Robert Reich: The only sure way to fund universal healthcare

http://www.salon.com/opinion/feature/2009/05/26/healthcare/print.html

The only sure way to fund universal healthcare
With revenue scarce, Obama is going to have to borrow an idea from John McCain to pay for universal healthcare.

By Robert Reich

May. 27, 2009 |

Salon.com

During the presidential campaign, I thought Obama made only one big policy mistake. He criticized John McCain for proposing to tax all employer-provided health benefits. McCain's overall health plan was regressive -- he would have turned the savings into tax credits for purchasing healthcare -- but he was right about where the revenues should come from. I worried that Obama would come to regret the position he took. Half a year later, it appears that the President will need to tax employer provided health benefits in order to finance universal healthcare. Or at least the tax-free benefits now enjoyed by higher-income employees. Many in Congress and in the White House are convinced it's the only good option. Max Baucus, chair of Senate Finance, explicitly put it on the table last week. Peter Orszag, the President's budget director, has told Congress the option should remain on the table.

The White House is in a revenue bind. The President had intended to raise money for healthcare by limiting the income tax deductions that wealthy taxpayers can claim. This would have generated some $318 billion over ten years, about half of Obama's proposed "healthcare reserve fund." But the proposal ran into a buzz saw of opposition from congressional Democrats. Not only did Baucus balk but so did Charles Rangel, chairman of the House Ways and Means Committee. With deficit vultures already circling, Obama has to come up with a far more reliable way to fund healthcare. That's where employee health benefits come in. According to the Congressional Budget Office, taxing all employee health benefits would yield a whopping $246 billion every year. Even limiting the tax to higher-income employees would go a long way to funding universal healthcare. Employer-provided health insurance is the biggest tax break in the whole federal income tax system.

Tax-free employer-provided health care is also, in effect, the government-backed health insurance system we now have. It now covers three-fifths of the American population under 65. Seventy percent of the 253 million Americans with health insurance receive at least some of it through their employers. Which is exactly the problem. Most middle-class American families rely on it and won't want to give it up even if a new universal system becomes available. Organized labor rightly considers these benefits among the union movement's proudest achievements.

(snip)

It's also an upside-down system. The biggest share of the $246 billion goes to upper-income people. The lower your pay, the less coverage you're likely to have. Workers in lowest paying jobs don't generally get any health insurance from their employers. Few people collecting $12 an hour at fast-food restaurants or big-box retailers see any part of the $246 billion. The higher your pay, the more health coverage you receive, and the bigger chunk of the $246 billion you get. Top executives and their families get gold-plated plans guaranteeing top-notch medical attention for just about every risk imaginable, along with extra coverage in retirement. The good news is that a program providing universal healthcare doesn't need the full $246 billion a year generated if every employee now receiving tax-free health benefits had to start paying taxes on them. Obama's healthcare reserve fund needs around $650 billion over ten years. So a sensible and politically feasible alternative is to limit tax-free employer-provided health benefits to workers whose incomes are under, say, $100,000 a year, and subject those with higher incomes to progressively higher taxes on them.

Either raise the cap to $250,000 or $300,000, or eliminate it altogether.

It would take a lot of pressure, but I have little doubt the the vast majority of Americans would support it.

:patriot:

...without relating it to their health benefits?

to be payed for later in part by taxing those remaining with employer based coverage. Also make it a law that if employed you must be covered with one of these options. Then decide how best to deal with the few remaining uncovered people.

Fucking stick it to the rich, goddammit.

system becomes available.

Is there ANY evidence for this statement?

People rely on it because that is what there IS. If universal, single-payer, not for profit coverage was what there is, people would rely on it, too. WHY would people not switch to a system that offers better coverage at a lower price, if it was available?

This is bullshit.