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Department of Hmm...
But winners [from the Bush health care plan] could turn into losers with time. Even people with policies under the cap could eventually hit the ceiling as health costs rise. That's because the cap would be indexed to general inflation -- not health care inflation, which has risen more rapidly in recent years.
That is from today's Wall Street Journal, p.D3, "How Health Care Proposals Could Affect the Insured." Here are some numbers on how much the two inflation rates differ; so is the Bush plan simply an eventual phase-out of this tax deduction?
Posted by Tyler Cowen on February 6, 2007 at 08:58 AM in Medicine | Permalink
Comments
Who said Dubya is a dummy?
Slow phasing out of the health care deduction due to the difference in inflation reates?
As the Guiness Boys say: Brilliant!
Posted by: Buzzcut at Feb 6, 2007 10:04:37 AM
Could it be that it's a softer way to reign in the growth rate of healthcare spending? If spending continues to grow at its current rate, then costs will quickly rise above the ceiling, at which point further increases will be felt more strongly by consumers. Presumably once they're no longer enjoying that shield, they will be more conscious of their spending and the rate should shrink.
Posted by: Chris Wuestefeld at Feb 6, 2007 10:05:08 AM
Its not a bug, its a feature for conservatives...
Posted by: mickslam at Feb 6, 2007 10:27:10 AM
I've long thought that health savings account contributions should be invested in a fund that represents the healthcare industy, perhaps something similar can be done to fix the glitch.
Posted by: aaron at Feb 6, 2007 10:36:12 AM
Aargh. It's "rein in", *not* "reign in"!
Posted by: A Tykhyy at Feb 6, 2007 11:25:10 AM
That assumes that the change in policy wouldn't affect the inflation rate for healthcare. My guess is that insurance plans will seek to come under the tax ceiling and over time it will serve to restrain the rising costs of health care in general.
Posted by: Chris at Feb 6, 2007 11:46:35 AM
> Aargh. It's "rein in", *not* "reign in"!
Don't rain on my parade.
Posted by: Chris Wuestefeld at Feb 6, 2007 11:54:53 AM
I'm not a big fan of the health care 'inflation' numbers. For a constant basket of goods, health care prices (like most things) drop off quickly over time. The effect of health care 'inflation' is driven by wanting access to higher and higher tech health care items. The invention and discovery of such items is at least partially (and I would argue largely) driven by the fact that you can make money from them. As such, yes it is expensive to keep up with the latest, most advanced techniques. But is that really 'inflation' in the classic sense?
Posted by: Sebastian Holsclaw at Feb 6, 2007 11:59:32 AM
Nothing personal, just wanted to rail against the pervasiveness of inaccurate spelling.
Posted by: A Tykhyy at Feb 6, 2007 12:13:00 PM
Once the feds turned over more responsibility to the states, Medicare spending dropped 5%, IIRC, this was a recent article.
And let's face it, Congress is not known for raising things, except for taxes and their wages and pork.
I'm thinking specifically of IRA deductions and campaign spending.
Posted by: Sandy P at Feb 6, 2007 12:53:47 PM
I believe the way our health insurance tax code is now - encouraging people to select without regard to cost - is one of the biggest reasons for healthcare inflation. The plan would certainly reduce that. And in any event, I would say the first-best solution is to end the tax break for health insurance, which is still a private, not a public good.
Posted by: Tim V at Feb 6, 2007 7:06:37 PM
Sebastian draws attention to an important and all-too-often overlooked fact: if we are careful to track the cost of fixed goods and services, health care costs aren't rising at all -- in fact, they're falling precipitiously.
(The cost of one hour of a physician's time, probably due to rising malpractice premiums, is an exception. But the cost of physicians' time is only a tiny fraction of medical spending.)
Perhaps we could use this fact to provide low-cost universal insurance. The government could insure every American for state-of-the-art medical care -- in 1980. Penicilin would be covered; anti-retroviral therpy would not. X-Rays would be covered; MRI scans would not. I wonder how advocates of universal coverage would react to such a scheme?
Posted by: David Wright at Feb 6, 2007 7:56:08 PM
Get even more socialized medicine, they'll find out.
When Canuckistan's dogs and cats were getting MRIs faster than humans......
Posted by: Sandy P at Feb 7, 2007 12:55:49 AM
I have to make an appointment to see my primary care physician just to get an appointment with a specialist to try a prescription drug. There no reason I shouldn't be able to skip all that and just go to the pharmasist who has the same, if not better, information about what I'm taking and what to look out for.
Posted by: aaron at Feb 7, 2007 8:04:44 AM
responding to the post at the top, currently heatlh costs are rising faster than general inflation but one of the results, hopefully, of the bush health plan is that offering tax breaks to people who buy insurance on their own, in other words, levelling the playing field and making basic catastrophic insurance mandatory for all will reduce heatlh costs from rising as rapidly as they do now.
by the way, and this may be a different post, singapore has an excellent health care system, according to tim harford, the undercover economist.
Posted by: choe at Feb 7, 2007 4:08:14 PM
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Posted by: 謝文豪 at Apr 1, 2008 10:18:46 PM
