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Wow, that was quick
Democrats on three House panels continue to meet privately to seek consensus on a single plan. Democrats on the House Ways and Means Committee said they were trying to decide whether to finance coverage of the uninsured with one broad-based tax, like the value-added tax, or a combination of smaller taxes.
The article is here. I wasn't expecting that for years to come. From my distant perch out here in Fairfax (and Arlington), I believe this means health care reform is falling apart. It means the unions won't let them tax health insurance benefits and the CBO won't let them punt on the issue of finance.
Posted by Tyler Cowen on June 16, 2009 at 10:07 AM in Political Science | Permalink
Comments
"From my distant perch out here in Fairfax (and Arlington), I believe that means health care reform is falling apart."
I don't get this conclusion. It would appear that a flurry of action would indicate something is going to get done, not the opposite.
If you mean "watered down" reform, OK. But once Congress begins seriously discussing revenue means to support a program, then that is a good sign. A bad sign would be that they simply ignore how it's going to be paid for because they know there won't be anything passed.
Posted by: Beezer at Jun 16, 2009 10:15:41 AM
Or Tyler believes that once people start acknowledging the costs of healthcare, it is going to fall apart because those costs are so high.
Posted by: mravery at Jun 16, 2009 10:24:37 AM
A tax increase for those < $250k a year will not be popular and it also violates an Obama campaign pledge. If they are looking at that it means that other fiscal options are not faring too well.
Posted by: Tyler Cowen at Jun 16, 2009 10:26:36 AM
You can't just look at is just another added tax though, because presumably you will no longer need to pay for private medical insurance. Most of us can't go without health insurance anyway, so even if it isn't called a tax, private insurance is effectively a tax.
Between what my work pays and what I pay, it's close to $12,000 a year for private insurance for my family. My tax rate would have to increase significantly to match that....
Posted by: JB at Jun 16, 2009 10:40:31 AM
$12,000 a year for one family's health insurance?
I pay $840 per year. Granted, it's only me, but it's good insurance - about $3m lifetime. And it's less than my auto insurance. Some friends of mine pay as little as $600 per year.
Do you have twelve family members? Or more likely does your "insurance" pay for things insurance should never pay for - fillings, regular visits, eyeglasses?
Posted by: Wowow at Jun 16, 2009 11:00:51 AM
You can't just look at is just another added tax though, because presumably you will no longer need to pay for private medical insurance.
Sure. Too bad that Candidate Obama ignored this idea when blasting McCain for taxing employer insurance and replacing it with an individual tax credit. He and his ads looked at it as "just another tax" and ignored the credit. Just like Candidate Obama blasted McCain for having voted to reduce Medicare reimbursements in the past, another idea being considered.
As a candidate, Senator Obama ruled out all the methods of paying for health care reform and even insinuated that Senator McCain was a liar for saying that he'd have to resort to them. Perhaps those were "just words" that President Obama would like to ignore, but I think it presents a real political problem for him.
Posted by: John Thacker at Jun 16, 2009 11:03:57 AM
Damn JB 12K a year. Do you not like to pay for visits to walk in clinics every time your child has a cough?
Posted by: John Pertz at Jun 16, 2009 11:07:40 AM
Damn JB 12K a year.
All it takes is one significant factor to boost rates to that level. Diabetes anyone?
Posted by: Tom West at Jun 16, 2009 11:16:19 AM
Taxes are taxes because the money goes to the government indirectly related to a collections for services, which are fees. Just because I HAVE to have bread, I am not paying a bread tax.
Posted by: Andrew at Jun 16, 2009 11:33:09 AM
$12K is my insurance as well. Actually, mine costs more:
$12K is what my employer pays; $3500 is what I pay.
When you have a family things cost a lot.
Posted by: Bob Montgomery at Jun 16, 2009 11:34:27 AM
Also Tyler, it's not just "the unions" that don't want to tax employer health insurance. It polls badly. That's why President Obama used it as a line of attack in his campaign.
The polls pretty definitely show that the American people want and expect a free lunch on health care. They expect reform will be possible without cost. They oppose an individual mandate.
And politicians, especially President Obama, have done little to prepare them for that cost. In the campaign, when anyone else, whether Hillary Clinton or John McCain, brought up the idea of paying for reform in some way, Candidate Obama was swift to categorically rule that method out. He's regretting it now, to be sure, but of course he wanted to win the election then.
Posted by: John Thacker at Jun 16, 2009 11:35:58 AM
I think that one positive is that of the people who are currently not covered there are three groups, the 'uninsurable', the working poor, and the invincible young. The invincible young have very low medical expenses (other than child birth), the working poor have average medical expenses, and the unisurables have exorbitant medical expenses. Now if they were able to offer two plans that separated the young people and the working poor from those with preexisting conditions it might be more politically palatable to subsidize the very sick. Then by grouping the working poor and the young together you could have the young subsidize the working poor slightly and use monopsyny bargaining to cut costs further and you might have something that enough dems could latch on to to get through the door. By keeping it seperate from medicare you could also offer more limited services since both the young and the working poor have relatively little political clout.
Posted by: Michael Foody at Jun 16, 2009 11:42:49 AM
Obama is incapable of doing everything that he claims. Implementing this federal tax will not help at all. People will still have to pay for private medical insurance, though. This is to help 17 million people that do not have medical insurance, not the nation as a whole. It's not going to withstand the test of time, and if he does all of this, he probably will not be reelected. It's politics--he's now so very clearly a politician and not a savior.
Posted by: Aurelia Masterson at Jun 16, 2009 11:54:41 AM
Why will people have to pay for insurance if this will cover people without insurance?
Posted by: Andy at Jun 16, 2009 12:50:31 PM
Screw the unions. Health insurance shouldn't be tied to employment compensation, period. The higher we tax health insurance benefits, the more encouragement society has to move away from the entrenchment of health insurance as a form of payment.
Posted by: Neal at Jun 16, 2009 1:02:22 PM
Sorry, I should have been more specific. $12k is the total cost. I personally pay about $1,800/year in premiums, and have a deductible of $2,000 which is going up to $3,000 next year... (HR's solution to rising costs was to get prescriptions that are twice the dosage, and cut them in half.). My wife is in grad school, so it's the only option we have. Which is part of the reason why I find it so amusing that people claim we have 'choice' under the current system. Most of us have no choice.
I have friends with preexisting conditions and coverage is not affordable (thousands a month) or not offered for their condition. Doesn't that ignore the whole idea of insurance - we spread the cost for some unfortunate individuals across the population?
Posted by: JB at Jun 16, 2009 1:52:49 PM
The average cost of employer sponsored health insurance premium for family coverage in 2008 was $12,680 (of which the worker contribution was $3354). That is up from an average of $5791 in 1999, an almost 120% increase.
So for every one of your stupid schmucks paying $800 a year, someone else is paying a small fortune.
If we are playing as much as 30% too much for health care in this country then our inefficiency amounts to a "tax" of about $4000 per family.
Posted by: Joe at Jun 16, 2009 3:28:41 PM
I think Joe's numbers are correct. I find Wowow's hard to believe - where do you find a health insurance policy in the US that costs $840 per year? I'd like the details on that one.
Posted by: dale at Jun 16, 2009 3:50:34 PM
"Doesn't that ignore the whole idea of insurance - we spread the cost for some unfortunate individuals across the population?"
The whole idea of insurance is that you pool *risk*, not cost. One of the big problems is that most people do not understand the difference, insisting that insurance is about the latter rather than the former.
Posted by: Vulture at Jun 16, 2009 3:52:13 PM
My employer pays almost $15000 for my United Healthcare PPO plan (no pre existing condition)
Posted by: gigi at Jun 16, 2009 4:06:08 PM
Ok, so this is the new America. Americans increasingly spend an increasing percentage of their income on housing, housing that is increasingly lavish by historical standards. American families own more cars then ever and they are, by historical levels, filled with expensive add on features. Educations costs are escalating rapidly while education outcomes decline.
Yet the problem for the average American is health care? We have treatments for the average citizen that the richest man in the world could not buy 30 years ago. This is failure?
Or is the problem that government wants to promise more then it can deliver. Or do some Americans just want the government to pay their bills without any decline in access or quality.
If electronic medical records will generate huge savings, why has the market place refused to make changes?
If you have area variations in health care expenditure,s and compelling best practices to follow, why don't private insurance companies have a huge incentive to implement those changes.
McAllen TX , the poster child for run away health costs, is a town with almost no private insurance, but some want to use this town as an example of why we need a government run system? Insane
What is the correct level of spending on health care?
And Democrats complain about government health care costs because they want to free up money they can throw at education, politically connected road crews, crooked community groups and a thousand other special interests groups.
They will cripple the health care system until it cannot survive without a full subsidy from Washington. How did that work out in the auto industry?
Posted by: DanC at Jun 16, 2009 4:14:04 PM
If we are playing as much as 30% too much for health care in this country then our inefficiency amounts to a "tax" of about $4000 per family.
So my youngest had tubes inserted in his ears the other day. It took 4 people and a room in a hospital for 15 minutes, which somehow became a $5,000 bill. Now, I have no real incentive to even worry about that, because my insurance just pays for it, but it's clear that there's a pretty healthy profit margin in there for someone.
Posted by: Sam at Jun 16, 2009 5:43:44 PM
"If electronic medical records will generate huge savings, why has the market place refused to make changes?"
Because the market place is not always efficient. Many private companies are notoriously slow at adapting to new technology, and there is a certain degree of inefficiency just built into the business world.
To use the health care analogy, taxpayers wouldn't tolerate the head of a government organisation making $10+ million a year, but we 'happily' let Health Care executives make that because it's standard practice in the corporate world. How about private jets? Company vehicles (efficient would be get people the cheapest reliable vehicle right? Not high end vehicles?)? I could go on.
Posted by: JB at Jun 16, 2009 6:21:56 PM
DanC how did the Democrats or government cripple the US auto industry? Emissions regulations? Allowing collective bargaining? OSHA. I don't think there's a particularly credible argument where the government did anything other than to artificially prop up the domestic auto industry for longer than it was viable on it's own. It's not as though Japan has so much less red tape or is a libertarian utopia but it's auto industry has been successful.
Right now Americans pay more than any other country for medical care that is, by the simplest (if not the most accurate) definition not the best. I believe some amount of American exceptionalism is warranted but, I also think that the fact that our system as it exists is so deeply flawed it is certainly not a forgone conclusion that the US will decline by making our medical system more like those medical systems that get better healthoutcomes for less money.
Posted by: Michael Foody at Jun 16, 2009 6:31:31 PM
I also think that the fact that our system as it exists is so deeply flawed it is certainly not a forgone conclusion that the US will decline by making our medical system more like those medical systems that get better healthoutcomes for less money.
It's also certainly not a foregone conclusion that the US will get a medical system "more like those medical systems that get better healthoutcomes for less money."
My theory is that we'll get a system just like Medicare expanded to cover more people. But Medicare doesn't get health outcomes for less money. The primary evidence about 30% inefficiency that people keep quoting are studies showing that in some places Medicare spends 30% more for equal outcomes.
I completely fail to grasp this magical argument whereby Medicare is unreformable now, but adding even more patients to the rolls will create the incentive for exactly the sort of cost-cutting reforms that people hated when the HMOs were doing them in the early '90s, and got laws passed to prevent.
Posted by: John Thacker at Jun 16, 2009 7:00:15 PM
