The U.S. government subsidizes the private provision of health
insurance through employers. Benefits paid to employees are
deductible as expenses by firms, but not recognized as taxable
income by employees. Consider two employees, Ann and Bob, who work
for two different employers. Ann earns $30,000, pays 15% in taxes,
and pays $12,000 in premiums for health insurance offered by her
employer. Bob earns $40,000, pays 25% in taxes, and has $12,000
worth of medical bills which he has to pay...