Tax Justice Digest stories about Health Care
Of course, many Americans might be surprised to learn that any program is funded, on paper anyway, for the next 33 years, so most future retirees are probably reacting calmly to this announcement, as they should. It's difficult to project revenues and expenditures of any sort out more than a decade, since these projections are extremely sensitive to changes in the economy and other factors. Further, under current rules Social Security benefits increase annually to match the growth in wages, which generally increase more rapidly than inflation, meaning that even if the unlikely worst case scenario came true and benefits were reduced in 2041, they might still be greater, in real terms, than those benefits received today.
Medicare is a different story. As the report itself says, "Medicare's financial difficulties come sooner -- and are much more severe -- than those confronting Social Security." This is because Medicare is not just facing the coming retirement of the baby boomers in large numbers, which is the only challenge facing Social Security. Medicare costs are rising because health care costs generally are rising. The trust fund for Medicare hospital insurance will be exhausted in 2019 and payroll taxes flowing into the program will only cover 78 percent of projected expenditures. Medicare benefits are not automatically cut if this happens. Rather, it would put a huge strain on the rest of the budget, as more general revenues are diverted from other services.
The cabinet officials who presented these figures on Tuesday seemed to be uninterested in answering any detailed questions about them. The figures don't exactly support the administration's approach, which has been to play up the alleged "crisis" in Social Security to somehow justify siphoning money out of the program and into private accounts, while opposing Medicare reforms proposed by the Medicare Payment Advisory Commission (MedPAC), a panel of experts created by Congress in the late 1990s.
This week President Bush vetoed the bill to expand the State Children's Health Insurance Program (H.R. 976) that was approved by the Senate and House of Representatives last week. The bill would increase funding for the program by $35 billion over ten years by increasing the federal tobacco tax for cigarettes from 39 cents to a dollar per pack. The President has promoted his own idea for expanding health care -- a change in the tax code that would weaken the employer-based health care system without guaranteeing that it's replaced with a viable alternative.
None of this is to say that the way the tax code currently treats health care is optimal. The deduction for employer-provided health insurance provides the greatest benefit for those in the highest income brackets and the lowest benefit for those in the lowest income brackets, making it an undeniably regressive policy. Also, it does nothing for the estimated 45 million Americans lacking health insurance.
This week President Bush vetoed the bill to expand the State Children's Health Insurance Program (H.R. 976) that was approved by the Senate and House of Representatives last week. The bill would increase funding for the program by $35 billion over ten years by increasing the federal tobacco tax for cigarettes from 39 cents to a dollar per pack. The President has promoted his own idea for expanding health care -- a change in the tax code that would weaken the employer-based health care system without guaranteeing that it's replaced with a viable alternative.
None of this is to say that the way the tax code currently treats health care is optimal. The deduction for employer-provided health insurance provides the greatest benefit for those in the highest income brackets and the lowest benefit for those in the lowest income brackets, making it an undeniably regressive policy. Also, it does nothing for the estimated 45 million Americans lacking health insurance.
A bill to expand the State Children's Health Insurance Program (H.R. 976) was approved by the House of Representatives on Tuesday and the Senate on Thursday. The bill would increase funding for the program by $35 billion by increasing the federal tobacco tax for cigarettes from 39 cents to a dollar per pack.
The federal government's primary approach to helping the middle-class access healthcare is through the tax code. Most importantly, employers can deduct funds used to provide health insurance to employees, who generally exclude the benefits from income. This is not the most rational or comprehensive approach but has helped middle-class people obtain health insurance.
The deduction for employer-provided health insurance is projected by the Congressional Joint Committee on Taxation to cost the federal government $534 billion from 2006 through 2010. Deductions for health insurance premiums available to the self-employed will cost another $22.6 billion between 2006 and 2010. While many middle-class families have obtained health insurance through this route, there are many ways in which it may not be an efficient or equitable policy. For one thing, the tax benefit is greatest for those in the highest income brackets and lowest for those in the lowest income brackets, making it an undeniably regressive policy. Also, it does nothing for the estimated 45 million Americans lacking health insurance. The rising high cost of health care has caused many employers, particularly small businesses, to decide to not provide health insurance to their workers, despite the tax break that would benefit the employees.
White House Proposal Could Make Matters Worse
President Bush argues that his health care tax proposal would remedy this situation. He would eliminate the deduction for employer-provided health insurance and instead offer a deduction for health insurance purchased on the individual market (for the purchase of coverage that is not employer-provided) The reality is that his plan could weaken employer-provided health insurance without ensuring that an adequate alternative takes its place. The President's proposal would basically make the tax code biased towards individually purchased health care and even high-deductible health care. There would no longer be any tax incentive for employers to provide health care, so many could "cash out" the health care benefits they currently offer, meaning some employees would receive additional monetary compensation instead of health insurance. The problem is that these employees would have to turn to the individual health insurance market, where plans offered are much more expensive and less generous.
A recent summary of research from the Center on Budget and Policy Priorities notes studies showing that most low-income people trying to obtain coverage on the individual health insurance market have difficulty and over a quarter are denied coverage or are charged much more because of a pre-existing condition. The types of coverage available on the individual market often result in greater out-of-pocket expenses that will cause some low-income people to forego necessary health treatments.
Public Programs Like SCHIP More Efficient than Tax Subsidies - Yet Face Presidential Veto
The President has claimed his proposal would be more efficient than the House and Senate bills to expand the State Children's Health Insurance Program (SCHIP), which the two chambers approved this week. The White House argues that expanding SCHIP will "crowd out" private insurance. The Congressional Budget Office has found that two thirds of the children receiving health care under either bill would be those who would otherwise not have health insurance. Health care economist Jonathan Gruber has pointed out that the "crowd-out" effect of SCHIP is probably the lowest of any health care proposal, and that the majority of benefits from the President's health care proposals go to those who would have health insurance anyway.
On August 2, the Senate passed its SCHIP bill, which increases the federal cigarette tax by 61 cents to one dollar per pack to offset the costs. The House passed its broader bill, which increases the federal cigarette tax by 45 cents per pack and includes other revenue-raising provisions, on August 1. The President has indicated that he would veto either version.
Democratic leaders in the House and Senate hope to bring an expansion of the State Children's Health Insurance Program (SCHIP) to the floor next week. The Senate Finance Committee has approved a $35 billion expansion that would be funded by a 61 cent increase in the federal tobacco tax (bringing the tax to a dollar per pack of cigarettes). Many have pointed out that cigarette taxes are regressive, but others have argued that this is the only funding mechanism that will produce anything close to bipartisan agreement in Congress.
