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Well, not exactly. But I wanted to get your attention.
Senate Finance Committee Chairman Max Baucus (D-Mt.) has unveiled a blueprint for major health reform. And it includes a call for scaling back the tax benefits of employer sponsored insurance. Baucus has put on the table a variation of John McCain’s plan to scrap that benefit and use the money to finance a refundable credit for anyone buying insurance (either in the individual market or though their employer). This would be the very same idea that Barack Obama so frequently ripped as a massive tax increase on your health care.
Now, Baucus hardly endorsed the McCain plan. He is talking instead about capping the exclusion—either for gold-plated plans or high-income insurance-buyers. He buries the issue on page 81 of a 91 page document—rather odd placement from the chairman of the tax-writing Finance panel. And the discussion is both perfunctory and couched in classic, passive-voice Washingtonese: “Some have proposed….Many economists argue…More targeted reform might make the incentive more equitable…. Like the rest of the Baucus white paper, this is more a menu than a clarion call.
Baucus also glosses over critical distinctions among the various ways of restructuring tax treatment of health insurance. There are critical differences that would, sooner or later, need to be sorted out.
But the important thing here is that Baucus has the exclusion on his agenda. He is not alone. Another influential plan—a bipartisan bill sponsored by senators Ron Wyden (D-Ore.), Bob Bennett (R-Utah), and 16 others—would also convert the current exclusion. Even Jason Furman, a top Obama economic adviser (and former TPC fellow), has written extensively on the benefits of reforming the current tax exclusion for employee-sponsored insurance. So has TPCs Len Burman.
What they are all saying, in their way, is that a serious discussion about health reform needs to include the exclusion. Nearly all health economists agree that it makes little sense for government to subsidize the purchase of high-priced workplace insurance (which, not incidentally, encourages people to buy costly and unnecessary treatment) while doing little to help those who struggle to buy insurance on their own.
Messing with the exclusion must be done carefully. Badly designed changes could wreck the employer-sponsored system without giving people access to quality coverage in the individual market. And real reform will require plenty of other adjustments in non-group insurance. But done right, scaling back the exclusion can greatly enhance our current system of insurance. It would also provide a couple of hundred billion dollars that Obama will desperately need to finance any health reform he does propose. Simply dissing the idea, as Obama did repeatedly in the campaign, will do little more than drive the health reform debate into a ditch.
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