Health care and tax payers

Eliminating the tax preference for employer-sponsored insurance would therefore shift control over more than $532 billion each year, and $9.7 trillion over the next 10 years, from employers to workers. That effective $9.7 trillion tax cut would not increase the federal budget deficit, and it would more than swamp any small, explicit tax increases that altering the existing tax treatment of employer-sponsored insurance would impose on some insured workers.

Not incidentally, HSAs also put heath care consumers back in the position of paying with their own money, with an incentive to look at the price tag.

John C. Goodman and Peter Ferrara of the National Center for Public Policy Analysis have a similar idea. They propose giving people uniform tax credits to purchase health insurance. Once again, that approach would give individuals more control over their health expenditures, since they wouldn't be bound by employers' choice of insurers. It would also be more equitable, since current employer-based tax breaks vary widely depending on workers' income.

Goodman and Ferrara also want to "guarantee renewability" to address the problem of people being dropped by insurers. And they propose a safety net, funded up to the level of unclaimed tax credits, to cover the less-than-proactive segments of the population.

D. Eric Schansberg, a professor of economics at Indiana University Southeast, also likes tax credits, though within limits. He suggests they should be offered "only at a level to provide catastrophic insurance for substantial and unpredictable medical expenses. A variation on this theme would be to provide the subsidy on a means-tested basis, reducing it for those with higher incomes."

As with Goodman and Ferrara, Schansberg suggests health status insurance as a hedge against "the risk that one’s health status deteriorates in the current period—and thus, that future medical insurance premiums will increase."

Cannon and Schansberg both see a spiderweb of tight regulations on health insurers as limiting competition and driving increases in costs, which then squeezes many Americans out of the market for health care.

Pioneered by states seeking to satisfy every possible constituency with a heart-rending story to tell of illness and expense, mandated coverage of various ailments and treatments has inarguably elevated the cost of health coverage. While each individual mandate has a relatively small price tag, the Council for Affordable Health Insurance estimates that, in aggregate, "mandated benefits currently increase the cost of basic health coverage from slightly less than 10 percent to more than 50 percent, depending on the state, specific legislative language, and type of health insurance policy." The federal government, to much fanfare, now dictates "mental health parity," which raises costs by five to 10 percent, all by itself.

Those mandates have to go if we're to control costs, points out Cannon, and Schansberg agrees. Schansberg adds that insurers should be allowed to offer products across state lines to increase competition.