|Selected research from leading health care experts whose findings have a direct bearing on public policies effecting medical progress. Research is chosen based on its quality and relevance by the Medical Progress Today editorial staff.||
Evaluating Effects of Tax Preferences on Health Care Spending and Federal Revenues
These authors explore the likely consequences of allowing individuals to deduct health expenses from their federal income tax. Although they admit that this is a "second best policy" they argue that it is a definite improvement on the status quo.
As Mark Pauly's (1986) classic review shows, virtually all observers of health policy since Martin Feldstein's (1973) seminal article have agreed that the tax preference for employer-provided health insuranceunder which employer contributions to employee health insurance are deductible to the employer and nontaxable to the employeeencourages overconsumption of health services in the United States. By making health spending in general, and insured health spending in particular, appear less costly than they are, the tax preference gives employees the incentive to take compensation as health insurance rather than cash, even if they would otherwise prefer not to...
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