In the midst of skyrocketing healthcare costs, large-scale employers such as General Motors, Ford, major airlines, as well as small businesses are scaling back employee health benefits in an effort to reduce budget strains. This crisis is leaving many Americans to pick up healthcare costs on their own, adding to household budget strains. However, the unfair tax code has left many who would buy their own health insurance unable to do so.
Last Friday, the Alliance for Health Reform and the Henry J. Kaiser Family Foundation held a forum titled, "Where are HSAs and High-Deductible Health Plans Headed?" The panel, which included Katherine Baicker of the White House Council of Economic Advisers, Uwe Reinhardt of Princeton, and Frank McArdle of Hewitt Associates, a Washington-based human resources consulting firm, debated the Bush Administration’s proposals to level the playing field and slow the growth of healthcare costs.
One of the most astonishing facts revealed at Friday’s forum was the inequality of the tax code as it pertains to consumer healthcare costs. While Americans with employer-sponsored insurance (ESI) face no payroll or income tax on their premiums, the premiums for self-employed Americans is subject to a payroll tax. Worst off are those Americans who work for an employer but purchase their own health insurance plans, all of which have high premiums and/or deductibles.
President Bush has proposed extending the tax benefits enjoyed by Americans with ESI plans to self-employed and other Americans who have non-group plans. Liberals strongly oppose this plan to make all healthcare plans tax-free, saying that we cannot afford further tax cuts. However, removing tax burdens from those who buy their own health insurance is not exactly an issue where the "affordability of tax cuts" should factor into the congressional debate.
Additionally, the Bush Administration has proposed increasing the contribution limits to Health Savings Accounts, which were a central feature of the 2003 Medicare Modernization Act. Contributions to these accounts are made by both the employer and the employee, and are tax-free. The funds from HSAs are then used to cover non-catastrophic healthcare costs. The trend among large-scale employers reveals an increase in employers offering low-premium HSA plans as an alternative to high-deductible health plans. Democrats in Congress have derided attempts to increase contribution limits as another tax shelter for the "wealthy," leading average citizens to inquire about exactly who qualifies as "wealthy" to Democrats.
While the panel was generally supportive of the HSA plan, panelist Reinhardt of Princeton presented a plan in which the wealthy would pay $30,000 premiums and those making under $40,000 would only pay a $4,000 premium. His socialist utopia was presented as a serious power-point presentation. Reinhardt even went so far as to suggest that those making over $100,000 a year be prohibited from buying health insurance and required to pay all costs out of pocket. Further, he derided efforts to make the tax code fair to those who buy their health insurance as ineffective. Rather, these Americans should be forced into a government-sponsored health insurance program which will provide a much lower quality of care than private insurance plans. This logic only serves to preserve discrepancies in healthcare quality between rich and poor.
The proposals to increase contribution limits for HSAs and to make the tax-code fair to those who purchase their own health insurance are good steps in the right direction in the effort to relieve average Americans from skyrocketing healthcare costs, despite Democratic objections to doing so. However, for those who simply cannot afford health insurance at all, Medicare and Medicaid should subsidize not government-sponsored plans, but plans offered through private insurance companies. Only then will access to high-quality healthcare be truly equitable for all Americans.