The federal government created individual Health Savings Accounts (HSAs). They allow people to set up an income tax free account that patients can use to pay for health care. These individual accounts solve the portability problems where people lose their coverage when they change jobs.
The FairTax does the same thing. It replaces the income tax with a sales tax. Since there is no income tax, people get all their pay. Any money left over after expenses results in tax-free savings that people can use to pay for their own individual health care plans.
Both HSAs and the FairTax give the same tax break to out-of-pocket medical care as to insurance premiums. Both also allow tax-free savings and as savings accumulate, people will gravitate to high deductible or catastrophic health insurance policies. Most medical care will be paid out-of-pocket.
Insurance companies hate this because lower premium payments mean lower profits. As good crony capitalists, the insurance companies lobby against HSAs and the FairTax. The politicians respond by voting for the insurance companies and against the people.
The FairTax allows for free market medical care where individuals own their own catastrophic insurance plans and pay for most of their health care out of pocket without government interference. This is because there is no federal government sales tax break to health care. Without a tax-break to health care, there is no government list of allowable expenses.
HSAs do not result in a free market medical care system because they require the IRS to have a list of allowable expenses. Federal bureaucrats compile this list and will influence many of our health care choices.
As HSA’s allowable health care expenses are turned into the IRS, health care data is accumulated. It is the accumulation of data that allows bureaucrats to control our “tax-free” health care choices.
Some will argue that HSAs are better because the government list of allowable health care expenses are completely tax free. True, but there is an economic argument against this.
It is an axiom of taxes. If you want less of something tax it. If you want more of something, un-tax it. This is what HSAs do. Allowable health care expenses are not taxed so we have more health care in our country. This makes health care more expensive and puts more of a burden on the poor.
The FairTax will allow for a true free market in health care. This will allow patients and their families to make their health care choices without government interference.