Two birds with one stone…

Bob Greenstein of the Center for Budget and Policy Priorities is right: it will take lots of different financing mechanisms to pay for the coverage expansions in health care reform.

But certainly, there are some sources of funding that should be preferred by policymakers, while others that may be necessary if not ideal.

For example, some have offered the notion of a modest tax on tobacco, alcohol, or soda. A tobacco tax was a funding mechanism for the State Child Health Insurance Program–providing the double benefits of funding children’s coverage, but also reducing smoking, especially among teens. California’s AB x1 1 included a tobacco tax as a funding mechanism as well.

Alcohol and soda consumption also have health impacts–albeit different ones from tobacco–and so a consumption tax makes sense. Some may argue that it may have a disproportionate impact on lower-income consumers, but that issue is mitigated given that the benefit of expanded coverage will go disproportionately to those same populations.

But tops on my list for funding is revisiting the favorable tax treatment of Health Savings Accounts, passed as part of the infamous Medicare Part D package early in the Bush Administration.

There’s a bill being considered today, Wednesday, in the Senate Revenue and Taxation Committee–SB 353 (Dutton), to provide a state tax deduction for HSAs to mirror the federal one. Health Access California opposes the state bill, and wouldn’t mind if the federal tax benefit went away as well.

Here’s three reasons:
* The opportunity cost is high. For the same money to provide tax benefits for HSAs, we could increase coverage for a lot more people under Medicaid or SCHIP. If the goal is more people covered, you actually don’t get very much bang for the buck.
* The benefit largely goes not to the low- and moderate-income working families, but to the young, healthy, and wealthy. HSAs are tied to high-deductible health plans that attract a certain demographic. Many lower-income folks won’t have the excess money to invest in an HSA, and thus don’t get the benefit of the tax deduction.
* From a health policy point of view, it doesn’t make sense to subsidize underinsurance. Maybe HSA’s were a bandaid in the absense of health reform. But the goal of health reform will be to reduce uninsurance and underinsurance, so it doesn’t make sense to subsidize high-deductible health plans. Health reform will get rid of high deductibles, but there’s no reason to encourage them.

These funding sources won’t be enough, but they are a start. Yes, these proposals will have significant political opposition, but so will any financing plan. The benefit of these efforts is they not only provide funds, but help the health system as a whole.

Health Access California promotes quality, affordable health care for all Californians.
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