Browsing the blog archives for June, 2009.

Healthcare Reform- The Core Principles

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No healthcare system is perfect, but ours is already the best in the world. Here are 4 questions we should ask anyone who seeks to change it:

1. Does the proposal require that EVERYONE getting coverage pay a significant portion of the bill? Healthcare is expensive and the truly poor might need some help, but EVERYONE must pay as much as they can before the taxpayers are asked to contribute. NO ADULT WITH ANY INCOME SHOULD BE EXEMPT FROM PAYING. Any help provided by taxpayers must come ONLY after the individual pays all he can. And it should go without saying that ILLEGAL IMMIGRANTS SHOULD NOT BE COVERED BY ANY PUBLIC PLAN.

2. Does the publicly-funded program ration care as much as possible? Yes, I said ration. Taxpayer-subsidized healthcare should be rationed. Those getting help should have high deductibles and should be required to take the least expensive option available, which limits choices of hospitals, procedures, doctors, and medicines. The goal should be to provide the most cost-effective level of care, nothing more.

3. Does the proposal strengthen the private market? Government-administered programs WILL REDISTRIBUTE INCOME AND WILL RATION CARE, as already evidenced by programs such as Medicaid and SCHIP. Government involvement should be minimized so that rationing only occurs among those without private coverage.

4. Is the proposed program financed in part by reductions in payments for services? This is a real gimmick. One way or another, doctors, hospitals, drug companies, and other providers must be paid. These private health care providers must NEGOTIATE payment schemes with insurance companies, but the government simply underpays, shifting part of the cost to others.

Obama’s plan fails #1. He insists that there should be exceptions for low-income Americans, which means that the producers will end up paying for their coverage, and the definition of “low income” will rise over time.

Obama’s plan seems to fail #2, although he is short on specifics. The notion that non-payers should have access to the same healthcare that others pay for is economically unsustainable.

Obama’s plan fails #3. His “public option” program cuts payments for services, requiring providers to make up the difference elsewhere.

Obama’s plan fails #4. He openly asserts that reductions in payments will help finance the system. Those with private insurance will subsidize those with the “public option,” creating an incentive for everyone to go public. In the end, we’ll get a single-payer system.

DON’T BE FOOLED. Those on the left are not just interested in basic healthcare assistance for those truly in need. They want the “producers” to pay for most or all of the tab. To them, the healthcare “crisis” is really just about redistributing income.

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More on Healthcare

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I proposed my own brand of healthcare reform 3 months ago. Congress is now set to tinker with the private system, so it’s time to revisit the issue.

 

The quality of healthcare in the U.S. is unsurpassed, and EMTALA (passed in 1986) guarantees emergency care to everyone regardless of ability to pay. So what’s the problem? About 15% of Americans currently do not have insurance and many could face major financial problems in the event of a serious illness.

 

Proposals on the left to extend coverage to the uninsured range from various cost controls to requiring employers to provide insurance to a single-payer system. Cost controls drive out suppliers and result in rationing—mandated lower prices with lots of unmet demand. Requiring employers to provide (i.e., contribute to) health insurance raises the cost of hiring, which results in fewer workers, more outsourcing and offshoring, and higher prices. A single-payer system places a bureaucrat in charge of deciding who gets coverage and under what conditions. Care is rationed when available resources (i.e., tax revenues) can’t cover the demand, which is why it’s very difficult to get an MRI or other “non-essential” treatment in Canada.

 

We really have 3 options to address this problem: (1) Spend more for healthcare, (2) reduce quality through some form of rationing, or (3) settle for some combination of the two. THERE IS NO FREE LUNCH. Some liberals acknowledge this reality and call for higher taxes and/or rationing up front. Others attempt to deceive us by claiming that the government can make up the difference by squeezing all of the “excessive” profits from the healthcare industry. Don’t be fooled.

 

I would like to focus on an assumption the left usually makes that is typically unchallenged. The 40+ million without healthcare are assumed to be poor, working families just getting by, with little or no ability to pay. This may be true for some, but I wonder how many would pass the cell phone/cable TV test. Whenever someone on the left claims that universal coverage is needed—usually on moral grounds—I ask them to identify 3 people they know who lack health insurance. When I ask how many of the 3 have cell phones and cable or satellite television, they usually acknowledge that at least 2 are PAYING for at least one of these nonessentials. I ask if these folks have considered cancelling their cell phone and TV plans and using the savings to purchase private health coverage. I am usually told that I am hard-hearted, and this is not realistic anyway because cell phones and cable/satellite TV are NECESSITIES. My retort is simple: Someone who CHOOSES to pay for nonessentials such as a cell phone or cable TV INSTEAD of health care insurance is not doing all he can to take care of his own needs. Such a person should be embarrassed to ask society to provide his coverage.

 

The debate ends here with some liberals, but others persist. This may be true for some, they argue, but what about those who really need insurance, are willing to pay what they can, and can’t get basic coverage because of serious financial problems or existing health conditions? Can’t a moral society help provide access for these folks? Although it does not justify nationalizing the current system, this is a reasonable question, and I have a solution.

 

I propose that we end all income-based federal health care programs (Medicaid, SCHIP, etc.) and institute a payroll tax for everyone who lacks health insurance. ONLY THOSE WITHOUT COVERAGE PAY THE TAX. Congress sets the flat rate with no exemptions or exclusions, so everyone without coverage pays the same percentage of gross income. The proceeds from this tax are matched with contributions from the general fund, which means that taxpayers—the producers in society—pay for 50% of the coverage. The federal government works with this pool of money and contracts with insurance companies to administer a no-frills plan. It can spend what it has, but no more unless Congress raises the payroll tax.

 

What are the advantages of my proposal?

1.       Rationing will occur, but those without private insurance get basic coverage.

2.       The uninsured pay for 50% of the total cost of the program.

3.       Because the insurance tax rate is fixed and flat, those covered by the government system have an incentive to get private insurance as they earn more.  

4.       Private health care insurance premiums will decline because there will no longer be unpaid medical bills due to a lack of coverage.

5.       The government contracts with the existing private system to administer the program.

 

I’m sure liberals would like to amend my proposal with some sort of sliding scale that reduces or eliminates the tax altogether for those below a certain income. They might also like to increase the amount of coverage subsidized by the general fund. SUCH AMENDMENTS MUST BE REJECTED. IT IS ESSENTIAL THAT EVERYONE WHO RECEIVES BENEFITS FROM THE SYSTEM HELP PAY FOR IT. The fixed and flat tax rate means that those with lower incomes pay less, but everyone still pays the same percentage. Limiting the subsidy to 50% is only fair to taxpayers who already have coverage, and it also provides an incentive for those benefitting from the plan to get their own insurance.

 

Some of my libertarian-leaning friends might reject this proposal outright because it involves government subsidies. My challenge to them is to present a plan that addresses the universal coverage problem with a market-based solution. I’ve heard some good ideas, but most conservative proposals seem to assume that those without insurance will use various tax incentives to purchase their own coverage. This may be true in some cases, but the universal coverage problem will not be addressed, which means millions of Americans (and others in this country) will receive emergency treatment without contributing anything to the system. One way or another everyone gets coverage, and we need to ensure that everyone contributes and that the care is delivered by the private sector. If we can’t sell the American people on a fiscally responsible solution, we’ll get a massive entitlement that will likely never be undone.   

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