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108 IRET Byline 1 (1992)

handle is hein.taxfoundation/iretbyln0108 and id is 1 raw text is: October 9, 1992 No. 108 The Managed Competition Act of 1992: A Wolf in Sheep's Clothing The collapse of socialism in Eastern Europe has led policy makers throughout the world to turn to free markets to improve social wellbeing. On the banks of the Potomac, on the other hand, the inclination seems to be to go to more government management. To be sure, the rhetoric that policy makers use has changed; the language of free markets is now being used to repackage the same old big government solutions. A test of The latest example is H.R. market bas 5936, the Managed Competition health cart Act of 1992, being proposed by a see wheth group of congressmen known as expands the Conservative Democratic Forum (CDF). The proposal's choices chief sponsor, Rep. Jim Cooper (D- government Tenn.), argues that this bill gives CDF prop markets one last chance to solve test absolut the nation's health care problems. However, this proposal represents a market approach only in the trivial sense that it is somewhat less intrusive of private decision making than the proposals that are being offered by other Democrats. In reality this proposal would significantly increase the role of government in the provision and financing of health care services. There are several clues that suggest that this bill would move health care in America away from market based decision making and toward greater government control. First, it would involve large tax increases. an ?dp er in and co osal ely. IRE Byln Institute for Research on the Economics of Taxation The CDF proposal is proof positive that the power to tax is the power to control. Limitations would be placed on the amount of health insurance premiums that companies could deduct from their taxable income. These limitations have two purposes. The first is to exert control over health insurance and the second is to raise revenues by $30 billion per year for additional spending. The CDF believes that the government should dictate the kind of health insurance that can be included in workers' compensation packages. They have decided that all Americans would be best served by what the Act calls Accountable Health Plans (AHP) which resemble HMOs (Health Maintenance Organizations). If a company participates in an AHP the premiums are considered a legitimate business expense and would be deductible for tax purposes. If the employers and employees of a particular company think otherwise, the CDF apparently believes that such misguided preferences must be discouraged. For plans other than the officially approved AHPs, no y so-called deductions would be allowed. Self roposal for employed individuals could also eform is to deduct health insurance premiums, or not it but with the same restrictions. dividuals' Furthermore, even for AHPs, reduces deductions would be limited to the ntrol. The cost of the lowest priced plan in I fails this the area in which the company is located. Not only does the CDF apparently know what kind of health insurance is right for all citizens, it also knows the appropriate amount. The cost of any coverage that is not part of the basic AHP would be taxed. This is not what the founding fathers meant when proclaiming that all men were created equal. An additional tax increase would come from lifting the $130,200 cap on wages that are subject to the Medicare health insurance tax. This would be equivalent to increasing the marginal tax rate for individuals with higher incomes by 2.9 percent and IRET is a non-profit, tax exempt 501(c)(3) economic policy research and educational organization devoted to informing the public about policies that will promote economic growth and efficient operation of the free market economy. 1331 Pennsylvania Ave., N.W., Suite 515, Washington, D.C. 20004 Phone: (202) 347-9570

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