OK, We All Need to Chill About Health Care Financing

Earlier this week, when discussing the Senate Finance Options Document for paying for health care reform, I wrote, “any one of the ideas is going to send some lobbyist to the Hill, screaming bloody murder.”  What I neglected to mention was it would send barrages of negative ads – the current being an ad campaign from the union AFSCME against Democratic Sen. Ron Wyden removing some or all of the tax exclusion for employers on health care benefits.  This comes after weeks of statements from public officials and interest groups on what would be an “appropriate” way to pay for health care reform and what would not.  So let me make one clear statement:  We all need to chill out.  From where we sit today, all options should still be on the table.

Take Action:  Tell Congress to chill out about health care financing.

The one thing we know is that health care reform will require some start up dollars, and that savings that would bring that cost down through better prevention, Health IT, reduction of hospital re-admissions, etc. will take a few years to kick in, if they do at all.  We know the Federal government will have to find about $150 billion a year for something like the Obama plan, more for single-payer.  We also know you can’t do that without someone getting mad.  And when someone gets mad, they call their members of Congress.  And when members of Congress hear from constituents get mad, they tend to issue statements saying such-a-one financing option is unacceptable, and they’re opposed to it.  And if you get enough of Congress opposing enough provisions for financing health care and drawing lines in the sand, pretty soon you reach an impasse where representatives either have to break their promise to oppose such-a-one financing option, or there’s just no money to get it done.

A test case is what’s going on in Oregon right now.  Jon Cohn puts it best:  “This isn't about Wyden. It's about the future of health reform.”

AFSCME’s attack on Sen. Wyden doesn’t make sense for a lot of reasons.  For one thing, AFSCME has long been a supporter of comprehensive health care reform, and Ron Wyden has been one of the staunchest supporters of finding a solution to our health care problems that’s not only progressive but also able to win support from Republicans.  In short, this is friendly fire.

But it’s also, frankly, stupid friendly fire.  Currently, the money an employer pays for health benefits is not treated like income – health benefits are tax-free for employers but salary is not.  Yet the increasing costs of health care is one of the reasons why that same salary has largely flat-lined in terms of real wages.  It’s also a regressive tax, in that the tax exclusion benefits high-income workers with robust “cadillac” benefits much more than it benefits lower-income workers with more pedestrian benefits.  Finally, the tax exclusion amounts to slightly less than $200 billion a year, according to the Senate Finance Committee estimates.  If it were entirely repurposed for health care reform, it would entirely pay for something like the Obama-Baucus plan.  (It wouldn’t do anything to help finance single-payer, as you wouldn’t have employer-sponsored private insurance at all, meaning there’d be nothing to tax.)

So Wyden, Baucus and others have suggested some restructuring of that tax exclusion to get at some of the money in a progressive way.  As explained by Bob Laszewski, Wyden’s original health care plan “would limit the amount workers could exclude from taxes to $6,025 annually for an individual. Married couples with children could deduct $15,210, plus an additional $2,000 per dependent child.  That compared to the average cost for family health insurance at just under $13,000 a year. So, families that have health plans costing more than $2,000 over the average have nothing to worry about.”  Not only would we have money for health care – a progressive and urgently needed cause – but the tax exclusion would now also work more progressively.  It’s far from the only way to pay for health care reform, but it’s one worth serious consideration.

Rep. Charles Rangel was one of the first to reject out of hand any plan that looks at changing the tax exclusion.  AFSCME and others are looking to enact similar pledges from members of Congress.  It’s only a matter of time before you see similar efforts from other groups – many of them supportive of the overall goals of reform but determined not to allow a payment option that cuts into their share of the pie.  Well, that’s just nuts.  We all need to chill out.

And there are many serious proposals for financing health care reform.  Right now, we don’t have a piece of legislation, although we have a good idea of where it’s likely to go, so it’s hard to tell how much money we’ll need.  But that makes it even more imperative to stop this nonsense of rejecting options – we’re just going to make the ultimate compromise harder.

Write to your member of Congress.  Urge them to resist calls to take financing options off the table – at least until we know how much money we’ll need.

(Photo credit:  crashmaster007 on Flickr.)