Yes, but not the way it’s being spoken for (and against) in Congress.

When Congress talks about “taxing health benefits”, they mean taxing the amount your employer pays the insurance industry to cover your visits to doctors and hospitals. If these amounts weren’t paid out as insurance, they would (in theory) be available to increase your salary. So some part of those amounts, at least, should be taxed as salary. Right?

Wrong. If my employer pays, say, $3000 a year in insurance premiums for me, and I require no medical visits or treatment in that year, I’m out $3000. I have received no real benefits, only a contingent benefit where the contingency never happened.

In terms of motivation, since I see all that money going out, I’m going to be sure to get a benefit — get my money’s worth. So I have every reason to see a physician over some small complaint, or let my arm get twisted to agree to a minor operation I don’t really need, just so I’m not a sucker who’s just lost a $3000 bet. Maybe I’ll “win the lottery” and use up $6000 in medical costs. I just doubled my money. Right?

The motivation here is all going the wrong way. We do need to tax health benefits, but in a way that will induce people to reduce demand to what’s really needed, and bring down the overall cost of health care for the whole country.

The way to do this is to tax actual benefits, and the simplest way to do this is to add $10 (say) to the $10 or $20 you already co-pay when you get attention from medical professionals. The tax could pay for essential treatment for people who have no insurance, improve public health, subsidize medical research, etc. — whatever medical need is greatest. This co-co-pay wouldn’t fund all medical needs, but it would make a major contribution.

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