An Equitable Way to Pay for Universal Coverage

Abstract

This article describes a way to finance universal health care coverage that preserves much of the current financing system and replaces funds obtained from regressive sources with revenue from more progressive ones. New funding would be needed for 24 percent of health expenditures and would be raised through an increase in the federal personal income tax. Premiums are eliminated since their cost is the same to everyone regardless of income. Cost sharing and out-of-pocket spending for medically necessary services are also abolished. In a more equitably financed system, employers would pay a new payroll tax that raised the same amount of money they currently spend for employee health insurance premiums; this would require a payroll tax of about 7 percent. Revenue from an increase in federal personal income taxes would replace household out-of-pocket expenditures for medically necessary services and payments for insurance premiums. For the average, middle-income family, the tax increase would total $731 in 1998. In exchange for the tax increase, no American or American employer would need to buy health insurance or face out-of-pocket charges for any medically indicated health care.