Purity and deficit reduction plans

Matt Yglesias has an interesting post on the various deficit reduction plans from progressive/liberal groups that were a part of the Peterson foundation’s recent deficit reduction conference. Some progressive/liberal groups think engaging the discussion in this way is a sell out of some sort. Yglesias notes that the end policy result is the true outcome of interest, not participation in a conference. His bottom line seems to be:

It sounds to me like progressives ideas have real merit, and that the main thing we learned from this exercise is that progressive policy prescriptions will have to be a major part of any realistic long-term fiscal solution.

The 6 participating groups that offered plans had broad ideological span, yet produced four areas of agreement across plans:

  • current policy is unsustainable, so changes are inevitable
  • maintain government as a key part of the health and retirement safety net
  • subsidy of the well off is now overly generous and should be reduced
  • tax expenditures, or the aspects of the tax code that incentivize, provide tax credits, or exclude income from taxation should be reformed (and their aggregate cost is $1 Trillion annually)

This points out the possible availability of a next step in the health care realm that could increase the cost saving ability of the ACA, and which would likely serve to address costs in any imaginable reform that might later emerge: capping the tax exclusion of employer paid health insurance. My experience in giving talks on health care reform to community groups shows that while they can easily be whipped into a frenzy about the ‘need to control health care costs’ once you begin to offer solutions like capping or ending the tax preference for employer paid insurance they change their tune. Not that change, we work hard for our benefits!

There is no easy way out of the cost problem we face, however, so perhaps this politically difficult choice can emerge from the current deficit/debt limit talks. The Bowles/Simpson commission suggested it. It is an obvious next step to take to address health care cost inflation among health policy wonks, and it would serve to address costs in the private part of the system instead of only focusing these efforts on Medicare. It is a reform of tax expenditures that seems to grow in popularity as a way to increase federal revenue while either leaving marginal tax rates steady or even dropping them. Further, it should pass any sort of progressive litmus test since the current policy disproportionately benefits higher income workers. This is what addressing health care costs will look like.

About Don Taylor
Professor of Public Policy at Duke University (with appointments in Business, Nursing, Community and Family Medicine, and the Duke Clinical Research Institute). I am one of the founding faculty of the Margolis Center for Health Policy, and currently serve as Chair of Duke's University Priorities Committee (UPC). My research focuses on improving care for persons who are dying, and I am co-PI of a CMMI award in Community Based Palliative Care. I teach both undergrads and grad students at Duke. On twitter @donaldhtaylorjr

3 Responses to Purity and deficit reduction plans

  1. steve says:

    The tax expenditure for health care should be on the table. My only concern is that they might be portrayed as a tax increase, which would make it more difficult to pass.

    Steve

  2. Don Taylor says:

    @steve
    it will definitely be called a tax increase by anyone arguing against it. Addressing the long term deficit will require hard choices.

  3. Texan says:

    Like most people, I’m totally against this idea. Yes, it hurts those who at least HAVE some health benefit at their job and doesn’t hurt those with no health insurance – in that sense it is progressive. But essentially it’s another step in the successful campaign to not have regular people share in increased prosperity as wages and benefits and pensions are continually eroded while the top few percent suck up more and more of income and assets.

    I know the line is “but health benefits are part of wages and if employers spend less on health care they will raise wages” — but I don’t believe that for a moment they will just pocket the difference as they have all the productivity gains of recent decades. I *am* a progressive and I think I’d be a fool and a sucker to support this.

    I also don’t agree that “subsidy of the well off is now overly generous and should be reduced.” As has been noted, “programs for the poor are poor programs”. There’s also a lot of overhead in means-testing things — as well as a lot of indignity for those who still qualify. Only by having a prosperous constituency as well as an impoverished one is there the political clout to make a program provide decent services. I’m more than happy for the government to provide health services and social security benefits to well-off people and it’s the right thing to do — as is taxing them in progressive fashion to pay for it.

    The right way to control costs is through a single-payer or government-run system with everyone in the same boat. The wrong way is by pushing more costs onto average (even if somewhat more prosperous than impoverished) workers.

    The ACA is I think destined to fail and I don’t really know whether we’ll end up with a broad lack of health care and even wider misery than now (a la Ryan plan) or with (I hope) some sort of Medicare or VA for all.

    But yes some sort of change is inevitable because yes current trends are unsustainable — something experts grasp completely but ordinary people don’t really get AT ALL yet.

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