Doc’s Prescription for Health Care Reform 2009

Every thinking person agrees that the health care (actually, sick care) system in the United States is not performing as well as it should.  I say “every thinking person”, because special interest money can turn off one’s thinking cap very quickly.  This is what is happening now.

People, by our genetic makeup and millennia of experience, are averse to change.  We like thinks to be predictable, especially when it is fundamental to our survival.  We like our homes, familiar abodes of safety, just as well today as we liked our caves, or our hunting and gathering grounds, or any number of things that gave us a sense of security thousands of years ago.  Change, and the uncertainty associated with it, is scary for most of us.

This is part of the problem with health care reform.  We take comfort with which we are familiar, even though it might not be very good, but at least it is a known quantity (until one loses her or his job, or gets terminated because one gets ill, or gets rejected for a necessary procedure because an insurance company decides it is not profitable to cover said procedure).  Fear of the new is a palpable instinct.

Before I continue, I want to bring out a central issue that neither “side” has considered very much, at least on the news and even in the more intellectual blogs.  This is the simple fact that millions of people are invested, literally, in health insurance companies.  Look at your semiannual statement for the S&P Index for your 401(k) or IRA, and you will find United Health, Blue Cross, and several other health insurance companies in it.  This is not to defend them, but it is a fact.  This brings up the next point.

What if we just passed a law that made “Medicare for Everyone” the law of the land tomorrow (I actually favor that model, but it has serious funding issues).  Well, that part of your investment is essentially wiped out, its value going to zero overnight.  Even though many, including I, think that the health insurance companies have abused their positions of strength, just to wipe them out makes no sense, because not only does it cause a chaotic situation in the “health” industry, it removes a significant part of investments for ordinary folks.  In addition, it throws out of work hundreds of thousands of ordinary folks who work for those corporations.  I am not so concerned about the bigwigs there, since they have already make their fortunes (those folks have smelt this coming since 1993, so the have feathered their nests very well since then, especially after 2001 since they were given a pass).  Look at the rate increase in health insurance premiums between 1993 and 1998, and since then.  “Hillarycare” put the fear of a deity in them, and they relaxed for a while.  After then, it is Katie bar the door.  Some statistics show that premiums have risen 80% since 2000 to now, and corporate profits some 400%.

I do not want to put all of those regular folks out of work, but I have no soft spot for the executives.  But how do we just put them out of business?  We can not, so we have to buy them.  That is right, if we are to have a single payer plan, we have to buy out the insurance companies.  I remind you that this buyout includes many of people like you and me, since many of us own their stock.

This is the real problem with health care reform.

We can not just put folks on the street for a better plan; it is immoral.  So what can we do?

Here is my plan, and it is rough, but not too far from one that could be viable.  It will not be very pleasing to anyone, but I see not any other practical one.  I will bullet point it.

–  Begin to form a single, quasi-federal insurance company with huge buying power.  This will take two or three years, likely.

–  Formulate minimum standards for coverage, including a universal pool of members, including the very young to the very old, legal and illegal persons, without regard to “pre-existing conditions”.  Everyone is in the pool if she or he in within the United States.  In other words, a universal coverage for anyone within our borders, including tourists from other places.

–  Instate a 5% federal sales tax on EVERYTHING, to fund the universal medical fund.  Before you call me out for saying that this is another regressive tax, let me make my case.  I agree that it appears to be regressive at first, but it is not, and here is why.

—  Everyone buys things, sometimes by proxy (like babies and the very old).  Folks with more money buy more things and would pay more.  I would not be averse to exempt food from this rule, but a luxury tax on foods not currently covered by WIC might be a good idea.  Here is an example:  The poor couple who buys a used car for $1500 pays $75 toward health care, and the fat cat who buys that new BMW for $86,000 pays $4300.  That does not seem so regressive to me, if all of the proceeds go to universal care.

—  Poor folks are already paying around 1.2% of their income to Medicare, and Medicare is underfunded.  The increased revenue would be a good thing, at very little cost to them.  Let us do the math.  Say that you make $10 an hour and are lucky enough to work a 40 hour week.  Let us also say that you are too poor to save anything, so you spend everything.  Your current payroll tax (not including Social Security, a whole different essay) for Medicare is $4.80.  Let us also say that you spend everything that you make to make ends meet.  That would be (less the Medicare and Social Security, at 7.62%, added to the Medicare, is $35.28), so your net is $364.72.  Let us also assume that you have to spend all of that to live, and pay the 5% tax for health care.  That comes to $18.24, not even a deductible for a visit.  Now let us examine the folks who make, say, for easy numbers, $100,000.

–These folks also pay 1.2% or so on Medicare, and the 7.62% on Social Security.  Let us see what is left there.  Hmmm, $1200 in Medicare, and $7620 in Social Security.  That comes to  $8820, leaving $91,180.  Let us assume that these folks were lucky enough to save 10% of that, or $9118, leaving $82,062 in disposable income.  (This is not actually correct, because a couple would have around, say $10,000 in income tax to reduce their disposable income, bringing it down to $72,062, and stipulate that they live in a no income tax state like Texas).  Assuming a 10% savings rate, and a 90% spending rate, the numbers show that $7206 would be saved, $74,856 would be spent on cars, houses, dancing lessons, liquor (not for everyone in this status), parties, contributions to religious or other charities, MEDICAL CARE, teeth braces if that hypothetical couple had a kid with bad teeth (most probably already covered by insurance from the employer), gasoline to get back and forth from work, and around 25% of the cost of medical insurance.  Taxing that at 5% would net a good health plan $3743.  This seems to me a good bargain.

So a poor person under my plan would pay an extra $18.24 a year, and for the middle class folks, $3743 per year.  But I am not done yet.

When I way employed, and I hope to be again soon, because I think that I have analytical skills that, for example, just exposed this, my employer paid around 2/3 of the bill.  That was just money that they did not pay me, and it was over $300 a month.  This is why it is so, so hard to see.  When I got my COBRA statement after termination, it was horrible.  I paid a fraction of that, around $100 a month, and thought that it was a good deal.  When I lost that job, over $300 was not a good deal.

But the central issue is still here.  We can not nationalize a corporation and hurt the shareholders in the meantime.  We have to buy them.  I think that I have made a pretty good observation of the situation.

Warmest regards,

Doc