I know up front what a thin line we’ll be walking to keep this as a GQ, but I’d love to get factual answers for these questions if at all possible.
There are two facets of healthcare that I don’t understand. First, removing the tax deduction for employers that offer health insurance. What does this boil down to? Would this dis-incent employers to offer it in the first place? If they did, would that amount be included in my taxable earnings? What about my contribution amount; would that be included as taxable income as well? I keep hearing about this in passing, but strangely (to me at least), I don’t seem to hear much flak about it on the radio, and I would have assumed this would have people that are currently covered up in arms.
My second question: are there ANY hard numbers on how nationalized healthcare in the U.S. would truly affect R&D in the pharmaceutical industry? On its face, it seems logical that the U.S.'s huge healthcare spending would subsidize the R&D of new drugs for other countries, but I also find it hard to believe that new drug development would/could just wither up and die.
Thanks for any info- what info’s out there is so dense and politically slanted that I’m having a hard time wading through it all.
I think it depends upon whom you ask. One person would tell you that if the employer loses his tax deduction, he won’t offer insurance. Another would tell you that the employer must offer insurance in order to attract the highest-quality employees. (Since there are so many jobs, and so few qualified workers. Sorry. I really couldn’t help myself.) In a down economy where employers are doing all they can to reduce costs, ISTM that removing the deduction would result in fewer employers offering health insurance. In a stronger economy, where employers are fighting for workers, health care would probably be offered.
If an employer offered coverage, under McCain’s plan the employee would have been taxed on the amount of the employer’s contribution, as it would be considered income.
As for R&D, there are pharmaceutical companies in countries that have UHC that are still profitably doing R&D.
It depends. If the employeer is taxed then if the employeer has contract requiring them to give health care then health care will continue. If they do not then some will either drop it or require the employee to pay a larger share of the priemum.
As I understand it if you are paying a health care priemun it will become fully taxed. I also understand that some want to tax all benifits, health care and retirement. In my case between my wife and me our taxable income will increase $4681 a month. At the 28% bracket that is a tax increase of $1310 a month, or another way of putting it is my take home will decrease $1310 a month.
I would have coments about this but that is outside GQ.
A couple of things to keep in mind about the healthcare tax deduction. Taxes can be progressive (people with higher incomes pay more), neutral, or regressive (people with lower incomes pay more). The healthcare tax deduction makes the tax system more regressive. It provides the greatest benefit to those who have good jobs with good benefits, and who pay income tax at the highest bracket. In some cases, employers provide extremely rich benefits plans (well over the $14K that is a typical cost for family coverage) and the whole deal is tax deductible. Those who purchase insurance on their own do not get as much benefit from this tax deduction. In some cases the self-employed can deduct their premiums out of profits. Others who might pay their own premiums, such as unemployed, students, or retired do not get the benefit of the tax deduction.
As far as the nuts and bolts of your payroll deductions, let’s assume that the cost to insure you and your family is $14,000 per year. Your employer is paying $1000 per month and you are paying $167/month. Right now you are both paying that in pretax dollars. In the future, you will both need to pay with after-tax dollars. The extent to which that increases your contribution amount will depend on your marginal tax rate. Since this tax deduction currently benefits folks in the highest tax bracket the most, repealing it will hurt them the most. Your employer may also decide that since it is now paying with after-tax dollars, it needs to shift more of the premium cost to you, and therefore increase the contribution.
When **Snnipe 70E **refers to having a contract, I assume he is referring to a union contract. Benefits for union employees would continue to be a bargaining point. However, the fact that they are no longer tax deductible would increase the cost to the employer to provide them, so the negotiations would heat up. For the vast majority of US private sector workers who don’t have a union, an employer is free to drop health benefits and only will provide them if it needs to to recruit and retain employees. There are a few locations (MA, San Francisco) where employers of a certain size have to provide health insurance, and an employer mandate could be part of healthcare reform. But right now, they’re free to drop it.
The reasons in favor of removing this deduction is to avoid concentrating government support for healthcare (which is what a tax deduction is) among the population working full-time for a large employer or government. Money raised by removing the tax deduction could be used to support other options for access to health insurance and care that are not employment-based.
I believe another thought for removing the employer tax break is it does away with hiding the “costs” of the health insurance (edit: this is why it is considered a “conservative” fix - it supposedly removes barriers to “free market” operation of health insurance prices)
by (re)creating the burden of paying for the insurance, instead of getting a tax write off for it, you (re)incentivize businesses to either a) aggressively negotiate downward health insurance contracts or b) force businesses to download the costs upon the employee, which would then also have the same effect of causing the employee/insurance consumer more cost-sensitivity.
As for your second question, it is not logical in the slightest that spending money on health insurance and delivery of health services is in anyway related to pharmaceutical development.
Why do you say that? Spending money on health services (particularly drugs) is what creates the market for pharmaceuticals.
I sort of agree with you in that whoever is paying for it, there will still be a market, and how we reswizzle insurance doesn’t change that.
On the other hand, the pharmaceutical companies are well adjusted to making money under the current US system, and would no doubt have to make some changes to how they do business if the system were to change radically. We are the largest healthcare market in the world, and if any business’s largest market changes radically, it will affect them.
Look at the recent decision to cover prescription drugs under Medicare. The decision was made not to allow the government to negotiate discount prices with drug companies. The drug companies fought *tooth and nail *to get that provision. That’s a pretty clear example that the nature of healthcare reform affects the pharma market.
The more profitable the market is, the more effort will go into developing products for it. If the profits aren’t in pharma anymore, investment capital will go to other technologies - energy, communications, whatever. I don’t know if anyone has GQ-style numbers on what the effect would be, it’s a really complex question, but there is plenty of market logic leading one to expect an effect.
The largest single source of biomedical research (edit: dollars spent) is the NIH.
What creates the market for pharmaceuticals is disease and ailment, not the existence of a health insurance industry. This is like saying car insurance companies drive the market for innovations in the automotive sector. Which isn’t the case; the end-users of both products (edit: i.e. drivers) do.
What is going to happen is a two tiered system. I have worked for a lot of comanies doing analysis as an outside contrater and one thing I found almost all of them had “special” packages for top level employees like department heads.
Some of them are put through as “incentives” but in reality you were contractually obligated to recieve those, so they are not true incentives because you got them regardless.
The department heads and hard to fill jobs got this. I found it interesting that the H/R department heads didn’t know about these, 'cause this was done via regional or corporate.
For instance the company may be set up so that payroll is paid out for say a controller or GM through corporate but everyone else is paid by the local divison.
It’s done like this to give the impression everyone is getting the same benefits.
It’s not illegal to offere different benefits to people as long as it’s consistand and no one is denied because of a protected class (for instance race is a protected class).
But if you put these benefits into incentive plans, then you can offer it individually. For instance, it may be easier to get a GM for a store in NYC where people want to live than in a store in Sheridan Wyoming where fewer people want to live.
So a company would pay this “incentive” to the GM at a store in Sheridan but not to the GM doing the same job in NYC.
So this exists now, and I see now reason why it shouldn’t get more common.
Economic demand is not just wanting something, but also being able to pay for it. Increased subsidies for healthcare would increase demand, but government negotiating a block price could eliminate an opportunity for profit (through monopsony). So depending on how health reform is structured, it could affect the size and profitability of the US pharma market.
Ely Lilly does not secure Aetna’s guarantee that it will cover Drug X as part of its prescription drug benefit. It certainly does not do this a decade before the drug comes to market - the time when the decision to spend the research dollars is made.
If a pharmaceutical manufacturer develops a drug that has a significant benefit, they will profit mightily from it, regardless of who is paying the bill. They may find their profit motives cut on boner pills and whiny-housewife depression meds, but so be that.
The province of Quebec taxes tha complementary health insurance that employers provide; the Canadian government does not. It doesn’t seem to make that much difference. Presumably pay is slightly lower here that in the other provinces that allow the federal government to collect their taxes.