WASHINGTON, D.C. – House Ways and Means Committee Chairman Kevin Brady (R-TX) today delivered the following opening statement at a hearing entitled “The Tax Treatment of Health Care.”

Remarks as prepared for delivery:

“Good morning. Welcome to our hearing on the tax treatment of health care. It’s only fitting that this important discussion falls during “Tax Week” – a time when Americans are reminded how unfair and overly complex tax policies are hurting workers, job creators, and families. We can all agree Americans deserve better, which is why we’re working toward solutions to make our tax code simpler, fairer, and flatter for everyone.

“Today, we’ll examine proposals to reform the tax code to help all Americans access more affordable healthcare, including proposals to create a new, fairer tax credit and encourage greater use of consumer-driven health care models to spur innovation and lower costs.

“The tax code is full of provisions affecting the quality, cost, and accessibility of health care for millions of Americans. Currently, the tax code contains over a dozen health-related tax expenditures – all intended to help more Americans access health care by subsidizing many of the costs. Unfortunately, using the tax code in this way also can have the opposite effect, increasing premiums and costing taxpayers trillions of dollars in the process.

“Let’s consider the largest health tax expenditure, for employer-sponsored health insurance plans, commonly referred to as the employer exclusion. Congress incorporated this highly popular tax break into the tax code decades ago so that employers could attract and keep workers during a time of wage freezes. At the time this provision was created, the labor market and the health insurance market both looked very different.

“Today, more than 150 million Americans under the age of 65 get their health insurance through their employer. Our conversation today is about how we can preserve and modernize this important tax incentive at work while also expanding tax benefits to Americans who seek additional health care choices. More specifically, how can we make this nearly 100-year old tax break more flexible so Americans can have a new, modern option – to choose a health plan that fits their needs and can travel with them to a new job, to start their own business, or to raise their family at home?

“Some consumers feel confined by their employer-sponsored arrangement because they are required to choose a plan from options determined by their employer, rather than getting to shop around for the plan that best meets their needs. Others who select health insurance through their employer feel trapped in their current job because they don’t want to lose the coverage they like. The tax code compounds those concerns because this pre-tax benefit is tied to the job, not to the individual. This approach limits options, is unfair to those who don’t get their health insurance through their job, and creates what many economists call “job lock.”

“Additionally, the employer exclusion is a contributing factor in our country’s stagnant wage growth. That’s because the tax code incentivizes putting a greater share of compensation toward nontaxable health plans and less to taxable paychecks. So, as health care costs rise, employers divert increases in compensation to health care at the expense of take-home pay.

“Evidence also suggests that the employer exclusion leads to higher health care costs for all Americans. Often times, someone who participates in an employer-sponsored health plan does not face the actual – and increasingly expensive – cost of care. This encourages beneficiaries to consume more health services, including services they may not even need, driving up overall costs.

“I cannot emphasize enough: the employer-sponsored health insurance market is a vital one. The question we must wrestle with is how we can sustain this option while advancing reforms that make the tax code fairer and health care more affordable for all Americans. We need bold solutions to tackle this challenge – not Obamacare’s punitive tax on high cost health insurance plans that the law itself has made even more expensive.

“We also need to consider expanding consumer-driven health care, a model that empowers consumers to unleash the forces of choice and competition to lower costs and increase quality. Yet, for many people, Obamacare has limited the consumer-driven plans they liked – including Health Savings Accounts or Flexible Spending Accounts. This Committee will continue to protect and expand opportunities for Americans who want to take control of their health care dollars.

“I want to thank our expert panel of witnesses for being here today. I look forward to a robust discussion about how we can help all Americans – regardless of employment status – access the affordable, portable, quality health care choices they deserve.

“With that, I’ll yield to the distinguished Ranking Member of the Committee, Mr. Levin, for his opening remarks.”