Universal HealthcareBy NextBestFit
Problem · Problems created by solution paths

Replacing premiums with taxes

Public financing replaces premiums and out-of-pocket costs with taxes. Total spending may fall, but taxes become larger and more visible, change incentives to work and invest, and fall on different people than premiums did.

Is it really a cost?

The arguments on each side, with sources. Whether it matters depends on whom you ask.

The case that it is
The case that it isn't, or matters less

Who's affected

Who is hurt
  • High earners: They pay more under income-based taxes than they did in flat premiums.
  • Employers: Businesses that never offered coverage start paying toward it.
Who gains while it lasts

Under your mix of paths

Paths that create or worsen it
Paths that fix or soften it
Using your saved plan. 0 paths picked.Edit all picks
Root causes
  • Shifting payment from private premiums to public revenue

Open questions

  • Which taxes should fund health care: payroll, income, consumption (VAT), wealth, or a mix?

Caused or worsened by these paths

This problem only matters if one of these paths is chosen.

Single public payer for everyoneTens of millions of people have no coverageChosen

Taxes replace premiums and most out-of-pocket costs. In CBO's single-payer options, federal subsidies rise by $1.5 trillion to $3 trillion in 2030.

Regulated multi-payer: everyone must have a non-profit or tightly regulated planTens of millions of people have no coverageRejected

The cited sickness-fund model finances coverage through payroll contributions shared by employers and employees.

Lower the Medicare age step by step (and enroll children at birth)Tens of millions of people have no coverageRejected

Expanding Medicare enrollment brings more people into the existing public program, with older entrants costing more per person.

Universal long-term care insuranceLong-term care requires spending down to povertyChosen

Separate public long-term care insurance requires a new tax.

Dedicated trust fund with automatic indexingChronic underfunding by government budgetsChosen

Dedicated health financing uses earmarked payroll and income contributions.

No employer tax: fund from households directlyEmployer health taxes can lower wages at firms that never offered coverageRejected

Replacing employer payments with direct household funding requires higher household taxes.

Solution paths (4)

Open a path for what it fixes, what it creates or worsens, who gains and who loses, precedents, and how it connects to other paths. See all paths as a decision tree.

Payroll tax (employer and employee)Rejected

Replace premiums mainly with a payroll tax, similar to what employers already pay in premiums.

    • −Employer health taxes can lower wages at firms that never offered coverage
    Progressive income tax (including capital income)Rejected

    Fund mostly from a health income tax that also covers capital gains and dividends.

        Value-added taxRejected

        A broad consumption tax dedicated to health.

          • −Adds paperwork, coordination, or complexity
          A mix of payroll, income, and redirected spendingChosen

          Combine redirected public spending, employer contributions, and a household income-based contribution.

            • −Adds paperwork, coordination, or complexity

            Also addressed by paths for other problems

            Public option alongside private insuranceTens of millions of people have no coverageRejected

            Keeping existing coverage alongside a public option limits the initial tax increase.

            Modest copays with an income-based annual capUnderinsurance: covered, but can't afford to use itRejected

            Keeping modest copays requires lower taxes than eliminating cost sharing.