There are no systems more fundamental to American society than the healthcare industry and the U.S. tax code. But they’re also among its most burdensome. In addition to the inherent physical and emotional hardship, health care is a major economic burden, as rising costs put enormous pressure on users. While the insured face ever-rising premiums, rising healthcare costs have crowded out compensation for employees, playing a role in the stagnation of incomes for the typical American worker. Meanwhile, the 27 million uninsured working age adults are most vulnerable, as they will have to pay out of pocket for any unforeseen medical event, which can easily throw a struggling family over the brink. Healthcare costs also remain the number one cause of bankruptcy. Most Americans, regardless of political allegiance, consider lower healthcare costs to be a top policy priority, and most Americans even believe that it is the government’s responsibility to ensure all Americans have healthcare coverage. Yet despite these widely held beliefs, our country remains unique among developed nations in that while we pay the most for health care per person, we do not guarantee universal access to health care.
As for the tax code, Americans spend 1.8 billion hours and over $28 billion annually in tax compliance costs. Time and money that could have been spent on productive activities are instead spent worrying about how much is owed to the government. The weeks leading up to April 15th can be a time of stress and anxiety for many, which can foster a sense of aggravation toward the federal government. And how can taxpayers support necessary increases in government spending when paying the taxes used to finance that spending can be so painful? Most Americans aren’t happy with the current tax system, viewing it as both complex and unfair. The most serious problem facing taxpayers is the complexity of the tax code, according to the consumer protection agency, the Taxpayer Advocate Service. Pew Research also shows that most Americans believe that rich people and corporations don’t pay their fair share in taxes, making the average citizen understandably discontent for paying into what they would consider an unfair system. But possibly more concerning is our tax system’s inability to finance future spending. If taxes fail to keep up with our government’s growing spending obligations, this nation will bear an ever greater debt burden, leading to a lower standard of living in our future.
The two systems – taxes and health care – are more related than many may think. Health care makes up 17% of our Gross Domestic Product (a country’s annual income), the highest in the world, and 25% of federal spending (5% of our GDP) is directed toward health care. Due to an aging population and rising healthcare costs, health care is projected to constitute nearly 30% of our GDP by 2040. This will require federal spending worth 8% of GDP, increasing the already grueling debt. Further, as 6 out of the 10 fastest growing sectors are within health care, our government will be more dependent on health care for its needed revenues. Hospitals are becoming the workplaces of the 21st century, and they will play an ever more important role in the economy and in public finance. Finally, the cost of health care will rise with an aging population, inevitably pricing out many consumers. And as more public and private spending is directed toward funding our broken healthcare system, more revenue will have to be raised from our broken tax system. By 2050, the portion of Americans over the age of 65 is predicted to comprise over 20% of the population, up from 15% today. And it will be this generation and future generations who will suffer from the failure of our government to act on health cost challenges, with society’s most vulnerable being forced to pay the heaviest price for our complacency. If we intend to improve our country, for today and for the future, it must involve reforming health care and taxes.
Policy experts have laid out many proposals to make both systems simpler, fairer, and more cost effective. Many politicians have even proposed pragmatic reforms with bipartisan support that would improve the quality of these two systems. But we’re too often led astray by quick and easy answers. Ideology and special interests are passed on as good policy, while experts are pushed to the side, leaving nothing but greater divide. Political progress is nearly impossible with private lobbies defending their interests and the public being too caught up in political and ideological debates to recognize what really needs to be done. Our political system has become more polarized than ever before, just at a time when we need compromise and legislative progress most.
Both health care and taxes must be recognized as complex systems whose solutions lie beyond simple slogans. Both are comprised of a vast collection of parts that all contribute to each system’s dysfunction. Neither is burdensome and inefficient in its own right, but instead is made up of smaller burdensome and inefficient features that must be understood and resolved if the whole system is to be improved. For health care, it is insurance, pharmaceutical companies, and medical device companies; hospitals and doctors; and the many areas of government policy, including regulatory bodies and healthcare programs. For taxes, it’s all the deductions, exemptions, credits and exclusions, for both businesses and individuals, along with special rules and preferences. While these loopholes are intended to benefit certain groups, together they end up burdening everyone. Not to mention the ways that the tax code applies to parts of the healthcare industry, which builds on the complexity and often leads to inequitable and inefficient outcomes. Any feasible solution to these issues would have to be taken step by step and piece by piece.
The goal of this column is two-fold: to engage in policy discussion meant to understand these systems and to propose what needs to be done. While I will be highlighting the proposals and actions of the Trump administration especially, I will also look at the systems overall and focus on what aspects need to be fixed. I will attempt to dive into the policy detail but also look at the big picture. The issues, while complex, are key to understanding and fixing our broken yet most fundamental systems. These issues won’t go away and will only get worse as we become more divided and more complacent. The time for change is now, not the next election. It is more important than ever before to have a clear understanding of health care and taxes. It’s the only way we can move forward.