RebelCapitalist: Financial Information for the Rest of Us

This Should Not Happen in The U.S.

Oct 29, 2008 | By: Mr_Blue | (0) Comments | Permalink | Tags: economy, health care

The headline reads: Medical Debt Sending Many Over Financial Brink. The stories about people being financially devastated or declaring bankruptcy because of medical bills are becoming far too common. People are becoming trapped in their jobs because of pre-existing medical conditions or are making job decisions because of affordable health care coverage, usually resulting in lower wages/salaries. The U.S. health care system is broken and something needs to change.

The U.S. has the largest economy in world: $11,750,000,000,000 and is 6th richest country in the world based on GDP per capita (heck, we are spending $700 billion to bailout our financial system). But yet, we have one of the worst health care systems of the industrialized nations of the world. It is estimated that 45 million Americans lack health insurance. The cost of health insurance and medical care is rising faster than household incomes. Health insurance is not portable, meaning people can’t carry their coverage from one job to another.

Health care is a basic human need and access to health care should be a human right, much like the freedom of speech. Access to health care, especially affordable health care, is essential to a stable economy. A Commonwealth Fund survey found that 41% of working-age adults, or 72 million people, have medical debt or are having problems paying medical bills. This is not good for any economy because that means less money is going to retirement savings or big-ticket purchases such as cars.

Health care reform must be a priority for the next president and congress. We cannot afford to continue the status quo. It is extremely important that we understand the health care reform proposals of the current presidential candidates.

John McCain: Senator McCain’s proposal relies heavily in changing the tax code and the “open market” for health insurance. First, McCain’s proposal calls for workers to pay income tax on the value of their employer’s contribution to their health insurance. In return, Americans would receive a $2,500 tax credit to single people and $5,000 tax credit to families. The theory is that people can apply their tax credit to the purchase of a health insurance policy – people can choose between staying with employer’s plan or finding a policy in the “open market”.

The McCain proposal is fine for younger, healthier people but the tax credit will not help families since insurance premiums for them are much higher than the $5,000 tax credit. A bigger risk of McCain’s proposal is the potential fragmentation of workers.

The great danger is that Mr. McCain’s plan will fragment the sharing of risks and costs — the bedrock of any good insurance plan — by enticing young, healthy workers to bail out of their employers’ group policies to seek cheaper insurance on their own. Their older or less healthy colleagues would be left behind, which would drive up premiums at work. The rising costs could lead many companies to drop their health coverage entirely.

Barack Obama: Senator Obama’s proposal requires all parents to get coverage for their children, expand Medicaid and the State Children’s Health Insurance Program (SCHIP). It would create a National Health Insurance Exchange that would help uninsured and those who want new health insurance. He would also require large and midsize companies to offer health insurance to their workers or pay into a fund to subsidize a national plan. His proposal would provide subsidies to small businesses to encourage them to provide coverage and help low-income people buy insurance.

Senator Obama’s plan basically expands our current system of employer-based coverage and government programs.

Mr. Obama says the government would provide subsidies to encourage small employers to offer coverage and to help low-income people buy insurance. This is not a government-run program — as Mr. McCain claims — but it does give the government a much bigger role than it now has by expanding public programs and creating a new national plan.

Senator McCain’s plan could actually cost more money in the long-term because of the tax credit. Studies estimate the cost of Sen. McCain’s plan ranges between $1.3 trillion to $2.05 trillion and Sen. Obama’s ranges between $1.17 trillion to $1.6 trillion.

The difference in the number of people that could receive insurance coverage is dramatic between the two plans.

Some experts estimate that the McCain plan would reduce the number of uninsured only modestly because millions of people would drop or lose employer coverage, and not many more than that would buy policies outside of work. The nonpartisan Tax Policy Center estimates that the McCain plan would lower the number of uninsured by a mere two million in 2018, out of a projected 67 million uninsured in that year. The Obama plan would cut the number by 34 million, the center says, but still leave nearly 33 million uninsured.

In the end McCain’s plan may cost more and provides less coverage - not a good deal for us. Senator Obama provides more coverage but does not go far enough to cover all Americans. Senator Obama’s plan is a good start but we deserve better.

We can have better. But it requires our political leaders in Washington to stand up to the big money special interests and lobbyists. It requires policy makers to review what works best in other countries.

For instance, France’s health care system was rated best in the world in 2001 by the World Health Organization (U.S. was ranked 37th). France is a “single-payer and universal coverage” system, which means that the government pays the bills and everyone is covered. It is not “socialized” medicine – government does not own the hospitals and doctors are not employees of the government. It preserves patient’s choice of doctors and doctor’s control over medical decisions. But it is expensive for European standards: $3,500 per capita. That is still far less than ours: $6,100 per capita. There is private insurance available in France typically in the form of supplemental insurance.

No health care system is perfect. Many opponents to universal health care will focus on the problems and even provide disinformation/lies about it (remember the whole crap about “socialized medicine”). However, most Americans will agree that our current system stinks and something has to change. We cannot continue to have people uninsured and struggling to pay medical bills. We have to start somewhere and Senator Barack Obama’s plan is a good place to start.