How Much Is Health Care Costing You In Taxes?

Cost. So much of the current national conversation about health care comes down to costs. Of course, the sheer magnitude of our system combined with the vast array of interests involved in it make the question of health care cost a veritable Gordian Knot.

It is this economic complexity that made me sit up and take notice when I ran across the recent article in Dollars and Sense: The Magazine of Economic Justice penned by Joel A. Harrison, PhD, MPH. In it, he presents a case for the "hidden costs" of American health care. Dr. Harrison takes us on a tour of where the money is generated and where it goes, as well as with what effect.

From the section titled "Paying Through The Taxman":

The U.S. health care system is typically characterized as a largely private-sector system, so it may come as a surprise that more than 60% of the $2 trillion annual U.S. health care bill is paid through taxes, according to a 2002 analysis published in Health Affairs by Harvard Medical School associate professors Steffie Woolhandler and David Himmelstein. Tax dollars pay for Medicare and Medicaid, for the Veterans Administration and the Indian Health Service. Tax dollars pay for health coverage for federal, state, and municipal government employees and their families, as well as for many employees of private companies working on government contracts. Less visible but no less important, the tax deduction for employer-paid health insurance, along with other health care-related tax deductions, also represents a form of government spending on health care. It makes little difference whether the government gives taxpayers (or their employers) a deduction for their health care spending, on the one hand, or collects their taxes then pays for their health care, either directly or via a voucher, on the other. Moreover, tax dollars also pay for critical elements of the health care system apart from direct care—Medicare funds much of the expensive equipment hospitals use, for instance, along with all medical residencies. All told, then, tax dollars already pay for at least $1.2 trillion in annual U.S. health care expenses. Since federal, state, and local governments collected approximately $3.5 trillion in taxes of all kinds—income, sales, property, corporate—in 2006, that means that more than one third of the aggregate tax revenues collected in the United States that year went to pay for health care.

While it seems that everyone is aware of the costs of care, this examination of the ebb and flow of dollar signs is quite illuminating. Even for those who find economics to be a rather dry and dusty subject, this should make for gripping reading. As we move towards redeveloping our domestic health care, an understanding of these patterns and forces is essential to making an informed decision.

Four main sections make up Dr. Harrison's article:

• Paying Through The Taxman
• Where Does All The Money Go?
• More Taxpayer Dollars, Less Medical Research
• Getting What We've Already Paid For

As you can see, these are all topics that address basic underpinnings of our broken system. An understanding of the flow of revenue is data that can only help, after all in order to fix a problem the first step is identifying it. The discourse surrounding the Presidential Election has already determined that Americans are well aware of the breakdown, now it is time to move from the macro to the micro and look at the details.

Dr. Harrison's full article (with a large amount of documentation) may be found in the "sources" listed below.

SOURCE: "Paying More, Getting Less" 06/24/08
photo courtesy of Paul Keleher, used under its Creative Commons license

Fear of Big Tobacco in California?

This morning Mike Zapler at the Sacramento Bureau of the Mercury News examines the the new tobacco tax proposed in California as a means of funding health care reform. Two dollars a pack could generate a lot of revenue for expanding coverage to the twenty percent of California residents who lack it, but will it be that easy?

Problem is, it might be the very thing that dooms health care reform.

A new cigarette tax would be tantamount to a declaration of war on Big Tobacco, which last year spent more than $65 million to defeat a $2.60-a-pack tax on the California ballot and just this week easily turned back an attempt in Oregon to raise tobacco taxes.

"You can bet they would aggressively fight it, and I don't think they'd be alone," said Sacramento political consultant Frank Schubert, who advised tobacco companies during last year's ballot campaign.

Any attempt to overhaul health care is bound to invite opposition, given the huge financial stakes in the system. The tobacco tax idea is an example of the difficult balance that Gov. Arnold Schwarzenegger and Democrats are struggling to strike at the negotiating table: achieving meaningful reform without triggering insurmountable opposition.

The challenge is amplified by the fact that any health care proposal is certain to end up on the ballot, where interest groups can spend tens or even hundreds of millions of dollars to defeat it.

He goes on to look at the pros and cons of several aspects of the legislation in its current form, paying particular attention to sections of the law that could be contentious. From Governor Arnold Schwarzenegger's lottery lease plan to the Democratic provision for purchasing drugs in bulk, he provides a concise summary of the options being put forth.

As for tobacco, backers of the proposed cigarette tax - which would be on top of the current 87-cent-a-pack tax - acknowledge the industry's political might. But they say the millions of dollars tobacco companies likely would spend against a health care initiative wouldn't necessarily ensure defeat, given the industry's low standing among the public.

"If you have all of the health care community backing reform, I think it can trump the money spent by tobacco," said Kris Deutschman, a political consultant who advised last year's failed campaign to raise the tobacco tax. "Because all they have is money and self-interest."

SOURCE: "Analysis: Tobacco Tax Could Doom Plan for Health Overhaul" 11/09/07
photo courtesy of curran.kelleher, used under this Creative Commons license

Let The SCHIPs Fall Where They May

The State Child Health Care Insurance Program (SCHIP) is a major bone of contention between President Bush and the United States Senate. There is never a lack of strident debate when it comes to issues as polarizing as health care has become. Sources large and small are weighing in on the subject everywhere from major networks to the blogosphere.

Political correspondent John Fout talks about SCHIP and examines the brewing confrontation for The Street in his Market Features column:

The program provides coverage to poor children who are ineligible for coverage under Medicare and who lack private health insurance, and according to a Senate report, it's been a big success. According to the report, the number of uninsured children has decreased from 14% in 1997 to about 9% in 2005, bucking the opposite trend for adults.

Fout then proceeds to examine both the funding source for the new expansion and the President's rationale for his threatened veto:

The expansion of the SCHIP program would be funded by a small tax increase on cigarettes. A recent poll by the American Medical Association found that 70% of Americans support a tax hike to pay for children's health care. In addition, incremental increases in cigarette prices are thought to have played a role in decreases in smoking. This sounds like a win-win situation for public health.

Bush, however, prefers to fight expansion of the program. He favors funding care for poor children only -- rather than the lower- or middle-class families who'd be covered under the Senate bill -- and suggested that expansion would cause middle-class families to cancel private policies in favor of public policies. The expansion only affects people presently lacking coverage.

President Bush went on to characterize the bill as "federalization" of health care and to accuse Democrats of using the issue "to score political points." He has also promised to veto the bill once it reaches his desk. (As pointed out in our Aug. 3 post, it passed the Senate with a 68-31 margin -- sufficient to override a veto.)

SOURCE: "Bush Fights Losing Battle Over Kids' Health Care" 09/20/07
photo courtesy of Tenuda on Flickr

SCHIP

Market Reform Key to Health Care Reform?

In today's Boston Herald, Dr. Lawrence A. Hunter, a senior fellow at the Institute for Policy Innovation, critiques health care reform plans that involve market reform.

Hunter criticizes "market-based health plans," such as those proposed by 2008 Presidential candidates Sen. Hillary Clinton, Massachusetts Gov. Mitt Romney, and Sen. Barack Obama, and former Sen. John Edwards.

In both parties, politicians have proposed to "curb," "harness" or "reform" the market to "fix" America’s health care system. However, lawmakers continue to ignore the underlying problem with today’s health care system. Because of government intervention in the marketplace, there’s a vast gap between the demand for health care and its supply.

Hunter discusses troubles he believes are already apparent in Massachusetts' state-based health care reform and compares these to potential reform on the national level. He also goes on to point out specific problems he sees with the candidates' plans.

John Edwards' plan hides this tax hike by forcing businesses to "either cover their employees or help finance their health insurance," and Obama has promised to "require employers to make a meaningful contribution to the health coverage of their employees." Romney’s plan assessed new taxes on those who chose not to buy health insurance and small business owners who wouldn’t play along - proving there is no such thing as voluntary socialism, even when designed by a so-called conservative.

SOURCE: "Market Reform Most Unhealthy: Gov’t Meddling Sickens System" 07/30/07