How the Public Hurts Health Care Reform
Lori Montgomery has a nice article on a perennial wonk dream: Funding health care, or even American government, through a Value Added Tax (more commonly known as a VAT, and best understood as a modified sales tax). This is how Europe funds its health care systems. This is how health policy expert Ezekiel Emmanuel, brother to Rahm and health care adviser to Orszag, would fund his ideal health care system. This is how tax policy expert Len Burman would fund his ideal health care system.
But Montgomery doesn't get too deep into the reason why a VAT won't be used to fund our health care system. The issue is not the VAT. It's the health care system. The central principle reformers is very simple: Let people keep what they have. That was the lesson learned in 1994. People want more options. But they don't want to be forced out of their current arrangements.
If you rebuilt health care financing around a single tax, you'd also have to rebuild health insurance offerings around what is, in effect, a single payer. That doesn't mean the insurance couldn't be private. But it couldn't be coming from hundreds of different sources. Employer-based insurance, for instance, only exists because employers pay for it. If the government were paying for it through a VAT, then that insurance would no longer be attached to employers. That would be a good thing because employer-based insurance is a bad thing. But it would also mean individuals would "lose" their current insurance (even though it would be instantly and seamlessly replaced). Which is why we won't have a VAT.
This, incidentally, is one of the health reform constraints people don't really like to talk about. You hear a lot about the malign influence of the health care industry, or the intransigence of Republican senators, or the difficulties posed by deficit hawks. Those constraints all have, for Democrats, easy villains. But a lot of very bad policy limits are the product of public preferences. And those are harder to attack, and thus harder to change.
The health care system is in extremely poor shape. That means, fairly logically, that it requires pretty extensive changes. But when it comes to health care, the public is afraid of too much change, too fast. There's a lot of status quo bias. Many wasteful and damaging inefficiencies -- like the financing system -- are left to fester because changing them would create too much disruption. The end result is that we're treating the health care system with anti-inflammatories and physical therapy when what it really needs is surgery. The reforms we're considering will make the system better. But they won't make it well.
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