More on Healthcare

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.   

11 thoughts on “More on Healthcare

  1. Great proposal, doc. I really like this. Nobody could milk the system for free care anymore. EVERYONE PAYS. If the liberals are so convinced that health care won’t be rationed in a government run system, then they shouldn’t complain about one like this just for those without private insurance.

  2. Dr. Parnell, Your plan makes entirely too much sense to even be considered by Congress, but it is the best solution I have seen.
    I am in the medical field and one observation I can add is that as people have to pay out of pocket for medical care, they utilize less. The converse being true too – when someone else is paying the bill, they use more. Therefore, for any plan to be successful basic economic principles tell us that everyone needs some skin in the game. You’ve hit the nail on the head.
    (This is somewhat faceious, but we should probably expect that someday soon a cell phone and cable TV will be deemed as “rights” too. Point being, where does it end?)
    Your plan also addresses a fundamental moral issue regarding rights and responsibilities. A person who takes good care of himself should not be obligated to subsidize insurance for another person who smokes, drinks to excess, eats poorly and engages in risky behavior. Again, when someone else is paying the bill there is less incentive to take care of oneself.
    Thanks and don’t take so long between your posts next time! It’s been over 2 weeks!

  3. I’m a little nervous about anything universal, but its already here. Everyone gets treatment anyway and thats not going to change. We need a system that makes everyone a contributor.

  4. Hey Parnell, why should you get better care than working people who cant affort healthcare? The insurance companies and the doctors are screwing everyone. If the government runs the system it will be fair. Why are you scared of the government? Do you own stock in the insurance companies?

  5. Wow, bandit, are you that niave?? Can you name one gov program that actually runs on budget and on time? Don’t worry I can’t either. Why don’t I, a very healthy, 41yr old who exercises daily, whom eats right and generally takes care of myself, just shut up and pay for a 20 something, smoker, drug user, alcoholic, who engages in risky sexual behaivor’s medical care? Tell you what I will pay for…..your mental compitency exam.

  6. Bandit,
    Man up and have some pride in yourself. I am a working man and you do not speak for all working men. Who exactly is stopping you from getting your own health insurance? You’ve got to take some responsibility. Try it – it feels pretty good. Education, a better job, working two jobs, cutting back on unecessary expenses like cell phones and cable TV all come to mind as a place to start. In the meantime, the US provides health care safety nets for people who have fallen on hard times and need a break to get back in the game.

    You also ought to read up on countries that have government provided care. I am in the medical field and I can tell you that the government plans we have already are far from fair. What you read about Canadian and European plans would probably scare you too.

  7. This proposal might be a little better than the status quo but it’s still government health care. This sounds more moderate than conservative to me.

    1. R-Con: I appreciate your point here, but let’s keep several things in mind: We ALREADY have universal ER care and this will never change. Some people are freeloading by refusing to purchase any insurance, leaving society to pick up the tab in the event of a serious emergency. Others simply cannot get a policy because of a preexisting condition which may not be linked to personal life choices such as smoking, alcoholism, or promiscuous sex. And some genuinely cannot afford coverage. We need some sort of system that has all of these folks contributing to a basic plan. NO SOLUTION WILL BE PERFECT, just as the present situation is not.

      My proposal requires that those without private insurance pay a flat payroll tax to get this basic insurance. The 50% subsidy serves 3 functions: (1) Most on the plan would be low-income and the system will need the matching funds to provide bare bones coverage; (2) Coverage CANNOT be increased without a 50/50 split on contributions, meaning that the covered MUST PAY MORE TO GET MORE; and (3) the flax payroll tax provides an incentive for people to GET OFF THE SYSTEM when they earn more. The bottom line is that this government-subsidized plan would provide very basic, rationed care. It is a VERY CONSERVATIVE PROPOSAL because everyone who works MUST contribute to get care. As a result, it would strengthen the private system by substantially reducing the write-offs from the uninsured that are raising costs for everyone else. With a flat tax contribution and a 50/50 subsidy, this plan would NEVER become the option of choice for most Americans. It simply fills a few important holes in the current system without creating an excessive burden on those who have private coverage.

  8. We are in a reactionary mode and Obama is on the offensive. What are the core principles we need to stick to when the democrats propose their reform?

Leave a Reply

Your email address will not be published. Required fields are marked *