March 26, 2007

Universal Choice Can Fix the Health Care Roof

A simple change in the antiquated tax code would create an avalanche of universal choice in health care, instead of current proposals that produce universal dependence on government. Namely, the U.S. should eliminate the deductibility discrimination between employers and employees for health insurance premiums.

The ideal solution would be to replace the tax code with the Fair Tax, which essentially replaces the income tax with a consumption tax. But since few politicians with a bully pulpit have shown the moral or political courage to lead the sizeable Fair Tax movement, let’s start with the second best approach, universal deductibility.

Universal deductibility of health insurance premiums by employers, employees, the unemployed, individuals and business owners would connect the consumer to health care costs. When people spend their own money, they spend it more wisely. Most people will purchase health plans they can afford, instead of expecting more benefits from their employer or the government.

The flagrant flaw in most of the ideas proposed by the presidential candidates is that they are variations of socialized health care.

Hillary Clinton, Barack Obama and John Edwards have all offered health care plans that eliminate individual choice and increase government mandates on employers, individuals and health care providers.

RomneyCare in Massachusetts is already experiencing a cost explosion. The only Republican to propose a market-based solution is Newt Gingrich, who has not yet declared his candidacy.

The proponents of socialized health care do not believe individuals and doctors possess the ability to make their own health care decisions. They would rather take advantage of what Steve Forbes recently described as “the abysmal ignorance of so many – including boatloads of business executives and entrepreneurs – about what it takes to bring rationality, productivity and lower prices to the U.S. health care market.”

The greatest flaw of Health Savings Accounts (HSAs) and President’s Bush’s new proposal is that they are tied to the disastrously flawed tax code in the form of yet another tax deduction. These plans are improvements on the current discriminatory system, but they further complicate an already incomprehensible tax code.

The president’s proposal, which allows deductibility of health insurance premiums, has a hidden “sneak-a-tax.” Under the Bush plan, if your employer pays more than $15,000 for your annual health insurance premium, you pay tax on the excess coverage. Below that amount for a typical family, the plan provides only small, non-game-changing savings. Worse, the plan is not indexed to inflation. When inflation eventually catches up to the $15,000 deduction, families will suffer the same tax penalties posed by the Alternative Minimum Tax.

HSAs are another concept that was supposed to “move us in the right direction” of more affordability and accessibility of health insurance. HSAs have worked for many, but way too slowly as health care costs and insurance premiums have increased at annual double digit percentages. 

The socialists among us object to universal choice because they fundamentally believe that government can spend people’s hard-earned money better than the person who earned it. The bureaucrats object to universal choice because it would force them to cut wasteful spending to “offset” the “lost” revenue from allowing the deduction. That’s political speak for “our job is to continue to rearrange the deck chairs on the Titanic.”

Even with universal choice, the liberals will still scream about the 47 million people who do not have health care. They will ignore the 63 percent of the uninsured who work for small businesses that cannot afford health insurance coverage because the costs keep rising faster than their profits. Conservatives ought to counter with the 253 million people who have private health insurance that four of the presidential front runners want to take away.

As I stated on an NBC health care special in 1994, if you have a leak in the roof of a building and you know that the roof is leaking, you don’t blow up the building to fix the leak in the roof. That’s what total government control would do to our health care system. The system will work if government would get out of the way. We don’t have to blow up the system to fix a few leaks.

Universal deductibility would stimulate universal choice, which would fix the leak in our health care system’s roof while making the building stronger.

The free market system, in which the consumer has access to information, choices and his own money, has driven down the prices of all goods and services that government has not overregulated or over-controlled. With a simple change in the current tax code to eliminate discriminatory deductibility for health insurance and eventually health care costs, free market dynamics can solve another problem that Clinton, Obama, Edwards and Romney want to make worse.

Universal choice in health care is a choice the public must demand. Otherwise, they will have to live with the disease of socialized health care.

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