Health Care

edited 0526 to add Hyman article reference.

The Senate action on Health Care seemed to be targeted not at solving the health care crisis in the most economical way, but at finding a way to continue allowing the insurance/financial institution industry to siphon off huge profits while providing inadequate care.  At the hearings of the Senate Finance Committee in May, protesters appropriately gathered to demonstrate against the Baucus committee's decision against having voices in favor of single payer/single provided government health care system represented in the committee's "roundtables".  See, e.g., Washington Times, Health Care Protestors Disrupt Senate Panel for Second Week in a Row, May 12, 2009. 

 Of course, the problem is that the Republican Party today stands for privatization of everything, along with weakening of government's role even in areas in which government is more able to provide services than private companies.  Senate Republicans have taken aim at universal health care, and intend to make it very hard for the Senate to pass a decent bill with a public option.  Republicans argue that government-provided health care usurps medical doctors' role and rationing.    See e.g., AP, Senate republicans plan attack on Obama health care bill, May 17, 2009.  That disregards the facts: 1) the current system rations health care based on sick people's ability to pay rather than on decisions about how to best provide for the majority of the people, with profit-making health groups deciding whether or not a person's doctor will be paid if he or she performs a particular medical care regimen; and 2) government acts in the public interest, whereas care providers and insurers may be acting in their own profit-making interests.  

Baucus has already made up his mind that a government provided health care system is neither practical nor politically feasible in this country, which demonstrates the incredible power of the financial/insurance industry today.  Nonetheless, there needs to be a public option in the reforms, so that the role of government in providing such a basic service can be demonstrated and show ordinary Americans that it works, in spite of the misleading propaganda from the financial industry PR machine.  We already know that Medicare and VA medicine meet patient needs at a cost staggeringly below that  of private insurers, and one suspects that the reason the financial/insurance establishment is so against a public option as part of the current reforms is that they know that Americans will find out what Europeans have experienced for some time--health care as a service provided by government works better than privatized care where making a profit, not providing care, drives decisions.

The Senate approach has bogged down, though Baucus still claims that the Senate will begin consideration of reform legislation in mid-June. See Geisel, Health Care Reform Could Clear Senate This Summer, Assurant, May 21, 2009.  Instead of enacting a single payer system, Baucus is still thinking about adding regressive taxes (the beer and soda tax proposal) and curbing the existing tax break for health insurance premiums to expand coverage (possibly capping the exclusion for healthcare expenses based on income).  Baucus is even considering reducing Medicare spending on successful projects like home healthcare, medical imaging and durable medical equipment.  See, e.g.,  Senate serves up Beer Tax For Health Care, CBS News.com, May 21, 2009; Young, Sens: Time has come for decisions on healthcare, Leading the News, May 20, 2009.  It is hard to see how taking a good program like home healthcare--which permits families to take care of their chronically ill relatives at home for a pittance of the cost of hospital care--aids the goal of moving to a more equitable and more reasonably priced health care system.

David Hyman has a new article considering the factors that influence the costliness of health care in the US.  David Hyman, Health Care Fragmentation: We Get What We Pay For (available on SSRN). One such factor is the highly fragmented system, on both the delivery and the financing sides of the market.  Multiple providers and multiple payers without integration across the systems create incentives that favor inefficiency and duplication--and this is true of Medicare as well as private systems (not surprising, Hyman notes, since Medicare was modeled on 1965 private sector arrangements).  The lack of a single payer system means that "in health care, most compensation arrangements pay health care providers for what they do, not for what they accomplish."  Id. at 5.  To avoid abuses in the private sector, various anti-trust and unfair competition laws tend to encourage further fragmentation.  Hyman outlines some of the problems, but notes that it isn't clear how to achieve coordination and integration under our current payment system.  While he proposes a few options (the typical economic incentives), he doesn't address the "elephant on the table"--the possibility of moving to a single payer, or even a single payer-single provider, system to address these problems of fragmentation.

Citizens for Tax Justice notes that discussion about "difficult choices" and "sacrifices" for funding health care reform seem to always disregard progressive choices in favor of regressive ones, like a value-added tax or regressive national sales tax.  CTJ has a simple proposal--reduce the subsidies and preferences in the tax code "for the wealthiest and most powerful, especially in light of our having provided Wall Street (and thus the richest people in America) the biggest taxpayer-funded bailout in history." Given the recent history of the Wall Street collapse and savings by ordinary taxpayers, CTJ suggests a deal:  "Main Street is paying to make wall Street healthy.  Wall Street, when it is healthy, will return the favor."  CTJ, Progressive Revenue Options to Fund Health Care Reform, May 21, 2009.  Here's what CTJ proposes for raising a trillion dollars over a decade, beginning in 2012, to fund health care reform, simplify the tax code and move to fairer taxation of individuals:

1. Make the Medicare tax progressive (increasing the rate about 1% for high-incomes) and make it apply to all income (not just wages);
2. Quit subsidizing rich people's investments by raising the capital gains and dividends rates to 28% by 2012;
3. Eliminate tax subsidies for Wall Street such as the write off for intangible assets under section 197 and special treatment of stock options for executives;
4. Reform international provisions--repeal the new worldwide interest allocationrules  and require corporations to defer deductions on unrepatriated foreign income.
5. Repeal health savings accoutns ("inefficient health care subsidies favoring high-income taxpayers").

CTJ notes that most of the new revenue would come from taxpayers with adjusted gross income above $200,000 (singles).  As CTJ notes, we provide an ongoing subsidy to Wall Street through the preferential treatment of capital gains and most dividends.  The Bush Congress claimed that reducing the rate for capital gains and dividends would encourage investment, create jobs, and improve quality of life.  That claim was a mirage that did not materialize, and it is time to recognize it.  We have in the meantime provided a huge bailout to Wall Street that makes it even harder to justify the capital gains preference (if there was ever a decent reason for it in the first place).

The Senate needs to get serious, and it needs to quit giving primary consideration to the insurers and financial interests that manage privatized health care in this country today.  A public option needs to be on the table, in a way that lets Americans see how well it works.  Let the health insurers compete.

P.S.  Jim McDermott of Washington has introduced (again) legislation that makes considerable sense, whatever else we decide about health care reform. See McDermott website press release, May 22, 2009 (with a link to the proposed legislation).   H.R. 2625, the "Tax Equity for health Plan Beneficiaries Act",  would end the taxation of health care benefits provided to domestic partners.  As McDermott notes, "there is no justification for the grossly unfair treatment some Americans receive today simply because Congress has not updated the tax code to reflect the modern labor market." Businesses have to pay taxes on employer-provided domestic partner benefits, and the employee receiving the benefit also faces an income tax liability.  McDermott appropriately wants Congress to treat domestic partners the same way that dependent children or spouses of a qualifying employee ar etreated.  Good thinking, McDermott!