Universal Access To Affordable Health Care: Common Sense Deductibles And A Renewed Commitment
We’ve been talking this week about how to fix our nation’s health care system, which is in critical condition. As a physician for the past 30 years, and now as a Congressman, I understand how difficult it is for families to pay for their necessary treatments. People today all across America find themselves choosing between their next pill and their meal.
But you don’t have to be a doctor to know what the problem is: ordinary working people don’t earn enough to pay for skyrocketing insurance premiums and prescription drugs.
My initiative - the Declaration of Health - calls for injecting real competition into the system and guaranteeing universal access to affordable care through Open Disclosure of all health care costs, Unitary Pricing so that each of us pays the same amount for the same product or service, and forming a Single Risk Pool to leverage down prices for every Citizen.
Today, let’s look at the fourth step — common-sense deductibles and a renewed commitment to cover those who are in need.
Let’s reward tax paying households by allowing them to deduct their family's health care costs from their federal tax payments. There are several ways to accomplish this — a straightforward deduction from their taxes at the end of the year, a tax credit, or a deductible of up to three percent of a household's taxable federal income.
But the goal is simple: transplant the point of purchase of health insurance from the workplace to the home - to give every working family more control and lift the burden from small business.
And let’s renew our traditional values as a society and provide for the “least of these, our brothers and sisters” who need our help from time to time. This goes to the heart of what kind of nation we are, and what kind of nation we want to be.
Congress must guarantee that all our children have an opportunity to reach their full potential without an illness standing in their way — based on doing ONLY what is best for patients, not Big Insurance’s bottom lines.
We made a good start last week when we expanded the successful S-CHIP program to cover more kids of working parents who earn too much to qualify for Medicaid, but not enough to afford health insurance on their own. But we need to do more.
Finally, let’s stop ignoring the connection between higher costs for health care and higher taxes. A truly open and competitive health care marketplace will drive down costs. And lower costs will help state and local governments deal with their biggest expense — health care.
It’s common sense: lower taxes from lower health care costs.
I have appreciated this forum all week to discuss with you ways to fix our broken health care system. As I said on Monday, there’s no longer any mystery about why. Rising health care costs have outpaced wages. Solid middle-class families are being squeezed. How can people afford to purchase insurance policies when the average annual premiums are about $12,000 for a family of four? They simply don't have the money.
Here’s my bottom line: No citizen — rich or poor, young or old, anywhere in these United States — should be denied access to affordable care. And no business should go bankrupt simply because it cares for its employees.
After 30 years of helping to heal the wounds of my patients, you can probably tell I’m strongly pro-cure. Let’s work together to make certain Congress is, too.
Thank you for your input and your help.
Steve Kagen, M.D.
Member of Congress
Tax breaks are worth more to those higher up on the income ladder. This sounds like a variation on the vague proposal Giuliani made recently.
If you are paying $12,000 in premiums and you are earning a low middle income of, say, $40K per year the benefit of the tax break (or credit) will be, at most, $2-3K. If you are earning $100K, the break will be worth $5-6K. This helps those who need it the least. A large percent of people don't even pay federal income tax, some even get EITC. So I don't see fiddling with taxes as an equitable approach.
There is an implicit assumption that high health costs are caused by lack of competition, inadequate information and poor choices made by patients. So far this week most commentators have failed to be convinced by these assertions.
There is still no mention of why we need a private middleman layer at all? What is the justification for preserving an industry which adds no value to medical services? Because they already exist? There has still been no case made as to why this needs to continue.
If the funds available for health services seem insufficient there are several things that can be done. The first is to raise taxes on those most able to pay. There is no reason why the Walton family should be shielding $80 billion in wealth from taxation.
Second there needs to be a real examination of national priorities. The US has no problem finding $800 billion to fund wars in the Middle East. Spending half the discretionary federal budget on militarism has consequences. How many more areas of public life have to get sacrificed to this insatiable monster?
We have New Orleans destroyed because of inadequate infrastructure maintenance, we have bridges falling down, we have the world's largest prison population because of inadequate education and social services for those living at the margins. We aren't even the leader anymore in basic scientific research. There is no special power that is going to keep the US as number one if it squanders its resources on empire. Just look at all the failed empires which went down the same road. We are slipping and our only response is a more aggressive foreign policy. It's all connected. You cannot examine one government program while ignoring others that are much larger.
If you haven't seen it before his a nice chart showing where the money goes:
Federal Pie Chart
One final point. The idea that health expenses will continue to rise is based upon simplistic straight line projections. This is never a good technique. Health cost increases will moderate because of technological improvement which make treatment less expensive. Just look at the price/performance of computers. Why shouldn't the savings from advances in technology work in other areas as well. In addition the high cost of drugs will moderate as many popular ones go off patent protection. Third the benefit to society from keeping people healthier and productive is not factored in to the picture. Only the cost is considered.
For example, fifty years ago, if you survived a heart attack you were probably going to live a physically restrained (shortened) live. Many would have to give up work. Now people get bypass operations and return to work and start paying taxes. Where is this factored into the equation?
I'm glad the congressman has taken the effort to talk to "the great unwashed", but I don't think his proposals go far enough, or have been shown to have the effects he claims they will. Perhaps others in congress will be willing to join in to the discussion.
--- Policies not Politics
Daily Landscape
August 10, 2007 7:33 AM | Reply | Permalink
Once again, a great argument about what is wrong with our current system, and why single payer would be the best way to go... and then not actually backing single payer. Sort of like Jon Cohn's book.
The need for any "moral hazard"... deductibles and co-pays are a myth. They block access to needed care, do not reduce unneeded care and do not save the greater system money.
"Competition" among for profit insurers will not reduce costs. The only competition is who can avoid insuring sick people. Only getting the for-profits wasted overhead 15-20% compared to 4% for Medicare, at a total of 350 billion per year will reduce costs.
Only single payer get us to universal coverage (all people) that is also comprehensive coverage (all needed services) with quality control and cost savings. see:
http://www.pnhp.org/facts/single_payer_resources.php
and scroll down for more information.
August 10, 2007 9:50 AM | Reply | Permalink
Thanks, rdf, for your ongoing comments and participation.
DEDUCTIBLES or "fiddling with taxes"
* People here in Wisconsin like the idea of being able to use their health expenses as either a tax deduction or receiving a tax credit.
And they're willing to purchase their insurance at home instead of at work - especially if they can receive an tax benefit for doing so.
* You are correct that in theory deductibles could reward higher income earners, but this can be prevented very easily by limiting the amount one can deduct to the lesser of either (a) 3% of one's taxable income or (b) $3,000 annually.
* Households with annual incomes below $48,000 cannot afford $12,000 - $14,000 premiums.
rdf ASKS "DO WE NEED INSURANCE COMPANIES ?"
* Insurance carriers will have to justify their existence only when we establish an open marketplace in health care. Today, everyone understands we do NOT have an open marketplace. So, what are we waiting for?
* Let's finally allow insurance companies to compete for us by establishing a standard insurance policy they must offer to ALL Citizens everywhere in these United States.
* When of all the essential elements I have presented here this week are in place across the U.S. - Open Disclosure, Unitary Pricing, a Single Risk Pool, Deductibles set at 3% of annual taxable income, and a Renewed Commitment to those in need - UNIVERSAL ACCESS TO AFFORDABLE CARE will exist.
(It is interesting that no one on the TPMCafe blog disagrees with any of the essential elements I have put forward in the Declaration of Health.)
* Finally, once again, single payer represents the loss of freedom of choice - something Americans are unwilling to consider.
Thanks again rdf.
I appreciate your input and hope you will consider supporting the ideas of Open Disclosure and Unitary Pricing the next time you visit your doctor or dine at a restaurant.
August 10, 2007 8:59 PM | Reply | Permalink
Many thanks, DrSteveA, for allowing me to respond to your comments this week.
I respectfully disagree with you, however, with regard to your belief that competition does not drive down costs.
On the contrary, when businesses compete in open markets, consumers gain access to higher quality products and services at lower prices.
A Single Payer health care system may appear desirable to many doctors, especially those who are frustrated with today's inefficient and unfair medical delivery, but in the end a Single Payer system represents a loss of personal freedom for consumers and for physicians, no matter how dedicated, intelligent and kind the authors of the "system" may be.
I have presented a way forward, one that will guarantee universal access to affordable care to every Citizen, one that will prevent any and all discrimination against any Citizen for any pre-existing medical conditions, and one that will drive down health care costs.
I understand you are commited to the idea of single payer, but at the same time, throughout this week's discussions you have not disagreed with any of the essential elements in my initiative - The Declaration of Health.
Thanks again for your input.
Best regards,
Steve Kagen, M.D.
Member of Congress
August 10, 2007 9:50 PM | Reply | Permalink
I can only conclude from the way this discussion has played out that we are talking a cross purposes, or that we don't understand each other's terminology.
DrSteveA and I don't see what purpose private insurance will provide once everyone is in the "pool". Kagen responds with something like this:
I'm obviously not thinking the same way as Kagen. What is the "choice" that is lost? Well one choice might be that you have to go to a specific health provider. We already have this. The most extreme cases are the HMO's, but even my private insurance company makes it very expensive if I go to someone "out of network". With universal coverage there will be hardly any health services that will not be participants. So it would seem that "choice" will be greater.
Another possibility is that "choice" means choice of treatment. In the UK, for example, the NHS has restrictions on what they will pay for. Just yesterday they voted against covering some new early-stage Alzheimer's drug. The solution to this is to either pay out of pocket, or buy supplementary insurance. This has discriminatory aspects since the poor have fewer options, but it is still better than the present situation.
Finally, perhaps "choice" means the ability to have non-traditional services covered like acupuncture or homeopathy. Personally I see this as a positive, with my scientific background I don't see why superstitions should be pandered to. If they can't withstand scientific scrutiny they shouldn't be paid for by the basic plan.
Anyway without a clarification of what the congressman means by loss of choice we can't really continue to have a meaningful discussion.
--- Policies not Politics
Daily Landscape
August 11, 2007 7:03 AM | Reply | Permalink
Congressman Kagen-
As promised I read both your bio and your #4 point "Declaration of Health" plan.
While I admire your accomplishments as a physician (as I am )and your engagement as a congressman on Health Care reform, I cannot endorse your plan. Here is why-
-No country on the planet has completely figured out the health care issue. But the US is a genuine embarrassment on the world stage mainly because of arrogance and greed. And we are a terribly immature nation.
-US politicians need to own and act upon how deep our US health care crises really is. David Walker head of the US GAO talks about "economic tsunamis" and of course Michael Moore's movie SICKO,while muckraking in the best sense of the word,exposed some devastating realties to the public- as do less emotional-more academic- portrayals of our situation in the US to the policy wonks.
- 1993-1994 IS NOT 2007-2008. The situation has become increasingly dire over 15 years. We are in genuine meltdown on several fronts including economic and ethical to name a few.The scare tactices ("Harry and Louise" etc) used to bury the Clinton plan will not now work!
- Big PhRMA is a true miracle industry gone terribly sour. Unless some Big Phrma CEOs do jail time and there is genuine FDA,anti-trust and pricing reform I don't see this former miracle industry reforming voluntarily. What is going on now is a national tragedy.
- Big Insurance also is morally bankrupt out of the excesses of greed and poor leadership. Adverse selection continues and I don't see how your plan really gets at that? Big Insurance has destroyed themselves as credible institutions.
I believe American voters from all political parties want bold health care reform now and will elect our next president on the basis of that domestic issue.(The war and related homeland security will still dominate the non-domestic agenda)
Personally I am for single payer- a modified HR 676(Conyers/Kucinich- "Medicare for All") with much more emphasis on individual(health behaviors) AND institutional (public health) prevention.
Because prevention will free up the $ to apply affordable treatment to ALL of us when we need it.
The mere fact that you accepted TPM "Table for One" forum is to your credit.
Best Wishes and Be Well,
Dr. Rick Lippin
Southampton, Pa
http://medicalcrises.blogspot.com
August 12, 2007 5:32 AM | Reply | Permalink
I understand that Representative Kagen has refused the medical coverage that is standard for members of Congress and will do that until all of us in the US are covered. I appreciate that symbolic stand.
But why is it that most elected officials are afraid to say that the insurance companies are a major problem and until we get rid of them health care in this country will be a mess? Does it have anything to do with the gobs of money that insurance companies spend on lobbying and campaign contributions?
In California, our "post-partisan" governor attempted to put into law that the insurance companies must pass on at least 85% to actual care. The insurance companies are fighting that tooth and nail. That means that insurance companies put less than 85% into actual care. How can we possibly cover everybody at a reasonable cost when we are giving 20%, 25%, or even 30% to the insurance companies. When I worked as a financial planner, I am ashamed to say that I received 20% commission in the first year and an ongoing stream of 10% over ten years for insurance that I sold.
Yet, Medicare has an administrative cost percentage of about 3%. That means 97% goes to actual care. If Representative Kagen attempted to substitute his complicated plan for Medicare, he would never be re-elected. So why is he trying to foist this system on us that ultimately has the effect of protecting the insurance companies?
There is an editorial in the New York Times today titled "World's Best Medical Care?" Statistically, the United States tends to come in much lower on the majority of measures of health when compared to the other industrialized nations. The difference is that we are the only nation that does not have a single payer system. Go see it at:http://www.nytimes.com/2007/08/12/opinion/12sun1.html?bl&ex=1187150400&en=eafa08e3e1315044&ei=5087%0A
August 13, 2007 8:13 AM | Reply | Permalink
Disagree with the essential elements?
Need for Private Insurance. Not stated as an essential element, but apparently distributed throughout, is the assumption that private insurance needs to be reform. I totally disagree that either single payor, or heavily regulated and safety-netted multiple payor as in Germany and Japan, "represents loss of freedom of choice -- something Americans are unwilling to consider".
The potential value of discovering better means of service delivery outside the insurance system, can indeed be demonstrated by the open market. Cosmetic surgery did demonstrate much of the value of free-standing surgicenters, and it also demonstrated liposuction is a much more hazardous procedure than had been thought.
How is it that I have freedom of choice when my private insurer does not have certain recognized specialties in its network? How is it that I have freedom of choice when I was limited -- and was very lucky -- to find a PCP that accepted my coverage?
Transparency. The CRS study I cited indicates that there is no solid data that transparency will reduce overall cost. Unfortunately, it only cited "retail". A cost range between $20 and $500 for a CBC makes very little sense. The lowest price was in the most expensive city, although volume may affect the price.
Single Risk Pool. I fully accept this, although it needs to be said, out loud, that buying coverage will be as optional as buying automobile liability insurance. I do recognize that First Amendment considerations may cause limited religious exclusions, as for Christian Scientists.
I really don't follow your observation about restaurants, doctors, transparency, and uniform pricing. Apropos of need, my PCP prominently displays a sign that no patient will be denied immunizations due to inability to pay.
--
Howard
*equal opportunity offense to both extremes*
"Those who cannot remember the past are condemned to repeat it" [George Santayana]
August 13, 2007 8:35 AM | Reply | Permalink
Several developed countries, notably Germany and Japan, do have multipayor. They differ from the US in tightly regulating the insurers (often not-for-profit social insurance cooperatives), providing a safety net, and dealing with statistical detection of significant cost outliers rather than case micromanagement.
--
Howard
*equal opportunity offense to both extremes*
"Those who cannot remember the past are condemned to repeat it" [George Santayana]
August 13, 2007 8:38 AM | Reply | Permalink
I'm afraid I overlooked this last post of Steve Kagan's, and I have to say it disappointed me by its focus on tax deductions. I'm not sure how best to make insurance affordable for all, but surely tax deductions are the least fair way. The people who need assistance the most are exactly the ones who'd get the least benefit. The suggestion in his follow-up comment that he could mitigate the unfairness by capping the deduction doesn't get at the affordability at all.
It also leaves unstated other key issues in preparing a plan, such as the nature of the government alternative, if any, as in the Edwards plan, which seems necessary to me, since we're asking private insurers to disclose their price and make it equally available to all, but we're not saying whether they might then choose in order to stay profitable to make that price high and appeal to a higher-income segment. Or whether purchase is mandatory, as seems essential.
So on balance, I'd have to say the Edwards plan is realistic and this is not. I do think that, as much as we on the left are going to prefer single payer, that be separated from the other debates. First, the practicality of the plan should be judged on its own merits. Second, there's a case to be made by even people as progressive as Maggie that we're not getting single payer, so let's see what we can get that doesn't feed the industry and punish the poor and middle class. And third, there's Krugman's argument that a well-constructed alternative like Edwards's will drive out the private sector anyhow.
But even if this is wrong, and we need single payer, I'm afraid that Congressman Kagan disappointed me for the other reasons as well.
John
http://www.haberarts.com/
August 13, 2007 10:27 AM | Reply | Permalink
but at the same time, throughout this week's discussions you have not disagreed with any of the essential elements in my initiative - The Declaration of Health.
I hate to repeat myself, but once again, it is not that we disagree with any of the elements, it is that they, in sum, do not offer a real, comprehensive solution. What about that is so hard to understand?
August 13, 2007 10:31 AM | Reply | Permalink
Correct. Further, when the Congressman says, "Finally, once again, single payer represents the "loss of freedom of choice - something Americans are unwilling to consider" he is just plain wrong on the facts.
The fact is, finally, once again, in poll after poll, between 60 and 70 percent of Americans would favor a single payer type of plan and are willing to pay more taxes to fund it.
August 13, 2007 10:38 AM | Reply | Permalink
I'm extremely pleased that Congressman Kagan was willing to read and respond to comments here. I wish all of the contributers would do so well.
However, the responses from Dr. Kagan were not at all acceptable to me, nor is his plan. His plan appears to be an aid program for health insurance companies. It would use federal tax money to subsidize that industry. That is far from what is needed.
As virtually everyone else commenting has said, what is needed is universal health care for everyone living in this country. That is possible at reasonable cost only with risk pooling, or pooling of the costs of health care among everyone, so those who are lucky enough not to need the services of the health care industry help to pay for those who do. And, we all need to accept that we will all be paying for health care, one way or another. The best way is that which keeps our cost under control and reasonably low, which dictates that insurance companies not be middlemen in the process.
I don't think Dr. Kagan is at all interested in that type of a solution, unfortunately.
Hoppy in Sacramento
August 13, 2007 12:40 PM | Reply | Permalink
If the federal government is the single payer, why do we all have to pay for health care? Why not force the top five per cent, say, of income earners to pay for the vast majority of the nations health care costs? That would go a long way toward solving the “two Amiericas” problem as well…a twofer.
August 13, 2007 3:52 PM | Reply | Permalink
Congressman Kagen,
You write that "Households with annual incomes below $48,000 cannot afford $12,000 - $14,000 premiums."
While it is true they cannot afford them, they still have to pay them. A good friend of mine is a single woman in her 30's unable to buy anything but California's "High Risk" insurance.
She pays $900/ month, or nearly $11,000/ year for her necessary insurance. All her other choices- job, housing, location- are constrained by it. After her low-budget wedding next year the two of them together will most definitely be a household making under $48k paying more than $14k.
(I'd also like to highlight my unanswered question in your essay #3: is your proposal limited to Citizens, or Citizens and Legal Residents? As mentioned there, if the former, then my doctor would be ineligible for the healthcare he provides. Not to mention the US's technology and R&D sectors are filled with immigrants: they are taxpayers and wonderful members of the community, with the same healthcare issues as citizens.)
August 13, 2007 4:53 PM | Reply | Permalink
Probably for the same reason that Social Security has a cap on taxable wages: it was felt that if everybody paid to the last dollar, the program would be viewed more as welfare than as insurance, and the public wouldn't buy into it.
There'd also be problems with people hiding income, as well as the disincentive to climbing into a higher bracket.
August 13, 2007 5:34 PM | Reply | Permalink
I don't want Universal Health Care to become just another welfare program, to be cut back the next time the Republicans win some elections. Since we should all stand to gain a lot by having such a program, I see no reason why we should not have to help pay for what we get. Of course, I would make the cost progressive - higher income people would pay a larger share than low income people, and the truly poor would pay nothing at all.
Hoppy in Sacramento
August 13, 2007 7:48 PM | Reply | Permalink
While, as I say, my strong preference is for single payer but I'll live with other plans, so long as they're truly addressing the notion of universal health care, I was intrigued by an argument in a letter to the Times today. It's not strictly speaking an argument for single payer, as cooperation among insurers and between insurers and providers could get the same result, but it's another interesting indication of a cost saving that could come betst with single payer that I hadn't thought of. It notes the savings in having medical data on any patient readily available, so that mistakes are reduced.
Anyhow, what I can't countenance is the pretence that competition among insurers alone will make insurance affordable to all, so long as pricing is public. It's preposterous.
John
http://www.haberarts.com/
August 14, 2007 10:15 AM | Reply | Permalink
* When of all the essential elements I have presented here this week are in place across the U.S. - Open Disclosure, Unitary Pricing, a Single Risk Pool, Deductibles set at 3% of annual taxable income, and a Renewed Commitment to those in need - UNIVERSAL ACCESS TO AFFORDABLE CARE will exist.
No, it won't. You have consistantly failed to address two of the major problems confronting us. First I think you have confused and conflated universal access with universal coverage. When you say "access" I think many will assume you mean access to a doctor, hospital, or medical treatment when needed. What you are really saying is access to an insurance policy. Not the same thing. This equivocation undermines your entire argument.
In an earlier comment I asked if there would be unversal coverage as well as universal access. You have not answered that all important question. Then I asked how you intended to provide it for those unable to pay all, or much, of the cost - a significant percentage of individuals and businesses - and said parenthetically "don't say tax credits!" Well, you said tax credits. Other posters have outlined well enough why this approach is a joke, to put it mildly.
What it comes down to is your plan is mostly smoke and mirrors and skirts the really core problems. Health care is a terrible example of free market economics at work and your proposals and your "loss of freedom" argument a dodge, as most already have very little "freedom" under the current system to begin with, and the "freedom" thay have is mostly the freedom to go bankrupt.
Further, everytime someone criticizes the obvious holes in your plan you respond with "what don't you like about Unitary Pricing, Open Disclosure, etc." That's just disingenuous. It's not that we don't like these concepts, it's that they just nibble at the margins of a more serious problem, yet you put them forth as some sort of innovative solution. They're not.
Look, we all have access to a Rolls Royce. All we need is the money. Health care is not about "access," it's about providing care for all who need it and paying for that care in a sensible, socially equitable way.
Insurance carriers will have to justify their existence only when we establish an open marketplace in health care.
And what exactly will be the competetion for the insurance carriers in this marketplace? If it is merely other insurance carriers you are asking for trouble and manipulated markets and oligopolies, not a real resolution to the cost issues. If you mean a government sponsored single payer type plan in competetion with the private insurers, sort of a voluntary medicare for all with a sliding scale payment scheme where the truly poor pay nothing and those who can afford it pay their share of the costs, with the difference made up from tax dollars, that's something else. In that case, the private, for profit insurers would really have to justify their existance. But that's not what you've proposed, is it?
August 14, 2007 11:52 AM | Reply | Permalink
"It's preposterous"
That nails it.
August 14, 2007 12:01 PM | Reply | Permalink
I don't have freedom of choice of physician, medication, hospital, or durable medical equipment provider under my insurance plan. They are under no obligation to provide all recognized mainstream specialties.
Either a single payer system, or a tightly regulated (with safety net) multiple payer system such as in Germany or Japan, can allow free choice of physician. A single payer system such as Canada's does allow choice of primary care physician, assuming there are PCPs accepting new patients, but controls choice of specialist through PCP gatekeepers.
To describe the healthcare system as an open market is quite misleading. Classic free markets operate with maximum possible information. While I recognize malpractice and discipline are not adequate surrogates for quality metrics, and marginally so for poor quality, do you propose making the National Practitioner Data Bank accessible to the public, or will it remain restricted to medical boards and certifying organizations?
Open markets set prices based on interaction between buyer and seller, subject to factors such as elasticity of demand. By what economic theory is competition among intermediary benefits managers likely to reduce prices while increasing quality? As others have suggested, the core of your proposal appears to be access to insurance, not to healthcare, the presumed good.
I have yet to hear any explanation of how efficiencies enter into drug development and delivery, including appropriate incentives to research and recognition of tax-funded research, and the overhead of developing "me-too" drugs. What is your position on direct-to-consumer advertising of prescription drugs? Should the cost of marketing be a larger part of the unit cost of drug than was the cost of research and trials? Do you believe that the results of all clinical trials, which may affect approval of drugs or devices, should be public?
--
Howard
*equal opportunity offense to both extremes*
"Those who cannot remember the past are condemned to repeat it" [George Santayana]
August 14, 2007 12:22 PM | Reply | Permalink
The real reason healthcare costs are increasing is the free market.
There is a concept in the economics called elasticity, it is a way of measuring how people react to a change in the price of a good. The definition of elasticity is elasticity=(change in demand)/(the change in price) or (elasticity)/(change in demand) = (the change in price), thus if change in demand = 0 then change in price = infinity. The elasticity of healthcare, at least of emergency care is approaching zero, so hypothetically the price will be approaching infinity. Since there is no such thing as infinite money, health cost clearly can't equal infinity, but they cans behave as if they are approaching it. Mathematically cost approaching infinity would appear as an exponential rate of increase, and that is exactly what the data shows occurring in healthcare prices. It is possible for policies to temporarily reduce the rate of increase, but healthcare costs can never truly be controlled in this manor. It is impossible to control the cost of healthcare so long as it remains in the open market; the laws of supply and demand will inevitably push health care costs upwards towards infinity. The only solution is a system where market pressures do not affect healthcare costs, meaning a single payer system or something similar to it.
Graph of exponential increase in costs of American healthcare
Let's look at what that means in reality. Individuals never, or almost never truly pay for their own health care; a situation which is inevitable when you have a vertical demand curve. So who does pay for it? If you have health insurance from your employer they pay for it. If you don't you'll probably clear out your bank account quickly, then start relying on credit cards or loans. People often borrow more than they would expect to make in a life-time, putting much of it on credit cards or paying a high interest rate because of a reduction in credit caused from the money have already borrowed. This forces people so far into debt they have no choice but to declare bankruptcy, and by that point they have no or few assets left, so the bank and/or the credit card companies end up paying the bill. The people who do have the kind of money it requires to pay for their own health care almost always have it invested in the stock market, they would take the money from the stock market, then start borrowing money. You cannot get blood from a stone; individuals almost never have the money it takes to pay for their own health care, so one way or another someone else ends up paying for it.
If individuals aren't really paying for healthcare, the money just passes through their hands as it goes from one point in the economy to another, who is paying for it? The answer is Visa, banks, and corporations. The result is increased interest rates, which reduce investment and slow the economy overall. We are already paying for healthcare collectively; the money is essentially being deducted out of the economy at random, and in a way that is much more likely to cause an economic slow down than if the money were taken out of the economy in rational & predictable fashion by taxes.
A divide by zero equations in such a crucial sector of our economy is extremely destructive both socially and economically; as is seen in the level of medical bankruptcies and the humanitarian crisis which our health care system has created. Excessive healthcare costs increase interest rates outside Federal Reserves control, reduce investment, and weaken the economy as a whole. Using taxes to pay for health care is better for the economy because taxes can be structured to take the same amount of money from the economy, but allow control over where and how the money is deducted, minimizing the effect on economic growth. The zero elasticity of healthcare makes it a market failure.
Tax credits won't solve this, if anything they will make the situation worse because the rich will have more money to spend on healthcare so prices will go up further for everyone. To achieve your goals healthcare must be taken out of the open market.
Another interesting fact about the elasticity of healthcare is the zero elastically applies only to emergency care, not primary care. If it won't kill you and/or you're not in horrible pain you won't go to the doctor if you can't afford to. Our current system forces patients to wait until a condition has become life treating before seeking medical care. How does that make sense?
August 15, 2007 11:08 PM | Reply | Permalink
How does that make sense?
Of course, it makes no sense. Neither does Congressman Kagen. By the way, where did he go? It seems when the commenters got to the meat of the problem and the defects in his thinking, if it can be called thinking, he's gone. Hmmmm.
August 16, 2007 11:00 AM | Reply | Permalink
Correct mjshep-
The good Congressman did get the support he was looking foron TPM Cafe Blog so he bailed on us rather than modify his ill conceived #4 point plan
Oh Well
Rick Lippin
August 16, 2007 5:39 PM | Reply | Permalink