Share this story
Close X
Switch to Desktop Site

Health-Care Costs: a Tax Or a Premium?


ON the surface, the great health-bill labeling question is another eye-glazing, inside-the-Beltway accounting debate.

But the fate of the Clinton health-care proposals may well ride on whether officials at the nonpartisan Congressional Budget Office (CBO) deem the bulk of the Clinton plan part of the federal budget or not.

About these ads

The main question is this: Is the tab for the new system a federal tax or an insurance premium?

The Clinton health-care bill would require businesses to pay at least 80 percent of their employees' health-insurance premiums. The payments are compulsory, are paid to a quasi-governmental regional health alliance, and are set by a national health board.

So is it a tax?

If it is, then the health-care proposal steps into a parliamentary thicket of requirements for budget bills, and the whole health plan could be subject to the pay-as-you-go budgeting requirements that control deficit spending.

But far more significant is the political power of the labels.

For a program to be officially dubbed a tax is to cast it in the worst possible light for selling it to Congress and the public. And if the employer payments are taxes, then the payouts from the health alliances to private health-care providers is government spending.

Thus President Clinton's fight for his bill would have him promoting the greatest-ever tax increase by far and an expansion of government so massive that it alone would qualify as a member of the G-7 industrial democracies.

About these ads

White House staffers argue that people are already paying for the health-care system through an inefficient private insurance system. Their plan would direct the payments through the health alliances, which are designed to bring greater efficiency and equity to the system. Most people and most businesses should not pay more than they already are, they say.

Critics counter that health insurance bills may be high or inefficient now, but they are not compulsory. You can always downgrade or cancel your insurance at your discretion.

Under the Clinton plan, everyone must subscribe to a comprehensive benefit package, and employers must pay 80 percent of the cost, unless they qualify for subsidies.

Administration officials note that the payments will not actually go to the federal government. The health alliances will be set up by states as nonprofit organizations.

So the required payments are more like workplace safety regulations or environmental cleanup requirements; they exact costs from businesses, but they are not exactly taxes that go to government coffers, says Bob Boorstin, a White House spokesman.

THE Clinton administration decided last summer to fund its plan for universal health-insurance coverage the way it does - through required premiums - largely to avoid the ``T-word.''

Levying a payroll tax would have been a simpler way to adjust costs for low-wage employers, and the bill for companies would have come out about the same. But including an outright tax - apart from tobacco taxes - was too treacherous.

The CBO is still mulling over its decision on the tax-or-premium question. Most insiders expect that in the end the CBO will rule the Clinton proposal off-budget.

``If you start from the principle that what should matter is what you pay for what you get, then it doesn't matter what you call it,'' says Joseph White, a health-care and budget expert at the Brookings Institution. ``Anybody who wants to call it a tax wants to call it that because they want to beat it,'' he says. ``They oppose a national health-benefit guarantee. Anybody who wants to call it a premium wants it to go through.''

Carol Cox Wait disagrees passionately. She has mixed views on the health-care plan itself but insists that truth-in-government requires acknowledging the Clinton ``premiums'' are federal revenues, whether dubbed taxes or social insurance contributions.

``The real issue here is what budgeteers call transparency. The public has to be able to understand what government is doing in order to hold them accountable at the polls,'' says Ms. Wait, president of the Committee for a Responsible Federal Budget. ``This is about acknowledging that your government is proposing a rather dramatic expansion of the federal government.''

Former CBO director Rudolph Penner is a little troubled that his former agency, whose director is appointed by Congress to fixed terms, holds a ``tyranny of numbers'' over such programs. Former White House budget director Jim Miller disagrees. ``So many of these programs are so complicated and people have so little trust in politicians that there's a need for a more objective group,'' he says.

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.