Friday, July 24, 2009


Some incremental changes to the existing system:

  1. Instead of a tax deduction for employer plans, a tax credit equal to 90% of the first $5,000 per employee plus 80% of the next $2,500, and a deduction for the rest.  Employees would pay no tax on the benefit, if only because there is no easy way to calculate the value of an individual’s benefits.  
  2. Give the same deal to individuals (including the self-employed) whose employers do not provide health insurance.
  3. Create a Federal pre-existing condition reinsurance company that will pick up the cost of insuring whatever pre-existing conditions the Government wants to mandate be covered.  The reinsurance would be free, so the cost of covering pre-existing conditions can be ignored by private insurers in setting premium rates.  That will reduce those rates even further.
  4. Increase corporate and personal income taxes to cover the cost of these subsidies.  In other words, move the cost from customers to taxpayers.  They’re the same people, but the opportunity to avoid the cost by buying foreign goods will disappear.

See? How hard was that?


  1. I am not a fan, first of all I do not feel that I should HAVE to pay for programs like Medicare, reinsurance or any other program of the sort. Programs like these should be voluntary to those who do not have access to private insurance, or those who choose not to find their own insurance. Of course I may be biased because I don't agree with any kind of income tax. I don't like someone else spending the money I earn for me. My health, my insurance, my cost, my choice.

  2. Larry- After many years, I am coming to agree with those (Zeke Emmanuel, Ron Wydon)that one of the ways to revamp the health care system is to significantly alter the fact that currently it is a tax free financing through an employer providedbenefit. That wasa a method needed during WW11, but it has oulived it's usefulness. It should be eliminated and replaced with a VAT that will cover the costs of the program, along with income based subsidies and tax credits for the poor.

    With respect to "pre-existing condition", and you reinsurance plan, I am not sure that I understand your plan, and if we achieve something close to 100% coveraqge (everyone except illegal immigrants), I think the issue of pre-existing condition goes away, or should be mandated to go away.

    I your approach to pre exisitng conditions will fail, because there is no way that one could "mandate" which pre exisitng condition to cover. There is no way to define a pre existing condition, and even if you could to then be able to make the Solomonic decision of which to cover.In these days of Genome testing, everything could be considered to be a pre exisitng condition.

  3. Heather -

    I don't see the logical connection between what the Government taxes and what it does with the money. None of us operates in a vacuum. We need roads and armies and cops and the FCC and courts. We all benefit from the compulsory contribution of some of our income to the protection of the circumstances necessary for the creation and enjoyment of that income.

    Welfare - transfer payments of all kinds - are a wholly separate affair. We live in a competitive economy. Competition is essential to the striving that produces general prosperity. There must be consequences for not participating in the competition. If you don't try, you don't get stuff. And winning must be better than losing. But by how much?

    Programs like Social Security and Medicare are only partly added transfer payments. In another, more important sense, they are merely intermediations of generational transfers that would have happened anyway. People used to support their own elderly relatives. Now we all support each other's elderly relatives. Same economic burden, just spread differently. With an added, beneficial effect on the structure of the workforce.

    Welfare is different. There are lots of reasons to provide welfare: reducing violent crime - Jean Valjan wouldn't have had to steal bread if his family weren't starving - helping those we preceive as less fortunate, avoiding the daily sense that our happiness is built on someone else's misery.

    The only question is whether such transfer payments should be compulsory or charitable. We tried charity, and it didn't work. The electorate realized that most of us would be happier if fewer of us were homeless and foodless than a charity-based relief system permitted. So we voted, for our own peace of mind, to compel contribution. Think of it as a tax to pay for improvements to the environment. If we can pay to create a public park, why not to create a more pleasant public emotional space?

    I argued in another post against the idea that any of these transfer payments involve a "fundamental right." But I have no problem with the idea that they are the right thing to do.

  4. Irwin -

    My reinsurance proposal is made in the context of an employer-bought (but
    taxpayer-financed) tweak to the existing system and so has to be viewed on the assumption that such an overall system remains in place.

    The idea of reinsurance is that the government would FULLY subsidize the cost of adverse selection attributable to pre-existing conditions. Policies already contain pre-esisting condition exlusions. All the reinsurer has to do is adopt as its definition of what is covered whatever today's plans say is excluded. There's no Solominc judgment involved, just the subsidized elimination of an existing exlusion.

    I agree that 100% coverage, including the unemployed, from birth, would eliminate the pre-existing condition problem. But we're not there yet. I'm proposiing tweaks to the present system that would move us in that direction, but until we have 100% cradle-to-grave protection, we will have anti-selection, and rather than impose that cost on businesses' customers (effectively making it a consumption tax), government should pay for it directly and pay for it through the income tax.

    Please explain why you prefer a VAT to an income tax hike (either as denial of the existing exclusion or a surtax on the increased income enabled by the increased subsidy).

  5. Larry- very much enjoyed your response to Heather. My comments re pre-existing conditions is premised on having essentially universal coverage by years end, or shortly thereafter. I still believe that if we had to go to your reinsurance idea in the interim, there would be an difficult administrative problems in definition and monitoring.

    As to a VAT tax, I just think it would be easier to implement and administer.

  6. Irwin -

    I agree about the advantages of the VAT, but those may be its only advantages, and they may be outweighed by the VAT's bias toward economy-crushing thrift. We are a consumer society. The world sends us cheap stuff because we will absorb it. Put a VAT on it, and the music may stop. Just something to consider.

  7. You are right that the connection isn't totally logical, I just get very passionate about the subject of taxes and how they are spent.

    I agree that some things are better spent to satisfy a better quality of life for the whole, cops, roadways, and in limited cases welfare programs, but the system isn't perfect. Most of the programs are poorly run and not available to those who really need them. Not to mention those who live off the system. In an ideal situation, those emergency programs would be used for just that, emergencies. Not extended periods of time. It might be more worthwhile to have programs that promoted health, self-sustainment, and education. All of which are benefits not only to the individual but also the whole.

    On your idea for a re-insurance program, although the idea is not a bad one, I don't see how a program of that magnitude could be as effective as it would be costly. I see so many ways that the current health care crisis could be remedied. Looking at what drives healthcare costs would be a great start. Lowering the costs to insurance companies and making premiums more affordable would cut down the occurrences of pre-existing conditions. Cobra costs are outrageous and perhaps requiring insurance companies/employers to offer an employee their current coverage at lower costs after employment has ended could decrease the amount of people with lapses in insurance coverage, in turn eliminating pre-existing conditions.

    The way i see it: A bridge is broken, you fix it, you don't build another bridge around it. And if it isn't fixable, then you tear it down and start all over.

  8. "I argued in another post against the idea that any of these transfer payments involve a "fundamental right." But I have no problem with the idea that they are the right thing to do."

    I agree with this statement. Which is why I volunteer some of my spare time at the local animal shelter, and I am a secretary of a non-profit organization that that supports Environmental Education, conservation, and sustainability, but I stick to my previous argument that I shouldn't be made to contribute to programs I don't support.


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