Just Taxes: Redistribution through Universal Health Care

The market-based health insurance system in the United States is a significant contributor to economic inequity, with lower-income people paying proportionally more for health care than the wealthy, yet receiving lower value insurance plans. A redistributive universal health care system, even at sub-national level, is projected to provide significant financial relief to lower and middle income households and raise the incomes of 9 out of 10 families. These are the conclusions of detailed public financing proposals, including microsimulations, developed (with involvement of this author) for the state of Vermont, which in 2011 enacted the country’s first universal health care law.

This paper will examine the potential of public health care financing for advancing equity at the state level. It will outline a rights-based approach to health care reform that links universal health care goals not only to health indicators but also to economic redistribution and equity outcomes. The paper will use evidence from progressive taxation models to argue that radical health care reform can pave the way for a broader paradigm shift toward universal public programs in the U.S., replacing the threadbare safety net of means-tested benefits. Health care can function as a strategic lever for building a more equitable society through the universal provision of the goods and services needed to exercise basic economic and social rights.

The Vermont financing proposals demonstrate the financial and economic feasibility of a state-based universal health care system, utilizing the data presented by the state’s governor and a new taxation model developed by the Healthcare Is a Human Right Campaign, a grassroots movement. The principle of equity is the guiding factor for the campaign’s proposals, which are centered on a new tax design for advancing income equality. In addition to income and wealth taxes, the proposals introduce and simulate the idea of using company-level wage disparity - a clear equity criterion - as a factor in setting payroll tax rates for businesses. A tax based on the wage ratio between the bottom 50% and top 1% of wage earners in a company, as well as on company size, incentivizes wage equality within companies, guards against negative wage effects and protects small businesses. By using human rights principles to guide the tax design, the proposals demonstrate significant equity outcomes, while also guaranteeing every resident full access to comprehensive care. Although the proposals have not been implemented, their policy solutions offer a new approach to advancing equity at state-level.

In addition to presenting the Vermont case study, the paper will draw on national and international health systems research, which confirms that commercialized health care systems with significant private sector involvement both impede access to care and deepen inequities. It will present an analytical framework for designing health care systems that advance equity and universality, specifically in the United States. This analysis situates health reform efforts in the contested arena of budget and revenue policies. It suggests that universal health care advocacy can contribute to catalyzing a transformation of the budget process, which customarily starts with a revenue estimate and proposes spending initiatives based on available funds. Universal health care requires inverting this process: an assessment of health needs has to precede the preparation of a budget, followed by tax proposals that aim to fund the needs-based budget. This process of assessing needs, mobilizing public funds through equitable taxes, and accountable decision-making based on the scope and depth of need, is a prerequisite for funding public goods and entails a fundamental re-envisioning of budget and revenue policies.

Universal health care exemplifies the struggle over resource distribution rather than resource availability, especially in the United States, with its extremely high levels of health care spending. A focus on the redistributive nature of health systems recasts health care reform as a broader economic policy intervention. It serves as a reminder that health care is one of several social and economic rights - alongside housing, food, and increasingly education - whose realization is thwarted by the commodification of human needs and the failure to distribute resources equitably to meet those needs. Radical health care reform is as much about guaranteeing access to care as it is about economic redistribution through taxes, and the Vermont proposals show that a decommodified health care system can produce signifiant redistributive effects that advance equity.

Anja Rudiger, Ph.D.
https://www.researchgate.net/profile/Anja_Rudiger