Economists today warned members of the Senate to be careful when trying to redesign the U.S. health insurance tax incentive system.
The Senate Finance Committee invited the economists, Jonathan Gruber of the Massachusetts Institute of Technology and Katherine Baicker of Harvard University, to talk about the economic concepts affecting health reform efforts.
The Bush administration has proposed replacing the current tax exclusion for employer-sponsored health coverage costs with a tax deduction that would go to anyone with private health coverage. The proposal would, in effect, cap deductions of employer-sponsored health insurance costs.
Sen. Max Baucus, chairman of the Senate Finance Committee, said during his opening statement that reforming the U.S. health finance system will be easier said than done.
“We’ve … learned from past attempts at health care reform that too much disruption can backfire,” Baucus said at the hearing, according to a written version of his opening statement. “Too much change for those who already have health coverage can cause a backlash…. We need to fix what’s broken, without breaking what’s working.”
Gruber, who has written articles contending that public health coverage programs are more efficient vehicles for expanding access to health coverage than tax breaks are, noted that no health expert today would set up a health system that offered a large tax subsidy only for employer-sponsored health coverage.
But, because individual purchasers of health coverage face medical underwriting, removing the tax exclusion could create a new set of uninsured people who cannot afford health coverage, or cannot buy health coverage at any price, Gruber said.
Gruber praised Massachusetts’ requirement that residents who can afford health coverage have health coverage.