12/26/2019

The new spending bill is a disaster

"The disaster is the repeal of the so-called “Cadillac tax” on expensive health care plans. To understand why this is such a tragic mistake, you first need to understand the nature of American health care. Almost half of the US healthcare system is directly financed via government programs such as Medicare, Medicaid and the Veteran’s Administration. A large share of private sector health care provision is funded by private insurance. Because this insurance is often provided by employers, it is tax deductible.

This means that the government effectively picks up about 40% of the cost of health care provided by the private sector. Needless to say, this provides a powerful incentive for excessive use of health care, and helps to explain why American health care is far more expensive than in other countries. Even worse, this tax provision encourages people to pay for health care via the insurance system, rather than out of pocket. Even my disposable contact lens are purchased this way, which means American taxpayers pick up roughly 40% of the cost of this frivolous luxury."