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  • Sen. Wyden (D-OR) Speaks Truth on Health Tax Policy

    Here’s a simple fact: It’s impossible to reform the health insurance markets and create a consumer-driven system based on personal choice and real health plan competition without reforming the federal tax treatment of health insurance. All arguments to that fact, from Republicans and Democrats alike, are nonsensical.

    So, it’s heartening when self-proclaimed progressive Sen. Ron Wyden (D-Ore.) is on the same page as the Heritage Foundation and the nation’s leading conservative health policy analysts on the central issue of federal tax policy. Wyden’s comments today at the Urban Institute underline the broad bipartisan support that does exist in Washington and elsewhere for changing the tax treatment of health benefits to make it more equitable for individual consumers.

    In a panel on overall tax policy, Wyden renewed his push for Congress to convert the unlimited tax break that’s available for employer-sponsored health benefits (technically called the employer-based exclusion) into a system of individual tax relief so that individuals and families could buy their own insurance plans without today’s punishing tax penalties.

    “We need to convert the tax exclusion into a generous deduction or credit and put that in the hands of individuals to go into the marketplace and find policies that work for them,” Wyden said, a member of the Senate Finance Committee, which is currently marking up legislation that could dramatically overhaul the U.S. health care system. “This will result in millions of Americans getting tax cuts when they shop.”

    Heritage health policy and tax expert Stuart Butler has pointed out this tax reform also would incentivize millions of Americans to help drive down soaring health care costs:
    “There are two objectives behind proposals to reform the “exclusion” of [employer-sponsored] benefits from a worker’s taxable compensation:

    • First, it would focus the unlimited special tax break — which, after all, is a distortion in the underlying tax code — on those who need help the most. Currently the total value of the tax exclusion is about $270 billion annually to families at the federal level (there is also tax relief from state taxes), with most going to upper-income families who are in higher tax brackets.
    • Second, it would achieve efficiencies and cost reductions in health care over time by making workers more attuned to their health benefits. Economists generally agree that the tax-free status of health benefits means their true cost is essentially hidden: Their value does not even appear in paychecks or year-end W2s. This discourages workers from questioning value for money in health insurance or whether they are overusing services. This in turn pushes up the cost of these benefits and correspondingly reduces the cash income component of worker compensation. A cap would focus workers’ attention on the total cost of their insurance and make workers a self-interested partner with employers in seeking more efficient and less costly plans.

    Now, this doesn’t mean that either Butler or other Heritage experts feel the rest of Sen. Wyden’s health policy agenda, including his legislative proposal with Sen. Robert Bennett (R-Utah), are desirable or sound. Nina Owcharenko had urged lawmakers to approach the bill with caution:

    Despite many attractive tax reform aspects, a troubling feature of the bill is that it would replace the current health system with one that is heavily regulated by the federal government: Individuals would have access only to plans permitted by the government and would be required to purchase such a plan.

    Still, giving individual consumers tax breaks to buy their own insurance plans — plans they could keep through any job changes or spells of unemployment — would greatly stabilize today’s unstable health insurance markets. Moreover, real consumer choice, in which individuals can hire and fire health insurers just like they can with other insurers, would exert intense pressure on the market, forcing it to offer competitive and affordable health plans or lose market share.

    As Wyden said today, “Choice and competition are how you get to affordability in health care.” That’s the right response to the statist, central planning, bureaucratic rationing and price controls that are being proposed.

    Posted in Obamacare [slideshow_deploy]

    5 Responses to Sen. Wyden (D-OR) Speaks Truth on Health Tax Policy

    1. Ben Vos says:

      So, we'll have decentralized, multiple bureaucracies instead? We'll force providers and hospitals to spend more time, money, energy, and frustration trying to get billing done? We'll create more confusion, frustration, and heartache for families trying to find the best care for their needs? How is this a good idea?

    2. matthew queens, ny says:

      this is a true first step. also an honest one from a liberal. how refreshing. lets see if we can get true competition by allowing interstate competition and we may finally be getting somewhere.

    3. Steve, Kalifornia says:

      We need to be able to cross state lines to find the best deals. We need tort reform or this is all just a power grab by Washington.

      Instead of creating a multitude of beaurecratic locust type agencies. Why wouldn't health saving accounts that you can roll over each year, that acrue interest & are tax exempt work? Make the HSA's high enough to use for Dr.'s visits, earaches, prescriptions, etc.

      Then make available castrophic care insurance policies for accidents, major illnesses, etc. This way, everyone has "skin" in the game, this will deter running to a Dr. for anything from a hangnail to a hangover!

      The HSA would be used for all minor illnesses & accidents & the insurance used for major illnesses & accidents. This would give us competition, lower costs at the hospitals & greater savings for We the people.

      What it wouldn't give us is just as important, it wouldn't give us socialized, rationed medicine. It wouldn't give us huge deficits, bigger government & more government in our lives!!

      I haven't worked all the details out,I figure there should be an expert somewhere that can polish any finer points needed. If I can figure this out why can't our congress critters figure it out? They're the "wizards of smart" & so much more enlightened than we the unwashed masses! (we're who they intend to place in servitude via government health care take over)

      But, the last paragraph is why we won't get anything as simple as HSA's, because government won't be eating up another 17% of our GDP nor get a strangle hold on all our lives!

      Like Mr Reagan said, "government is not the answer, government is the problem!!" It's true in healthcare costs as in too many other aspects of our lives!!

    4. Greg, Baltimore MD says:

      Having health insurance tied to employment is hurting productivity and distorting the labor market. It does drive efficiency in billing and customer service for the insurers but with modern data systems this should not be the factor it might have been a few years ago.

    5. Christine, Californi says:

      I agree with Steve, Kalifornia. He is absolutely right. I am a registered nurse and in my career, some 45 years, spent 15 years working for a Medicare Advantage program, those are the programs that have already been identified as a program that will be cut. Those programs provide benefits that Medicare does not provide and with cuts in Medicare funding and cuts in reimbursement to physicians, care to seniors will be dramatically diminished (rationed). Many physicians now, both primary care and specialists, will not see patients with Medicare as government reimbursement rates are so low and they are scheduled to be dramatically decreased again in the coming year. So you say, doctors make "big money" already, they can afford to take a cut in Medicare reimbursement and make up for it with patients who have private insurance. As I said, I have been an RN for 45 years, long enough to remember when doctors did make "big money". I also remember when here in California obstetricians quit purchasing malpractice insurance as they could not afford it. Why? Because attorneys would take cases, with or without, merit and push the limits on settlements thereby making huge amounts of money for themselves. Do doctors need to make "big money"? Consider this…they are in school for a Bachelors Degree (4 yrs); Medical School(4 yrs);Internship (2 years); Residency Training(2-4 yrs); Specialty training (2-4 yrs). Figure close to 14+/- years of school…With all those years of education come a "trillion" dollars of student loans…thousand and thousands of dollars…then they need money to set up a practice, rent an office, buy equipment, hire trained staff, buy malpractice insurance, continue on-going education…and maybe even to feed a family! So why is decent reimbursement necessary? With the proposed health care reform many physicians will give up their practice …those who continue to practice may not take a Medicare patient so then what happens to those on Medicare? Obama promises you can keep your own doctor…not likely, that benefits will not change…CONSIDER…with a Medicare Advantage (at a minimum…as there are many other benefits) program when you go see your physician you pay a $5 office co-pay; see a specialist $10 co-pay; go to the emergency room a $50 co-pay which is eliminated if you are admitted. Under straight Medicare you pay 20% of all your doctor, hospital, emergency room, procedures (MRI;surgeries, etc)assuming, of course, they are covered as determined by a non-medical bureaucrat. We MUST stop the health care reform as it is proposed in Washington. Read the above comment by Steve, Kalifornia…he has solutions that many people know and recognize that have not been tried or even discussed. I get really annoyed when I am accused of being a "conservative"…would you want to have a heart transplant done before other "conservative" measures were tried first? Ask your Congressman and Senators to sign up for their heart transplant and as soon as they do, I'll be happy to have the same@!

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