A study reveals that Harvard Taxing job training, health services hit hardest working families

 

Wednesday, Sep 02,2009, 9:56:12 AM   Click:

While the debate on reform of health care continues to unfold in public meetings on local and Capitol Hill, a new study by two Harvard researchers found that employment-based taxation of health benefits would heavily penalize the insured working families.

The study, entitled "The regressivity of the tax paid by employer health insurance," appears in the online edition August 19 New England Journal of Medicine. It was written by Drs. David Himmelstein and Steffie Woolhandler, a professor at Harvard Medical School and primary care physicians of the hospital in Cambridge, Massachusetts.

The tax benefits offered by employers to health has been advocated by many health economists and legislators, including some members of the influential finance committee of the Senate is now drafting legislation to reform health care. President Obama said he did not rule out such a tax to finance its reforms.

Analyzing income and insurance data from the 2005 Current Population Survey of the U.S. Census Bureau and other sources, the authors reveal that taxing workers' job-based health insurance would cost those with low-incomes ($0- $10,000 annually) 18.3 percent of their income, but cost high-income (over $100,000) families a mere 2.7 percent. (See the table from the study at http://healthcarereform.nejm.org/?p=1521 )

The authors note that the tax rate would drop even lower for the super-rich. "A Goldman Sachs executive who enjoyed the firm's infamous $40,543 health plan got a federal tax subsidy of about $15,367 last year," they write. "But that's only 0.13 percent of the bonuses received by the company's four top earners. So though taxing health benefits would spare the uninsured, the average poor family with employer-paid coverage would be taxed at a rate 140 times higher than Wall Street titans."

Dr. David U. Himmelstein, lead author of the study and associate professor of medicine at Harvard, added: "Most economists and many politicians have claimed that taxing health benefits would hit the wealthy hardest, while sparing the poor. But exactly the reverse is true. For a poor, insured family a tax on their health benefits would take almost one-fifth of their total income."

Dr. Steffie Woolhandler, co-author and professor of medicine at Harvard, said: "Instead of taxing benefits, politicians should embrace the only affordable option for universal coverage: a single-payer, Medicare-for-all program. Single-payer would save $400 billion annually by simplifying administration, enough to assure quality care for everyone. We cannot afford to keep wasteful private health insurers in business, and pay for it off the backs of working families."

Himmelstein and Woolhandler are co-founders of Physicians for a National Health Program, an organization of 16,000 doctors and medical professionals who advocate for single-payer national health insurance.