When Donald Trump supported a single payer approach--before he opposed it--he recognized that unless and until we are willing to let people die in the street, healthcare costs are something for which the entire nation is ultimately on the hook. If, at the end of the day, we are all going to wind up paying those costs, it is the cost structure itself that should be the focus of the healthcare discussion, rather than legislation that does little more than shifting costs and risks from one place to another.
Problems began for participating insurance companies when fewer healthy individuals signed up than projected, undermining the expected economic balance of the program. The January executive order validated insurer concerns over the political risks inherent in participation in the newly created healthcare exchanges, and further undermined the economic tradeoff, leaving insurers with the prospect of losing the upside of original bargain--the young, healthy customers who would get back far less than they paid in--while still on the hook for the higher cost populations they were obligated to underwrite. The prospect of terminating the subsidy payments to insurers--as Donald Trump reaffirmed this week--promises to be the last straw for participating insurance companies; if the January executive order constituted two bullets to the chest of Obamacare, the termination of the subsidizes looms to be the bullet to the head.
Public education, for example, is funded primarily by property taxes at the local level, and household funding contributions reflect differential wealth levels across a community, as calculated by home assessed values. Payment of those taxes by all homeowners is compulsory, and no consideration is given to whether a household has many children or no children; whether those children attend public schools or not; or whether a child has special needs that place a greater cost burden on the school district.
We have similar systems of cross-subsidization of service costs at all levels of government. Most obviously, on account of the progressive federal income tax, wealthy Americans pay the lion's share of federal taxes. According to the Congressional Budget Office data, the top 20% of taxpayers pay 69% of federal taxes, and the top 1% pay 25% of all federal taxes. Taking into account the distribution of taxes paid and direct services received--according to a Tax Foundation analysis--the federal government redistributes $2 trillion annually from the wealthier 40% of families to the less wealthy 60%. Similar transfers of tax dollars across populations are inherent in our public finance structure, including from wealthier, predominantly blue states, to less wealthy red states through the federal budget, and within states from urban centers to rural communities.
At a much publicized town meeting in early May, Representative Raul Labrador (R-ID) caused an uproar when he asserted--in response to the suggestion that the healthcare bill passed by the House would result in millions of families losing access to health insurance--that "nobody dies because they don't have access to health care." The next day, Labrador explained his response by pointing out that federal law requires that hospital emergency rooms treat anyone who shows up with a serious condition, regardless of ability to pay.
GOP obsession with the individual mandate as a fundamental violation of individual liberty ignores the fact that healthy individuals are already compelled to participate in group health insurance provided by employers. The notion that individual participation is part of a broader programatic structure that shifts costs and risks across populations is also nothing new. As noted above, we transfer costs from one group of people to another all the time. In the healthcare sector, in particular, funding for Medicare, Medicate and veterans healthcare--which now comprise 50% of National Health Expenditures--are funded from broad based tax revenues.
In addition to those direct expenditures, we provide massive public subsidies to the private insurance market though the tax deductibility of employer-provided healthcare. When Obamacare added tax credits for individuals, in conjunction with the individual mandate, it was simply leveling the playing field. While it is reasonable to argue that the individual mandate is inappropriately narrow in scope--as it essentially constitutes an income transfer from people in their 20s and 30s to people in their 40s and 50s, through age 65, when they become eligible for Medicare--it is not inherently different than the myriad other ways that we transfer costs and benefits across populations. In particular, it mirrors those programs, such as Medicare and Social Security, that are funded on a life-cycle basis, wherein people pay in when they are younger and receive benefits when they are older.
As Donald Trump has pointed out, healthcare is more complicated than it might seem to be. The underlying problem is that at the end of the day—unless we are going to let people die in the streets—healthcare costs are something for which the entire nation is ultimately on the hook. Given that is the case, Congress cannot pretend to have provided a real solution if all it has done is to shift costs and risks from one place to another.
Read it at the HuffPost.
Follow David Paul on Twitter @dpaul.
Artwork by Jay Duret. Check out his political cartooning at www.jayduret.com. Follow him on Twitter @jayduret or Instagram at @joefaces.