Health Versus Wealth
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| Fri, 07-09-2004 - 11:54am |
By PAUL KRUGMAN
Published: July 9, 2004
Will actual policy issues play any role in this election? Not if the White House can help it. But if some policy substance does manage to be heard over the clanging of conveniently timed terror alerts, voters will realize that they face some stark choices. Here's one of them: tax cuts for the very well-off versus health insurance.
John Kerry has proposed an ambitious health care plan that would extend coverage to tens of millions of uninsured Americans, while reducing premiums for the insured. To pay for that plan, Mr. Kerry wants to rescind recent tax cuts for the roughly 3 percent of the population with incomes above $200,000.
George Bush regards those tax cuts as sacrosanct. I'll talk about his health care policies, such as they are, in another column.
Considering its scope, Mr. Kerry's health plan has received remarkably little attention. So let me talk about two of its key elements.
First, the Kerry plan raises the maximum incomes under which both children and parents are eligible to receive benefits from Medicaid and the State Children's Health Insurance Program. This would extend coverage to many working-class families, who often fall into a painful gap: they earn too much money to qualify for government help, but not enough to pay for health insurance. As a result, the Kerry plan would probably end a national scandal, the large number of uninsured American children.
Second, the Kerry plan would provide "reinsurance" for private health plans, picking up 75 percent of the medical bills exceeding $50,000 a year. Although catastrophic medical expenses strike only a tiny fraction of Americans each year, they account for a sizeable fraction of health care costs.
By relieving insurance companies and H.M.O.'s of this risk, the government would drive down premiums by 10 percent or more.
This is a truly good idea. Our society tries to protect its members from the consequences of random misfortune; that's why we aid the victims of hurricanes, earthquakes and terrorist attacks. Catastrophic health expenses, which can easily drive a family into bankruptcy, fall into the same category. Yet private insurers try hard, and often successfully, to avoid covering such expenses. (That's not a moral condemnation; they are, after all, in business.)
All this does is pass the buck: in the end, the Americans who can't afford to pay huge medical bills usually get treatment anyway, through a mixture of private and public charity. But this happens only after treatments are delayed, families are driven into bankruptcy and insurers spend billions trying not to provide care.
By directly assuming much of the risk of catastrophic illness, the government can avoid all of this waste, and it can eliminate a lot of suffering while actually reducing the amount that the nation spends on health care.
Still, the Kerry plan will require increased federal spending. Kenneth Thorpe of Emory University, an independent health care expert who has analyzed both the Kerry and Bush plans, puts the net cost of the plan to the federal government at $653 billion over the next decade. Is that a lot of money?
Not compared with the Bush tax cuts: the Center on Budget and Policy Priorities estimates that if these cuts are made permanent, as the administration wants, they will cost $2.8 trillion over the next decade.
The Kerry campaign contends that it can pay for its health care plan by rolling back only the cuts for taxpayers with incomes above $200,000. The nonpartisan Tax Policy Center, which has become the best source for tax analysis now that the Treasury Department's Office of Tax Policy has become a propaganda agency, more or less agrees: it estimates the revenue gain from the Kerry tax plan at $631 billion over the next decade.
What are the objections to the Kerry plan? One is that it falls far short of the comprehensive overhaul our health care system really needs. Another is that by devoting the proceeds of a tax-cut rollback to health care, Mr. Kerry fails to offer a plan to reduce the budget deficit. But on both counts Mr. Bush is equally, if not more, vulnerable. And Mr. Kerry's plan would help far more people than it would hurt.
If we ever get a clear national debate about health care and taxes, I don't see how President Bush will win it.

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Something must be done about healthcare.
I watched Larry King last night he interviewed Kerry & his wife. He briefly
As a fiscal conservative with strong family business ties, I see first hand how difficult it is for companies, particularly small ones, to provide "affordable" health care to their employees. So, I'd like to see a serious effort by lawmakers to tackle this.
C
If we start discussing health care here I may be able to get passed the "glazed eyes" I get when I try to read proposals.
Some states have tackled health care, should this be a state, federal or joint effort?
The Clinton administration took a bath, because 1) the country didn't want to be socialists and 2) they tried to do too much at one time. Is the country in the same place today. Any other reason why the Demo might suceed this time?
The point I found most interesting in the OP was:
"Second, the Kerry plan would provide "reinsurance" for private health plans, picking up 75 percent of the medical bills exceeding $50,000 a year. Although catastrophic medical expenses strike only a tiny fraction of Americans each year, they account for a sizeable fraction of health care costs."
Will this work?
I also visited Kerry's web site and took off a few points:
1. Saving families up to $1,000 a year by providing premium relief and tax credits;
2. Cutting the costs of prescription drugs that are a major driver of rising health care costs;
3. Using America's technological know-how to eliminate the billions of dollars lost through waste, fraud, and abuse;
4. Cutting costs through incentives to improve efficiency and quality of care;
5. Reducing the number of medical malpractice cases in the system.
Each of these has a blurb about what will be done. Is Kerry on the right track?
http://www.johnkerry.com/issues/healthcare/costs.html
IMO it should be a joint effort.
<>
The country wasn't ready for it then. However, now when so many upper middle class professionals are working as "contract workers" and discovering that no matter how attractive their salaries may be, without benefits included the cost of providing health care for their families is "unreasonably expensive". But when they decide to forego health insurance, any serious illness or home accident could put them into bankruptcy.
The time for this discussion has come.
C
"1. Saving families up to $1,000 a year by providing premium relief and tax credits;
2. Cutting the costs of prescription drugs that are a major driver of rising health care costs;
3. Using America's technological know-how to eliminate the billions of dollars lost through waste, fraud, and abuse;
4. Cutting costs through incentives to improve efficiency and quality of care;
5. Reducing the number of medical malpractice cases in the system."
1: This would help provide more with access to health insur.
Points 2,3 & 4 are the most important, IMO.
2: Rx's are outrageously expencive, so many simply do not take their meds resulting in more serious complications from a condition.
3 & 4: There's huge waste because of inefficiency. Heard that 50% of a medical
Isn't the FDA responsible for part of the large cost of getting drugs from conception-to-market? I've heard that it can take up to 10 years for a drug to get to the marketing stage...if the people pushing it don't run out of money first! The drug co's just want to recoup that loss/expenditure. So that should mean that the longer a drug has been on the market, the cheaper it gets? Maybe we should 'overhaul' the whole gov't while we're at it! ;)
I have to admit, I haven't followed this issue too closely, luckily no one in my immediate family needs the really expensive drugs to survive. But I do know that my uncle, who has developed and is now marketing a drug that helps bleeding wounds to clot faster, has taken the manufacturing of his drug overseas (to Sweden, I think) because it's cheaper. It passes the lower cost to the users (mostly EMT's and ER's).
Hi Tlarose! I've been wondering where you'd disappeared to, missed you.
Also many companies are finding the cost of health puts a stress on their bottom line. I am not so sure that governmental <<"reinsurance" for private health plans, picking up 75 percent of the medical bills exceeding $50,000 a year.>> Is a good idea. I can see insurance companies taking the money, and keeping insurance costs high. This sounds like Bush’s plans for Medicare plan—money for the pharmaceutical industry.
For libraone:
<<2: Rx's are outrageously expencive, so many simply do not take their meds resulting in more serious complications from a condition.>>
The pharmaceuticals claim its R&D that makes the price so high. I don’t buy this at all—the price is high because the companies are making large profits, pay their executives millions and spending money on advertising to create a demand for their product.
<<3 & 4: There's huge waste because of inefficiency. Heard that 50% of a medical expence was due to paperwork>>
I have heard that private industry is suppose to be efficient, so I suppose he is talking about Medicare and Medicaid. Or is he talking about the way insurance companies work. Here is another industry that makes big profits off medical needs.
<5: Dr's pay a ridiculous amount of insurance. The insurance co's blame law suits others blame the insurance co's. I don't believe that legitimate suits should have caps.>>
This has become a fallacy; a claim by insurance companies to keep the cost of insurance high. I have read articles that say payouts have decreased over recent years.
To tlarose: <>
This is a problem, but I’m never certain how much of this is hype by the pharmaceuticals. I would never suggest that we eliminate this process, but I am certain it could be more efficient.
<>
I assume if you uncle is distributing in the US he got approval from the FDA. Basically, what I understand you to be saying is that large pharmaceuticals have squeezed out independent manufacturers. Cut out the competition. Do I understand you correctly.
>For libraone:
<<2: Rx's are outrageously expencive, so many simply do not take their meds resulting in more serious complications from a condition.>>
The pharmaceuticals claim its R&D that makes the price so high. I don’t buy this at all—the price is high because the companies are making large profits, pay their executives millions and spending money on advertising to create a demand for their product.<
ITA. The pharmaceutical companies pay for all that $$$advertising$$$. Think of all the research that would buy! Some
By PAUL KRUGMAN
July 16, 2004
If past patterns are any guide, about one in three Americans will go without health insurance for some part of the next two years. They won't, for the most part, be the persistently poor, who are usually covered by Medicaid. They will be members of working families with breadwinners who have jobs without medical benefits or who have been laid off.
Many Americans fear the loss of health insurance. Last week I described John Kerry's health plan. What's the Bush administration's plan?
First, it offers a tax credit for low- and middle-income families who don't have health coverage through employers. That credit helps them purchase health insurance. The credit would be $3,000 for a family of four with an income of $25,000; for an income of $40,000, it would fall to $1,714. Last year the average premium for families of four covered by employers was more than $9,000.
A study by the Kaiser Family Foundation estimates that the tax credit would reduce the number of uninsured, 44 million people in 2002, by 1.8 million. So it wouldn't help a great majority of families unable to afford insurance. For comparison, an independent assessment of the Kerry plan by Kenneth Thorpe of Emory University says that it would reduce the number of uninsured by 26.7 million.
The other main component of the Bush plan involves "health savings accounts." The prescription drug bill the Bush administration pushed through Congress last year had a number of provisions unrelated to Medicare. One of them allowed people who purchase insurance policies with high deductibles, generally at least $2,000 per family, to shelter income from taxes by setting up special accounts for medical expenses. This year, the administration proposed making the premiums linked to these accounts fully tax-deductible.
Although the 2005 budget presents that new deduction under the heading "Helping the uninsured," health savings accounts don't seem to have much to do with the needs of the families likely to find themselves without health insurance. For one thing, such families need more protection than a plan with a $2,000 deductible provides. Furthermore, the tax advantages of health savings accounts would be small for those families most at risk of losing health insurance, who are overwhelmingly in low tax brackets.
But for people whose income puts them in high tax brackets, these accounts are a very good deal; making the premiums deductible turns them into a great deal. In other words, health savings accounts will offer the already affluent, who don't have problems getting health insurance, yet another tax shelter. Meanwhile, health savings accounts, in the view of many experts, will actually increase the number of uninsured.
This perverse effect shouldn't be too surprising: unless they are carefully designed, medical policies often have side consequences that worsen the problems they supposedly address. For example, the Congressional Budget Office estimates that one-third of the retirees who now have drug coverage through their former employers will lose that coverage as a result of the Bush prescription drug bill and will be forced to accept inferior coverage from Medicare.
In the case of health savings accounts, the key side consequence is a reduced incentive for companies to insure their workers. When companies provide group health insurance, healthier employees implicitly subsidize their sicker colleagues. They're willing to do this largely because the employer's contributions to health insurance are a tax-free form of compensation, but only if the same plan is offered to all employees.
Tax-free health savings accounts and premiums would provide healthier and wealthier employees an incentive to opt out, accepting higher paychecks instead, and would lead to higher insurance premiums for those who remain in traditional plans. This would cause some companies to stop providing health insurance, or raise employee contributions to a level some workers can't afford.
The difference couldn't be starker. Mr. Kerry offers a health care plan that would extend coverage to most of those now uninsured, paid for by rolling back tax cuts for those with incomes over $200,000. President Bush offers a tax credit that would extend coverage to fewer than 5 percent of the uninsured, plus a new tax break for the affluent that would actually increase the number of uninsured. As I said last week, I don't see how Mr. Bush can win this debate.
http://nytimes.com/2004/07/16/opinion/16KRUG.html?hp
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