Policymakers are considering an array of options for making health care affordable. The question is what’s the end-game? Lower costs and easy access to care or obstacles to care that lead to lower spending. In an op-ed for The Washington Post, Liz Fowler and Michael Cannon of the Cato Institute propose limiting the tax exclusion for employer-sponsored health insurance as a way to make health care affordable because it would make it hard for most working people to get care.
In essence, Fowler and Cannon suggest that capping the employer tax exclusion would lead employers to spend less on employee health insurance, which would, in turn, bring down health insurance premiums, which currently average $27,000 for a family. But, if people had insurance with lower premiums, they would face higher deductibles and copays. They would have less coverage and not get as much health care. That’s not a solution to our health care affordability crisis.
As it is, most health insurance is not comprehensive. Consequently, tens of millions of insured Americans are skipping health care or they are getting health care and facing medical debt. Eliminating the tax exemption on employer-provided health benefits without having the government guarantee Americans health insurance coverage, or without requiring employers to pay their employees whatever they had spent on health insurance contributions, would hurt working people. Otherwise, working people are not likely to receive higher wages, as Fowler and Cannon suggest.
Fowler and Cannon do not appear to like comprehensive health insurance coverage,.They seem to want people who need care to spend more out of pocket for their care or go without it. They want people to be “price sensitive.” They fail to recognize that tens of millions of Americans are already price sensitive when it comes to health care, skipping care or delaying care because their costs are so high.
The tax emption makes health insurance premiums more affordable for working people. A tax on high-cost health insurance, as Cannon and Fowler propose, would simply be a reason for employers to cut back on health insurance coverage for their workers. It would leave low-wage workers struggling even more than they already do to pay for their health care. It’s Darwinian. Fowler and Cannon say that it would reduce prices by 1.3 percent; even if that’s true, that would not make health care affordable.
The big health care affordability problem is not the tax-exemption on health insurance premiums for employer-provided health care, as Fowler and Cannon would like people to believe. It’s health care costs. Competition does not rein in hospital, medical, or drug prices. Rather than allow hospitals, physicians and drug manufacturers monopoly pricing power, government needs to regulate their prices to make health care more affordable.
The problem with the tax exemption on health insurance premiums for employer-provided health care is that it locks people into their jobs if they want to keep their health insurance. So, separating insurance from employment could make sense. But, only if it were married to a policy that still required businesses to contribute to the cost of their employees’ health insurance and government regulation of health care prices.
Here’s more from Just Care:
- Facts about prescription drug prices in the U.S.
- Billions in Medicare savings from Medicare drug price negotiation by 2031
- Health insurance spending projected to rise 9 percent in 2027, while almost half of working Americans struggle to pay for health care
- Trump’s solution to unaffordable health care: Americans resort to loans from insurers
- Nearly half of Americans can’t afford their health care
