Monday, October 19, 2009

Obamacare Taxes The Sick






Tax the Sick by Kerby Anderson


Dick Morris recently wrote a column in which he argued that the latest plan to pay for the health care reform bill was to tax the sick. That seemed like a rather extreme charge to make. However, as I read the details of the plan, I realized that it would indeed tax the sick. I trust that this part of the plan gets tossed out quickly.
What was proposed in the Senate bill was to increase the threshold of deductibility of medical expenses. Currently taxpayers may deduct any medical expense that exceeds 7.5 percent of their Adjusted Gross Income. The proposed plan would raise that to 10 percent for taxpayers under age 65.
This change in policy would affect eight million Americans. They are poor enough and sick enough that their expenses exceed 7.5 percent. And it turns out that six million of them make less than $75,000 a year. This change would increase their taxes by hundreds of dollars (and in some cases more than a thousand dollars or more).
You might ask why members of Congress would propose a policy that would harm people in the middle class who are sick. There are three reasons. First, it would be a way to generate more income. The initial estimates are that this simple change in the tax laws would raise $20 billion over ten years. Second, most Americans wouldn't notice this change, at least not until they filled out their taxes.
But the third reason is the most telling. Democrats are defending the proposal because they believe it would discourage health care spending. They believe people are spending more than they need to spend on medical tests and services. Some proposals attempt to limit the number of tests physicians might prescribe. This proposal attempts to limit the amount a patient would be willing to spend on their health.
I believe this is a flawed assumption. The vast majority of Americans who spend more than 7.5 percent of their income on health care are doing so because they are sick and need to do so. They aren't doing it because they like to spend money at doctor's offices and hospitals.

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