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Health and taxes: Even worse than death and taxes

By Richard E. Ralston
web posted October 6, 2003

It is insulting enough when the government celebrates your death by taxing away your wealth or your business. Much more damaging are the taxes on the money you need to stay alive.

Medicare legislation now pending before a conference committee in Washington would continue to punish those who pay their own way, and deceive those who think they can get away with forcing everyone else to pay for their health care expenses.

The wealthiest government employees or corporate executives who receive health care insurance as a part of their compensation package receive this benefit on a tax-free basis. Any one who pays their own health insurance premiums or medical bills must struggle to wring these payments from income that is fully taxed. This practice transcends unfairness and lack of equity. It also inflates the cost of health care for everyone.

Those who are provided with their health care as a tax-free benefit have little incentive to spend those health care dollars wisely. After modest co-payments or deductibles, the sky is the limit. Those spending their own money have much more motivation to pursue the most efficient use of their health care resources. Yet the government taxes -- and thereby discourages -- that behavior. It rewards the cost-is-no-object approach to health care insurance.

It is hard to understand the reasoning behind this approach. Perhaps there are those who would prefer that everyone be dependent on someone else-or on the government-for their health care. Given the expense explosion that results from "free" health care, perhaps there are those who would prefer that every detail of our health care be regulated by the government. There often appears to be a great fear in government circles of autonomous individuals left free to pay for their own health care, and to make their own decisions about it.

One thing the government could most easily do to bring the cost of health care within the reach of almost all Americans would be the expansion of unrestricted tax-free medical savings accounts (MSA's). Such accounts can cover most or all of everyone's routine medical expenses. In conjunction with high-deductible, low-premium insurance for medical emergencies and long-term care, these accounts make health care affordable. We all would then be freed from the tax burden of supporting a huge government health care establishment. (Very restricted MSA's exist today, but the legislation creating them will expire at the end of 2003. A small provision for this type of account was passed in the House version of Medicare legislation now in conference committee-embedded in an otherwise bad bill. But it is unlikely to survive.)

A major advantage of this approach is that each individual would permanently own the health care coverage, independent of any employer and unencumbered by government regulators. This makes it completely portable so it can follow each individual through a career and into retirement. Actually, it would extend beyond retirement as any unused savings could be passed on to heirs. Such ownership would provide far more security than a financially unsupported government "entitlement," real peace of mind, and true independence.

This independence provided by tax freedom for our health care expenses would, more importantly, leave us free to make our own health care choices and to accept or reject the recommendations of the physicians and surgeons that we choose. That is a far more important benefit than the actual dollar savings that tax equity for health care expenses would provide.

Let there be no doubt about it. What the government pays for it also controls. When the government makes itself the primary provider of anything, it commands it. It owns it. A government that provides for all of your body's health care needs will ultimately think and act as if it owns your body. Those who are uncomfortable with that idea need to understand that they need to reject the illusion of government handouts, and demand the right to spend their own dollars -- free of tax -- to provide for their own lives and health.

Richard E. Ralston is Executive Director of Americans for Free Choice in Medicine. © 2003 Americans for Free Choice In Medicine. All rights reserved.

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