Real Tax Reform: Cutting the Healthcare “Excise Tax”

Politicians in Washington have been wrangling over healthcare and tax cuts since January 2017 (really, since 2009). They got a couple of things right. First, they realized that health spending amounts to an 18% excise tax on all economic activity; that’s how much of GDP we currently spend on healthcare.  And that’s where real “tax savings” are to be had. Second, they realized that Obamacare’s “Essential Benefits” are exorbitantly over-generous.

But so far the politicians haven’t been able to “connect the dots” politically and ethically. They tried to curtail Essential Benefits by indiscriminately cutting out entire categories of high-value services like maternity and newborn care, or by letting insurers play games with expensive pre-existing conditions. And when that failed, they simply tried to save money by withholding care (or really, government payment for it) from millions newly covered by Medicaid.

Think how good it would be for government budgets, corporate profits, household economics if politicians could could reduce the “health tax” even to 17% of GDP and keep it there. For every 1% of GDP we cut out of healthcare, we would have a $185 billion “tax cut” that could be divided among government, business, and private households. To paraphrase Everett Dirksen’s famous aphorism, “Pretty soon talking real money.”

Impossible, you say? Well, Oregon achieved political and budgetary success in 1994. The Oregon Health Plan cut the Medicaid budget by using sophisticated cost-benefit analysis to eliminate coverage of expensive low-value treatments (not coverage of reasonably-priced high-value treatments). Oregon could serve as a national model.  See my YouTube video or my “Big Fix” presentation for more details.

Now, take action!