Health Care Math 5: Paying the Piper
The four preceding parts of this series discussed the cost of proposals for “improving” the way we pay for health care, and the quantity and quality of that care.
To evaluate such proposals certain calculations and projections must be made. The conclusion was that the improvements would be costly---more than five trillion dollars over the next ten years.
The only way to pay for these costs is some combination of public and private money. Ultimately, the public money comes from the taxpayers. The fundamental point of disagreement politically is over how much of that money should pass through the government on its way to the providers. Today, approximately half does.
The argument over whether filtering the payments through the government actually cuts costs comes down to identifying waste in the current system. Most of the claimed waste is in profits and administrative costs. The math showed that there is very little to be gained here.
Neither insurance buying cooperatives nor “insurance exchanges” can overcome the math. If there are inefficient insurers, they will gradually be forced out, but there is no evidence that there are any today.
There are enormous philosophical issues at stake. If the government could be more efficient than the private sector in handling one sixth of the economy, then why not with the rest of it? Yet history is clear. Private enterprise always beats government control. This is a corollary of the principle that freedom is better than slavery.
Thus all the fanfare over competition, public options, and evil insurance companies is just noise. The only way to cut the total (public and private) cost of health care is to consume less or to pay less for the same amount. That sounds pretty obvious, doesn’t it? Wouldn’t it be nice to hear a politician from either party admit it?
Much of the debate revolves around how the changes will be paid for. If there were no borrowing needed, it would come down to income redistribution. Essentially it amounts to a graduated schedule of payments. The rich pay for their own care and subsidize care for the poor. Mandated purchases of insurance are taxes. Penalties for failing to buy insurance are taxes. Taxes on luxury policies are taxes. Taxes on medical equipment and drugs are taxes. Ultimately, all insurance premiums can be viewed as taxes.
Some of these taxes are just plain silly. The tax on medical devices is a good example. If you tax a device by ten percent, its cost will rise by ten percent. Even if there were a single payer system, that ten percent would be paid by the collector of the tax. THERE IS NO GAIN.
A penalty on the uninsured combined with guaranteed full coverage whenever one needs it, is patently ridiculous.
The fundamental premises behind the proposed legislation are false. Some group has to lose. Is it the providers? Is it the consumers? Is it the middlemen (insurers or taxpayers)?
Progressives believe that all citizens (and then some) are entitled to some basic minimum of “free” care. They pretend that a guarantee like that will not increase demand for services. The most progressive progressives believe that nobody should be entitled to more than anyone else. Somehow in practice, this restriction will not apply to certain very important people. You know…the ones who are smart enough to RULE THE REST OF US.
If the base level could be provided, even without the restrictions on improvement, the most efficient way would be with a (possibly progressive) tax on earnings and/or wealth. All the other ways of paying amount to hidden forms of that kind of tax which well-connected groups can legally evade. That includes higher premiums paid to insurance companies.