Newspaper article St Louis Post-Dispatch (MO)

Congress Made Real Villain in Health Care

Newspaper article St Louis Post-Dispatch (MO)

Congress Made Real Villain in Health Care

Article excerpt

In the beginning, 11 months ago, was the Clinton health-care plan.

That begat the Cooper-Breaux plan (offered by moderate Democrats), the Dole plan (from the Republicans) and a single-payer plan (from liberal Democrats). Out of the cacophony, congressional leaders built the Gephardt and Mitchell plans. Now these have been amended further and are being touted as bipartisan compromise plans.

Even the comic strip Doonesbury has weighed in with a health-care plan.

But in all this proliferation of plans, one fact remains constant: No one - not President Clinton, not Congress, not the comics - has tackled what some economists see as the root cause of health-care inflation.

What is this untouchable subject, so ingrained in the American way of life that politicians recoil from any thought of changing it? The real villain in the health-care drama was created decades ago by Congress itself: the tax deductibility of employer-paid health-insurance premiums.

Premiums first became deductible during World War II, as something extra that companies could offer employees without running afoul of wage and price controls. With Uncle Sam footing part of the bill through the tax preference, workplace plans became the most common way for Americans to buy health insurance.

They've become so commonplace, in fact, that Clinton may have thought he was on safe ground when he proposed taking the concept a step further, and requiring companies to insure their employees.

Imagine if companies were allowed to deduct the cost of food they served in the employee cafeteria. Employees would rather have a dollar's worth of tax-free roast beef than a dollar of taxable salary.

But, just as there's no free lunch, there are no free hospital stays either. When the tax code subsidizes something, we consume more of it. And when enough people want more of something, its price goes up.

What's more, the tax subsidy affects the type of plan that many companies choose to offer. "Employers and employees have rationally chosen, given the bias in the tax system, to buy generous policies," said David Henderson, a visiting professor at Washington University's Center for the Study of American Business, in a recent lecture. …

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