It sounds like a good thing that the government is proposing: a reasonable tax on the wealthy to provide healthcare for the poor. But is that what’s really going on? This tax is higher than it needs to be because part of the subsidy goes to the middle class. I suspect this is getting pushed through because the middle class has an emotional reaction to paying for healthcare. It’s a mistake for the government to treat that emotional paralysis by taking over that aspect of people’s lives.
The healthcare problem has two elements: the poor and the middle class. The poor can’t afford healthcare because not being able to pay for one’s expenses is the basic definition of poverty. Giving money to the poor, perhaps in the form of a healthcare subsidy, makes sense to me, esp if it is in some way geared toward helping people earn enough to get out of poverty. The House plan, by the way, doesn't even provide insurance for all the poor.
The middle-class healthcare problem is more subtle.
- Premiums paid by employers are deductible while premiums and healthcare expenses paid by individuals are not.
- Employees have to change plans within 18 months of changing jobs.
- Medical technology is getting better at predicting illness, which makes it harder to spread the risk of illness among a population.
- Some people get overwrought about the thought of buying healthcare services, even though they are emotionally capable of making other purchase. The media stoke their fears.
- It needlessly removes market forces from middle-class healthcare purchases.
- It makes the taxes on the richer more onerous. As marginal rates exceed around 50%, we start to see it affect people’s incentive to work and create value. Marginal rates are not that high yet, but this is a step in that direction.
- It gets the federal government involved in a big sector of the economy. It will be very difficult to extract the gov’t from this sector if we decide we want to in the future.
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