Commentary: It'll take more than a Band-Aid to cure health care
This article first appeared in the St. Louis Beacon, June 12, 2009 - The success of any reform depends on the level of investment made in the new system. If policy recommendations are not adequately funded, those setting up the system will be forced to cut corners. That would mean insurance coverage only for selected groups, inadequate benefit packages or unaffordable premiums.
As discussions about health care reform continue in Washington, a key question is whether we are willing to pay for real reform that insures all Americans. The success of any reform depends on the level of investment made in the new system.
If policy recommendations are not adequately funded, those setting up the system will be forced to cut corners. That would mean insurance coverage only for selected groups, inadequate benefit packages or unaffordable premiums. Such provisions would undermine successful health-care reform from the start.
Some believe that funds for reform should come only from within the health-care delivery system itself. Certainly, substantial savings can be found by improving the payment and delivery system, eliminating over-payments to Medicare Advantage providers, managing pharmacy programs better and promoting evidence-based best practices rather than the most expensive treatments. But these strategies alone will not be sufficient.
Realistically, an influx of revenue will be needed. One logical strategy is to evaluate the hodge-podge of tax exclusions that have developed in the area of health, and that contribute to a very uneven playing field in accessing health insurance.
In World War II, a wage freeze made it difficult for companies to hire workers. In response, companies were allowed to offer health insurance as an untaxed benefit. Today, the exclusion of employer-sponsored health insurance from taxes is the largest single subsidy in the tax code, costing an estimated $246 billion in income and payroll taxes in 2007. Additional tax exclusions in the form of health savings and flexible spending accounts have also been adopted.
These tax policies are poorly targeted and benefits disproportionately go to individuals in higher tax brackets. In 2007, tax filers with incomes under $20,000 received only 6 percent of the benefit of excluding employer sponsored health benefits from their taxes. Research shows that many individuals use health savings accounts as a way to dodge IRA limit contribution and withdrawal limits. Flexible spending accounts are also more beneficial for individuals in higher tax brackets.
These tax exclusions do not have to be scrapped. Placing caps designed to take into account income, geographic areas and the health needs of the individual could result in a more equitable system, and still raise revenue to fund real health care reform. Putting limits on itemized deductions and a surtax on individuals with the highest incomes are also financing options.
Another potential source of revenue could be higher "sin taxes" on items such as alcohol or high-sugar soft drinks. Polling shows that about 68 percent of the public support higher taxes on alcohol.
Financing health care reform will require changes for insurance companies, health care providers, and some individuals who now benefit from the capricious array of tax exclusions. It will require policy makers, as well as the public, to be open minded.
However, insuring all Americans is truly good for everyone. It is the rare person who doesn't know a family member, friend or neighbor who is uninsured. Being uninsured often means an inability to seek preventive care or early treatment. It can lead to financial ruin or even premature death. By providing meaningful health care reform we can build stronger communities, a more robust workforce, secure families and children who come to school ready and able to learn. We can assure that seniors and individuals with disabilities don't have to choose between paying for medications and food. Can we really afford to do less?
Ruth Ehresman is director of health and budgetary policy at the Missouri Budget Project.