Effect of FairTax on HealthCare
Hayden requested a discussion on Heathcare (see first post).
The current tax system is a large factor that drives the structure of the existing health care system. We have a health care market that is subject to only restrained price competition and has almost no publicly available information concerning the quality of health care providers. Insured consumers do not bear the financial burden of their purchase decisions and have virtually no incentive to economize in their use of health care services. The change to a federal sales tax system will have a major impact on the health care industry.
The FairTax eliminates tax preferences for employer-provided health insurance. Health insurance and medical care are treated for tax purposes like all other goods and services. This changes considerably the structure of the health care delivery system over time. There is no longer a large tax reason for employers to provide health insurance, although many would probably continue to do so to remain attractive to potential employees. Some employers would undoubtedly choose to get out of the health insurance purchasing business and provide money to their employees to buy their own. Individuals could purchase high-deductible policies and use their time to shop more aggressively on price or minimize their use of health care, introducing more aggressive price competition to the health care marketplace.
See The Impact of the FairTax on HealthCare for more information.