This morning I peered into the crystal ball to think about how some provisions in the health care bill could shake out in the next ten to twenty years. I acknowledge that this experiment is of limited value because Congress can always pass laws that change the way we regulate, tax and spend our way through health policy, but it's useful I think to extrapolate based on current law since health reform is, after all, the law of the land.
Jon Chait, in a long post blasting Rep. Paul Ryan and his anti-communitarian ilk, says this about employer-based insurance:
Ryan would turn that on its head. Medicare and the employer-based health care system mitigate the risk of chronic or severe sickness. Ryan would slash the former and eliminate the latter.
And then this:
Dissolving employer-based insurance would help a healthy, low-earning 25-year-old at the expense of a diabetic high-earning 50-year-old.
I come into this argument closer to Chait's side than Ryan's, but I think it's important to be clear that in the long run this health care bill erodes the prominence of employer-provided health care. Employer-provided insurance is tax free. In 2018, an excise tax on gold-plated plans kicks in that will grow faster than inflation, hitting more business over time. Americans will have the chance to break with their employer insurance and enter the exchange market where they can receive subsidies (that will also shrink in value over time). Exchange-care will grow. Employer-care will shrink. That's the plan.
Chait should mostly like this. The employer subsidy is awfully regressive because the tax subsidy disproportionately goes to richer insurance plans. Beginning to tax insurance would not only be fair -- inasmuch as wages and benefits should receive similar tax treatment -- it would also correct a fundamental distortion in the health care market, which is that employees don't see the money they're spending on health care because it's taken out of their compensation pre-wages. Economists on all sides of the spectrum agree that tax subsidies on employed-based coverage are critical distorters, and also low-hanging fruit compared to, say, dismantling fee-for-service Medicare.