What The Task Entails For Health Care Reform Legislation (Part One)

[JimofPennsylvan]

The current debate on health care legislation has become a massive debate, the public commentary on what the country should or should not be doing has been overwhelming, and it has become really difficult for ordinary Americans to determine what is right on the issues. The following is a sensible, principled and clear thinking analysis of this whole debate with an emphasis in identifying the right answers on the major issues.

I)
As many commentators have underscored the health care reform legislation (hereinafter “HC reform legislation”) must not harm and must preserve the employer sponsored health care insurance (hereinafter “employer HCI”) system that our country presently has. Most people that have employer HCI are happy with it and if we lose employer HCI in America, American families and American governments will have to pick-up the tab and this will be another financial burden on these parties that is too heavy for them. To be succinct, employer HCI is a super precious asset of America, this Congress and President must not damage it.

One Part One)
To preserve employer HC, the Congress must do the following. The Congress must not touch the tax-benefits flowing to employers with respect to employer HCI from the present system. Some commentators are calling for elimination of the deduction now accruing to employers where they can deduct the premium costs they pay for their employee insurance which reduces the income on which they pay taxes; these commentators want to use the elimination of this employer tax benefit to raise money to pay for the HC reform legislation.. To touch this tax benefit would be a colossal blunder because it would increase employers’ costs for providing HCI thus increasing the pressure on employers to drop employer HCI. Good judgment calls for the conclusion that there is no opportunity here at all on the employer tax benefit to raise money to pay for the HC reform legislation. The politicians that are responsible for passing HC reform legislation that tampers with this employer HCI tax-benefit which presently exists will pay a price for their culpability, the American people will not forget these politicians damage to America’s precious asset in their employer HCI system come future elections.


One Part Two)
The other area connected with the employer HCI system where politicians want to raise money to pay for the HC reform legislation is in the area of the tax benefit accruing to employees in regard to their employer sponsored HCI, currently the premium cost employees pay on their employer sponsored HCI is exempt from the income figure on which they pay federal income taxes. Some politicians want to do away with this exemption and not just for wealthy Americans and use the tax income generated to help pay for the HC reform legislation. This is a disastrous idea because as a practical matter if employees have to start paying taxes on the premiums they pay for employer sponsored HCI many of them are going to be moved to drop their employer HCI because many of them probably don’t like coverage limitations of their employer HCI to begin with so if you couple the fact they now have to pay taxes on the premiums that will be sufficient pressure to move them to seek private HCI and when sufficient numbers of employees come to this decision point employers are going to start dropping employer sponsored HCI because their premium costs will likely significantly increase and become unaffordable as the number of participants in their employer HCI plan drop and their HCI insurance company underwriting department significantly increases the per employee premium cost because the pool of the insurance plan participants is smaller so there is lesser number of people to spread the overall cost to the insurance company for providing the HI plan. To be succinct, if politicians touch the employee tax exemption for HI premiums for anyone other than wealthy Americans they will be significantly damaging the current employer sponsored HCI system and that will be unforgivable. Prudent politicians would conclude if they make this misstep the American voter will make them pay and pay dearly in future elections.


II)

Outside of the major goal of the Health Care Reform Legislation to provide affordable HC insurance to uninsured Americans and to Americans that are being overwhelmed by the cost and/or coverage inadequacy of their current HCI plans the next major goal of this reform legislation is to pay for this extension of HCI created by the reform legislation. There is many good ways to pay for this legislation and it is pretty clear that because of the enormous cost of this HCI extension of coverage (which is probably around $1.5 trillion over ten years) the reform legislation will have to contain many revenue raising mechanisms.

The reform legislation needs to mandate a financial charge on employers who either drop or don’t provide an employer sponsored HCI plan to its employees. Doing the right thing compellingly calls for this. Employers have a duty to help pay the health care cost of their workers, the applicable principle is quite simple you use that workers labor you help pay for that workers health care needs. Employers paying part of workers health care costs through employer HCI plans is part of the cultural fabric of America, employers have been doing it in large numbers for close to seventy-five years, ordinary Americans want it and as a matter of fact it is part of the American dream, to many if not most Americans the American dream embodies a good paying job with good benefits. It embodies the fullness of rights that workers deserve as evidences by the countless collective bargaining agreements that currently exists in America where America workers are contractually guaranteed employer sponsored health care insurance.

It has been reported in the media that some politicians want to put in the reform legislation mandates that if an employer doesn’t provide employer sponsored HCI that such an employer unless a small business exempt employer has to pay eight percent of the employees wages to help pay for that workers health care needs. That is a great initiative and it would be great if it becomes part of the reform bill, the eight percent numbers are fair in light of the premium costs of a private health care insurance policy. Another alternative floating around is significantly less good, it is a mandate to make employers who don’t provide employer HCI to reimburse the government for the subsidy the government provides the employer’s employees. This is less good because it is not a hard number, so it doesn’t have the deterrent effect that the eight percent mandate has in deterring employers from taking the easy way out and just dropping employer sponsored HCI; moreover, if politicians know they have the power to pass on the cost of a subsidy to an employer employers better brace for paying heavy reimbursement costs – the system shouldn’t give politicians a blank check like this.

What should really worry ordinary Americans is those politicians that oppose anything that even resembles a tax or any type of financial burden on businesses and them derailing these needed initiatives. To get right down to it my brothers and sisters in the Republican Party who hold political office in Washington and you non-Republican Washington politicians to whom these remarks apply your campaigns giving effect to conservative platitudes that you proclaim as your core principles will not cut it in this health care reform debate. These platitudes of low taxes and less regulation on business are not the ultimate standards that should be used in these analysis the ultimate standard that should be used is to do what is good. This issue of health care is too important, the country must act now if it can muster the virtue to put together a good bill, the costs of health care on businesses, families and the government is beginning to break these affected parties, to you right wing politicians your lack of cooperation on this overall health care issue will hold dire consequences. This applies not only to the financial charge mandates on employers that drop or don’t have employer HCI but all the revenue raising initiatives needed to pay for this reform bill and all the health care cost cutting measures sought to be added to this reform bill. America is in crisis on health care, it will not be tolerated you right wing politicians acting as business as usual on this legislation initiative, it is expected you do what is good in all major matters involved in this HC reform bill.

****** See Part Two in "Reply Section" *****

 

[JimofPennsylvan]

******* Part Two *******

III)

As mentioned numerous times a critical point about this HC reform legislation is how to pay for it. Liberal Democrats being the group in power in Washington mandates the following danger be described and underscored. It is not an option that Washington pretend to pay for this legislation by outlining all these savings they are going to get from Medicare and the balance of the system that are not reliable. For instance, it has been proposed that there will be big savings in future cuts to Medicare hospital and doctor fees; ordinary Americans have seen on countless occasions Congress repeal planned Medicare cuts on hospital and doctor fees because of political pressure, this proposed savings is totally unreliable and should not be used to pay for this reform legislation. If this reform bill is not paid for properly, it will increase the deficit which is extremely dangerous at this time to the economy or cause dangerous cuts in government spending like to the military or cause tax increases. To you politicians and Washington insiders that are responsible for passing HC reform legislation if a bill passes this year you better be using reliable figures on any cost savings from the present system to pay for this legislation because if it turns out you used faulty numbers and the American people have budget and/or deficit issues over this matter you will pay a dear price over it. The Federal budget is a great source of instability for America’s economy it is totally unacceptable if Washington adds to this instability by passing a massive HC reform legislation that is not fully paid for.




IV)

There is many good ideas that have been proposed to pay for this HC reform legislation. The following is a review on some of them.

Four Part One)

It has been proposed to raise money to pay for the HC reform legislation by limiting the tax exemption on premiums for employer HCI paid for by wealthy Americans like limit the exemption to the average premium cost on a high deductible health insurance plan which a lot of low and middle class Americans have for affordability reasons. It has also been proposed to raise money to pay for the HC reform legislation by reducing the tax benefit of certain itemized deductions for the wealthiest Americans reduce the tax benefit of these exemptions to the level that would exist if these tax payers were in the 25 % tax bracket. Both these initiatives are good because the government needs to raise revenue to pay for an important government function and it is fair and legitimate to ask the wealthiest of Americans who can afford the costs to shoulder these modest costs to them.

Another good initiative would be an increase in the Federal tax on alcohol. Alcohol is a luxury item, currently the Federal Tax is not that high. A modest increase in this tax to pay for Health Care which is a good cause most Americans should find acceptable. The proposed tax on soft drinks to raise money to pay for this reform legislation is a foolish idea, it is a regressive tax. From a practical standpoint soft drinks and the like are a necessity, so as it turns out lower income and middle class families will be paying a larger portion of their income for this tax compared to affluent Americans it is not good public policy.


V)

A major issue in this whole Health Care debate is whether or not to have a public run health insurance plan to provide health insurance to people and compete with private insurance companies. There is two major points that need to be identified to properly analyze this specific issue. First, surely there is a few politicians that are supporting a public insurance plan option to further their agenda of a single payer system in America, but the bulk of those politicians and other Americans that want this HC reform to work want this public option if it can be done in a manner that puts private insurance companies on a level playing field with the public plan because it provides a necessary element to the success of the HC reform legislation. This necessary element essentially entails that this whole reform initiative will fail unless there is affordable HC insurance plans for low income and middle class families, if the plans aren’t affordable Americans won’t participate and this 46 million uninsured figure which currently exists in America will largely remain and grow; a public plan creates a mechanism in the system where the government can just force affordable HC insurance plans to be created. One sub note, this is why this coop idea that has been floated around as an alternative to a public plan is such a foolish idea because these coop ideas will not provide the opportunity and/or power for the government to create affordable plans.

The second major point that needs to be said about the public plan option is that it does pose a real and alarming threat of creating a single payer system. When Americans of varying stature make this single payer fear claim proponents of the public plan are dismissive of this claim or use other clever techniques to undermine this claim. It is an insult to the American people when the leaders behind this reform legislation engage in these debate tricks to silence those with a single payer concern. These leaders should address the merits of these concerns, specifically, describe how private insurance companies will be kept on a level playing field with the public plan so this fear is not valid

Since it is clear that a public plan is needed to make this HC reform work, the task remains how to design a public plan that enables private insurance companies to compete in a fair manner. The following holds the elements of the answer. First, mandate in the legislation that the government or any other authority connected with the public plan cannot mandate reimbursements to hospitals or doctors or the like below these parties costs or 135 % of Medicare reimbursement rates whichever is lower (the latter condition is to stop providers from engaging in mischief on their costs), this should stop hospitals, doctors and the like being paid less than their costs and correspondingly increasing charges on private insurance companies thus hurting private insurance companies business. Secondly, any subsidy the government provides for the public plan must be in the form where it is linked to the income and/or wealth of an individual or individual family who is enrolled in the plan and the same subsidy must be provided to the private insurance companies for their equivalent income enrollee, this takes away the subsidy advantage of a public plan. Thirdly, is a rather obvious one which is any mandate on mandating price on medical providers dictated by the public plan, private plans are guaranteed that same lower charge by the medical provider (the reform legislation should mandate this) so the costs of the private plans are the same as the costs of the public plans so they can compete fairly. This parity of charge is not unheard of in the health care industry even as of today, drug companies must give Medicare a price for drugs that are equal to the lowest price it charges any of its other customers. On this last item, this parity of charge mandate could result in the authority of the public plan essentially controlling the prices medical providers charge a huge portion of their customers it could essentially be creating a price control system for medical costs across the nation where it may not be prudent for America to be taking this step at this time. Therefore, to remedy this problem the public plan should only be permitted to mandate prices medical providers charge for patient care for patients who fall into the income category of middle class or lower (family income of $90,000/year or lower) and of course the private insurance companies would only get this equal lower costs for their plan participants whose income falls into this middle class or lower income category; this way these price control mechanisms are limited to a portion of the health care industry.


******* See Part Three in "Reply Section"*****

 

[JimofPennsylvan]

******* Part Three ********



VI)

In the media it has been reported that families with incomes up to $110,250 (500% of the poverty level) would get subsidies to help pay for health insurance. A truly fair, knowledgeable and reasonable person could fully understand and support helping such a family in this manner. Nevertheless, such a subsidy from a practical standpoint is not really politically sustainable. One can see the commercials now that will take place come election time about the wasteful spending in giving taxpayers with such high incomes a subsidy. The better approach and the more practically prudent approach is to allow those families with that level of income to exempt from their taxable income the amount of premiums they pay that are equivalent to the amount of premium costs equivalent income taxpayers who have employer sponsored HC insurance are able to exempt from their taxable income. This is truly fair putting this income level of taxpayer who buys private insurance on the same level from a tax standpoint as the same income level of taxpayer who buys employer sponsored HC insurance.


VII)
When the Democrats in Washington several months ago prudently said that they wanted to make health care reform priority number one this year, one would have thought that the Congress and the President would have done an outstanding job on this initiative if they could just get legislation enacted which addressed the insurance part of the health care problem and created easy noncontroversial cost cutting initiatives in the system. In light of the recently released Price Waterhouse report that health care insurance premium costs are projected to rise on average nine percent next year the situation has completely changed it has become intolerable. It is clear Washington must act to cut costs in the Health Care Industry and act in a dramatic and bold fashion. To be a little more specific this reform legislation must contain dramatic reliable health care cost cutting measures in it.