A Tax Hike I Could Really Get Behind
March 15, 2009 1 Comment
Here’s a potential Obama decision I could get behind (if it’s not just a posture): Administration Is Open to Taxing Health Benefits. Of course, it’s no surprise, because if you read the article you’ll see this would be essentially an embrace of a McCain position that Obama had criticized during the campaign.
One of the stupider side-effects of our tax code is that virtually everyone in the country has become conditioned to believe that health care has to come from your employer, via a “plan”. Health care and employers are linked! Everyone knows that! If you have a job, you can have health care, because (hopefully) your employer signs you up for a “plan”. Conversely, if you don’t have a job, you don’t have health care, because how can you get a “plan”? And if you switch jobs, you have to worry about whether your new employer would have a “plan” for you. Would it be as good? Etc.
No one seems to ask, why do health care services have to come in the form of an employer-provided “plan” in the first place? Virtually nothing else is done this way.
Let’s think about cars. Your car needs regular gasoline fills, oil changes, tune-ups, and minor repairs. I don’t know about you, but here’s how I handle those things when they come up: I take my car to a specialist of some sort, he performs the service on my car, and in compensation I give him a thing called “money” (or at least, my credit card). Then I go home and forget about it. If my car needs more work, I end up paying more; if it needs less work, I pay less. Of course there is risk of huge repairs being required, but for that I have a thing called “insurance” that requires ongoing payments, and in return I am covered for catastrophic repairs above a certain amount. I bought this “insurance” myself, after some shopping around, and mostly haven’t needed it. I also used “money” for that. It’s the money that I get from my employer, not the “plan”. This is better! I have more freedom to choose how I use that money. People should prefer this! It’s like the difference between getting $100 cash and $100 gift card for Olive Garden. Is there any real confusion as to which is preferable?
But what if we handled those things the same way we handled health care?
Well, first of all, I’d have to sign up for an Auto Care Plan through my employer. (If I had no employer, I simply wouldn’t have an Auto Care Plan, and presumably would start whining to the government to cover me.) On the first day or week of my job, I’d go to a seminar at my employer, where some lady who works for my company (for whom this is her full-time job!) would explain to all us new hires the options we have for a Car Care Plan. Plan A offers $5 co-pays for oil changes but we have to get our oil changed at particular places, Plan B has $10 co-pays but more freedom in choosing oil change shops, etc. Then on the basis of this we’d have to choose which Car Care Plan we want. We’d be stuck with this choice for a whole year, if we chose wrong we have to wait till the next “Open Enrollment”. Having thus chosen, we’d then get a plastic card to carry in our wallet (because Lord knows we don’t have enough of those), a huge amount of brochures and literature about our Car Care Plan (which of course we all read entirely, right?). And so every time my car needs an oil change, or gasoline, I have to have that card on me (if I forgot the card, can’t get the service – they don’t accept mere money, or at least, if I use money, there’s a huge markup), and pull out that card, and fill out some forms so that the gas station or oil change shop can properly bill our Car Care Group. (All gas stations and oil change shops have people on staff whose full-time job is to fill out and submit that billing and deal with all the paperwork involved.) Sometimes there are mistakes or I forgot to fill in one box, then my Car Care Group nags me and sends me a bill or says I have 45 days to clarify the paperwork if I want the thing to be covered. I might have to call them during office hours 9-5 to argue with them, convince them the thing should’ve been covered. Maybe I win the argument. Then maybe they send me a check, which I’ll have to deposit.
Ah, the convenience of being in a “Plan” to pay for and evaluate the cost of things, as opposed to the hassle and cost of using “money”! One predictable result is that I’d just stop taking my car in for maintenance. Too much trouble.
But health care is important, you say. I’m trivializing things by comparing it to car repairs. Well then, what about food, do we handle “Food” this way? Everyone needs food! Do we handle “Shelter” this way? Everyone needs shelter! Indeed, Food and Shelter are actually the most high-priority forms of health care. You don’t get either of those, you can forget about all the other aspects of your health (cholesterol level, etc.). So then, why don’t we have a system where your employer is expected and/or required to provide you with a “Food Plan” or a “Shelter Plan”? Instead what happens is that your employer gives you a thing called “money” in the form of a thing called a “salary”, and you use that “money” to obtain Food and Shelter yourself.
Oh, but health care is too expensive, you say. Well, one reason (not the only reason but one reason) it’s expensive is that people over-consume health care. Why? Because they don’t see the costs. Everyone (at least, many of those who overconsume) is in a “Plan” of some sort, which insulates them from the actual cost of their choices.
So why do it this way then? Well, it’s a historical legacy dating back to the ’40s. There were wage controls, and Congress came up with letting employers provide non-taxed benefits. So “health care plans” (among other things) were set up as ways for employers to offer attractive compensation that wouldn’t be taxed or controlled away, and they’ve been with us ever since. Take away the tax advantage, though, and just maybe the incentive structure starts pointing in a normal direction again.
I’m proud to say that I’m with President Obama 100%. (Again – assuming he’s sincere.)