Politics

New Taxes Will Help Pay for Health Care Reform

| by Reason Foundation

Your tax dollars at work...generating ideas for more tax dollars!

House Democrats have lots of potential targets for higher taxes as they aim to expand health care coverage to reach the roughly 50 million that experts say are uninsured.

Also under consideration are higher alcohol taxes, increases to the Medicare payroll tax and a value-added tax, a sort of national sales tax, of up to 1.5 percent or more....

The final price tag for that effort could top $1 trillion, with cuts to Medicare and Medicaid covering the rest of the cost.

The tax options include:

--Increasing the price of soda and other sugary drinks by 10 cents a can.

--Applying a potential 2 percent income tax increase to single taxpayers earning more than $200,000 a year and households earning more than $250,000.

--A new employer payroll tax could target 3 percent of employers' health care expenditures.

--Taxing employer-provided health insurance benefits above certain levels -- a less likely option but one that still is in the running.

More from USA Today via the Cincinnati Enquirer.

This all sounds great, boys! How's that economic recovery coming? And the promise not to raise taxes on anyone other than Joe the Plumber?

Meanwhile, the Senate is "struggling" to reduce a $1.6 trillion plan into a mere $1 trillion. Which means that when the House and Senate get together, the final bill will be announced as north of a trillion. And the final price in reality? If Medicare is any indication, it will be a gazillion over that:

At its start, in 1966, Medicare cost $3 billion. The House Ways and Means Committee estimated that Medicare would cost only about $ 12 billion by 1990 (a figure that included an allowance for inflation). This was a supposedly "conservative" estimate. But in 1990 Medicare actually cost $107 billion.

Which is a stat that should be hauled out and put on the table every time someone talks about government intervention in health care as a cost-containment measure. There's little doubt that a government-run system (either directly or indirectly) will be a bureaucratic nightmare; there's also little doubt that any reduction in overall spending will come from denying coverage rather than making it more cost-effective.

Another thing to bring up is the simple fact that, as Reason's Brian Doherty has pointed out, "health care systems don't equal health."

As [author John] Goodman notes, "beyond some basic public health measures, there is not much correlation internationally between health care inputs and the overall health of a population." Our health is far more in our own hands—depending on our own behavior, from exercise to diet to risk taking—than politicians would have us believe. That reality, combined with the fact that we could spend our entire GDP on health care without satisfying all individual demand for it, leads to the conclusion that no policy reforms, even the most market-leaning, will solve all, or even most, of any loosely conceived health care "crisis."

More on that here. It's not a trivial point: The constant equation of being insured with being healthy and with having access to health care is vastly misleading. These are simply not the same things, but their conflation does push the cost of medicine way, way up. What has truly perverted medical care and costs in this country is an insurance system that doesn't simply insure against catastrophic or high-dollar fixes (as is the case with home and auto insurance), but the standard protocol of covering at least part of all routine procedures, checkups, you name it. Why in the world does, say, a cholesterol test cost more than $5 or $10? Because the labs and the doctors and you name it can pass along the costs to third parties (chief among these is the government, which currently picks up 45 percent of all medical spending).

And a final point about the "uninsured." About 45 percent of them could either purchase coverage if they chose to or qualify for existing government programs. Why not push that as a first-step solution rather than taxing Mountain Dew? And as important, what are the deep implications on behavior of the government effectively controlling the health of the state? Does that give crusaders, whether of the right or left, an even more intrusive opening into policing how we live, eat, breathe, love, and recreate? Can we just ban skiing and sailboarding and everything else folks such as John Kerry do with impunity? Papa Bush, no more skydiving! How many Sonny Bono-Michael Kennedy types can we afford clogging the nation's emergency rooms and using up precious health-care resources?

Watch Reason.tv's "Get Some: How to fix America's health insurance crisis." Go here for links, embed code, iPod, HD versions.