A Radical Proposal

Why are we always told that to give health care to people will raise taxes yet to spend hundreds of billions every year for Iraq can be done along with (regressive) tax cuts?

A note on abbreviations:

h= health

hc = health care

hcp= health care providers: docs, hospitals, nurses, pharma industry

ins= Insurance

sq= Status Quo

mkt pwr= market power

http://www.guardian.co.uk/Iraq/Story/0,2763,1681119,00.html

http://www.rollingstone.com/politics/story/12855294/national_affairs_the_2_trillion_dollar_war/print

has: “that includes the government's past and future spending for the war itself ($725 billion), health care and disability benefits for veterans ($127 billion), and hidden increases in defense spending ($160 billion).”

Other analyses of the Stiglitz study clarify that hundreds of billions in costs are being incurred by destroyed physical capital like humvees and other vehicles, including helicopters that are downed. It is clear that none of the budgeting we hear about takes into account one penny of the value of destroyed trucks, machinery, and weapons we will have to pay to replace.

Take $125B/yr as total War in Iraq costs. It can easily be more, and this says nothing of expenditure in Afghanistanl; note this entire analysis assumes the US involvement in Afghanistan goes on at the same level of engagement as it is today.

Health care costs 7-8K per person in US.

Use more conservative #'s to say it wouldn't solve the health care crisis to get out of Iraq & redirect the $, Say we say 10K per person, and only $100B /yr. that's 10 m people covered.

That's not yet including any gov mkt power to reduce costs. (a single buyer or major buyer in a market will effect a reduction in price to the extent their sellers - the producers - do not also have comparable market concentration aka monopoly power)

Military spending is minimum 5-600 Bn, so trimming it 30-40% would (combined with 0 spending in Iraq) cover health care for the other 35m currently uninsured.

Note there was no change in taxes here.

Trimming this % Non-Iraq Military Spending would even have to be cut are conjunctive policies of (1) govt using its mkt power to get lower prices in nearly every type of health care and (2) There is a buyer (govt) and a seller (direct providers: hospitals, docs, nurses, pharma companies) so there is no need for a middleman (the health insurance company). So all money spent (by policy holders in s.q.) that becomes their profits, advertising, and labor costs would be saved by the buyer. Payouts by the Insurance co's that had gone to docs, hospitals, pharma, would not be part of the savings since those payments would still have to be paid.

Taking (1) and (2) together, there are several reasons the 7-8k/ person currently paid for health care would be reduced. Say it becomes 5k.

($100B from Iraq + $200B from military)/ $5k = number covered --->60m...covering the 45m uncovered + $ to improve conditions for underinsured and shore up catastrophic coverage, or even natural disaster protection eg Katrina.

To this point we've got the uninsured covered w. no change in taxes. Nothing has changed for the 255 M who already had coverage.

THE PAYROLL TAX

Now what if we give those 255M people the option of not spending the (avg) 7k for insurance and instead paying (avg) 5k for the govt program (In taxes, net of medicare payroll taxes already being paid). This would most likely be accomplished for each person opting into the new program by having their payroll taxes, which currently total 13% of their pay and go toward SS, unemp, disability insurance, and medicare insurance, would increase several percentage points. If we wanted to ease the burden on lower and middle classes, the cap on payroll tax by income would be raised and preferably removed entirely. This idea in brief:

Currently payroll tax of 13% is collected only up to 90K of income.

Person A makes $9k per year $9k*13%= $1,170

Person B makes. $ 90k per year $ 90k*.13=$11,700

Person C makes $900k per year $900k*.13= $117,000

Wow, $117,000, thats a lot of revenue from person C. Too bad under s.q. the Gov't never sees a dime of 90% of it since the payroll tax is currently not collected for income earned above 90k. That means under the current system Person B pays $11,700 in payroll tax and Person C pays the exact same $11,700 in payroll tax, just as they would if they made 900 Million per year. $11,700.

It's not hard to see how this reform (removing the cap on taxable income for payroll tax collection) could go a long way towards easing the burden on Person A and Person B if Person C now actually does have to pay the full 13%: $117,000

Now with single payer a $5k cost rather than (conservatively) a $7k / person cost. We have 300 m people . 45m we just paid for.

255m left. Multpily each by the $2k saved, you get$ 500 B . This will either be a saving in total spending or if the full $7k/ person is collected by the govt, it's More than enough to build the army back up, after mkt forces adjust down the price of health care due to (1) and (2). If they only want to let people keep $200B of this savings, they more than make up for the cut in military spending, so that can be restored. If they didn't let any savings flow back to the people, even Iraq cd also be maintained. Lets say they let people keep the savings. Instead of an avg $7k paid to insurers, much of which goes to the hc providers, they pay $5k to govt. So taxes have gone up but they save overall$ 2K on avg.

Private, no change from S.Q. option open to however many millions of Americans like their hc:

To make it palatable the first announcement to the public could be if you like your private insurance, keep it. While the government is totally bypassing the middleman, let anyone who wants to pay the toll of the insurance every month to have a company dedicated to keeping the hcp from delivering hc to a patient continue to do so. This interim phase would of course mean not a total immediate die off of the health insurance industry but a slow contractionary period of indeterminate length at the start of which it will have had its customer base drop by at least 2/3.

Relative to the hundreds of billions discussed here, a small amount will have to be set aside (similar to what's called trade adjustment assistance) in funds to get the hc insurance employees back into the workforce, even giving them free training, certificate programs, and education choices. Keep in mind while the near-total dissolution of the h. insurance industry is likely eventually in this scenario, there are other types of insurance jobs these workers could pursue, including car ins, home - fire, earthquake, etc. ins, renters ins, life ins. Not only that, some could be given preference to join what will have to be a somewhat larger beurocracy and become govt employees coordinating delivery of health to patients. This could be quite liberating for them to be in a job where anything doctors say a patient needs is done as opposed to their previous position that earned more profits for their employer to the extent procedures and medications were denied to patients.

Note that (1) above is automatic; single buyer (monopsony) from many sellers has the mkt pwr to effect a lower price just as a single seller (monopoly) to many buyers has mkt pwr to raise price.
But (2) would require a conscious policy to go around the middleman.

QUESTION:

So my question for you is, can you advocate such a plan or argue against it?

In terms of arguing against it of course there are opportunity costs, since this started with a cut, at least a temporary drawdown in military spending. Remember though, to whatever extent (1) and (2) reduce costs, and those reductions are not simply returned to the taxpayer, that money could be used to build the military right back up. In practice since it takes so long to overhaul the military up or down, by the time the year is over and the money has been restored, the drawdown would have only partially begun. Perhaps on the expectation that the tax revenue will be rolling in this year, funds could be moved around to have no drawdown whatsoever. But we also said spend much less money in Iraq to do this. Since Iraq is going to have direct costs of about $150B/yr and we used as a # from that source only $100B/yr, we'd have to maintain any activities there on just the remaining $50B/yr. If we can do our business there on less that $50B that money could be used domestically as well. So are there consequences from any of this policy as described? What are they?

Finally, is it radical? Relative to what the power elite (media and politicians) have ordained as mainstream U.S. politics, it is certainly borderline radical at the least. However, since every developed country in the world besides the U.S, does see hc as a human right rather than a privilege and does have a national hc system it would from a global perspective make the US s.q. radical if systems like Sweden, Britain, etc. are the standard for the entire Western Industrialized world.

Comment From L. Moglen, Attorney

Comment, the anti-illegal-immigration folk (including me) will see this as further impetus to draw Latinos north. Since many of them do not report income, they will have free run of our health care system at yours & my expense. They have already overwhelmed the emergency care units. They are poised to take down the free care for all system by shear multitude.

D. Moglen's response:

The Immigration issue, while I'd lk to take the time here to argue a system of legalizing hard workers and therefore makng sure they pay Both the Payroll And Income Tax, to be brief if they have a false SS number reported the govt is withholding payroll tax. Whether they get all or only a part of it back will vary by person, certainly in the SS portion of the payroll tax excess billions pour in every year from people with false SS #s and these people most likely will never receive SS payments. So whether illegal immigrants are paying the 17% or 13 % or whatever the payroll tax is at the time is again an issue of IRS Enforcement strength and priorities.

In other words, if they work and if we’re watching employers closely enough to make sure wages are reported, payroll tax withheld each month and sent to the US Treasury, those folks will through this tax or through savings outlined in the plan pay for their own care. Non-working folks who get emergency care will be a burden, but keep in perspective the total percentage of illegal (let alone legal + illegal) immigrants who are both not working and illegal. People come here to work. It is a very small percentage who come here seeking only emergency medical care.

IIlegal immigrant criminals raise the question of deportation, and how can it be immediate. Injuries incurred on US soil in these incidents will be a small cost in the scheme of the money being discussed here, especially if deportation occurs expediently. Expediting deportation for undocumented criminals should be a priority.