Taxing Insurance Isn't the Answer
Letter to the Editor

Your editorial "Taxing Health Care" (May 29) pinpoints the true reason for Democrats' U-turn on taxes and health insurance, but it understates the full consequences of trading in one form of financing third-party payment for another, at the same level or higher. Yes, Capitol Hill Democrats would like to encourage longtime Republican backers of capping the tax exclusion for employer-sponsored insurance to come up with some of the money needed to finance an expansion of health insurance for everyone else. In other words, re-enlisting as "tax collectors for the welfare state," under Democratic management.

However, the current problem of how third-party payment overstimulates more spending on health care and raises both the price of services and insurance coverage won't be solved by redistributing some of the total amount of tax subsidies for health care from the open-ended tax exclusion to a tax credit and more Medicaid spending for the uninsured. Less than 13% of all health spending is spent out of pocket, and that share continues to drop each year.

It's the total current amount of this spending factor (encouraged and augmented by tax subsidies and public entitlement program transfers), as well as its future growth rate, that drives health spending at a faster growth rate than that of the underlying economy. Delivering the subsidy candy through a different chute of the same Washington-based, third-party vending machine will still leave us with a bloated health sector which crowds out other investments and encourages more care instead of better health.

This year's health "reform" unfortunately has been all about redistribution, with make-believe cost containment only providing thin camouflage.

Thomas P. Miller is a resident fellow at AEI.

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Thomas P.
Miller

What's new on AEI

In year four of Dodd-Frank, over-regulation is getting old
image Halbig v. Burwell: A stunning rebuke of a lawless and reckless administration
image Beware all the retirement 'crisis' reports
image Cut people or change how they're paid
AEI on Facebook
Events Calendar
  • 21
    MON
  • 22
    TUE
  • 23
    WED
  • 24
    THU
  • 25
    FRI
Monday, July 21, 2014 | 9:15 a.m. – 11:30 a.m.
Closing the gaps in health outcomes: Alternative paths forward

Please join us for a broader exploration of targeted interventions that provide real promise for reducing health disparities, limiting or delaying the onset of chronic health conditions, and improving the performance of the US health care system.

Monday, July 21, 2014 | 4:00 p.m. – 5:30 p.m.
Comprehending comprehensive universities

Join us for a panel discussion that seeks to comprehend the comprehensives and to determine the role these schools play in the nation’s college completion agenda.

Tuesday, July 22, 2014 | 8:50 a.m. – 12:00 p.m.
Who governs the Internet? A conversation on securing the multistakeholder process

Please join AEI’s Center for Internet, Communications, and Technology Policy for a conference to address key steps we can take, as members of the global community, to maintain a free Internet.

Thursday, July 24, 2014 | 9:00 a.m. – 10:00 a.m.
Expanding opportunity in America: A conversation with House Budget Committee Chairman Paul Ryan

Please join us as House Budget Committee Chairman Paul Ryan (R-WI) unveils a new set of policy reforms aimed at reducing poverty and increasing upward mobility throughout America.

Event Registration is Closed
Thursday, July 24, 2014 | 6:00 p.m. – 7:15 p.m.
Is it time to end the Export-Import Bank?

We welcome you to join us at AEI as POLITICO’s Ben White moderates a lively debate between Tim Carney, one of the bank’s fiercest critics, and Tony Fratto, one of the agency’s staunchest defenders.

No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.