A congressional subcommittee will hold hearings next week on a series of proposals to tax a portion of employer contributions for health care.
The hearings, held jointly by a House Ways and Means subcommittee and the House tax expenditure task force, will focus on testimony of health care and government experts who claim that the existing tax exemption for health insurance contributes to the nation's spiraling health care costs.
Over the years, claims Jim Jaffee of the Ways and Means subcommittee staff, employes have opted for more tax-free benefits instead of additional wage increases which are taxed, thus boosting health care expenditures.
Employers in turn have been forced to foot an estimated $10 billion in tax expenditures for 1980, $15 billion by 1985, for their contribution to health plans which feeds inflation, according to Jaffee.
The argument that existing government tax policy contributes significantly to health care costs and in effect is helping to inflate the economy will be raised at next week's hearings by officials from the Congressional Budget Office, Federal Trade Commission and the Teasury Department.
Congressional budget officials are scheduled to testify that if people who currently pay 25 percent of health care are given free coverage, the number of physician visits will increase by one-third, a fact supporting the idea that employes will take arbitrary advantage of cost-free benefits.
The inspiration behind encouraging competition in the health care field was first raised publicly by Ways and Means Chairman Al Ullman (D-Ore.) and is supported by a number of experts including Stanford Prof. Alain Enthoven.
Enthoven's solution is to offer employes a variety of health plans and peg the employers paid costs to the cost of the lowest government health maintenance organization in each community.
For example, Jaffe explains that if an employer currently is paying $75 monthly and a government HMO sets a limit of $50, the employe would have the option of paying the additional $25, which would be taxable, for additional coverage.
Dr. Martin Feldstein a Harvard economist similarly plans to argue that people should not receive medical care "without taking something out of their pockets other than a Blue Cross/Blue Shield card," Jaffe explains.
Feldstein's concept of a co-insurance plan between employer and employe was introduced in a bill proposed in May by Congressman James R. Jones (D-Okla) who is chairing the hearing.
The bill proposes to void the deductability of a health insurance policy unless there's a co-insurance feature in it.
Dr. Paul Ellwood, president of a health consulting firm, will testify that health care costs in Minneapolis have dropped compared with a 9.4 percent national increase as a result of 7 health maintenance groups competing in that city.