Quick Follow-Up: 26% of What?

I’ve been trying to find a way to convert into an annual dollar amount the 26% figure calculated in my prior post, the amount of employer based health spending due to the tax subsidy. To do so I’d need to know total health spending by employer-insured individuals who are beneficiaries of the tax subsidy. I haven’t found that yet. Anybody know it?

The closest I’ve found is the NHE figure for annual private health spending. It’s in the $700-$800 billion range. Even the low end of that is probably high because there is some private health spending outside the employer-based system. Also, not every dollar of employer-based insurance premiums avoids taxation. Employee contributions to non-Section 125 (non-cafeteria) plans are taxed. (Good luck trying to find a figure for what proportion of employees are in or out of Section 125 plans and what proportion of the premiums they pay. Some colleagues and I have been looking for the former for a while. I recall seeing figures that half of firms offer Section 125 plans. They’re probably the bigger firms so the majority of workers are probably in such plans.)

So, it’s 26% of X where X is probably in the ~$400 billion range, but that’s a bit of a WAG. If right, that would make the additional spending due to the tax subsidy ~$100 billion per year or ~$1 trillion over 10 years. And that’s the price tag of health reform.

I think someone can only believe the tax subsidy is not a big deal if they don’t understand it.

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