Howard Forman
Professor

Howard Forman

Howard Forman, MD, is a professor of diagnostic radiology, public health, management, and economics at Yale University.

Insanity? Or Just Politics?

As I have mentioned previously, there is near-unanimous agreement that our current tax subsidy for the purchase of employer-sponsored health care insurance is an inefficient one. It encourages the purchase of more insurance than we need (as any subsidy would), and it ultimately is inequitable, as the poor receive a much smaller subsidy than the rich -- or none at all. Some effort to reverse this policy and redistribute the benefits to the poor and near-poor would have been quite desirable and maintained the effort toward budget/deficit neutrality.

Instead, in an effort to, perhaps, be politically thoughtful, the Baucus bill seeks to tax health plans so that it will not seem as though the consumer is being taxed. Economically, this tax will be passed along to the consumer and it will have little or no impact on health plan profitability. There is no economic advantage to this approach -- and one can already assume that a new cottage industry will arise to minimize this tax, with little or no benefit to the consumer or the federal budget.

By Howard Forman  |  September 22, 2009; 11:04 AM ET  | Category:  Health Care Reform , Insurance , Taxes Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
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I'm sorry, but how does taxing something that was previously excluded from taxation not equate to removing the exclusion on taxation.

It can't be both. If removing the exclusion from taxation would prevent market inefficiencies, it seems to me that the same would hold true by adding a tax to the excluded health care to compensate for the exclusion.

If this isn't the case, I would appreciate a clear explanation what the difference is, because I can't tell from what I've been reading.

Posted by: zosima | September 23, 2009 2:46 AM
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