Bending the Cost Curve on Health Care

After a summer of “lying Muslim, socialist Hitler” vitriol, a recent Pew Research Center poll shows that two-thirds of Americans think President Obama is “a strong leader” who is “trustworthy” and is “someone who cares about people like me.”  Though the President does not score as high on general approval or for his “handling of health care reform” (and for good reason), his character numbers are a major asset as we finally get into the substance of what kind of health care we are going to have in this country.

On the substance of reform, the details are devilishly complex not only because several variations are still being debated in Congress, but also because the economics of health care are actually just a little less complicated than brain science.  Fortunately, as public debate moves toward real issues of substance, we are all likely to go rapidly up a learning curve on something that is as morally and economically important to us as individuals as it is for us as a nation.

For example, after this summer’s now thoroughly debunked charge that Obama was proposing “government death panels,” there should be more interest in a study that will be published this December in The American Journal of Public Health.  The study calculates that each year about 45,000 Americans die because they lack health insurance coverage.  As lead author Dr. Andrew Wilper explains:

The uninsured have a higher risk of death when compared to the privately  insured, even after taking into account socioeconomics, health behaviors and           baseline health. We doctors have many new ways to prevent deaths from     hypertension, diabetes and heart disease – but only if patients can get into our        offices and afford their medications.

45,000 of what the study calls “excess deaths” (meaning people died unnecessarily) is a small percentage of all U.S. deaths in a year, but think of it this way:  It’s five times the number of American deaths caused by the terrorist attack on 9-11 and the subsequent wars in Afghanistan and Iraq over the past eight years.  Or, it’s equivalent to four towns the size of Wasilla, Alaska.  Even in the best of systems, accidents happen, mistakes are made, but about 45,000 Americans die needlessly every year because we choose as a nation to make access to health care a lottery game.

Likewise, though eyes glaze over when the President talks about “bending the cost curve on health care,” recent news coverage of the Kaiser Family Foundation’s annual report on health care costs helps illustrate why that bending is so important.   The average annual cost for family coverage more than doubled from about $6,000 to $13,500 in the past ten years, and it’s projected to nearly double to $24,000 in the next ten.  Employers typically pay about 73 percent of the total cost – which will be about $17,500 by 2019, or an increase of $7,700 a year over what they are paying now.  If this were a tax increase, conservative Republicans would call it a Giant Job Killer that will undermine economic growth, but though it appears as an increase in labor costs on employer balance sheets, these increases have exactly the same effect as tax increases would – fewer jobs, slower economic growth, and in this case, fewer employers providing health insurance for their workers.  Likewise, those workers who still have jobs with health insurance in 2019 will see their premiums increase from $3,500 a year now to more than $6,000 a year then.  This is what will happen if nothing is done.

“Bending the cost curve” is not about government budgets.  It’s about reducing the rate of increase of both health insurance and health delivery costs.  By 2019, according to Kaiser, the average worker will be paying at least $500 a month for family coverage, versus about $300 now.  If Obamacare can “bend the cost curve,” it will not mean that average insurance costs will actually go down, but that they would increase to only, say, $400 a month – $100 a month more than now, but a savings of $100 a month from what will happen if nothing is done.

What’s more, under Obamacare tens of millions of families will have some part of their premiums paid by federal government tax credits – 100 percent for families earning less than $29,000 and smaller percentages for families earning as much as $88,000.  When you add it all up, most working-class families should eventually see a real increase in their disposable incomes.

These tax credit subsidies need to be paid for, however, and that’s why the debate on health reform may initiate a sensible discussion about increasing taxes.  As I’ve documented in my last three blogs, progressive think tanks are finally starting to do the math on how to raise taxes on the top 5 percent of taxpayers.   The leading progressive outfit on this topic, Citizens for Tax Justice (CTJ), recently did a Review and Comparison of Six Progressive Options to Finance Health Care Reform.  CTJ provides three “moderate” options, which together would produce about $70 billion a year, more than enough to pay for the health insurance tax credits and all other aspects of Obamacare.  The increased taxes would fall almost exclusively on the top 1 percent of taxpayers whose average annual income is $1.5 million, and it would cost those folks an average of $45,000 a piece.  The next 4 percent from the top, with average incomes of about $280,000, would see their taxes increase by about $700 a year.

If I made $1.5 million a year, I’d be glad to pay an extra $45,000 in taxes just to live in a country where nobody died because they lacked health insurance.  But I’d also probably be economically savvy enough to know that a substantial increase in working-class incomes is good for business and that the President is right when he claims that the future of our economy is riding on bending that cost curve.

Jack Metzgar

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3 Responses to Bending the Cost Curve on Health Care

  1. Jack Labusch says:

    Why universal health care? A strong government payer working on behalf of all citizen-patients, who are uniquely vulnerable in conducting medical transactions, can help curb medical practitioners’ worst instincts towards personal gain and inordinate political prestige. Hippocrates and late 19th century European conservatives both noted the extraordinary authority medical doctors enjoyed within the examining room could readily be transferred into mischief, as they saw it, without. Universal health for social equity? Sure, but there are plenty of other reasons health care ought to be universalized that never see the dark of print or the light of day.

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  2. Jack Labusch says:

    “The AMA does not believe that creating a public health insurance option for non-disabled individuals under age 65 is the best way to expand health insurance coverage and lower costs.” Comments submitted to the Senate Finance Committee and reported in The New York Times June 11, 2009.

    The unwillingness of elite and popular opinion to publicly recognize, much less challenge, the AMA-imposed quarantine on meaningful health care debate pretty much quashes reform before it gets started.

    For an alternative view of medicine as a public trust, see Physicians for a National Health Program (www.pnhp.org).

    How will premium-paying employers react to Obamacare? I’d expect them to more aggressively pursue the health care cost-cutting that Obamacare politically can’t through co-premium dumping, bankruptcies of convenience, outsourcing and off-shoring schemes, etc.

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  3. Pingback: Bending the Cost Curve on Health Care « Working-Class Perspectives « Top Health Insurance Companies

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