This is counter-intuitive. Let’s tax health care benefits just like we tax wages (and reduce other taxes to compensate). Back to basics – the more we tax something the less of it we get; the more we subsidize something the more of it we get.
The more we subsidize health care (by making health insurance tax-free compensation) the less employees have an incentive to fight for lower prices and to shop around. Also, to the extent companies can give a dollar of tax-free benefits it is the equivalent of giving $1.50 of taxable wages (for someone in the 35% marginal tax bracket). So when one runs a company and is trying to get the most after-tax benefits to the employees for the dollar spent one uses health care benefits rather than higher wages.
But company-run health care programs are not very efficient either. They are clearly more efficient than government-run programs but not nearly as efficient and effective as a program predicated on an individual spending his own money.
Out of my prescriptions offered to date this is the least likely to be understood and endorsed by our pointy-headed politicians but this prescription would still be effective as one partial solution to getting our health care system back on track.
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