What’s Max thinking?: Proposal to tax health benefits makes no sense

Sometimes you have to wonder what they put in the water coolers in Washington, D.C. One of those times was just this week when our own Sen. Max Baucus rolled out the funding scheme for his vision of reforming American health care. In short, Baucus thinks we should tax insurance premiums paid for by employers as employee income and use the revenue to fund his “mandatory insurance” health plan.

Max’s funding scheme would treat any payments by employers as taxable income to the employees. The example reporter Mike Dennison gave in an article this week is fairly simple: “If the actual cost of the policy for your family is $12,000 a year (not an unusual amount) and your employer pays $8,000 of that cost, you’re getting $8,000 a year in tax-free income.” Those payments nationwide amount to an estimated $245 billion a year, making them what Baucus considers the largest, single cumulative tax break in America. Under Max’s still-forming health care concept, that $245 billion would be used to bolster his plan to have all Americans buy health insurance.

But there are a number of reasons why Baucus’ plan may never become law. First, this country is in its worst economic crisis in 50 years and the idea that we should increase the tax burden on average Americans at this point seems downright nutty. With more than 8 million of our fellow citizens out of work, it also seems like political suicide for a Democrat to be suggesting what is basically a massive “tax and spend” plan.

Another problem with Baucus’ plan is that the insurance premiums he wants to tax as income never actually go to employees. Instead, the money goes straight into the coffers of the nation’s bloated insurance companies—in many cases the same insurance conglomerates, such as AIG, now being bailed out with hundreds of billions of taxpayer dollars.

Finally, any tax applied uniformly across the board, regardless of income level or ability to pay, is simply regressive. If you’re making millions as the CEO of some recently bailed-out financial institution, for instance, the tax burden from considering the insurance premiums paid by your employer as income will be barely noticeable. But stick the additional taxes for $8,000 of income they never even received on someone making the Montana average of about $30,000 a year and the financial burden is a considerably greater part of their available income.

Even worse than Max’s tax plan is the other half of the picture—the spend part. Baucus shocked health care advocates across the nation by insisting that a single-payer plan, which is used in various incarnations by virtually all of the other industrialized nations of the world, is “off the table.” Instead, Baucus has decided to come up with what he calls “a uniquely American” health care system that leaves the insurance industry firmly between citizens and their health care providers.

Unfortunately, Max has yet to tell the American people what it will cost to implement his system of taxing and spending. For one thing, any effort to track, verify and tax employer-paid insurance premiums nationwide is going to require thousands of new federal employees and perhaps whole new agencies. They’ll need someplace to work, too, so toss in the additional and ongoing costs for new buildings and continuous maintenance, energy, etc. And since federal bureaucracies, like all bureaucracies, only tend to get bigger with time, best be adding in some long-term multipliers to those costs.

In the initial press releases announcing his intent to introduce legislation containing his health-insurance-care plan, Baucus portrayed his idea as being based on what is now generally regarded as a failing experiment by Massachusetts to mandate that everyone have health insurance. What was missing then, and continues to remain unknown, are the details of how Max intends to force people to buy increasingly expensive health insurance.

Given the nation’s economic plight, the idea of forcing anyone to buy what they can’t afford seems unlikely to survive even an initial vote. Moreover, since Max’s plan lacks the necessary details of who would have to pay for what—or how the nation would cover the costs for those who cannot pay—we are basically being asked to simply trust Baucus to design a plan significantly different from those successfully used in other countries, put a funding system into place to pay for it, and then fork over hundreds of billions to the insurance industry to continue to provide what is widely regarded as substandard health coverage to more than 300 million Americans.

On the other hand, there are some good ideas moving forward that make a lot more sense than Baucus’ half-formed proposals. HR 676, for instance, is a single-payer plan, already introduced in the House by Rep. John Conyers, D-Mich., and backed by hundreds of unions and organizations in 49 states. According to the bill’s supporters, the measure would institute a single-payer health-care system by expanding a greatly improved Medicare system to everyone residing in the United States. It would cover every person for all necessary medical care including prescription drugs, hospital, surgical, outpatient services, primary and preventive care, emergency services, dental, mental health, home health, physical therapy, rehabilitation (including for substance abuse), vision care, hearing services including hearing aids, chiropractic, durable medical equipment, palliative care, and long term care. It would also end deductibles and co-payments and save hundreds of billions annually by eliminating the high overhead and profits of the private health insurance industry and HMOs.

Perhaps Baucus, as chair of the powerful Senate Finance Committee, thinks his Montana constituents are only a small part of the big picture he wants so badly to paint. Or perhaps Max has forgotten that we sent him there to work for us—not the insurance companies that pour so much gold into his campaign coffers. Now might be a very good time for Montanans to remind him.

Helena’s George Ochenski rattles the cage of the political establishment as a political analyst for the Independent. Contact Ochenski at opinion@missoulanews.com.
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