Budgetary Approaches to Health Policy

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Decision-making by Consumers
As health-coverage purchasers/enrollees

Incentives and Interventions

• Reduce counterproductive state insurance regulations, including most benefit mandates and premium restrictions. In addition, permit insurance sales across state lines, with either enhanced federal oversight or harmonizing state regulatory regimes. (Antos)
• Limit tax deductions and exclusions:
  • The most important intervention would be to limit the employer tax deduction and employee tax exclusion to the premium of the most efficient financing and delivery plan in each region. (Enthoven)
  • At the plan level, capping of the exclusion from income for employer provided health care is an essential change. (Hungate)
  • Health insurance tax deduction should definitely be capped. (Penner)
  • The government could limit the tax deductibity (better yet a credit) (Reischauer)
  • A fixed (but unindexed) cap on the value of employer provided insurance that can be excluded from taxation enforced through some liberal or simplified "safe harbor" rules for calculating whether the cap has been exceeded. (Steuerle)
• I favor approaches that face employees with marginal cost of more expensive plans, provided that the benchmark plan provides needed financial protection and access to quality care. Substantial standardization of health plans is needed in a multiple choice situation with beneficiaries bearing the marginal cost. (Gray)
• Relate cost-sharing to income or earnings in some rough and ready way. (Van de Water)
• How much exposing consumers to more of costs will be cost constraining versus cost shifting needs discussion. While there may be a one-time effect, the skewed distribution of health spending with relatively few accounting for the bulk of spending may limit the over-time cost savings potential. (Scanlon)
• Indirect mandate on individuals: if they do not obtain health coverage, they would be denied the benefit of some subset of federal tax preferences such as the child credit, personal exemption, higher education subsidy, or itemizing deductions. While this is normally thought of as an issue of expanding coverage (& could be combined with an expanded subsidy for buying health insurance), it is also a way of reducing the costs of Medicaid by encourage more people to insure before drastic circumstances force them into Medicaid. (Steuerle)

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Disclaimer: The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.