I have written two posts analyzing Hillary Clinton’s healthcare plan. You will find them on www.tpmcafe.com (where I am a contributor). You can comment there.
Monthly Archives: September 2007
Why Are Earnings at Health Care Companies Growing So Much Faster than the S&P 500?
Yesterday Bloomberg reported that, according to its data, "earnings at health care companies will
expand 15 percent this year, compared with estimated profit growth of 8.5
percent for the S&P 500."
are a consumer paying for drugs, insurance and the hospital bills that
insurance doesn’t cover, you have to wonder: why are their earnings so high? Is
this what people are talking about when they say that healthcare is overpriced?
plummet. If you’re addicted to tobacco, you are going to continue to buy cigarettes, even
if it means giving up something else. As
much choice. When you are sick, you are not in a position to say “I’ll wait
until prices come down" or "that’s too
expensive; I’ll find something just as good that’s cheaper.” You are not in a position to comparison shop.
healthcare prices: the consumer just doesn’t have the same power that he has in most markets.
Commenting on “Do We Really Have to Cut Back on Healthcare Spending?”
This is a great overview of the facts and clearly
demonstrates the urgent need for evidence-based medicine. No matter what
form health care reform takes in the future, the issue of cost has to be
addressed. However, I believe that a significant key to solving the
puzzle of spiraling cost is an active and educated consumer of health
care.
To begin the process of developing such a consumer, there
must be financial “skin in the game.” How often does a consumer of
non-health care goods purchase a car, home or a computer without asking the
price of the item? All would demand a Rolls Royce if someone else
paid the vast majority of the bill. Admittedly, when it comes to health
care, the information needed for efficient purchasing is not sufficiently available
and is more complex than that necessary for purchasing simple consumer
goods. However, this is not an excuse for lack of consumer participation
and decision-making in the economic process of health care.
Have you noticed that most discussions of health care
reform are supply-side and payer driven? This is yet another
indication of the passive role that consumers take in our health care
system……..like children with parents who know better who make the major
decisions for us.
-Barbara E. Rodin, Ph.D
Commenting on “If We Mandate Insurance, Should Twenty-Somethings Pay Less?”
I can see the community rating argument (same rate for all vs. lower rate for young people) both ways. The important thing to understand, I believe, is how much the premium would have to be in order to charge a uniform rate for the under 65 adult population. Data that I’ve seen suggest that the premium for adults would have to be about $4,000-$4,500 per year while children (under 18) would have to pay $1,000-$1,500 based on what Medicaid current spends on the children covered by its program. The current average premium for a family of four is about $12,000. As an aside, we think community rating is a fair way to price health insurance, but we don’t have any problem charging young people more for car insurance because they have more accidents than older drivers. Go figure.
I prefer payroll tax financing for two reasons. First, it’s a flat rate (not regressive) scaled to income, so low income people pay less and higher income people pay more, but I think there should be a cap on the wages to which the payroll tax applies so you don’t have very high income people paying 10 or 20 times what the insurance benefit is worth. The more important reason, however, is transparency. I think it is extremely important for people to fully understand just how much their health insurance costs whether the payroll tax is paid by the employee or by the employer. If we are ever going to get to the point politically where we can start to make some of the tough tradeoffs needed to better control medical cost growth, transparency of health insurance costs at the individual level and the taxes required to finance them will be extremely helpful, in my opinion.
The Social Security payroll tax is also a flat rate tax with a wage cap. Since the infrastructure is already in place to withhold FICA taxes from wages, it would be easy to use the same infrastructure to withhold a healthcare payroll tax. If we also had a flat rate income tax of 28% that applied to all income (including capital gains and dividends) above the federal poverty level but gave a dollar for dollar credit for all FICA and health insurance taxes paid by the employee but not the employer), we would have a more progressive income tax structure than we have now.
Example: Assume one person earns $100,000, all of it from wages. He or she pays about $7,500 in FICA taxes and a similar amount under my approach in health insurance taxes (assuming the same 50-50 employee / employer split that we have for FICA). The standard deduction is $10,000 and taxable income is $90,000. The gross income tax liability is $25,200 ($90,000 taxable income x 28%) less a credit for employee’s share of FICA and health insurance taxes paid of $15,000. Net income tax liability: $10,200. A second person earns the same $100,000, all from capital gains and dividends. That person pays nothing in either FICA or health insurance taxes but pays $25,200 in income tax.
So, two people earning the same income but from different sources pay bear the same federal tax burden. State and local taxes probably add another 10% or so to the tax burden for both people. For very high income
people ($500,000 and above), my approach would, in effect, subject virtually all of their income to the Alternative Minimum Tax which, under current rules, does not apply (for the most part) to capital gains and dividends. To the extent that employers’ health insurance costs go down from what they were previously paying, they could be required to raise salaries by a comparable amount per Senator Wyden’s cash out concept.
I have no problem with high tobacco taxes because they drive demand for cigarettes down, not because it raises a lot of money. I suspect we are already reaching the point of diminishing returns from that revenue source, at least in states like NY, NJ and CT with very high tobacco taxes already.
With respect to one set of national rules for Medicaid, I agree with paying the higher Medicare rates even though it will raise costs in the short run. It would simplify life for providers, make them more willing to see Medicaid patients, and it’s the right thing to do.
Much longer term, serious cost control is likely to require either global budgets (especially for hospitals), explicit rationing or both. If the public has clear transparency with respect to the actual cost of their health insurance and the associated taxes, it should advance the day when they will not only accept global budgets and/or rationing to better control medical cost growth, they might even demand it.
-Barry Carol
Responding to Comment on “Should People Who Don’t Take Care of Themselves Pay More?”
Bradley—Thanks for your comment. I’m inclined to agree with
you about smoking. Because so many people do quit, it’s clear that it is
possible for most people who are addicted to tobacco to give it up. So a
financial incentive (or penalty) might have some results. And there is no question but what smoking adds to our national health
bill.
take the weight off and keep it off. As for adults who are carrying an extra 10
to 20 pounds, this doesn’t seem to me a major health problem. Ideally everyone
would be at their perfect weight, but if we begin charging people who are 10 pounds overweight an extra
premium I’m afraid we would be feeding our culture’s obsession with being thin.
Responding to Comment on “The FDA Betrays Its Mandate”
Sorry I’ve been so slow in responding; I was traveling last
week. I completely agree that doctors should not be making a profit on anemia
injections or cancer drugs that they deliver in their offices. They should, of
course, be paid for their time and the skill involved in administering the
injection or drug. But they should not be making a profit on the product
itself—inevitably that creates a potential conflict of interest (even if it is
subconscious) when a doctor decides what drug to prescribe.
doctors discounts which then let doctors bill insurers at the full rate and
pocket the “discount.”
associated with letting doctors become pharmacists—it’s ironic that we have to
learn the same lesson all over again.
Conference Blogging: “Employer Innovations in Health Care”
The moderator of this session, Helen Darling, President of
the National Business Group on Health, began by suggesting that we can’t just
put more people into the system without fixing it. If we try that “we’ll have
twice the mess we have now. . . We
need to provide universal access and fix the system simultaneously,” she stressed.
In addition, she pointed out “The largest employers in every
jurisdiction in this country are public employers. We have to ask, where are
they in this picture?” This is a question that is rarely asked.
National Coordinator of Bridges to Excellence and Michael Widmer, President of
the Massachusetts Taxpayers Foundation.
reform, we tend to think first, about universal coverage. “Employers I have
talked to agree that we need universal coverage. But once you have access, you
have to ask: ‘Access to what?’”
providing “access to mediocrity.”
Conference Blogging: The Business Case for National Health Care Reform
The Business Case for National Health Care Reform
of health strategies, Office of Social Impact, AARP, declared “It seems to us
the business community is ready to engage in health care reform.” She also
suggested that states can serve as laboratories, noting that two panelists in
this session are from California and can tell us something about what is
happening there.
California, and John Arensmeyer, founder and CEO of the Small Business
Majority.
Conference Blogging: Second half of first session
Carl Camden, CEO of Kelly Services, began his address by observing that, ten years ago, too many in the business community were happy to stay on the sidelines—and many were, in fact, in active opposition to health care reform.
“It’s different now,” he said. “Health care reform will be influenced by the 2008 election,” he added, “and I expect little will happen until 2009. But we need to do the work now so that come 2009 we can put forward legislation for aggressive reform.”
Conference on Business and National Health Care—September 14, 2007
The conference began with opening remarks by Greg Anrig, vice
president, policy, at The Century Foundation, who welcomed the audience and
speakers and Karen Davis, president of The Commonwealth Fund.
employer-based healthcare including:
- lack of underwriting—no one is excluded on the basis of age or health status.