I received some good news about my daughter’s future orthodontist bill recently. Good news for me that is, at least in the short run. My wife’s dental insurance will cover part of the cost. While that insurance is part of her salary, it does not count as taxable income, and is thus exempt from federal, state, local and social security taxes. And, we’ll be able to put aside money on a pre-tax basis to cover the balance, under a plan she has at work, with a similar exemption from taxes. My wife works for a quasi-public agency. The government, therefore, will end up paying indirectly (through the tax break, and through private dental insurance purchased on her behalf) for about $3,000 of my daughter’s improved smile. The same government, that is, which (unlike the government of virtually every other developed country) doesn’t provide universal insurance for at least basic health care. If you aren’t a senior citizen, don’t have health insurance provided by your employer, cannot afford an individual policy, and are thus uninsured, her smile – which you are helping to pay for – may thus be more important to our elected officials than your life.
As I wrote here http://www.r8ny.com/blog/larry_littlefield/socialized_medicine_get_real_its_already_here.html, the American system of health care finance is a disaster. Directly or indirectly, the government is already paying for more than three-quarters of health care expenditures that, at 14.5% of GDP, are far higher here than elsewhere. The government’s share of this total, therefore, is more than many countries spend to provide universal health insurance. And that share keeps going up. According to the latest Statistical Abstract of the United States, the federal tax revenues forgone as a result of the exclusion of employer-provided health insurance from taxable income were expected to total $126 billion in FY 2006, up 23% in the two years since 2004!
(The government is also subsidizing energy-gulping McMansions through the deduction of mortgage interest from taxable income at a cost of $76 million in 2006, also up 23% since 2004, but at least this counts as income to begin with and is thus not excluded from social security taxes and subject to the alternative minimum tax).
The federal government could have decided to provide a guarantee of basic health care for all, and leave us on our own to pay for optional services like orthodontists. Instead, it has chosen to subsidize such luxury services, even for the affluent (more for the affluent, because their tax break is bigger) while providing others with nothing.
Most simply take the break and don’t think about the inequity. They aren’t worried about the health care needs of those who work behind the counter, serve their meals, watch their children, or do other jobs where employer-provided health care is uncommon. But the inequity makes me uneasy, and not just because I’m generous. Even from the point of view of enlightened self interest, this situation makes no sense.
For one thing, because the tax break is worth more the more you earn, I and virtually any other beneficiary would probably have paid to have their daughter’s teeth straightened without it. So the government isn’t really subsidizing straight teeth, it is subsidizing whatever is being purchased with the money that would otherwise have gone to the orthodontist. Plasma screen TVs and Hummers, for example.
I have had employer-provided health insurance throughout my career, but is there any guarantee that I will have it in the future (especially since I am no longer in the public sector)? No. In fact, health insurance has meant little to my family over the years, because we have used so little health care. The most significant costs were the birth of our children, with one night in the hospital for each.
But age 50, with its higher chance of a serious illness like cancer, is a half-decade way, and it is entirely possible that I, and others of my generation, will lose health insurance right when we need it. Possible that someone will become seriously ill at the small company I work for, leading to a massive premium increase and the elimination of health insurance as a benefit. Possible that I will become unemployed at the very moment when a serious illness hits. Possible that 1,000 unexpected outcomes will occur. Looking at the future, not just the present, her smile could be more important than my life.
And what about her? If present trends continue, employer-provided health insurance will be about as rare for her generation as defined benefit pension plans are for mine. It will be something that those who came before got, but those who come after do not, as part of our continuing generational war. Already, even among those companies that have health insurance for official employees, the tendency is have young workers not be employees – to make them either freelancers or temps rented from contract labor companies – to avoid providing them with health insurance. Taking the long view, therefore, her smile may be more important than her life.
Of course, the reality isn’t quite that bad. As my current supervisor put it, the United States has a universal health care program. It’s known as Medicaid, and the problem is that it stinks — you have to first use up all your savings and much of your income for health care in order to get it. Since most health care expenditures are on those with serious, particularly chronic, illnesses, others can remain uninsured without penalty as long as they are healthy.
But if they get sick, and can no longer work, expenses are likely to be so great that, after exhausting their savings, they will qualify for Medicaid. Under Medicaid, a middle class person can keep their house, their car, and their retirement plan and still qualify. How many American families have more savings than that? Not if they know what’s good for them in “borrow and spend” America, where savers are suckers.
The incentives this system creates are ridiculous. The loss of economic flexibility caused by tying health insurance to place of employment is also ridiculous, as I wrote previously. For one thing, in Canada the self-employed are double the share of the workforce that they are in the United States, and if working for oneself isn’t economic freedom, what is?
In fact I can think of only one argument against having some kind of national health care finance system. That by taking away much of the cost of health care, it would encourage those seeking healthcare to make unlimited demands, and those providing health care to enrich themselves by charging every higher prices, and manipulating the political system to force everyone to pay. Is there any evidence this would happen? Yes – New York State’s Medicaid program, the best argument against government funded health care in existence, and the subject of my next few posts.