Prague Twin

Wednesday, April 25, 2007

HR 676

I'm hearing some rumblings in my little blog world about supporting HR 676. Let me just say that I think universal health care is inevitable, and is needed. However, having said that, the transition is going to be very, very painful.

Total health care costs in the United States are running at $2 trillion per year. HR 676 proposes that this sum be paid for in the following manner:

(1) by vastly reducing paperwork; (2) by requiring a rational bulk procurement of medications; (3) from existing sources of Government revenues for health care; (4) by increasing personal income taxes on the top five percent income earners; (5) by instituting a modest payroll tax; and (6) by instituting a small tax on stock and bond transactions.

Ok, point (1) is a good one. Administrative costs may account for $500 billion so we could easily save $200 billion a year there. That would be great, but let's keep in mind that those costs would be largely saved by reducing the workforce in health care administration.

Point (2) is also a good one. Drug prices are outpacing even skyrocketing medical costs, and need to be reigned in. How much can actually be saved with this approach? That is anyone's guess, but let's be generous and say another $200 billion.

Point (3) is logical enough. The Government currently spends nearly $700 billion on health care (or $2,360 per person).

So the first three points are all logical and painless (unless you work for a hospital administrative unit or a pharmaceutical company). The next three involve some pain. We have to figure that despite the savings in drugs and administration, we are going to be facing at least another $1 trillion per year that is currently unfunded. So where will it come from?

Point (4) talks about raising taxes on the top 5% of wage earners. Since there are currently 146 million working men and women in the U.S., the top 5% represents about 7.3 million people who make on average about $260,000. If these 7.3 million people had their taxes raised by 10% (which is a lot) that would generate nearly $200 billion.

Ok, only $800 billion to go, and we are there.

Point (5) talks about a "modest payroll tax" being added. Now, I'm going to ignore point (6) for now because for one, it is a stupid idea which probably will backfire, and for two, it probably isn't going to raise that much money. Clearly, the bulk of the added resources will have to come from this "modest paroll tax." And what will this modest payroll tax be? Well, $800 billion divided by 146,000,000 (yeah, that top 5% who is already paying an additional $26,000 a year will have to pay it too) is.......

$5,479.45

I have been very kind in my calculations. I can't imagine that the top 5% is going to pay an additional $30,000 per year without a fight, and a lot of people are not going to be able to pay that amount, so the burden will have to be shifted up. Also, although the first two points will help to control the growth in health care costs, they are still going to grow. Also, don't forget that all those people who lose their jobs in the administrative industry are not going to be employed.

One final thought... what about all the people (like my sister, for example whose family pays nearly $1,000/month for insurance) who earn their living through investments such as real estate? I guess they get to shift the burden of their insurance on to the American worker? That is a HUGE whole in this plan.

Like I said, I think universal health care is a must, but HR 676 falls well short of providing it in any kind of sane or equitable manner.

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7 Comments:

  • I have to take issue with you on some of these stats:

    * The modest payroll tax is actually 3.3%, and it's on employers, not employees. So if a company is currently paying 8% or 10% of its payroll in health insurance for its workers, that's a huge savings. And that money can go into investment, price savings for consumers, etc.

    * Federal, state, and local payments into the health system in 2005 were 39% of the total, or $780 billion. It may be just an $80 billion difference, but, you know, a billion here, a billion there... ;-)

    * Expand your point #2 to include savings in the largest cost areas - hospital and physician costs. ALL health costs will be contained. There's a reason that Canada, for example, spends less than 10% of its GNP on health care (with better outcomes, in many cases) while we spend over 15%.

    * All insurance workers are not going to be out of work. As in other single-payer systems, people are free to buy supplemental insurance.

    * Conyers' plan also includes cutting tax loopholes, eliminating the Bush tax cuts, and yes, taxing stock and bond transactions. If investors want to cash in on this crazy 13000-pt market, they'll grumble, but they'll pay.

    By Anonymous abi, at 2:39 AM  

  • Sorry, the percentages in my 3rd bullet above are of GDP, not GNP.

    By Anonymous abi, at 2:47 AM  

  • One of the stickier points will not involve costs but the delivery of healthcare. I believe in Canada you must wait for certain procedures in non life-threatening situations (MRI, etc). In our "got to have it now" society, I think this will be a hard sell.

    By Anonymous rockync, at 3:22 AM  

  • You're right: it's inevitable (eventually, God knows when) and it's gonna be painful. And you're right about that top 5% putting up a huge fight. These are the people with lots of political clout, and they'll be fighting this with all they've got.

    Who Hijacked Our Country

    By Blogger Tom Harper, at 3:26 AM  

  • Abi,

    Thanks for the clarifications. I will go back to the drawing board with the numbers.

    As far as point one (yours), I think this is the most significant. Currently only 60% of employers pay for health insurance. So for the other 40% to start paying 3.3% (of their gross turnover?) they will have to cut wages. Sure, these costs can be offset, but the transition is going to be extremely hard to make.

    Again, thanks for these numbers.

    By Blogger Praguetwin, at 7:13 AM  

  • Rockync,

    I think you are right, that this is the big fear. Right or wrong, Americans believe they have the best health care in the world, and the resistance to change is going to be stiff.

    Tom,

    Adding to the above, the resistance to change among the to 5% is going to be exceedingly stiff, as they will be paying considerably more for health care than they are now.

    By Blogger Praguetwin, at 7:16 AM  

  • I make 'round the median income ($40K). I pay $220 a month for a pathetic HMO. My company pays as well.

    A "modest payroll tax" on me, may or may not be less for me, but it can't be that much more, will save my company money (they can lower their prices? pay me more? LOL!) and it would benefit me AND folks who don't even have as a good a Plan as I do.

    Sounds closer to a sane and equitable manner than the current state of affairs. Though, of course, it'll make it harder for anyone to make any $$$ on Wall Street off of human frailties.

    #6 is definitely a head scratcher though; an I'm a big-time Stock Market critic.

    By Blogger MichaelBains, at 4:04 AM  

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