Tuesday, November 11, 2008

Who should pay for coverage?

Health care reform will ultimately come down to one basic question:

Who should pay and how much?

Politicians would like to duck this question, of course, because the politics of requiring someone to pay more, especially if they are paying more so someone else can get care, are tough.

Realistically, the options come down to these:
-Increase taxes
-Require that employers provide coverage to their employees or pay a penalty
-Require that individuals buy coverage, if they are able to afford it
-Require that individuals contribute a share of the cost through higher premiums and cost-sharing, which could be income-based
-Pass the costs onto future taxpayers by borrowing the money and driving up the deficit.

It likely will end up being a combination of these options.

During the campaign, President-elect Obama proposed to pay for his health care proposal by repealing some of the Bush tax cuts for people with incomes above $250,000; to require "larger" employers to "pay or play"; and to mandate that parents buy coverage for their kids. Although he argued that his plan pays for itself this, this assumes cost savings from reforms, like prevention and health information technology, that may not add up in the end.

As controversial as the "who pays" issue will be, the current method of financing health care, which is largely through employee and employer contributions administered through direct contributions and deductions from wages, probably cannot be sustained.

Economist Uwe Reinhardt writes that rising health care costs will soon swamp the wages of many workers. He writes that for a family who today has an assumed gross wage base of $60,000, that gross wage might grow by 3 percent per year over the next decade, to $80,600 by 2017, while total family health spending might grow by, say, 8 percent per year over the same time frame, to $33,700 by 2017. For this worker, 41 percent of the family's gross wage base would be taken up by health care alone, before any deductions for taxes or fringe benefits.

His conclusion:
"Before long the gross wage base earned by American households will become too small a donkey to carry the load of the family's spending on health care."

This, he says, will leave the country with only two unpalatable choices: require higher income workers to pay more, or have a two tiered system where the well off get a rich package of benefits and lower wage workers get only "bare-bones" health care.

Today's questions: How do you think that affordable coverage for all can be paid for? Should higher income persons be required to pay more?


Anonymous said...

This assumes that more money is needed. I agree that to cover everyone would cost more in our existing health care non-system. We need to restructure the system so that accountable health care systems as defined by Steve Shortell are globally capitated and competitive. The solution is obvious, the will to implement the solution is not.

Jay Larson MD said...

First the system has to be affordable. U.S. healthcare costs are over 2 Trillion annually and have no signs of declining. Primary care physicians are the only physicians shown to lower costs and improve outcomes. Healthcare dollars should be directed towards primary care to cut healthcare costs. Healthcare dollars should be spent wisely and not just spent.

Healthcare costs should be shared equally. If higher income persons wish to spend more money on healthcare, they can have useless procedures performed on themselves.