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Who Pays for Health Care in Virginia?

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by

James A. Bacon
in ,

Source: “State of the Region: Hampton Roads 2018:

Where do Virginians (and Hampton Roadsters) get their health insurance coverage? Like their compatriots in every state, Virginians rely upon an assortment of private- and public-sector programs. The table above, taken from “The State of the Region: 2018 Hampton Roads” report, shows that in 2016 a higher percentage of Virginians (59%) had employer-based coverage than Americans did nationally. Virginians also had a higher percentage (12%) of military Tricare coverage — with the percentage spiking to 27% in Hampton Roads.

Virginians relied slightly less in 2016 upon Medicare than other Americans, and much less upon Medicaid — a gap of nine percentage points. But the percentages will change as Medicaid expansion takes hold in Virginia, enrolling an estimated 400,000 near-poor.

Keep a close eye on the numbers. As the percentage of Medicaid recipients goes up, which categories will shrink? Ideally, the percentage of uninsured drops dramatically. We don’t want to see a drop in “employer based” insurance and “direct purchase” insurance (which I presume refers mainly to Obamacare), which would represent a shuffling of people from one insurance system to another, not an expansion of coverage. Let’s hope the ODU authors of the 2018 Hampton Roads report revisit the Medicaid issue next year.

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12 responses to “Who Pays for Health Care in Virginia?”

  1. LarrytheG Avatar
    LarrytheG

    There’s an interesting thing about Employer-provided insurance with respect to govt revenues including social security and that is that as health care costs continue to rise – the income that is spent on EP insurance – is not taxed.

    ” The largest tax break in the federal tax code is a stealth subsidy that is both unfair and inefficient. Premiums paid for employer-sponsored health insurance are excluded from taxable income, reducing the amount workers owe in income and payroll taxes by about $250 billion annually. In effect, the exclusion is the third largest health program after Medicare and Medicaid, yet it has been largely ignored as Congress has tried to rein in federal health spending.

    That lost revenue is more than enough to cover the cost of providing health insurance to the 42 million people who were uninsured in 2013. In addition, the exclusion has other pernicious effects.

    The exclusion is regressive. According to a Joint Committee on Taxation analysis for 2007, the average savings for tax filers with incomes less than $30,000 was about $1,650 compared to about $4,580 for those with incomes over $200,000.

    It distorts how workers are paid. Many workers do not realize that their employer’s contribution to the health insurance premium comes at the cost of lower cash wages. This has contributed to a shift from (taxable) cash wages to (nontaxable) health benefits. Between 1999 and 2014, the average employer contribution for family coverage nearly tripled while wage rates increased by only about half.

    The exclusion fuels the growing cost of health care. There is no upper limit on the amount that may be excluded from income. That encourages workers to buy generous insurance that offers lower cost-sharing but higher tax-free premiums. Such coverage makes consumers less price-sensitive and promotes the use of medical services that may provide little value. According to the Institutes of Medicine, 30 cents of every dollar spent on health care in this country is wasted, in part because of the financial incentives of the exclusion.

    The money spent on Obamacare and other “Direct Purchase” however, IS fully taxed and if it were given the same tax deduction – would add even more to the deficit/debt.

    Here’s the list of all tax expenditures and their cost to the budget:

    https://www.taxpolicycenter.org/sites/default/files/screen_shot_2017-03-17_at_10.19.43_am.png

  2. TooManyTaxes Avatar
    TooManyTaxes

    John McCain proposed to make employer contributions to health care insurance premiums taxable, at least in part. Barack Obama beat the crap out of McCain on that issue. Why would anyone be crazy enough to campaign on making employer payments taxable?

  3. LarrytheG Avatar
    LarrytheG

    Actually – Obama supported the Cadillac Tax in Obamacare which put a cap on how much was tax-free.

    The main point is that Medicare, Medicaid, Obamacare AND employer-provided are all subsidized.

    And all of them also prohibit denial of coverage for pre-existing conditions (which is, in effect, a tax on the healthy to pay for the sick).

    And employer-provided and Medicare charge the same premium no matter age, gender or health or other factors.

    The thing about health care is that in order for us to hold a valid opinion – it needs to be an INFORMED opinion not an opinion based on what we believe or want to believe.

    1. TooManyTaxes Avatar
      TooManyTaxes

      Larry, you are correct in that President Obama did support the Cadillac Tax but that was after Candidate Obama opposed a tax on high benefit plans and hammered Senator McCain for proposing it. And, of course, the Goebbels Gang ignored the inconsistency.

      Medicare Part B does not charge the same premium. Members with higher incomes pay higher premiums.

  4. LarrytheG Avatar
    LarrytheG

    McCain was principled in that aspect of his so-called “free market” plan – which also advocated pricing premiums according to age or health as well as allow the insurance companies to deny coverage for pre-existing conditions.

    McCains health-care “plan” once the voting public knew what we was really advocating was the challenge. Most folks have no clue what he was really proposing… and if they did – bad stuff was
    going to happen … to his voters.

    You may also recall Obama did support the final Cadillac tax -which cost him union support dearly … and drove many to Trump … in 2016.

    Medicare Part B does means-tests its premiums but no one is denied coverage or charged more because of their age or health.

    the govt subsidizes health insurance for employer-provided and Medicare and it also prevents the insurance companies from charging premiums on an actuarial basis where higher risk folks would pay substantially more, have higher deductibles and capped maximum annual and lifetime benefits.

    If McCains plan was offered today – it would cost whoever supported it – their election. It’s what cost the GOP so many seats in the GA last election and, in turn, why they rolled over on the MedicAid expansion.

    right?

    Again – what I advocate is the unvarnished truth about issues like pre-existing conditions, subsidies, and community-rating (same premium regardless of age/health).

    Then I advocate, once people know the facts – that they vote their conscience.

  5. Acbar Avatar
    Acbar

    LG says above, “Many workers do not realize that their employer’s contribution to the health insurance premium comes at the cost of lower cash wages.” Well, yes. But it would all come out in the wash if the expense to employers of employee health care were taxed, either by taxing the employer or the employee. Right now it’s provided tax free, which is a huge subsidy of health care by the feds (and copied by most states). Today most employers provide it because it’s a lot less hassle that way; but there are workarounds for self-employed or unemployed individuals. If the employee benefit were taxed, it wouldn’t make employer-provided insurance go away but most would probably shift fairly quickly to a “we’ll pay the employee more and the employee deals with it” system, which would be a lot more straightforward and implicitly portable, and also would help put permanent and “temp” and contract employees on the same footing.

    As it is, my old employer doesn’t pay directly for my health insurance as a retiree, but pays an “allowance” for health care into an HSA account, which gives the employer the same tax deduction and leaves it up to me to decide where to buy health insurance and at what level of coverage (they assume I’ll get it through an Obamacare exchange).

  6. Acbar Avatar
    Acbar

    LG also says, “That lost revenue is more than enough to cover the cost of providing health insurance to the 42 million people who were uninsured in 2013.” Yes, if nothing else changed, i.e., if everyone simply let the feds begin taxing that additional employer income without raising prices on the employer’s products/services to pay the added taxes — but that’s not going to happen, they are going to raise prices. And eventually, with all those higher prices across the economy, wages would have to go up too, for those who are working. And for those who are not receiving health insurance from their employer, life would be more expensive, BUT now they’d all have health insurance. So, you’ve ended up passing the cost of expanding health coverage for those not working onto those who are working — not without a significant shock to the economy which will take a while to absorb it; BUT, if the goal is universal health care, that strikes me as a far better way to go about it than by simply raising income taxes on people to pay for it.

    1. TooManyTaxes Avatar
      TooManyTaxes

      Taxing health care premiums will push a lot of people into higher tax brackets and would result in a virtual complete turnover of the House of Representatives in the next election – irrespective of Party and whether in a primary, convention or general election.

      Also, I bet a plurality if not a majority of workers would not be held harmless by their employers. They would not receive dollar for dollar of higher wages for the amounts of forgone health insurance. And those workers with less education, skills and experience would be hit the hardest. This is a chance to shift part of an expense to the bottom line as a higher profit.

      Further, moving tax free money to the taxable side increases the employer’s tax obligations for Social Security. Do we really think most employers will absorb the tax hike?

      And the feds would have to control costs on all heath care services and products. Drugs, devices and services would quickly find themselves under price controls. The right for the feds, insurance companies or Obamacare exchanges would be given the right to control costs (including an antitrust exemption) as one of the prices for pushing employed people into higher tax brackets. In fact, it might well make sense to force all health care into state or a federal health service. The docs go from a million to $225 K as government employees. Nurses and technicians become GS11s. Drug companies have to sell their products at the lowest price they charge anywhere in the world. Hospitals and clinics are either operated by the government or must offer all services at Medicaid reimbursement schedules.

      If we enforced our immigration laws, wages would increase and more people could afford heath insurance.

  7. LarrytheG Avatar
    LarrytheG

    on health insurance – if those on employer-provided get a subsidy then those who work but don’t get it from employer – should ALSO get the SAME tax treatment.

    And it MORE than that because EP requires the insurer to not deny pre-existing AND to charge everyone the SAME premium.

    How do we make health insurance fair to everyone especially those who work?

    All these other issues – like what would happen to salaries for employees for employer-provided , those penalties already apply to those who work who do not get the subsidies nor the pre-existing protections nor the community rating premium where everyone regardless of age or health pays the same premium?

    What ENTITLES one group of workers to those subsidies and protections and not other workers?

    This is the essential issue with ObamaCare. Those who have employer-provided think that those on Obmacare are getting subsidies and better premiums and coverage that they don’t deserve – rather than understanding that it is those on employer-provided who are getting the better tax/subsidy treatment and equalized premiums regardless of age or health.

    So again – talking about how hard it would be to do something about EP is evading and avoiding the bigger point which is the disparate treatment on health insurance depending on who you work for or not. The govt should be treating everyone the same way on something as important as health care. Instead, we have a two-tier system where those without EP do not get equal treatment on their health insurance.

    I don’t advocate a specific policy by the govt with regard to health insurance EXCEPT that it should apply EQUALLY to everyone.

    The guy who works in a restaurant waiting tables deserves the same treatment as the guy working for Amazon or the USGS.

    1. TooManyTaxes Avatar
      TooManyTaxes

      Lots of things in the workplace are not equal. I operate my own law practice and have an independent contractor relationship with two law firms. I get paid a percentage of what I bill and they collect. I don’t get vacation, sick leave, insurance, profit sharing, 401k, etc. I pay my wife half the cost of her health insurance premiums. And I get to go to our annual Nationals game and the Holiday Party.

      But I can deduct all my business expenses, while all of my colleagues who are employees cannot. My airfare to San Francisco is deductible because I visited clients during part of my unpaid vacation. I can use a SEP IRA. Etc.

      There are pluses and minuses all across the board. Life is not equal, and, as JFK said, Life is not fair.

      I respect your view that health insurance should be different. But it’s not. Lots of people think lots of things should be different. But most of them are not. And one person’s justice is another person’s moral calamity.

  8. LarrytheG Avatar
    LarrytheG

    Those of us who do have EP take for granted how we get our health insurance. That’s to be expected. But when we don’t care what is happening to people who don’t get their health insurance from their employer and instead advocate policies that continue the discrimination against them – “we” are responsible for the political chaos over health insurance. We got ours. Screw them!

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