I'm going to post the actual article, but you can go and check out their website.
Is Sen. Barack Obama's health reform plan affordable, I asked one of the nation's most distinguished health care economists today.
"Yes," said Uwe Reinhardt, the James Madison professor of political economy at Princeton University, who spoke with me about the presidential candidates' health care proposals. But maybe the question should be phrased differently, he suggested.
"What we should be asking is, 'Can average American households afford not to have this plan?'" Reinhardt offered.
Please explain, I requested.
The professor began with the numbers. If you add up health care costs for an average family of four, including what an employee and his employer pay for health insurance and an employee's out-of-pocket costs for medical care, the total comes to $15,600 a year currently.
Next, he asked me to think of a lower middle-class working family, people who drive cabs or work in restaurants or retail shops and who make $20,000 to $55,000 a year.
Assuming their salaries grow 3 percent a year - the average over the last decade - a family making $50,000 today will be earning $68,000 in 10 years, by Reinhardt's calculations. (That assumption itself may be generous given the economy's current state.)
Then the professor applied medical cost inflation to that family's expenses. Medical expenses have been climbing 9 percent a year; in 10 years, that means an average family's total health care costs will have soared to $36,000 - more than half of their salary, he said.
"Americans will look to their government for relief and the government will have an extremely hard time saying no after having just bailed out the bankers," Reinhardt predicted.
"Someone has to pay, and the government has the money," he said.
(Reinhardt was referring here to government funds that could be redeployed from other uses or the government's ability to raise funds by taxing citizens.)
Of the two candidates, Obama is the one who would have the government play a larger role in the health care system.
The Illinois senator has proposed that all Americans will have access to health care and that all children be guaranteed coverage. Obama would establish a new, government-sponsored health plan as an option for consumers, in addition to the existing array of private insurance options. He'd ask all employers to insure workers or pay into a fund that would help finance insurance coverage. Low income workers would get subsidies, and public programs such as Medicaid would be expanded.
Reinhardt doesn't have illusions about how expensive Obama's proposal could prove to be. While the Democratic candidate claims his reform efforts will save an average family $2,500 a year, the economist thinks it's highly unlikely those savings will materialize for years to come.
Especially questionable, he says, are the projected cost savings from innovations such as expanded use of information technologies by medical providers. That will require an enormous investment in infrastructure and the returns might not accrue for as much as 10 years, Reinhardt says.
Obama's best bet would be to have the government refuse to pay excessive bills from doctors who act "as if money grew on trees," Reinhardt says.
If all doctors practiced medicine as they do at the Mayo Clinic - which is renowned for effective, efficient care - the health care system could save as much as $200 billion to $300 billion a year. But the government has, as yet, refused to penalize doctors who practice far less efficient, less effective care. "The problem is essentially political - no one has been willing to take on the providers," the professor said.
Turning to Sen. John McCain's plan, Reinhardt explained why he thinks it will leave consumers wanting and end up undermining the current system of employer-based insurance.
The Arizona senator would for the first time tax the value of health insurance that employees get in the workplace. The health benefits would be treated as income and taxed accordingly. (This is not the case currently). At the same time, he'd offer a $5,000 refundable tax credit to families ($2,500 to individuals) to help them afford health care coverage.
Both changes will give younger, healthier workers an incentive to stop receiving medical coverage through the employers, Reinhardt believes. Instead of paying the new taxes on benefits, these workers will tell companies "no thanks" and purchase coverage in the individual market, he predicted.
That would leave an older, sicker pool of employees in employer-based insurance, which will drive up the cost of insurance, putting an increasingly heavy burden on employers. Also, the cost increases will drive up the taxes workers would pay on the value of their health insurance, eating up more of their pay checks.
At first, the McCain tax credits would exceed the new taxes employees face when health benefits are treated as income. But the value of the credit will start eroding in short order, Reinhardt said.
That's because the tax credit is slated to rise in line with the Consumer Price Index, which increases 2.5 percent to 3.5 percent a year. Meanwhile, the value of employees' health insurance policies is likely to climb 8 to 9 percent a year, in line with medical inflation.
"Over time, the added taxes people will pay will in fact exceed the tax credit," Reinhardt says. "Five, six years from now, Americans will wake up and say I'm paying a lot of extra taxes and the tax credit no longer offsets it," he suggested.
Don't try to figure all this out from looking at McCain's Web site, the professor warned.
He directed me to the section titled "Straight Talk on Health System Reform" - the primary source of information about the Arizona senator's health reform proposal. There's no mention there that McCain plans to tax health insurance benefits for the first time, Reinhardt said.
Indeed, when I checked this afternoon, he was right.
You can find a few oblique references to the new tax on health benefits in a new section titled "Get the facts behind Barack Obama's untruthful attacks about health care."
One is a heading in a chart comparing "income tax liability" to "McCain-Palin tax credit." But there's no attempt to explain what that liability refers to.
Later, there's this statement: "In addition, payroll taxes will be protected from taxes under the McCain plan." That's an attempt to argue that the value of the tax credit will exceed the new taxes on health benefits, which aren't mentioned anywhere else.
"I have told his people, 'Guys, that's not honorable, that's not straight talk, that borders on insult,'" Reinhardt said.
No comments:
Post a Comment