Health Care in Finland . . . Should We Tax “Gold-Plated” Employer-Based insurance? and More . . .

Check out Health Wonk Review, a round-up of some of the best health posts of the past two weeks.  The current edition is hosted by David Harlow of the Health Care Law Blog http://healthblawg.typepad.com/healthblawg/2009/03/health-wonk-review.html

And he highlights a number of intriguing and provocative blogs that are not widely known– a measure of how many very good blogs are out there now–along with excellent  posts from favorites.

 

Among the featured posts:

 

On  Living the Scientific Life, “GirlScientist” offers an engaging and eye-opening  description of what it is like to find yourself in an ER in Finland. I hadn’t heard of this blog before, but I definitely recommend it. “GirlScientist” (a molecular biologist who studies evolution in birds) is a good writer, with a reporter’s eye for detail. I think you’ll enjoy her post.

 

Over at GoozNews, the always excellent Merrill Goozner suggests that we need an  Annals of Negative Results—- more news about drugs that failed in clinical trials, so that other researchers can learn from the failures. 

 

At Health Access Weblog Beth Capell questions the idea of taxing “gold-plated” health benefits that employees receive from their employers. She points out that the most valuable benefits tend to

offer insurance plans with relatively low-deductibles and co-pays—in other words, insurance plans that employees can actually afford to use. Do we really want to discourage employers from offering good insurance by taxing their employees’ “gold-plated” benefits ?

 

 Probably not. I would prefer taxing employer-based health benefits based, not on the value of the benefits, but on the employee’s income.  If a median-income family earning $55,000 is lucky enough to have good health benefits, I wouldn’t want to tax them, not in this recession.

 

 On the other hand, if a family earning $175,000 receives benefits worth $14,000—and if, like 15 percent of all “better paid workers” in the U.S.–  the employee pays nothing toward the premium ( while the employer lays out the full $14,0000)  it seems fair to tax the $14,000 as part of the employees’ total compensation.  The taxes paid could be used to subsidize healthcare for workers whose employers do not offer health insurance.

 

At BNET Healthcare David Hamilton throws a spotlight on Massachusetts, where many patients are finding it very difficult to make an appointment with a primary care doctor. Ironically, this is in part because the state’s heroic effort to provide universal access has sent more patients into the marketplace, looking for care. Meanwhile, the number of medical students training for primary care has been shrinking nation-wide, and thanks to low pay and poor working conditions, primary care physicians have been retiring early.

 

Hamilton points out that the Obama administration is doing what it can, “rushing out new federal funds to rescue Medicaid programs and public clinics across the U.S.”

 

Finally, at the Disease Management Care Blog Jaan Sidorov points to the high cost of out-patient care—all of those one-day surgeries that may not be necessary. . .     

To find these outstanding posts, and others, go to http://healthblawg.typepad.com/healthblawg/2009/03/health-wonk-review.html

15 thoughts on “Health Care in Finland . . . Should We Tax “Gold-Plated” Employer-Based insurance? and More . . .

  1. “it seems fair to tax the $14,000 as part of the employees’ total compensation.”
    Maggie,
    It may seem fair to you, but I don’t think it’s legal under current tax law. It is perfectly fine for employers to vary the employee contribution toward the health insurance premium based on income. It would probably also be OK to tax health benefits for all employees as income but then provide an offsetting credit as Senator McCain proposed (which Obama roundly criticized him for) during the campaign last year. Such a credit could be phased out for higher income people. I don’t think the law allows a subset of people to be singled out to pay taxes on a benefit that remains tax free to everyone else. There are also complexities regarding the definition of income (tax exempt bond interest, for example) and then there is the problem of someone who may have wage income below the health benefits taxable minimum but significant other income from interest, dividends, capital gains and rent. Should such a person get his or her health benefits tax free while the high wage earner with no significant other income pays taxes on his/hers? Like so much in the financial world especially, it’s just not that simple.

  2. Barry-
    If it’s not legal, someone should tell the chariman of the Senate Finance Committee:
    “Senator Max Baucus of Montana, chairman of the Senate Finance Committee, recently issued an 89-page health policy paper that many see as an important Democratic blueprint for health reform. His paper raises the possibility of capping tax breaks for health insurance premiums based on income, value of health benefits, or both.”
    If it isn’t legal now, Senator Baucus could help make it legal–by passing legislation.
    And I’m quite sure it is legal. Just recently, Peter Orszag said, very firmly, that taxing health benefits is “on the table” and he also has written about taxing benefits based on income.
    As President Obama sets out to great a mroe equal society, we’re going to see changes in many laws, particularly with regard to taxes. .
    (We’ll also see legisltion you like–particuarly, if its needed, laws saying that Medicare doesn’t have to pay or a more expensive treatment if a less expensie product or procedure is equally effective for certain patients. )
    The fact that legilators have actually called for a 90 percent tax on bonuses at bailed-out banks underlines the fact that we’re going to be seeing some dramatic changes.
    (I dont’ think that 90% tax will happen by the way–and I very much doubt Obama would endorse it. Those bonuses should have been blocked when the bail-out began. . . Though now that the bonsues are in he spotlight, more and more exectuives may feel they have to give all or least half back– or watch their career go down the tubes. Those who do return their bonus are not going to look favorably on those who don’t. And at this point top management is not happy about exectuives who resist–it casts the whole company in an unfavorable light.

  3. Maggie,
    There is no conceptual problem in taxing health benefits above a certain value. Senator Wyden, for example, talked about taxing benefits to the extent the actuarial value exceeds $15,000 per year for family coverage. To tax health benefits based on income, one approach that can be effectively administered is to first include the entire value of benefits as income for everyone and then provide an offsetting credit that could be phased out gradually as income rises above a certain level. Another approach is to tax the benefit as income but then increase the standard deduction and reduce the lower income tax brackets to offset most or all of the tax affect for people that make less than, say, $100K. What you can’t do is just pick an arbitrary threshold and say your benefits are tax free if you make less than that and fully taxable if you make even one dollar more. If benefits were taxable for ordinary income tax purposes, a separate issue would be whether or not payroll taxes for both the employer and employee would also apply.

  4. It seems you could determine the currently prevailing health insurance costs that are reasonable and offer a corresponding tax credit. Increases in the credit would be indexed to inflation as are current deductions for dependents. This would tend to slow the amount of tax savings over time assuming medical costs continue to outstrip general inflation. It would discourage helath plans that go over the credit amount since the recipients would be responsible for tax on the excess. The other thing it would do is make people more aware of there health care costs of insurance, something many people who are employed do not have a good idea of.
    I don’t understand why anyone would want to deny the same coverage for wealthy people as for those in the middle class. If you want to tax the more well off, there seem to be better ways than to tax there health benefits more harshly like higher percentages of income at higher earnings, extending the social security tax to higher levels of income, or restoring tax on capital gains to higher levels and restoring the inheritence tax.

  5. Keith–
    I agree with your second paragraph about taxes, but I dont’ quite follow what you are saying in the first paragraph.
    I’m not sure how we would determine what a “reasonable” insurance benefit is. For instance, some healht plans include mental health care –and are more expensive. Would this go beyond what is “reasonable”?
    Some have no lifet-time cap–and are more expensive. Would this go beyond what is reasonable?
    Perhpas one could just draw a line at, say, 80% and say that if 80% of health plans cost less no more than X, that amount defines reasonable, and any benefit over that amount would be taxed?

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  8. Perhaps taxing employer based benefits will give employees more incentive to look at their benefits each year and ‘right size’ the plan, according to personal needs. Otherwise, most employees take their untaxed employer sponsored benefits for granted and inevitably see the insurance (third party) as the one to absorb any care cost increases. People spend their own money much differently than someone else’s.

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