The Hidden Tax: How Much is It? Does it Matter?

Governor Arnold Schwarzenegger did a masterful job when introducing his health care reform package in moving the debate from health insurance lingo to terms “regular” folks could understand. One example concerns the term “cost shifting” which describes what happens when the uninsured receive medical care for which they cannot pay: the cost of those services are shifted to those who can pay — those with insurance. The term may be descriptive, but as political coinage, it carries little weight.

In introducing his health care reform plan Governor Schwarzenegger described the same phenomena as a “hidden tax.” Everyone understands a tax. No one likes them. And hidden taxes sounds vaguely sinister.  Most significantly, it allows the Republican Governor to position himself as a tax cutter at the same time he calls for imposing some very tax-like “fees” on businesses, hospitals and doctors.

But how real is this hidden tax on which the Governor depends so heavily? According to a recent column by the Sacramento Bee’s Dan Walters, the Governor relied on a study conducted by the New America Foundation which claims premiums in California are 10 percent higher than they would be if everyone is insured. This is real money: approximately $1,200 per year for a typical family. What this means is that the fees the Governor would oppose can be viewed merely as a means of recapturing some of this hidden tax for the noble purpose of subsidizing premiums for low- and mid-income Californians and lowering overall premiums for everyone.

However, a new study by researchers at Stanford University’s Hoover Institution takes serious issue with the methodology used by he New America Foundation. According to Walters, the folks at Stanford peg the Hidden Tax at less than 2.8 percent of premiums. Let’s assume 2.5% and it works out to about $300 per year for that typical family.

Academics can — and given the politics of the issue, will — debate the size of the Hidden Tax for months to come.  And those in the business community who oppose the fees the Governor would impose on them will use the controversy to position those fees as unfair. That’s politics as usual.

Yet all of this strikes me as a distraction. While a better understanding of the financial impact of California’s current health care system is important, it’s not the only justification to push for changes. The need for action is better justified because it’s the right thing to do.

Anthony Wright has a similar take on this in a May 29th posting on the Health Access California blog. And Senator Barack Obama captured the essence of the need for reform in introducing his own health care reform proposal on May 29th. “We are not a country that rewards hard work and perseverance with bankruptcies and foreclosures,” he said. “We are not a country that allows major challenges to go unsolved and unaddressed while our people suffer needlessly. In the richest nation on Earth, it is simply not right that the skyrocketing profits of the drug and insurance industries are paid for by the skyrocketing premiums that come from the pockets of the American people. This is not who we are. And this is not who we have to be.”

Leaving aside the rhetoric over profits, Obama captures the justification for reform.  Whether the Hidden Tax is two percent or 10 percent is less important than that we as a state and a country can do better to protect the health and financial security of our people.

That’s why the health care debate is so important. And that’s why it’s so important we get it right. Lawmakers need to take the time to thoroughly understand the consequences of their actions and to find a balanced, responsible approach to meaningful reform. Eliminating the Hidden Tax is a part of the puzzle, but only a part.  Creating a health care system which is accessible, affordable and fair should be our goal. It’s closer to who we are and who we can be.

3 thoughts on “The Hidden Tax: How Much is It? Does it Matter?

  1. IT MADE ME LAUGH TO HEAR PEOPLE MAY HAVE TO WAIT FOR FREE MEDICAL. HERE IN THE U.S. YOU JUST DON’T GET ANY CARE. IF YOU GET REAL LUCKY YOU MAY FIND A DOCTOR THAT MAY LET YOU MAKE PAYMENTS, BUT THEN OF COURSE THAT DOES NOT INCLUDE THE HOSPITAL, MEDICATION ETC. YOU CAN APPLY FOR ASSISTANCE BUT THAT CAN TAKE A YEAR TO EVEN HEAR BACK THAT YOU ARE TURNED DOWN, I KNOW I HAVE BEEN THERE!

  2. I guess the keys are the words “accessible, affordable and fair” for who? That is always where the rubber meets the road. There are so many issues this country needs to face. As a child we were on welfare for a period of time. I understand there is a need for it. I believe in having assistance programs like that. Aren’t there social programs that pay mother’s additional monies for additional children? The more kids you have, the more money the government will pay. Isn’t that a broken system? We limited ourselves to two children because it was all we felt we could afford. Why is the government paying more in benefits to folks who cannot afford more on their own. Shouldn’t they be forced to be responsible just like my wife and I were?

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