Lonesome Hobo Economics: Who Should Pay for Universal Health Care?


7-29-09, 9:04 am

  ...but I did not trust my brother I carried him to blame Which led me to my fatal doom To wander off in shame...

Bob Dylan, JWH, Lonesome Hobo 1967

We all should, right? Or, shouldn't it be free?

These two sentiments, both of which I favor, flow from different aspects of the topic question. No one wants to charge a rich man a higher price for an appendectomy than a poor man. Even if you morally approved soaking the rich, you would have to acknowledge the dangerous exploding 'fee schedule' that results often in more, not less waste, and worse health outcomes. Thus it seems to me  the price of the appendectomy must be equal, regardless who gets it. Zero is a nice round number for what should be a public good. We don't charge for lighthouses, nor should we for health care at least as good as that obtained by Senators and Congresspersons.

The principle argument against a 'zero' price is that it creates an incentive to abuse healthcare. A 400 pound smoker seeking liposuction surgery comes to mind – the subject of a real-life controversy in the UK national health care debates of a couple of years ago. The UK national system argued that such surgery involved much higher risk of complication – and costs – and had refused to allow the surgery. However there are many very good and healthful medical procedures whose universal use should be encouraged, that will go underutilized because where pricing is a disincentive. So I favor abuse being restrained administratively rather than through pricing:  panels of medical experts overseen ultimately by legislative authority, for example.   Of course medical care is not really 'free.' But neither is a decline in public health 'free.' Increases in public health return a positive economic value in terms of greater productivity and less per person cost. Further, while the political debate focuses on the medical system costs and delivery, we all know there are many environmental, economic and cultural factors that also bear upon the ultimate state of 'public health.'

Currently costs are paid for in a number of ways: employer paid insurance, personal paid insurance, Medicare (taxes), Medicaid (taxes), tobacco taxes, etc. Although very few employer provided plans have first dollar coverage, and they cover a declining percentage of all US workers, there is currently no tax on them. Effectively this is a fairly large federal and state subsidy of employer based health care costs. But proposals to have employees pay taxes on their medical benefits could easily result in a net drop in disposable income for many, although there are a lot of variables in the mix that will affect the bottom line positive or negative impact on the standard of living of most working people. In principle a single payer system funded by a progressive income tax seems fairest. 

It appears the road to the single payer system will not be one in a single conversion. There are just too many systems interlinked with varied payment and delivery responsibilities to really 'start from scratch,' which a single-payer system will require. A key question surrounding the 'public option' thus becomes: is it large enough and strong enough to drive the necessary structural cost controls through demoting the 'fee schedule,' exploiting economies of scale in administration, and paying for health outcomes that work, not just the latest unproven gadget that costs $100,000 per use.

If the public option can exercise leadership, then folks will vote with their pocketbooks and the crooked path to a quality, more efficient, national health care system for all, funded on a progressive income tax will get us there as surely, perhaps even more surely, as the straight and narrow.

Of course the public option may fail in favor of a quasi private system, bounded by very strong regulations, as in the Netherlands.  

How do you see your way through the maze of pros and cons? I choose calculating the simple pros and cons and their impact on your bottom line  income. Health care costs for uninsured and under-insured people are the main cause of personal bankruptcies – so one has to take that into consideration in weighing it against a possible net tax increase. Count the average cost of any benefit as income. I am going to be scoring the various bills contending for the 'health care reform act' of 2009, including the cost of doing nothing, right here in the Lonesome Hobo column. 

Thumbs up will mean – your income is going up after the bill; thumbs down means – we will be poorer after the bill.