A blog post appeared recently on thedemocraticdaily.com that made the case for consumer driven health plans becoming a major part of healthcare reform to achieve near-universal coverage in this country. The author, Jon Ethington, acknowledged that “the majority of Americans will probably never accept a one-size-fits-all health insurance system that is funded primarily with tax revenue” and went on to point out that the potential for consumer driven care is currently overshadowed by “the perverse incentives for health insurance placed in our federal tax code.”Ethington wrote that the most perverse incentive in our tax code pertains to the deductibility of health insurance premiums by employees. He noted that the problem with this is that it benefits high income earners much more than people that live paycheck to paycheck. A taxpayer in the top tax bracket saves 35 cents for every dollar of salary reduction, but most workers save 15 cents or less due to the structure of our federal income tax code.
Instead of the current system, Ethington proposed three basic ideas that for reforming the tax code to create a more sensible tax policy:
1. Replace salary reduction plans with a refundable tax credit between 15 to 25 percent depending on how much of the budget the federal government wants to devote to this purpose to provide Americans a greater incentive to purchase health insurance for themselves.
2. End the “use it or lose it” provision with Flexible Spending Accounts. Employees should be permitted to roll over FSA balances to the next year if the balance is less than the annual maximum they are allowed to contribute on an annual basis.
3. Allow all small businesses and corporations to have the same flat refundable tax credit for paying their portion of insurance premiums as part of their benefits package to employees.
Ethington went on to point out that a single payer system that guarantees everyone health care for life is just not realistic either form a budgetary or political standpoint.
These ideas actually sound quite a bit like the proposed McCain healthcare plan, and it is encouraging to see that this dialogue offered up in more progressive circles.