Mar11
The Contraception Fight
on March 11, 2012 at 12:52 pmSome free-market lessons. It is key that we decouple health insurance from employment. It has really screwed things up for decades. If there’s going to be a tax deduction for it, it should go to the individual, not the employer.
If it is as important as claimed, it should not only be ‘tax advantaged’ via a deduction, but actually completely tax exempt.
That would sink the entire thing.
But if we’re going to insist it is a right, then – at the -very- least, everything associated with it should be completely tax exempt. Apples are good for my health. Clothing protects me from the elements and is thus good for my health. And a house as well….
Sales taxes, use taxes, property taxes -boom-.
I personally favor a voucher program. Every individual gets a voucher for health insurance starting at birth. You may add to the voucher if you wish a better policy. The vouchers may be used alone or combined with those of others with no restrictions (work, school, family, friends, church, local groups, professional organizations, special interest groups, etc…) to get group rates on the premiums. Yes, turn competition loose.
The vouchers will be paid for by a modest increase in Social Security or by adding the voucher tax to the Medicare tax. The amount of increase depends on the voucher size that is decided on.
The vouchers may also be accumulated forward. If you only use say $2,000 of this year’s $3,000 voucher the extra $1,000 may be used by you in a future year. So they young may leverage good health by saving for their senior years.
The result is complete freedom of choice in coverage and carriers which will need to compete for your voucher. And employers won’t need to worry about health insurance if they don’t want to, or they may use it as a competitive advantage in hiring, for example offering to match a percentage of your voucher if you work for them and combine it with a policy pool they run… Again, freedom of choice.
And any premiums you pay beyond the voucher are tax deductible.
Folks are free to pick the services they want. A true free market solution.
Yearly premiums would end up being the vaule of the voucher at a minimum so there wouldn’t be anything to pay forward.
Wodun,
Nope, because of the choices you make in coverage AND the market competition to get your voucher. Don’t under estimate the power of a properly designed market place.
If I have X amount that can be spent on health coverage or lost, can’t be saved for future use, there is little incentive for a provider to offer a plan that doesn’t consume the whole amount. There is little gain for me to not spend the whole amount on a single general coverage plan that covers the risk I might save part of the amount for. Use it or lose it is not good for a proper free market.
On the other hand, if I can accumulate extra in a tax free health savings account I have incentive to look for less expensive coverage.
Peterh,
That is why you are able to save the amount of the voucher you don’t spend on this year’s premium’s for future premiums. And yes, that is incentive to look for less expensive coverage today so you won’t need to pay more out of your pocket in the future when you may need more. And in a market, insurance firms will respond to such needs.
Something not to overlook is human nature. An insurance company will look at how much money their target market has to spend on insurance. Everyone will have the same base, the value of the voucher. Initial pricing will hover around that value. Why would they charge less when they know you get $x to spend every year?
There is competition right now and it has not led to lower premiums because a lack of competition isn’t the primary factor driving premiums higher.
Consumers wont have much of an incentive not to spend the entire voicher every year. Saving a portion of it for the following year would only allow them to temporarily have nicer insurance. After the second year they would not have the extra money left over and would have to pay out of pocket to maintain that level of coverage.
Think about it like this. The voucher sets a floor for any price negotiations. If you try to buy a car and tell the dealer you have $3000 to spend, how many cars that cost less than that will he show you?
Wodun,
Cars, like most products, are already design for specific price ranges. The competition comes from the features each producer adds to the product to make it more desirable over others in the price range.
Thomas, I -think- what you’re saying and what I’d really propose almost mesh.
A personal IRA-like health savings account. Money goes -in- tax free. Employers can receive tax advantages for funding employee’s accounts – which can all be done via the same mechanisms currently used by employers funding IRAs.
The crucial piece is that the HSA-owner -owns- the account, and that it could be allowed to pass -tax-free- to the heir’s – into their HSA.
The key difference here is that this account is -not- primarily for ‘insurance’, but for the services themselves.
If one -has- an account with, say $50,000 in it, you are less tied to insurance for the reams of microscopic “health care” purchases that one might make. (Ace bandages?) But you still can have insurance for the catastrophic cases.
But you have to actually -have- such an account before you can even think of funding it to a reasonable level.
Even the redistributionary aspect can be tacked back on by funding the empty accounts of “the children” or whomsoever.
We already have hsa’s.
Being able to pass them down generation to generation would be nice.
Only some people can have an HSA. First you have to have health insurance and then it has to allow HSA.
Everyone should be able to have an HSA without regard to health insurance.
Al,
[[[Thomas, I -think- what you’re saying and what I’d really propose almost mesh.]]]
Nope there are quite different. See below.
[[[A personal IRA-like health savings account. Money goes -in- tax free. Employers can receive tax advantages for funding employee’s accounts – which can all be done via the same mechanisms currently used by employers funding IRAs.]]]
I already have an account like that which my employer partially funds, the rest is taken out before taxes and is tax free. And the account belongs to all of those on it. And its for ALL medical expenses, not just co-pays. So there is nothing new there, it already exists as an option.
As for health insurance being tax deductible, it already is if you are self-employed. If not, and if you don’t have insurance with your employer the premiums towards the 7.5 percent medical expense exclusion before itemize deductions, so a major portion of it will be deductible, the amount reducing as your taxable income increases. Given the average premium for a couple is around $5,000 a year that means if you make under $100,000 taxable income an year you are already getting a deduction that is greater then your premium. But remember, a deduction is not the same as a tax credit. If you marginal tax bracket is only 10 Percent, then you are only saving $500 dollars on your taxes for the $5,000 premium if its deductable. So your proposal would only impact those households making more the $100,000 in taxable income that are not self-employed. And even at the top marginal rate they would only see 35 percent of their premium cost returned.
My proposal covers 100 percent of households for 100 percent of their basic premium. So it solves the problem for everyone, not simply reduces a percentage of the cost for a small percentage households.
Given what we’ve learned about the women of Georgetown Law, “insurance” is not what they need. Insurance is to insure againt risk, not certainty. As I said on Steve Landsburg’s blog, car insurance doesn’t cover the cost of license plates because it is a certainty that every insured vehicle will need a license plate. Why have a middle man upping the cost that everyone must pay for a plate when he provides no benefit or added convenience?
Similarly, since all women at Georgetown Law need contraception, and lots of it, including an insurance company in the middle of the purchase makes no sense. All it would do is tack on extra costs to what they’re already paying.
Interestingly, the root of this mess is in fact economic. Sandra Fluke went on camera and railed against her situation, and that of all women at Georgetown Law, representing a classic example of the tragedy of the commons. If everyone is free to use a public resource, none will pay for its maintenance and upkeep, requiring government intervention or other external mechanisms to restore balance. The lesson throughout history to young women everywhere has been “don’t be the commons.”
Well, at the very least Georgetown needs more sections of its Remedial Economics course, lest more escapees badmouth them before Congress…
My question is: why do you want to pay more for contraception? Insurance is, by definition, the least efficient way to pay for anything. You wouldn’t want to pay for “food insurance” would you? Okay, I’m sure there’s some idiots out there who would be happy to do so, especially if the true cost was hidden by a third party like your employer, but hopefully most people recognize that this is a stupid idea. Of course, every time I try to have this conversation with someone I get “talk to me when you grow a uterus” or similar non-answers.
I think it’s all in how you phrase it.
“Well, I just don’t understand why you’d rather pay $18/mo for something that costs $9/mo.”
…
“Picture if there was a insurance company that -just- did birth control. They don’t -make- the drugs – they buy them and make contracts to buy them. Then they add the price of the labor for all the accountants and lawyers. Then they add a ‘reasonable profit’ of, say, 11%. Then they sell insurance based on -that- price. ”
The only rebuttal I get is: “Well, then the government should do it.” And then we diverge into discussing the joys of a true force-wielding monopoly.
Decoupleing insurance from employers would solve the problem of people being disassociated from the true costs of healthcare, maybe not in a good way. Would it lead to higher wages or lower costs in the health care industry? Uncertain.
Any system you devise that includes the government will ultimately lead to the same non-market based problems we have now. Decouple the whole system from government control and costs will come down. Nothing controls costs like writing a check for the service.