Health Care Reform Is All In The Money

One of the core goals of the Obama Administration and the Democratic Congress is some sort of health care reform. The House and Senate are creating their own bills; in some cases several different ones from different groups of legislators. The primary goal of all this is to increase the number of people with insurance and try to reduce the overall cost of the system in the United States. The way to do that is to provide some sort of public insurance plan funded through the government to cover those without insurance. There is also an imperative to do something about the government Medicare program funded through payroll taxes.

This as is the Social Security program on a glide path to eventually run out of money sometime in the next century. Ultimately either there will have to be tax increases to fund the program, reduce benefits or transition to something else. The same is true for Social Security. That, though, is a separate topic.

The plans proposed so far ran into a major problem this last week when the Congressional Budget Office (CBO) provided some estimates on their costs. These estimates came in so high for new spending that much of the momentum for reform stopped. Of course there are various ways being proposed to pay for all of this including what may be the worst case option: A tax on individuals health insurance premiums. Right now if you get this through your employer that money is tax free. This would raise a great deal of money but would certainly reduce people’s incomes.

Obama and his people have proposed cost savings in Medicare of all things and efficiencies that might come up with enough money. Right now many doctors don’t participate in Medicare due to the fact that it already reimburses at a low rate. If you cut those payments even more less doctors will participate making it harder for people to get health care. The government could force doctors to take these patients but then many might just quit or limit patient load. There may be no financial incentive for them to participate in this new quasi-government system.

Three states have tried in the last ten years or so to do this in an attempt to provide coverage to those without — Tennessee, Hawaii and Massachusetts. Tennessee attempted to set up a system that covered everybody. Hawaii did one for children only and Massachusetts is currently attempting to reduce its uninsured population. Tennessee and Hawaii had to give up as costs began to increase rapidly for various reasons. Massachusetts is in its third year and is seeing cost growth while there has been higher coverage.

In Hawaii they found people were actually going out of their way to have their children qualify by dropping their private insurance. This drove up costs past what was estimate and planned for. They had to end it. This is the fear about having a government program will cause businesses who are the leading provider of health insurance to dump their plans and let workers use that plan. This will make costs go up beyond estimates and require more funding from somewhere.

The real solution if you follow along this path is just set up a single payer government system like in many other countries. Now as to whether this will be cheaper or better in the long run is the major argument to be figured out. Medicare, the Veteran’s Administration and military health care system are not really cheap. The care they provide may not always be the best or most efficient.

This is an argument that will go on for the next several months as Congress, Obama, the media and the American public work it out. It is clear that there really cannot be any nibbling around the edges of health care as the costs are increasing. Any attempt to fix this though must be properly funded and must not just throw money at the system.