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Wednesday, October 16, 2013

Kleinbard: The Huge Health-Care Subsidy Everyone Is Ignoring

Health care ReformWashington Post op-ed:  The Huge Health-Care Subsidy Everyone Is Ignoring, by Edward Kleinbard (USC):

The political right has paralyzed government over the implementation of the Affordable Care Act, on the grounds that the ACA represents an unacceptable government intrusion into what today is the province of private markets. But the premise is fundamentally untrue.

Government’s hand has long shaped and subsidized health-care markets, for example, in Medicare and Medicaid (which dominate how medical care is organized and delivered in America, even for care that falls outside their reach), or the requirement that hospitals treat urgent care needs of indigents.

But perhaps the most consequential subsidy is rarely mentioned or even noticed: Government for decades has directly subsidized individuals’ costs of employer-based health care, to the tune of roughly $250 billion every year – sums far greater than the annual costs of the subsidized insurance coverage provisions of the Affordable Care Act.

That fact makes the ongoing debate positively perverse. What we are witnessing today are individuals who already receive government health-care handouts attempting to prevent others from obtaining similar (but smaller in aggregate amount) health-care subsidies, as well. And as a group, today’s recipients of government health-care subsidies are better off to begin with than are those they wish to exclude. ...

The plain fact is that those who have paralyzed government over the Affordable Care Act today feed at the trough of government health-care subsidies, while seeking to exclude others from sharing the bounty. This is simple selfishness in action. If you claim to stand on principle in your demands to destroy the Affordable Care Act, first give back the $250 billion you’ve been taking every year in government help.

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Comments

"If you claim to stand on principle in your demands to destroy the Affordable Care Act, first give back the $250 billion you’ve been taking every year in government help."

This is absolutely correct. Hiding the true cost of health care from the public makes costs grow much faster than they otherwise would.

Posted by: AMTbuff | Oct 16, 2013 3:50:21 PM

This was a thoughtful piece that, judging from the comments on Wash. Po., few understood. Few people seem to grasp the idea that tax breaks are disguised subsidies.

Posted by: HTA | Oct 16, 2013 6:53:00 PM

Though I mostly agree, you paint with too broad a brush. I am retired at 69, still supporting that nonsense with my taxes. But when I was younger and working as a contract engineer, I had no benefits whatsoever, much less the subsidized health insurance benefits you speak of.

Posted by: Jimbino | Oct 16, 2013 7:53:13 PM

If one has medical costs, they need in many cases to be paid for life to continue. The income tax is meant to measure ability to pay and to the extent one has medical costs, the ability to pay taxes from income needed for medicine disappears. Medical costs should not be viewed as a subsidy but, like the personal exemption, as a deduction before arriving at one's income reasonably subject to taxation.

Posted by: Joseph W. Mooney | Oct 17, 2013 7:57:46 AM

Joseph, while I am sympathetic to your point, the current state of the law does not operate like the personal exemption. I suspect that skilled, high-income workers are the biggest benefactors of this tax break. Those workers probably get costly health care coverage. This is likely a regressive subsidy.

Posted by: HTA | Oct 17, 2013 9:58:35 AM

@HTC: "Few people seem to grasp the idea that tax breaks are disguised subsidies."

Perhaps that's because they're not? The exclusion of employer-provided healthcare benefits from taxable income goes back many decades before the latest rate schedules, and are therefore built into the rates. The government has been paid in full and isn't "subsidizing" anything.

Posted by: No-no-no | Oct 17, 2013 2:50:29 PM