Obamacare: How Can Taxing Health Insurance Benefits Help Improve Health Care?

The president hasn’t supported this plan, but many Democrats (and John McCain during the campaign) want to tax employee health insurance as income if the benefits or employee’s income are above a certain point. I understand the notion as a way of raising revenue—the wisdom of which is beyond our scope here. But some argue that taxing health insurance will improve health care as it reduces costs.  From a column by Ruth Marcus in today’s San Francisco Chronicle:

On health care, the best way to help pay for expanded coverage would be to at least limit the amount of health care employers can provide tax-free. This would not only produce needed revenue but also help slow rising health costs. Done correctly, most middle-class taxpayers would be better off. According to my reporting, Obama’s economic advisers have urged that the president support a cap; his chief political adviser, David Axelrod, is opposed. So instead of taking the political risk - and angering unions to boot - Obama has held back, hoping that lawmakers would come up with a tax cap themselves. But without presidential leadership, this hasn’t happened.

Huh? So, by creating an incentive to provide lesser coverage for employees, health care will be improved and costs contained?  The only way taxing health benefits contains costs would be because it would induce companies to offer less comprehensive coverage and hence, less access to treatments for employees.  Is this what Obamacare is to become?  Punishing people with “too good” coverage (as we pay for illegal aliens and abortion)?

Here is another way that taxing good policies might control health costs: If employers changed their health insurance coverage after Obamacare went into effect because of the taxes, any replacement policy would have to be one approved by the government, even if a private plan, which would force employees into a system of care rationed by a utilitarian bioethics rationing board like NICE in the UK. No wonder politicians are having a hard time at the town hall meetings.

So, the point seems to be to reduce coverage to the lowest common denominator, on our way to an eventual single payor plan (since private health insurance would be highly regulated and unable to compete with a public plan). But that wouldn’t improve health care, it would be deleterious to most, while the funding increases might help the few who today don’t have coverage.  But we can deal with that problem with vouchers, increasing competition, and the like, without punishing those with good care today.  Moreover, please note: Under the current proposals, members of Congress could keep their own Cadillac policies for years. Let them eat cake!