Health care and the debt limit deal

On vacation today so keeping things brief.Bloomberg (Three Steps Toward a Grand Bargain on the Federal Budget: View) includes some smart thinking on what a deal to raise the federal debt limit should look like. Two ideas that have a lot of merit are health-care related:

• Ending the tax-deductibility of employer-funded health insurance is a $260 billion per year item that should go by the wayside (even if phased out)
• Another item --not quantified in the editorial, but clearly substantive-- is means testing for Medicare. This would mean requiring senior citizens with high incomes or wealth to pay more for Medicare

The direct financial impact of each of these ideas is significant, but there are other benefits. Reducing or eliminating deductibility of health insurance costs will cause employers and employees to focus more directly on controlling health care costs, and it will make the linkage between wage stagnation and the growth of health care costs a lot clearer.Means testing for Medicare won't necessarily reduce the program's overall price tag --it may just transfer costs from government to individuals. However, it is an important first step in recognizing and correcting the lack of inter-generational equity in US government spending.