This is the Cato Daily Podcast for Monday, March 17, 2008. I'm Caleb Brown.

The U.S. Tax Code has helped make a mess of how Americans get their health care,

but the interest that benefit from that tax break are resistant to any attempt to change.

Michael Cannon, the Cato Institute's Director of Health Policy Studies, recommends large health

savings accounts, which he says would return to workers' proper control of their own health

care.

For about 60 years the federal government has conferred special tax treatment on employer-sponsored health insurance so that if your employer provides health

insurance to you then you don't pay any taxes on the money that the employer uses to purchase that insurance.

You don't pay income taxes on it, you don't pay payroll taxes on it, and so that could reduce

the price of employer-sponsored health insurance compared to individually

purchased health insurance or paying for medical care out of pocket by

a significant amount by maybe 40 percent. Sometimes people end up having to pay twice as much for health insurance on their own

compared to what it would cost them through an employer and they sometimes get less coverage as a result.

Now what the effect that this has had on the health care sector is now in America most people

get their health insurance through an employer because the tax break makes it that

attractive and makes the individual market much less attractive because it's a much

thinner market as a result. But the fact that you appear to be spending

someone else's money on health care

and the fact that that health insurance is tax-free.

Causes people to demand a lot more health insurance than they would if they were spending their own money.

And that causes them to consume a lot more health care

services than they would if they were spending their own money and so there's

...