President Bush’s new health care proposal shows symptoms of being interesting and maybe even important, if only for what can be learned about the big question of health care by understanding the issues it raises.
Unveiled in last week’s State of the Union message, BushÃ¢â‚¬â„¢s idea is to give Americans a handsome standard income tax deduction for health insurance premium costs. They would get the same standard deduction ($15,000/family; $7,500/individual) as long as they had insurance, whether they purchased it through their employers or on their own, and regardless of its cost or their incomes. But any employer-paid premium above the deductible amount would be taxed.
Predictably, since this is a Bush plan, it earns generally high praise from conservative think tanks such as the Heritage Foundation. Here:
More notably, the plan gets good marks — though with plenty of regrets that Bush lacks the political capital to achieve anything with it — from the Economist of London.
But now for an almost disorienting surprise. The liberal Center on Budget and Policy Priorities, in a brief statement from its executive director Robert Greenstein, also has a kind word to say for Bush’s idea.
“On the subject of health insurance, by contrast,” Greenstein writes, “the President has shown leadership in placing the tax treatment of employer-based coverage on the table as part of health care reform.”
Yes, that’s what it says. He’s shown “leadership.”
To be sure, Greenstein goes on to signal that CPBB sees serious problems with Bush’s approach (a fuller discussion of those objections will be welcome).
Even so, this is a notable outbreak of civilities across the ideological divide.
It suggests that at least by confronting the flaws in America’s subsidized employment-based health insurance system, Bush has engaged an issue that many people who think about economics, liberal or conservative, believe to be of real importance.
There are enough varied flaws in that system to concern both liberals and conservatives. TheyÃ¢â‚¬â„¢re likely to emphasize different ones.
A liberal critic might focus on problems like these:
Ã‚Â· An unlimited tax exclusion for health care fringe benefits is a large tax shelter and subsidy for the affluent, which becomes more valuable the higher oneÃ¢â‚¬â„¢s tax rate.
Ã‚Â· This uncapped subsidy for the haves is in some degree financed by discriminating against workers who have to buy insurance on their own, and generally receive no tax benefit.
Ã‚Â· The system makes health insurance a virtual by-product of employment, restricting its Ã¢â‚¬Å“portability.Ã¢â‚¬Â
Conservatives, for their part, mostly lament the way this lavish but discriminatory subsidy system interferes with market discipline in health care. By ensuring that most health care consumers are unaware of the real costs not only of health care services but even of the insurance through which they receive them, the system, conservatives, believe, encourages over-consumption and eliminates incentives for price competition. One result is even higher prices for those who lack the subsidy.
The Bush plan, or something like it, would be a first step toward leveling the field between those with generous employer-paid health insurance benefits and those without, helping some of the uninsured better afford coverage.
It would also make health insurance costs more visible and tangible, probably inspiring many to shop for less costly alternatives, which in turn would inspire the market to provide them.
Health Care may be the ultimate Big Question in our era — big both in significance and complexity. Any discussion of changing the employment-based health insurance system is alarming to many. ThatÃ¢â‚¬â„¢s partly because there is comfort in not having to fully face health care costs and decisions, and partly because workers and unions fear losing benefits they have won through decades of hard negotiations and sacrifices on other fronts (wages, say).
WhatÃ¢â‚¬â„¢s more, market discipline and cost conscious consumers will do little to resolve what may be the biggest problem in health care – the vast expenses incurred in end-of-life care. Nor will it do much to allow the very poor or the very sick to obtain insurance.
But is it possible that the issue Bush has raised – the vast tax subsidy for employer-paid health insurance – deserves, as CBPP says, to be Ã¢â‚¬Å“on the table as part of health care reform”?
Here, by the way, is a provocative free market perspective on the problems with American health care - the problem of confusing Ã¢â‚¬Å“insulationÃ¢â‚¬Â with Ã¢â‚¬Å“insuranceÃ¢â‚¬Â — by Cato Institute scholar Arnold Kling.