Unbiased Analysis of Today's Healthcare Issues

Financing Reform…with Taxes on Tanning Salons?

Written By: Jason Shafrin - Dec• 21•09

The N.Y. Times reports that Democrats in the Senate are nearing the 60 votes needed to pass a health reform bill.  To do this, Democrats have made a number of concessions.  These include: abandoning a public option, prohibiting abortion coverage, and of course, long-term-care insurance to people with severe disabilities, new services for pregnant teenagers, financial breaks to nonprofit insurance companies, and of course extra Medicaid money to Nebraska.

How will the government pay for these additions?  There are new sources of revenue.  This include taxes on high income individuals, taxes on profitable health insurance companies, and taxes on tanning salons.  The tax on tanning salon replaces a proposed tax on cosmetic surgery.

People in favor and against a single payer system should be disturbed by these developments.  Single payer advocates likely are disturbed that there is no public options and that there are so many giveaways to special interest groups.  Those against a single payer option will be upset that at the seeming inevitability that government involvement in health care will increase.

Your lowly Healthcare Economist is also perturbed. A single payer system could work efficiently, lower cost and expand coverage.  Despite lots of ideological rhetoric, having a government bureaucrat reviewing your claims for reimbursement would not be much different than having a health insurance bureaucrat doing the same.  As I predicted, however, getting to the single payer system will inevitably involve handouts to interest groups.  Even if a single payer or government regulated health insurance system was ideal at the outset, lobbying would likely corrupt the system.  

The major problem with the current system is that if you lose your job (possibly because you are sick), then you also lose your health insurance.  The proposals on the table have the benefit of expanding health insurance to more individuals.  However, these same proposals offer little to decrease–or even slow the growth–of the cost of health insurance.  Proposals to tax tanning salons isn’t the type of real reform that is needed.

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