The challenge of health insurance reform

February 26, 2009

Diana Furchtgott-Roth–Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. The views expressed are her own. –

Today President Obama submits his budget outline to Congress, and, with it, a $634 billion fund for health care drawn from higher individual and small business taxes and lower reimbursements to medical providers.

Reform of our health care system is long overdue.  If you’re unemployed, or work for a small business that offers no health plan, or someone in your family has an existing illness known as a “pre-existing condition,” your main concern might be how to get health insurance.

As Obama said on Tuesday night in his address to the nation, “We can no longer afford to put health care reform on hold.”  But setting up a $643 billion fund and raising taxes in the middle of a recession isn’t necessarily affordable either.

In testimony yesterday before the Senate Committee on Finance, Congressional Budget Office Director Douglas Elmendorf presented options for controlling health care costs.  He warned that “reducing or slowing spending over the long term would probably require decreasing the pace of adopting new treatments and procedures and limiting the breadth of their application.”  That’s rationing by another name, not a comfortable concept to Americans. (To read the testimony in pdf format, click here.)

Mr. Elmendorf pointed to the current employer-based health insurance system, where health insurance premiums are untaxed income to workers, as one of the main causes of price increases.  He suggested replacing the tax exclusion or restructuring it, so that patients have more incentives to control costs.  In that way the purchase of health insurance would be similar to the purchase of home insurance or auto insurance, services that consumers appear able to purchase without major problems.

President Obama has said he will consider all proposals.  During his campaign, the centerpiece of his health reform effort was to set up a new health insurance plan, similar to the Federal Employees Health Benefits Program. It would be open to all, with “affordable” premiums and co-payments.

In addition, he proposed a new National Health Insurance Exchange to set standards and regulate private insurance underwriters. Those who could not meet the standards would close.

In a third provision, some employers who offer health insurance now would have to pay higher premiums in order to raise benefits to the level of the new public plan.  Those employers who don’t offer health insurance would be required to pay into the new plan, a new tax.

One way President Obama proposes to save health care dollars would be to encourage or require doctors and hospitals to use electronic health records.  Although privacy concerns have stalled this effort, it could save billions of dollars a year in medical error.  The stimulus bill allocates $20 billion to this effort.

Yet setting up an electronic data base raises many questions.  Can people opt out of the national database?   Should the federal government or individual states mandate one type of standard that can be shared between institutions? Can private companies be allowed to compete among themselves to offer the most convenient method to the medical community?  These questions need debate.

Obama plans to fund his $634 billion fund through higher income taxes on those making over $250,000 as well as limiting itemized deductions by 20 percent. This would be a substantial increase in tax for those households, as well as for small businesses who file under the individual tax code.

Yet even these numbers might be understated.  The insurance program for federal employees is of a higher quality and more costly that typical private-sector coverage.  Expanding health insurance and providing better care costs more money, not less.

Everyone agrees that health insurance needs to be easily accessible and portable, like auto and home insurance.  The question facing us is how to get there and how to pay for it.

Diana Furchtgott-Roth can be reached at dfr@hudson.org. For previous columns, click here.

39 comments

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Here is a solution. We all are rewarded for economic suicide. The insurers and government pay a bonus to those who are too costly to cure for their families. You do not kill a person only with a weapon. You kill them when you prevent them for saving themselves in some cases of have decent quality of life.

The average American that was employed years past when we had major corporations may have paid 30-35 years before retirement for insurance he or she did not use nearly at all. Then they were dumped into Medicare. Today insurance is affordable to only a few. Whether they are young, single, or married or with children.

Can there be equality in a country where only the best treatment is afforded the few who could purchase it outright? And, pray, who or at what income could a person afford an illness, one that requires hospitalization, and recovery and good technology, without affordable insurance? Perhaps only millionaires.

Have you been sick, or spent time in a hospital and watched? Why have good drugs if we cannot afford them? Let no conservative talk to me. No one wants anything for free, they just want to afford it. At a reasonable cost. Who in God’s name wants to be sick? More than half the Senate and those on think tanks probably have not walked the walk, obviously. For themselves, or a dear one. If sick they could take the longest leave of absence. Many could outright pay everything else at the Mayo Clinic without insurance.

How much profit is enough for medical providers and pharmaceuticals? Do you know how much administrative overhead there is? How many people milk the system? Lets put the horse before the cart. Today the overhead of Profesional Association and specialists with 20 secretaries cannot answer your call. And those doctors, pledged to their patients have to spend their staff time contacting insurers even for prescriptions that require validation.

One would aspire to have insurance for oneself or one’s family to cure them and save them, and if impossible to give them a peaceful death. I thought that was America. But are we going to reward good health? Should for example a Jacqueline Kennedy, whom we knew to live a healthy life, if it were not her be punished if she got brain cancer?

The larger the base of healthy people, including the elderly and children, the majority of whom do not have major health problem, the more money whatever insurance means there are the better we would be.

Posted by G.Cardoso | Report as abusive

Here we go again, expecting the government that created most of the problem, now has the wisdom and backbone to fix the problem. Consider FDA regualtions that drive the cost of medicine to unbelieveable levels, then FCC rules that allow the pharmacuetical companies to advertise medicines that require a presrciption to obtain, which of course requires a visit to a doctor, who invariably will require a series of tests, so that he does not risk getting hit with a malpractice suit. This takes us back to the government that has passed laws permiting treble damages, and civil lawsuit settlements that are totally out of control, so that the Insurance companies get to collect their nice fat premiums for malpractice insurance, from the doctors who are getting paid by the insurance companies for all of their precious time and tests. Let the government fix healthcare? I think our government has messed it up enough.

Posted by Bill Geiger | Report as abusive

I’m not a smoker but here it is: Jaqueline Kennedy was a smoker and who knows if she did any other drugs we don’t know about.
I don’t mind paying for universal health care if it is well-thought out and well applied. I don’t mind paying for the health care costs of smokers because I know beforehand that the price paid by each pack of cigarretes purchased is almost totally tax money that federal and states governments place upon it. So we are already using tax money that smokers give in revenue. Even the people who only eat fast food pay taxes on their food purchases. People anywhere, regardless of their sexual behavior sometimes, are at risk of getting a venereal disease because not all VD’s are sexually transmitted (blood transfusions, for example), so it is a concern to us all to help as many as we can because viruses don’t care if you pay your taxes or not.
The fact remains that people interact with one another. It can’t be avoided. It’s part of life. And sometimes you can’t help being affected.
Why should I pay for another’s health care or irresponsible behavior: Because if you don’t live in a box, completely separated from everybody, you will always be affected. It’s basic social responsibility. You can’t detach yourself by saying “but the others…”. With public health, it doesn’t work that way. I can apply the same reasoning to the water and sewage system.

If left to the private sector entirely, we’ll again be in the position that 19th and early 20th century americans were in. Not a sobering thought, given the rampant epidemics of the time.
I fear, though, that the importance given to electronic records may be just another lobby worming its way into the deal to get federal money and a profitable federal contract. Less garbage surrounding a good Public Health Care Plan and the deal has a good chance to be approved by the overall majority of the american public. And be efficient.

Posted by Dan | Report as abusive

Within the next few years Americans are going to be forced to grow up – the hard way.

Posted by Bill | Report as abusive

What the government needs to implement is “Medicare” for the masses. It would give basic coverage without underwriting, and if individuals want more extensive coverage an employer could provide a supplement that would cover the gaps in coverage, or individuals could purchase it from a major insurer. Also, the politicians need to help fund Rx research to help keep the cost of medications down, so people don’t spend their life savings on medications needed to survive.

Posted by lance | Report as abusive

The number of people who have no health coverage, neither an HMO, nor medicare or medicaid, will show an increase when the next Commerce Department–the Census Bureau’s–report in August is presented to the Public. Today the report claims that about 46 million people are without any coverage. Yet we seek to make money by buying stock interests in “for profit” HMOs. In other words, we like to make money by being sure that people who can’t afford to buy insurance are kept down at heel. It’s hard for some of us to adjust to that.

I know that we are our brother’s keeper but I, and a few others, are in the minority–especially when some say it’s OK to make money off the suffering of others.

If, on the other hand, we passed laws making it illegal to have “for profit” HMOs, we would be taking a significant step towards making health care affordable, (I wonder why health care has to be “affordable”) for more people.

Dan Kanoza

C

Why not have the same health benefits given to us that we provide for our employees? (The politicians)
I can just about guarantee that if they had the same insurance as ours, things would improve quickly!
Can you imagine this conversation, “Sorry, Senator, you have to wait in line like the rest of us, and your co pay is $.”
(Remember the port a potties they had out for the inauguration this year? Who got the best ones? Taxpayers or our employees?)
Maybe we should ALL be politicians long enough to get the benefits??? (kind of like the draft)

Posted by Jane | Report as abusive

I am a small business owner. Let’s see right I am involuntarily paying for 4 health plans 1.family health insurance 2.Medicare(Ponzi’s) 3.Low income health insurance 4. employee’s. On top of that, I pay copay, deductibles, with a 1 million dollar lifetime cap. (which means if(knock on wood)something happens I need multiple surgeries and treatments it will easily be exhausted) Now you want to increase tax when my business is struggling. And how many more small business are closing as I’m writing this comment?
Hmmm, how about this for a change– force the big insurance companies to lower their profits, and make it illegal for them to be a public traded companies. How many billions of dollar BCBS, UnitedHealthcare, Cigna were making and I don’t have the mention the pharmaceuticals. (only in America) Don’t come up with a fake universal health plan that not truly helping everyone, esp when the sole winners are the insurance companies. (even the Canadians systems make more sense) Corruption still lingers, tackle the fat cat that’s causing all these problems in the first place– HMOs and the pharmaceuticals.

Posted by Yo | Report as abusive

The best thing that you can do is protect your health with education, independence, and self determination. Exercize, a healthful diet, plenty of water, a wholesome lifestyle, nourishing relationships and caring for yourself: this is not only good for you and your family; it is good for the entire society. Everything that the human being needs is organic to planet earth. You just need to find it.

Start with your own garden. You will be amazed at what this small creation will do for you.

I think the problem is so basic that most people aren’t seeing it. As long as medical care is only concerned with profit then those deemed unprofitable will suffer. Namely those who typically need the help the most, unless they somehow happen to be lucky enough to be well off. Profit isn’t concerned with making people healthy, although that is a side benefit since it is a medical industry, but as soon as you become an inconvenience to that profit margin then you are kicked to the curb. How do you produce a competitive industry that is concerned with profit, and yet tell it to be open, fair, and do whatever it takes to help their patients. I don’t think it can be done. Unless the medical industry is over hauled to be a benefit to its people without regard to profit then there will always be losers.

Posted by Chris | Report as abusive

I’ve got a suggestion – introduce universal health care and eliminate the health insurance rip off and the multiple layers profit taking at the expense of the person needing the final service. That is why health costs are so high in the US and many people cannot not get access to the most basic health services. I have grown up in several countries that have universal health care – it may not be perfect but anyone can access services and if you do want to pay for additional services you do have a choice.

Posted by Nexus | Report as abusive

I’m 30 years old and live in IL. I have no health insuranceand don’t need any. I live a pretty frugal life and hopefully will continue to be healthy. Thank God.

Barack Obama should have started small and went with a strictly childrens universal healthcare plan. I’ll support that but not this bureaucratic, special interest charged junk.

Universal Healthcare is not neccesary in America. Higher accessability and fairness and accountability should be the priorities that the feds should focus on. If they did a better job of taking care of those things then healthcare would be alot cheaper.

Posted by Jose | Report as abusive

It’s immoral to force Peter to support Paul, regardless of Paul’s need and regardless of Peter’s ability. Support of universal health care is using the government to steal from Peter for Paul’s benefit. This “problem” is government created, and the solution is for the government to get out of health care and leave it to the free market. Consider, when the government wasn’t involved doctors made house calls. Support for universal health care is immoral – anyone supporting this should be ashamed of themselves (as they are asking to take money from others for their own benefit rather than taking care of themselves). Charity would do a better job of taking care of the poor. We’ve too much of the attitude that government should take care of us.

Posted by ForFreedom | Report as abusive

We’re all going about this wrong way. Health care cost is increasing so let’s find a way to pay for it? Lower the cost!!! Our hospitals and big pharmaceuticals are charging 5~20 times of other countries. Are our doctors and drugs that much better? Is that why we are the sickest country in the world?

Pharmaceuticals always argue that their drugs are expensive because they’re spending into research. Into what? Boner pills like Viagra, hair loss drugs, and cosmetics is what they’re mostly investing. Drugs that can make money. All the life threatening illness are being researched mostly by private foundations.
Everybody’s mad at the insurance companies. I’m sure they’re part of it but the root of the problem is the hospitals and pharmaceuticals.

When my wife was pregnant, our doctor… who also happened to be the director at the hospital was suggesting amniocentesis. It’s a test to find out if the baby has any genetic disorder before they’re born. But what she did not mention was that the test itself has small possibility to cause the disorder. When I asked her about it, that’s when she admitted it and said she “forgot” to mention. Thank goodness I researched it before we went in. I can’t accuse all doctors but many of them have become low life salesmen to sell procedures. Reform must happen at the hospitals first.

Posted by Brian Choi | Report as abusive

Dear Sir:

We use to be middle class now we’re a members of the working poor, here’s why. Our co-pay for 18 yes 18 is all we get for a 90 day supply from Carenot which is what we are required to use is $177.32, my husband’s company pays $413.75. This is for Imitrex Spray, I find it hard to believe that those 20 mg actually cost $591.09. I have to pay extra for shipping and handling.

That $177.32 is about what I bring home in a week from one of my jobs. My husband works nights so we don’t have to have a babysitter, like a lot of people. I remember when I didn’t have to work because my husband made enough money to pay the bills, now the bills are just to much.

I can’t remeber the last time we went out to eat, bought new clothes, we’ve don’t go anywhere on vacation. We just work to pay the bills. We live in Michigan, I wish Jenny would come home to the block and work for her living.

Posted by Liz | Report as abusive

I understand that healthcare is expensive. I live in Utah and bill 188 just passed. I’m not sure how I feel about the state being involved in healthcare reform. I wonder how it will be paid for.

Jared Balis
Utah NetCare Specialist

If you think single-payer makes sense, read this article from New Zealand: http://www.nzherald.co.nz/nz/news/articl e.cfm?c_id=1&objectid=10575739&pnum=0

“Immigration New Zealand has told one pregnant woman that – despite her financial stability – she would ‘be putting an additional strain on our already short services’, which the department claimed were ;stretched in most areas of the country’.”

The government of New Zealand had to hire my cousin (a newly-minted psychiatrist) on a 6-month contract, because few doctors actually want to work in such an environment.

As screwed up as our health-care system is, single-payer is worse…

Posted by Ron | Report as abusive

We need more agressive education on preventive health care and eating right, excercise and the like. Healthy living should be rewarded and junk foods taxed.

Posted by Carol | Report as abusive

Just read the article and some of the comments. It’s seems to me that we forget that we are all paying for one anothers’ health issues. If a family goes bankrupt because of overwhelming medical cost, or a person recieves emergency care knowing they can not pay, or a person dies because they didn’t recieve preventive care, we all pay. We pay a price either through higher taxes, higher insurance cost, or the emotional strain of knowing we can not afford or own health care. It seems a universal program would help to, if not completely eleviate some of these issues. And when we talk of losing choices of care, I just don’t see it. Besides, you are already being force to use the service your provider deems needed, and to further your providers power, you can only use doctors they deem worthy of being on there list of of caregivers. So, you really don’t have freedom of choice to begin with, other than finding another health insurance company. I don’t know about the morality of health care, but I do know in a civilized country we take care of one another. I don’t want to live in a nation which would turn a person away from medical service if they broke there arm, just because the injured party could not pay. And it goes even further when you consider many health conscious, well meaning individuals are stricken by illness and disease by no doing of there own. Another option would be to regulate health care cost. I can’t understand how one doctor can charge my insurance $180. for a doctor visit, and another can charge $85. for the exact same visit. There is obiously some unscrupulous behaviors going on here. At least when a mechanic works on my care I know what I will be charge per hour and that I will not be charge the highest amount the machanic think I cab pay.

As stated, this is not an easily solved issue. But, it is solveable. The problem is, as it always is, there will need to be changes made and everyone will not be happy. But, if the overall consiquence is a more civil nation with less coruption and money involved with personal health care. Then the difficulties will be worth while.

Peace and Love……

Posted by Phil | Report as abusive