The Dedicated VAT [Value Added Tax] Solution

The National Commission on Fiscal Responsibility and Reform must find a new source of revenue for the federal government and must slow the rate of growth of health care expenditures. In this policy brief, Fuchs writes, "It is time to eliminate the confusion, the hidden and inefficient ways that we pay for federal health care. A value-added tax (VAT) dedicated to funding basic health care for all through enrollment in accountable care organizations would address the revenue and health care problems at the same time."
"The accountable care organizations should be paid a risk-adjusted capitation fee per enrollee. The VAT revenue should be used only to fund health care and should be the only source of funding for that program. To be most effective, the base for the VAT should be very broad, not loaded with exemptions. This approach serves both liberal and conservative goals by providing universal coverage, cost control, and deficit reduction."