Healthcare Reform: Red State Booster Shot?

[Leonidas]

Article in today's Washington Post claims that national health care reform is likely to mainly benefit the so-called Red States at the expense of taxpayers in the Blue States.

Health-care reform may be overdue in a country with 45 million uninsured and soaring medical costs, but it will also represent a substantial wealth transfer from the North and the East to the South and the West. The Northeast and the Midwest have much higher rates of coverage than the rest of the country, led by Massachusetts, where all but 3 percent of residents are insured. The disproportionate share of uninsured is in the South and the West, the result of employment patterns, weak unions and stingy state governments. Texas leads the way, with a quarter of its population uninsured; it would be at the top even without its many illegal immigrants.

According to the author, jobs and workers fled the states in the North and East for lower taxed states where the regulatory and political environments mean that benefits are cheaper (and less plentiful). Now, with universal health care under consideration, the people left in the higher taxed (and better insured at higher prices) states could pick up the bill for the folks in the other states.

The plan picking up steam on Capitol Hill is to cover much of the $1.2 trillion cost over 10 years by taxing employer-provided health benefits. And who has the highest benefits? People in the North and the East, thanks to pricier health care markets, higher state standards for health coverage and stronger labor unions. Depending on how such a tax were designed, it could land hard not only on corporate executives but also on union workers whose compensation gains show up as health benefits instead of wages.

The South and West, which have much higher rates of uninsured will find that any federally mandated (and subsidized) increases in coverage will, at least according to the author, be heavily subsidized by the taxpayers in the North and East by taxing their better and more expensive employer provided benefits.

For example, he said, if you're a New York policeman married to a nurse and your combined salaries are $80,000, your health insurance will be taxed to pay for a family in Mississippi.

Alternatives that have been suggested included reducing tax deductions for the wealthy, taxing sugary sodas, raising the capital gains tax or expanding the Medicare tax to unearned income.

I'm not sure if any of this will come to fruition. And it does seem weird that the congress critters that are so heavily behind a lot of this are representing the folks who are apparently going to get zinged the hardest.

But pushing universal health care are Northeasterners such as Ted Kennedy and Chuck Schumer, and pushing against it are Sun Belters such as John Cornyn and Jon Kyl... "I'm trying to figure out how Chuck Schumer can raise his hands and say this is a good thing if New York workers are going to be such losers based on taxes," he said.

If this plan goes forward, it would seem that a lot of taxpayers North and East of me are going to start squawking. But it's their representatives that are pushing it and ours that are saying "no thanks".

Maybe it's like the author says:

It is a rare triumph of principle over parochialism -- or maybe no one is looking at the numbers.

Article here at the WaPo: washingtonpost.com

 

[samclem]

Thanks, this is an interesting take on the issue.

The tax on private employer health benefits would only be significant for a year or two. As soon as the tax goes into effect, employers would eliminate their plans (and increase pay to employees to keep them). The only reason employers provide health care coverage now is this tax deduction--because of the tax writeoff, they can provide the coverage less expensively than an individual could buy into a group policy, so it makes sense for the employer to buy the insurance.
Taxing of this benefit is one part of the bigger plan--it will kill off employer-funded insurance. The other part is the establishment of a low-cost (taxpayer subsidized) government insurance system that will always be able to undercut the premiums of any private (non-subsidized) group insurance. The proponents say that people will be able to choose the private or public insurance in this "competitive" market, but the whole thing is a Trojan horse--in a few years only the government plan will be left.

 

[Gone4Good]

The proponents say that people will be able to choose the private or public insurance in this "competitive" market, but the whole thing is a Trojan horse--in a few years only the government plan will be left.

I've yet to see a workable alternative to a government only plan.

The problem with health insurance is that it isn't "insurance" at all. For anyone who's sick, and everyone gets sick eventually, health insurance is really health care subsidization. No company in the world is going to willingly subsidize someone elses expenses at a loss.