New Harvard Study Reveals That Taxing Job-Based Health Benefits Would Hit Working Families Hardest

As
the debate over health care reform continues to unfold in town hall
meetings and on Capitol Hill, a new study by two Harvard researchers
has found that taxing job-based health benefits would heavily penalize
insured, working families.

The
study, titled "The regressivity of taxing employer-paid health
insurance," appears in the August 19 online edition of the New England
Journal of Medicine. It was written by Drs. David Himmelstein and
Steffie Woolhandler, professors at Harvard Medical School and primary
care doctors at Cambridge Hospital in Massachusetts.

The
taxation of employer-sponsored health benefits has been advocated by
many health economists and lawmakers, including some members of the
influential Senate Finance Committee, which is now drafting health care
reform legislation. President Obama has said he has not ruled out such
a tax to fund his 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 https://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.

***

A copy of the study is available from the New England Journal website at https://healthcarereform.nejm.org/?p=1521

"The
Regressivity of Taxing Employer-Paid Health Insurance," David U.
Himmelstein, M.D; Steffie Woolhandler, M.D., M.P.H. New England Journal
of Medicine, August 19, 2009.

Drs.
Himmelstein and Woolhandler are available for comment on their new
study and on other aspects of the health care reform debate. To contact
other physician-spokespersons from Physicians for a National Health
Program in your area, visit www.pnhp.org/stateactions or call (312) 782-6006.