Financing the U.S. Health System

Issues and Options for Change

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Health reform proposals across the spectrum have included changes in how the U.S. health system is financed. The goals of such changes include using financing incentives to promote system goals, replacing insufficient financing mechanisms with more sustainable ones, and increasing Federal subsidies for a reformed health system. Irrespective of their specific design and independent of the delivery system changes they support, these options have policy implications that have received little public attention. This paper examines the implications of different options for financing the health system. Specifically, it describes recently proposed policies including continuing current financing and redirecting health spending to more effective uses, rolling back high-income tax cuts, modifying the current tax exclusion for health benefits, a play-or-pay model, and a value-added tax. Their effects on individuals, employers, and the health system are explored.

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