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Tax Credit Hides True Cost of Healthcare

Philip Betbeze, for HealthLeaders Media, October 15, 2010

There is no perfect solution to covering everyone's healthcare needs. We are where we are, but a better mechanism might be transferring the money directly to the people who need the help under our current system, and requiring them to have health insurance by installing an individual coverage mandate with actual teeth.

The tax credits will be provided on a sliding scale. For example, a four-person family purchasing a $15,000 family insurance plan in 2014 with $60,000 in annual income would receive tax relief of approximately $10,200. A similar family with annual income of $35,000 would receive tax relief of about $13,600.

So why not just write them a check from the Treasury to cover the shortfall? Then, people have the incentive to actually shop for a healthcare plan that works for them and pocket the difference, if there is any. Before you ridicule this approach, the current plan is not simply accounting paperwork. Treasury will still be issuing checks to someone, or something. Guess who?

Under my proposal, there still would be the problem of protecting people from dishonest health plans that give the impression of coverage but don't pay out when disaster strikes, but we have that problem now, and will likely still have it under the current tax credit plan. Besides, PPACA, in addition to covering the uninsured, was supposed to be about solving the systemic problem of healthcare cost inflation. In short, it won't.

And guess what else? Getting the federal government to sign off on 10% annual increases in healthcare cost inflation is much easier than getting savvy consumers to do the same thing. Makes you wonder whether they did all this with that cynical thought in mind, doesn't it?


Philip Betbeze is senior leadership editor with HealthLeaders Media.
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5 comments on "Tax Credit Hides True Cost of Healthcare"


Todd (10/19/2010 at 9:35 PM)
Chantico, more employer could self-fund if they would like. In fact, employers can self-fund all the way down to only 15 employees if they are willing to accept the risk and/or can obtain reinsurance. But as long as Medicare and Medicaid continue to underpay providers, employers and health plans will see large cost increases year over year.

Chantico Skky (10/18/2010 at 8:36 PM)
The article is spot-on, but we need to look at how people are "insured," as well. In addition to allowing the inter-state sale of health insurance, for employer-provided healthcare (assumed as a non-mandated benefit), all employers should be allowed to be self-funded (pooling the contributions to provide the security) and should use a TPA and rented MD network to pay its claims directly. Instead of paying monthly premiums to an insurer, the money is set up in an escrow-like account and claims are paid out as they occur. The insurance companies make untold millions by collecting premiums for those insured who rarely seek care. Being self-funded puts the private employer in the same boat with union trusts[INVALID] who are also self-insured, but at the cost of the employing corporation.

Corbett (10/15/2010 at 1:30 PM)
Let's take your idea one step further...if the goal is to stop the decades of double digit cost increases in the health care industry, let's increase the patient's share of financial responsibility for care. Start by augmenting Medicare's proportion of patient responsibility, scale it over the next ten years to gradually grow to 50 percent by the end of 2020. Other payors will follow suit. Then someday we could truly have an industry where people are encouraged to shop, forcing providers to be more cost conscious and quality focused.