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Jul 16 2009, 6:00 am by Chris Good

Question Of The Day: Are We Ready For A Health Care Tax?

House Democrats have proposed a tax on wealthy individuals to pay for health care. Will the nation accept it?

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Comments (10)

Pineview1997

Will the nation accept a tax on rich people to provide health care for all? Yes. The nation would love to tax rich people (and polls show it every time) for all sorts of public goods.

But will the rich people who are supposedly the peoples' representatives in Congress pass a tax on their rich friends and contributors - harder to say.

But wouldn't it be nice to bend the Gini coefficient just a little more towards equality while serving a profoundly moral social good?

Nola Dawg

I worry that it will only start as a tax on the rich. I would prefer for the government to show how they plan on controlling costs before they commit the country to paying for it. Demonstrate by making Medicaire/aid work, then tax.

Instead, it seems right now they trumpet health care reform when they really mean health care expansion, with buzzwords like electronic records and preventative measures thrown in.

Wouldn't this be a much easier argument to make if they could demonstrate that they could actually control costs?

Abhinav (Replying to: Nola Dawg)

"Demonstrate by making Medicaire/aid work"

Medicare's administration costs are vastly lower than that of private insurers.

cdm (Replying to: Abhinav)

Abhinav,

Actually, that is not quite true.

The claim is that Medicare's costs per patient - as a function of total care costs - are lower, which masks two facts:

1) Medicare deals withe the elderly only, who are the most costly age cohort in terms of treatment, due to costs at the end of life. Thus, this cohort has a skewed denominator in the percentage calculation.

2) The highest cost of administration is labor. Medicare shows very low labor costs - due to the fact that other Departments/States provide the bulk of labor, and the costs of that labor are in the Departments/States budgets as opposed the Medicare budget.

If you made adjustments for those two facts, Medicare would be more expensive and inefficient than private insurance.

This is why you have the administration telling people that they are going to save money, while they are also trying to raise taxes to pay for it - which if you think about it is illogical.

Abhinav (Replying to: cdm)

cdm, Thanks for replying. The points you raised are interesting. However it seems there are counter arguments to your points raised by Nobel winning economist, Paul Krugman:
http://krugman.blogs.nytimes.com/2009/07/06/administrative-costs/

"However, the Congressional Budget Office (CBO) has found that administrative costs under the public Medicare plan are less than 2 percent of expenditures, compared with approximately 11 percent of spending by private plans under Medicare Advantage. This is a near perfect “apples to apples” comparison of administrative costs, because the public Medicare plan and Medicare Advantage plans are operating under similar rules and treating the same population."

"In international perspective, the United States spends nearly six times as much per capita on health care administration as the average for Organization for Economic Cooperation and Development (OECD) nations. Nearly all of this discrepancy is due to the sales, marketing, and underwriting activities of our highly fragmented framework of private insurance, with its diverse billing and review practices"

Nola Dawg (Replying to: Abhinav)

Yes, the administrative costs of Medicaire and Medicaid are lower. But that's not the issue. Many have indicated that the cause for concern about rising health care costs is disparity in payment (ie some regions pay a lot more for health care than others) with little disparity in health care outcome. This is the issue to which the Dartmouth Study and Gawande Article refer. Reducing administrative costs is a relatively low 1-time savings, and does nothing to stem the explosion of health care costs.

Also, of course they have lower costs; the IRS collects for them, while much of the costs for private insurers is billing and collection. An apples to apples comparison is not possible.

Abhinav (Replying to: Nola Dawg)

Regarding savings from the IRS,
http://voices.washingtonpost.com/ezra-klein/2009/07/more_on_administrative_costs_i.html

"We'd have a huge IRS with or without the Medicare program, and premium collection adds fairly little to the cost of running the IRS. If a public plan could likewise take advantage of a pre-existing premium collection apparatus to minimize its own admin expenses, it seems to me that should legitimately count as a significant admin cost saving."

But, you raise an excellent point about admin costs being just one-time savings while the real issue is the explosion of costs. Here too, it seems Medicare offers an example of how a large public plan can negotiate better rates with pharmaceutical companies and medical associations without spending money on sales and marketing of the insurance company itself.

Nola Dawg (Replying to: Nola Dawg)

Abhinav:
I agree that they save money by using the IRS, I was just saying that because of that it isn't an apple to apple comparison.

As far as Medicare offering an example of savings by "negotiating" better prices, I disagree. First, one of the supposed reasons we started along the health care "reform" path was due to the Dartmouth Study (http://www.dartmouthatlas.org/) that focused on Medicare itself, indicating that costs and amounts of health care varied widely by region, but the areas with more care/tests etc did not demonstrate a higher level of "wellness" or "healthiness". This indicates a problem not with who is paying, but with the practices of medicine itself.

We need to move away from a pay per procedure reimbursement scheme, which places incentives on unnecessary but expensive tests and procedures. In fact, many argue that the only way doctors and hospitals break even financially with Medicare is by ordering multiple expensive tests because of the faulty "negotiated" price set by a government bureaucracy.

Thus, in conclusion, I'm back to my original point: show that Medicare/aide can account for these problems and deal with them effectively and I will be on board with universal health care. Ironically, I think if the government is able to do this, health insurance companies will adopt the same policies quickly, reducing the need for universal health care, but either way I'm in.

TycheSD (Replying to: Nola Dawg)

This makes too much sense.

TycheSD

I think it sounds horrible - taxing one group of people to pay for the health insurance of another group. Why would I want to pay for someone who may not even be interested in taking care of themselves - becoming more of a drain on an already burdened system? And, I am far from being one of the people the House hopes to filch to pay for health care.

I still do not see how adding another health care program to the government's array of health care programs will save money. Medicare is bankrupting the country! How can an additional program help? There is no logic in this.

Let people have their own health insurance and be part of a national pool - or coop. Get employers out of it. This would make it portable.

The government should require insurance companies to cover everyone and only supplement those people who cannot afford anything. This would make it universal.