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Depressing Health Care And Retirement Affordability News And Taxes

November 10, 2015
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I’m feeling quite negative at the moment. It’s a strange and unsettling feeling for me. One thing I am feeling especially negative about is the unaffordability of health insurance, health care and retirement, and the government’s Band-Aid approach to addressing these issues. So far this week I’ve read a series of articles that provide examples of how bad things are and how unlikely they are of getting better. These articles spotlight how the private health insurance, health care and retirement saving systems continue to shut the door on any hope of reform.

To its credit, the federal and state governments continue to put forth proposals and pass legislation to abate the affordability crisis. These programs include:

  • Accountable Care Organizations (ACOs)
  • Obamacare
  • Automatic IRA
  • myRA
  • Retirement Savings Contributions Credit (SAVER’s Credit)
  • State IRA programs
But these efforts are still Band-Aids, at a time when we need a massive overhaul of the current systems. And we can start by comprehensively addressing government subsidies that make private sector plans more attractive than public sector solutions.

Rethinking Employment-Based Health And Retirement Plan Tax Incentives

Most workers don't understand the link between the workplace benefits they participate in and the federal tax code. Their employee benefit plan information is littered with terms like pretax, tax-free, tax-deferred and tax-favored, but they would be hard pressed to explain what these terms mean. However, if the link between health and retirement benefits and the tax code was severed, they would immediately figure out that something terrible happened. Their paychecks would be smaller. And they would insist on getting their government tax subsidies back.

Of course workers don't view tax-favored employee benefits as federal government subsidies. They think they are entitled to keep as much of their hard earned money as possible and who cares that only employer-sponsored health and retirement plans receive the subsidy. It's not their fault that not everyone gets it. The tax code is full of provisions that benefit some and not others.

But politicians and tax policy experts know better. They know that the grand bargain was that if employers were willing to provide workplace health and retirement plans, employers and employees would enjoy significant tax savings. The agreement meant that government had fewer citizens to provide medical care and retirement income.

But what bargain lasts decades without the need for revision and renegotiation? The business world has changed so much that most new businesses are small businesses that don't offer health insurance or retirement plans? Also health insurance, health care and retirement planning has gotten more complex and costly. These factors result in fewer people benefitting from the original agreement between government and employers.

And in addition to the outdated agreement between government and businesses, businesses simply aren't living up to their part of the original bargain. They allowed third parties to come in and increase the costs and complexity of health care and retirement plans to the detriment of workers and the country. To add insult to injury, they and their third-party invaders partially blame the affordability crisis on workers for not being "engaged" enough to make wise health and retirement plan choices. All the while their financial participation in the health and retirement plans they sponsor is voluntary and risk-free. They can contribute or not, or stop contributing whenever they like. Competition for talent is the only thing that keeps them in the game, but when all employers are shirking their benefit plan responsibilities, competition is not enough.

Conclusion

Government and policymakers know we are currently experiencing a health insurance, health care and retirement affordability crisis. These issues are already impacting government budgets and promises to get worse. However, the strategy of Band-Aid proposals, no matter how good, won’t solve the problem. What may solve the problem is a subsidized public national health and retirement system. It’s time to let private third parties in the health insurance, health care and retirement savings arena stand on their own and stop dictating the country’s health insurance, health care and retirement savings agenda.



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