bush’s moribund second term.
The grand idea is to sharply limit the amount of health insurance premiums that employees buying insurance through their jobs can receive as tax-free compensation. This tax subsidy is the major way the government promotes the purchase of private health insurance. It is why Americans who can’t afford to purchase insurance on their own – that’s most of us – cling to work-based policies. The job-based system is so embedded in American life that Clinton’s health care task force deliberately left it intact, and tried instead to fill the gaps around it.
The Bush panel abandons this caution. It takes what could become the official first step toward dismantling the employer-based insurance system. It shifts ever more costs to workers. It assumes that people will just stop buying health care if it’s too expensive.
Roughly put, it expects the sick to do a cost-benefit analysis before buying the care that might make them well.
There is an accurate assumption behind the plan. The current tax-free treatment of health insurance premiums benefits most those who already have the most. The best-paid workers buy the most expensive plans. And since they are in the highest tax brackets, they get more of a break than low earners. The inequity is intolerable, the panel says. And so it is.
But from this noble premise the commission concocts a scheme in which relentless increases in health care costs are shifted to all workers, not just the best-paid. The allowance for a tax-free premium would be set at an average premium cost – say $11,500 for a family.
Then this allowance would rise with general inflation, not the much steeper inflation in premiums.
Here is how it would work: Health insurance premiums for employer-sponsored insurance have risen 73 percent since 2000, according to the Kaiser Family Foundation. General inflation was 14 percent. Under the tax panel’s plan, who would make up the difference? You.
The point is to force people to switch from more comprehensive coverage to cheaper plans that reduce benefits and demand more in co-payments and deductibles. “Your co-pay would be higher, your deductible would be higher,” says James Poterba, an MIT economist and member of the tax panel.
This is, of course, already happening. Employers have been coping with high costs by shifting them to workers. The average family deductible for in-network services from a preferred provider organization is now about $679, according to the Kaiser research. More than half of covered workers face separate charges for hospital admissions. Co-payments for office visits and prescriptions also are rising.
The theory behind the tax plan is that all this individual responsibility for paying should make people avoid buying health care – and so lower its cost. If this were so, health care costs already would be dropping. They aren’t.
They’re driven upward primarily by advancing technology. In Europe, where government insurance keeps per capita health spending well below that in the United States, costs are rising just as fast – driven by new technology, according to Gary Claxton, vice president of the Kaiser Family Foundation.
A second part of the proposal, to give individuals a deduction equivalent to the amount of premium subsidy a worker gets on the job, could be the first step toward dismantling the work-based insurance system, Claxton says, as high-wage workers opt out. “A deduction is just not all that useful to low-income people,” he says. As for the uninsured, few who can’t afford insurance now would suddenly find it cheaper because its tax treatment is changed.
So this is really the health-care equivalent of the president’s plan to privatize Social Security. It takes a real problem and provides no reasonable solution. Not for the vast majority of the 45 million uninsured. Not for middle-class workers struggling with stagnant wages and rising health costs. Not even for businesses burdened with health expenses that hurt the bottom line.
Like the Social Security proposal, this one shifts the risk of managing life’s inevitable rough waters from a system with shared burdens and benefits to one the individual must navigate alone. It’s just too bad if you drown.
Marie Cocco can be reached at mariecocco@washpost.com.
