Re: A tax by any other name

Last month the review proposed taxing health care benefits as one potential solution for stemming spiraling health care costs. The general argument was that health care benefits, because they are not taxed, offer employees a compensation solution that is dollar-for-dollar more beneficial than additional salary raises. Companies increase benefits to retain key workers, and health insurance companies bid up their rates to capture most of that surplus, raising the cost throughout the entire system. The only "brake" in place today is Medicare. The government sets reimbursement rates (usually below profitability levels for most health care providers), which acts like a tether, preventing private insurers from getting too far away from the arbitrary cost floor.

While the system hasn't worked well, it has functioned. Individuals have reasonable flexibility to choose between health care providers, and those who can't afford it opt into Medicare. The oft-mentioned "coverage gap" is a huge problem, but the fact remains that EVERY one in the country has access to basic and emergency care. This system is inequitable, highly inefficient, and unsustainable without serious revision.

But the proposal by Congress to create a government run health care plan that will compete with private insurers is not a revision of the current system. It is a demolition charge set at the base of the building. In a best-case scenario (the public option sets reimbursement rates at the median of competing plans'), it will recalibrate the arbitrary cost floor and raise prices throughout the system. In the worst-case scenario (the public option undercuts all competitors), it will create a flight to cost, crowding out private insurers and leaving the government in charge of health care in this country.

During the 2003-2004 debate over the Iraqi War, the public didn't even blink while President Bush and the Republican Congress passed Medicare Part D. It was intended to neutralize political exposure on a key election issue, and by all accounts was very effective. It also constituted the largest increase in Federal entitlement spending since LBJ was in office. At the time, everyone was more focused on the billions of dollars being spent on cruise missiles for use in the next month, than on the hundreds of billions of dollars that the government was committing to spend over the next decade.

We seem to be running the risk of repeating recent history again. With the public attention captivated by the ongoing recession, everyone is focusing on the near-term costs of bailout spending measures. It would be very unfortunate if the public failed to take note of yet another long-term commitment that federal politicians seem all too willing to get us into.