I hear a lot of argument about whether or not the proposed Health Care Reform bill will be deficit neutral. Proponents of the bill claim it will be deficit neutral by means of taking money from other areas of spending, reducing fraud, and raising taxes. Opponents claim it won’t be, pointing out that three or four years of taxes will be collected before any benefits are paid (as if that’s proof against deficit neutrality), claim some of the money is double counted, and that reducing fraud won’t work (or they’d already be doing it).
The truth of the matter is no one knows. We can put our best people and their best calculations on solving the question, but even if they decide that after all the money wrangling involved in the bill, it comes out to be deficit neutral – or even better, reduces the deficit – it isn’t good enough.
What we should be worried about is whether the bill will reduce our health care liability. By liability, I mean the amount we, the government, and we, the people, spend on health care each year. If all the bill is doing is throwing more money at the problem, that’s not a solution, it actually worsens the problem.
Allow me to explain. The government, like each of us has a limited capacity to earn money. We do it by working at our various occupations, the government does it mostly through taxation. In our case, there’s only so high a salary the market will bare. The better we are at our jobs, more experience, etc. the more the market tends to bare. The worse or less experienced, the lower the salary.
Taxation follows a different set of rules, but it still has rules. The Laffer Curve is one representation of those rules. Summarized, it goes like this: If the government wants to increase revenue, it can do so by raising taxes, so long as it is on the left side of the curve. Once it passes the peak, raising taxes any further will tend to reduce revenue. This is due in part to those people and companies that are taxed the most will start moving to where taxes are lower, or finding loopholes in tax laws that allow them to pay less, when the tax rates start to get too high. It is also because taxes are a drain on the economy. Drain too much at one time and the economy as a whole suffers, resulting in lower tax revenue for even higher tax rates.
I don’t know where we currently sit on the curve, so raising taxes might still be a reasonable thing to do. But if we raise taxes now to pay for supposed Health Care Reform, if the reform doesn’t also include real and credible methods of “bending the cost curve” downward, more taxes will eventually have to be raised again and again to keep the program “deficit neutral” until we pass the peak point on the curve and start to head down the back of it.
The only thing I’ve heard about this bill’s effort to actually reduce costs has to do with two things. First, I hear payments to doctors from the government will most likely be reduced further for government plans such as Medicare. This isn’t reducing the cost of health care, it’s cheating doctors and patients on other insurance plans. Those costs that aren’t paid by the government are subsidized by other patients who are charged more for their services. This essentially helps drive up the cost of health care for those of us not on a government plan.
Second, they propose that by getting more people insured, the cost of insurance will go down. This isn’t necessarily true. Without an individual mandate to purchase health insurance (which many believe is unconstitutional, myself included), there is no reason an otherwise healthy person would buy health insurance. By disallowing preexisting conditions as grounds for denying insurability of a person, people will be allowed to buy insurance when they get sick. In other words, healthy people won’t buy insurance, but sick people will. Sick people then will need coverage, something more expensive than their premiums so insurance companies will either go bankrupt, or raise their premiums more.
If anyone knows how else this bill is supposed to actually reduce the cost of health care, I’d sure love to know. The above two points don’t even address the cost of health care itself, just of health insurance. Either they love to conflate the two, or they don’t understand the difference between them. Health care costs are the costs of doctors, facilities, medical supplies and pharmaceuticals. Health insurance costs are the payments we make to a third party as part of a contract that if we need medical care, they’ll pay a predetermined type and portion of the costs.
The real problem isn’t that health insurance costs are skyrocketing, it’s that medical care costs are skyrocketing. We can weep and wail and gnash our teeth about insurance companies making profits, and there’s real legislation we might pass to mitigate that “problem” without directly penalizing them for being successful capitalists, but it’s still not addressing medical costs.
What health care reform needs rather than more money thrown at it (not that money won’t or can’t help), is actual reform. We must do something to control the costs of health care, not insurance. If we open up the insurance market, the market will take care of the insurance costs, but only if we do something about the real problem.