Posted on 07/02/2012 3:30:26 AM PDT by 1010RD
ObamaCare may be constitutional but it isn’t the answer. A refundable tax credit is.
The Supreme Court has just told us that ObamaCare’s mandate to buy health insurance is constitutional under the government’s taxing authority, but this decision will not settle the debate. Republicans have vowed to repeal and replace ObamaCare—and if Mitt Romney wins the presidency, they just might succeed. But Republicans have been vague about the replacement. Here’s a suggestion: Replace ObamaCare with a refundable tax credit funded by taxing employer-provided health insurance.
Each year, some Americans contract a dire illness or suffer a serious injury but can’t pay their medical bills. They usually still get treatment, but the costs are passed on to the rest of society. Sometimes taxpayers pick up the tab. Other times, hospitals and doctors absorb the cost, which shows up in higher health insurance premiums for all of us. To address this challenge and move towards universal coverage, Congress should tax employer-provided health insurance and use the revenue to offer a refundable tax credit that will empower the uninsured to purchase coverage against catastrophic health costs.
As the government correctly argued in the ObamaCare case, in a very real sense everyone is in the market for catastrophic medical care every year. We all face the risk of getting cancer or being hit by a bus, and no one would be refused needed treatment. Some of us pay for that treatment in advance by buying health insurance. Others do not insure, creating the risk that much of their costs will be passed on to the rest of society—a risk that is often realized.
In a nation that values self-reliance and personal responsibility, people should not foist the costs of treatment onto others by refusing to carry insurance. And in a nation as wealthy as ours, no one should go broke because they get sick or injured. Universal coverage is an appropriate goal of government—it benefits both the individual and society, and it helps to make sure that you won’t have to pay for your neighbor’s health expenses.
A tax credit for purchasing catastrophic insurance could move our society towards universal coverage. You would be offered a certain amount of money in the form of a tax credit—a reduction in your tax liability—provided that you buy an insurance policy that provides coverage for at least catastrophic care. The credit would not depend on the cost of the insurance that you chose to buy. If you buy a policy that provides the required coverage for less than the credit, you can pocket the difference. Of course, you’re free to buy a policy more expensive than the credit, paying the extra cost out of pocket. You decide what’s best for you and your family—not the government. The tax credit should be refundable, so that the nearly half of American households which don’t pay income tax will receive it as a cash payment. It should be progressive, so that the government focuses its financial resources on those Americans who most need financial assistance.
Offering tax credits to those who purchase health insurance has been advocated by prominent Republicans previously, and should be strongly considered in the wake of the Court’s decision. As a couple of examples, President George W. Bush proposed tax credits in his 2005 budget and Representative Paul Ryan, currently chairman of the House Budget Committee, proposed them in his 2010 economic reform plan. And not just Republicans. Jason Furman, now a senior economic advisor to President Obama, has written favorably about using refundable tax credits to induce the uninsured to purchase coverage, provided that measures are taken to enhance risk-pooling in the individual market.
A costly tax break for health insurance may not seem affordable when the country faces such serious fiscal challenges. But if Congress were to end the existing tax exclusion for employer-provided healthcare, there would be more than enough money to provide the credit. Under the current tax code, the money that your employer spends on your health insurance is not subject to payroll or income tax, even though it is part of your compensation. The CBO estimates that this implicit subsidy will cost a whopping 1.8 percent of GDP in 2013-2022. Ending this exclusion means that employees will pay tax on the value of their employer-provided insurance, but their coverage will also entitle them to claim the new tax credit.
Replacing the tax exclusion with a refundable tax credit has several benefits. Depending on the size of the credit, it could bring down the deficit. It is also likely that the overwhelming majority of Americans, including those who are currently uninsured, will buy health insurance and claim the credit, bringing us much closer to the goal of universal coverage and putting downward pressure on premiums by bringing healthy people into the insurance pool. Unlike the tax exclusion, which is regressive because it provides a relatively larger benefit to those in higher tax brackets, the credit will be progressive, providing a larger benefit to poorer Americans. Ending the tax exclusion will remove the incentive for individuals to purchase more healthcare than necessary, and will find people looking more of their actual health insurance expenses straight in the eye. And ending the tax exclusion may induce more people to get health insurance outside of their job, which will allow them to change employers without worrying about a loss of health insurance—this could result in better matches between workers and firms and a more productive labor force.
This tax credit is very different from the subsidies that ObamaCare offers to low- and middle-income people in the state-based exchanges. Those subsidies—available only to workers whose employer does not offer a plan that the government feels is adequate—require the purchase of comprehensive coverage for even routine services rather than limiting the requirement to protection against extremely expensive catastrophic events.
The serious problem facing society is that the costs of treating the uninsured for catastrophic medical events often get passed on to the rest of us. Given that, it makes no sense to mandate that people insure against ear infections, strep throat, and canker sores. The solution should be limited to the problem. Offering a tax credit to people who purchase catastrophic coverage directly addresses the problem of people being unable to afford treatment for catastrophic events, and should help to make such coverage more affordable by increasing the balance of the risk pool.
Uninsured individuals being bankrupted after receiving treatment for catastrophic events is a serious problem, as is individuals who wish to purchase health insurance but can’t afford it because too few healthy people are in the risk pool. These problems allow for government action. ObamaCare, although constitutional, isn’t the answer. It is overly broad, too expensive, and builds on the current, structurally flawed system with its distortionary incentives to overconsume and overinvest in healthcare. A tax credit that empowers people to purchase catastrophic coverage offers a better solution.
The Court’s decision isn’t an endorsement of the status quo, and doesn’t imply that ObamaCare is good policy. Republicans and Democrats need to work together to achieve serious, comprehensive reform. Republicans want to repeal and replace? Great. They must convince the country that their replacement is better than ObamaCare. That hard work begins now.
If we leave another political vacuum we'll get more of the same from the statists. We need to start creating complimentary solutions and implement them.
If Romney wins we'll have less than half a year to implement an effective agenda that gets the economy moving and removes the regulatory and tax obstacles currently curtailing growth.
Once the economy is rolling then we can begin bigger changes with the support of the populace. We'll need to hold power for at least a generation to make a real dent in the Leviathan.
It’s the 16th amendment that gives the teeth to Obamacare. Even if Commie care is repealed in its enirety, it is only a matter of time before the politicians cook up some other scheme to enslave us further.
The ruling by Roberts should be a huge wake up call for us to change the way that taxes are levied and collected.
Is healthcare really “broken”? Sure there may be problems, but I have many relatives and friends alive today because of our current healthcare system. Claiming that our system is broken is merely a leftist propaganda tool that we better not fall for.
Pelosi: "...but the most eloquent statement of all will be from the experience people have....when they get their check in August, that says you are getting a refund because your health insurance company spent more money on corporate CEO compensation and administrative costs than they did on meeting your health care needs....
http://www.bing.com/videos/watch/video/pelosi-health-care-decision-a-victory-for-the-american-people/61bqwyw
That's a new one on me. I have to assume that insurance companies will now be under scrutiny as to what they pay their employees. That simply means they will hire less people and pay less to those they do hire. Way to go Nancy! AGAIN, you've screwed those who want to work and made it easier for those who don't!
I want to hear from some of you who support this. How do you in any way justify this? My premiums have already increased 80%. How much more will they go up? God only knows! I am doing the right and proper thing, spending my own money (and no I;m not "rich") to provide for my health care costs. Again, just like the mortgage mess, those doing the right thing are the ones being punished.
Is healthcare really broken? - that’s one of the myths we have to fight.
The Left has been leading this charge using outright lies.
See here:
http://www.american.com/archive/2012/june/the-healthcare-myths-we-must-confront
Roberts Ruling means the 16th needs Repeal. ASAP.
Also.....health care is too important to be left to the DC beurocrats. Only thing outa DC about “healthcare” will be only good for their health!!!!! And pocketbooks.
Last year, while on vacation in California, I watched a couple of dozen surfers enjoying life on a beach on a Monday morning. I talked to some of them. Many had college degrees. Almost all said they chose to live this way - wait tables or tend bar at night, share a shack with 3 or 4 other buddies and surf all day! It's the "good life"! Then, it occurred to me - these are the people we will buy health insurance for!
Here’s my prediction:
1. It makes no difference whether 0bambi or white 0bambi gets elected, health care wise. Policians are too enamored of power and the power that money brings.
2. The same bloated bureaucracy and the same enforcement will remain in place. If there is anything politicians favor more than power, it is bloated bureaucracy.
3. Rationing of health care and Death panels will result in a bloody revolution, unseen since the rench Revolution.
What? My premiums went up 80% after it was passed. No telling how much it will go up next year!
IMHO...the only way that bill goes away is when We the People go and pull it out by the roots....
Instead of even messing with the taxes, just lower the tax to $1 for every million.
And from tax cuts to SHRINKING GOVERNMENT by repealing Obamacare, No Child Left Behind, and doing away with most of the cabinet departments - for starters. THAT would result in the greatest prosperity America has known. The free market creating a greater % of prosperous Americans than all the failed and sad government programs combined.
Even if it’s ‘only’ a dollar....it will be subject to increases by future congresses. And we will get an additional set of worksheets with several pages of gobbledygook instructions to follow on our various sets of 1040 forms.
That’s just until it can either become obsolete or repealed.
Pelosi is talking this thing up but not many people will actually receive an insurance rebate check. Only about 3 million people and they’ll average around $150 or less. Insurance companies will be limited to spending 20% of premiums on administrative costs. What do government programs spend on administrative costs?
Concur on all points.
This is along the lines of a discussion my wife and kids had this weekend. We have purchased cataclysmic health insurance for years. This has kept our premium down while paying the deductible only when needed.
Sure we pay the entire amount when we go to the doctor. But, when my son had his appendix removed we paid the full deductible amount and the insurer picked up the excesss.
At the end of the day we saved more money since we did not pay a higher premium for several month (years) to simply see a doctor.
Another improvement would be to pass the tax benefit on to the individual and stop offering insurance through the employer. My choice of insurer should not be dependent on the choice of my employer. Let me choose and competition in the market will return.
If an insurer or employer self insure then we can get crappy coverage and have little recourse. If I am able to enter the market with the same tax deductiibility then the insurer will focus on the individual and not satisfying some HR representative.
I am my employer.
No matter how they gimmick this I get shafted.
And how is this any different from ObamaCare? It taxes the prudent to pay the imprudent.
HSAs for everybody. No required coverage. It's charity care for the rest. A tax for charity care should fall on the prudent and imprudent alike.
Health care is not and can not be an entitlement in any moral sense. We should stop talking about as if it could be. Don't let the left control the language.
Of course, simply killing the income tax and the 16th amendment would make it better for the prudent, and maybe encourage prudence among the currently imprudent. It would also kill ObamaCare immediately.
Short of that, we are in trouble. If we don't kill the root, we are left trimming the branches. The income tax is the root of big government.
bfl
When asked what we would do about the "broken health care system", our side always hems and haws and stammers some kind of blather about growing the economy. Why don't they come back at the questioner and say that the health care system isn't all that "broken" and we certainly don't need a 2700 page bill to fix the problems that DO exist. Nuff said!
They always let the press and liberal talking heads paint them into a corner, by defining the corner! Stop it!
Some examples of leftist talking points that we constantly are trapped by:
-War on Women
-War on Contraception (quit letting them say the Church is anti-women and anti-contraception. This debate should be about a Church's right to choose, abortions and requiring the distribution of abortifacients)
-Fairness!
-Health "Care" bill - it is a health insurance bill. Quit letting them accuse us of wanting people to "do without health care", as if we are so cold hearted, we would have poor people dying in the street. Everyone in America had access to health care before the bill passed. They still do. The difference is, those of us who carry our own coverage are now paying more for our own in addition to paying for someone else's.
-Evil oil and coal
-The "poor" (good grief! Their new definition of "poor" is no longer about economic status, it has become "not having what those evil rich people have"!
-Racism - racism is just as much about the perception of the listener as it is about the one who is talking. Alan West is in trouble for daring to compare today's welfare society to being a slave to government. THE WORD 'SLAVE' IS STILL A VALID WORD IN TODAY'S VOCABULARY! Quit letting them railroad us over our rhetoric!
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