Two interesting articles on the public financing of health care were published yesterday. One was an article in the Journal of Health Affairs, and the other was an op-ed piece in the Wall Street Journal.
What is interesting about the Health Affairs article is that the authors investigated the distribution of public health care financing within the population. Some of their findings are listed below:
Public spending on behalf of the civilian, noninstitutionalized population was a total of $752.9 billion in 2002 dollars, or 56.1 percent of total spending from all sources.28% of this spending ($214.8 billion) took the form of tax preferences (i.e. tax subsidies to private insurance and the exemption of most medical care spending from sales taxes.)
Public dollars flowed disproportionately to seniors, whose benefits were more than five times those of children.
Public spending also disproportionately benefited people with health problems, paying nearly 80 percent of the total cost of those in poor general or mental health
Even among families with incomes greater than four times the poverty level, public spending accounted for 45.8 percent of total spending.
Public spending accounted for 45.5-55.5% (depending on the calculation) of total spending among the uninsured—nearly the same share as in the overall.
This research sheds light on some very important points. It is not surprising that seniors receive a large proportion of their healthcare financing from government sources. What is new information is that that the public sector finances nearly half of all health care spending for families with incomes over four times the poverty line. These "high-income families" received an average of $1,177 per person in tax subsidies compared to $102 per person for those below poverty. This is likely because many is this bracket receive employer-sponsored insurance, which has no cap.
Also published yesterday was an op-ed piece in the Wall Street Journal written by John Goodman, who is the president of the National Center for Policy Analysis and an unpaid adviser to the McCain campaign. He writes that McCain’s health care plan would to be the most impactful in terms of generating meaningful reform.
Under the McCain plan, employers could no longer buy insurance with pretax dollars. These payments would be taxable to the employee, just like wages. However, every individual would get a $2,500 credit (and every family would get $5,000) to be applied dollar-for-dollar against taxes owed.
Goodman argues that this would have multiple effects, some of which are listed below:
It would not result in increased taxesIs more egalitarian as all health insurance would be sold on a “level playing field.”
Low- and moderate-income families would get just as much tax relief as the very rich when they purchase health insurance.
People who must purchase their own insurance would get just as much tax relief as those who obtain it through an employer.
In contrast to the Obama plan, it would give the most new tax relief to the middle class.
It would also encourage all Americans to control costs by providing coverage for catastrophic care and not the “bells and whistles.”
It is interesting to consider how these changes will impact the distribution of public health spending outlined in the Journal of Health Affairs. It would likely decrease the total amount of public health care dollars spent by decreasing total tax subsidies. It also would change the distribution of public health spending to middle- and lower-income families.