increase productivity as practitioners, managers, and others spend less time on paperwork and more time on patients. To cite another example, if some of the employer contribution to health insurance were treated as taxable individual income (as recommended earlier in this report), tax revenues would increase, although estimates of this increase vary depending on the assumptions about employer and employee responses. One desired effect of the change in tax policy is to reduce demand for generous health coverage, which would be expected, in turn, to reduce health services utilization and expenditures. The stronger this response, however, the less revenue might be expected from the tax cap, although that decrease would be offset to the extent that employers matched reduced health spending with higher wages as some economists would predict.3

In principle, the first step—cutting spending—may be achieved in many ways. The committee believes, however, that it is unrealistic to expect such good performance in reducing spending that all the costs of extending coverage could be offset, particularly in the short run. Given the great expansion in the share of national resources consumed by health care spending, it is also both unwise and unrealistic to argue that the nation can continue to draw resources away from other social objectives to the same degree it has in the past.

As a consequence, health care reform is likely to further burden financing arrangements that, in their current form, are often inequitable, inefficient, and poorly measured. For example, uncompensated care and underpayments by some public and private purchasers encourage crisis-oriented medical care, not prevention or timely therapeutic care, and they undermine the institutions that serve poor and vulnerable groups. Moreover, they increase costs for individuals and groups that lack the

3  

Tax caps are sometimes loosely grouped with several other kinds of financing strategies under the concept of means testing, whereby access to benefits is confined to certain categories of individuals (e.g., single mothers and their children) of limited means (i.e., income and assets). Medicaid is a classic example of a means-tested program. Although some have proposed that access to Medicare benefits should also be means-tested, more common—but still controversial—are proposals to link the beneficiary's share of the Part B premium (about 25 percent of the total) to income or to treat some of the government contribution to the Part B premium as taxable income.



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