Bush Solution to the Health Care Crisis

Z Magazine Online
April 2007 Volume 20 Number 4

Bush’s Solution To The Health Care Crisis

By Kip Sullivan

When he made his State of the Union address in January, George W. Bush knew he would soon be announcing sizable cuts in Medicare and Medicaid two weeks later. He chose to say nothing about that. Apparently he understood that a $101.5 billion cut over 5 years in Medicare and Medicaid is not the sort of thing that provokes standing ovations from members of Congress on prime-time television.

What Bush did mention was “two new initiatives” that would shift federal subsidies from some Americans to other Americans. His first “initiative” called for raising taxes on Americans who have employer-sponsored health insurance in order to lower taxes on Americans who buy health insurance on their own. His second proposal called for shifting federal tax subsidies from hospitals that serve disproportionate numbers of uninsured patients to insurance companies (which are not in the business of serving uninsured patients). The White House estimated the first proposal would lower the nation’s number of uninsured, now at 47 million, by 3 to 5 million in 2009 when these proposals would take effect. The White House offered no estimate of what the second proposal would do.

Bush’s proposal to raise taxes on people with employer-sponsored health insurance rests on the assumption that health care inflation in the U.S. is driven by “overuse” of medical services and that overuse is in turn driven by health insurance with “low” deductibles and copayments. According to the right wing in this country, medical care is no different from any other commodity—if insurance pays for most of your medical costs, then you’ll consume far more medical services than you need.

To make this point, advocates of high-deductible policies like to ask audiences to imagine what would happen to food prices if all Americans had grocery insurance that paid for 95 percent of their grocery bills. The problem with the grocery/insurance analogy is that medical services, unlike food, are rarely pleasurable and are often painful and even life-threatening. Would you rush off to have your uterus or prostate removed if it was not cancerous just because you are insured and would pay only a minor portion of the bill? Would you endure radiation and chemotherapy if you did not have cancer? Or, to take a service that is not painful, but just plain boring, Would you take time off work to have blood drawn for a cholesterol test you didn’t need just because you didn’t have to pay full price?

Research demonstrates that Americans, including insured Americans, vastly underuse medical services. To take just two examples: (1) half of all insured Americans with high blood pressure are not being treated for it; and (2) one-fourth of insured Americans who have had an angiogram that demonstrates they need either bypass surgery or angioplasty have neither done.

A large study conducted by the Rand Corporation that was published in the New England Journal of Medicine late in 2003 demonstrated that underuse of medical care occurs four times as often as overuse. The high-deductible policies advocated by Bush and the Republican Party ($5,000 to $10,000 per year for families) might or might not reduce overuse (patients are not doctors, after all), but they will definitely aggravate the underuse problem. Of course, highdeductible policies will not address the enormous waste generated by the health care industry in the form of excessive administrative costs, excessive prices for specialist services and drugs, and fraud.

Bush nevertheless invoked the myth of the “overinsured” America, arguing that some unspecified portion of the populace had “gold-plated” health insurance. He implied that overuse by these people was a primary cause of health care inflation. To discourage the purchase of “gold-plated” health insurance, whatever that is, Bush proposed to raise taxes on those who purchase it.

Under Bush’s proposal, employer contributions toward employee health insurance would, for the first time, be treated as income, just like wages and salaries are now. Employer contributions would show up on W-2 forms, just like other forms of income. However, Bush would offset this new liability with a deduction worth $15,000 for families and $7,500 for individuals. Thus, as long as you keep your insurance premium below the deduction, you would not have to report your employer’s payments for your health insurance and, therefore, you would not owe more taxes. One way to do that, of course, is to buy health insurance with a very high deductible.

According to White House estimates, the average cost of family insurance in 2009 will be $13,500, which is just below the $15,000 deduction Bush is proposing. Bush announced during his State of the Union address that 80 percent of Americans with employer-sponsored insurance will pay no new taxes. What Bush did not mention was that this 80 percent figure, while accurate for 2009, will fall as time goes by because the $7,500 to $15,000 deduction is pegged to the general inflation rate, while health insurance inflation zooms along at 3 to 4 times the general inflation rate in most years. By 2011 or so the average price of health insurance will surpass the deduction. According to the Tax Policy Center, the percent of Americans with employer-sponsored coverage who will pay more taxes will rise to 40 percent within a decade.

Bush is not proposing that the new tax revenues go to the government. He would use the revenue raised from Americans with “goldplated” employer-sponsored insurance to create a new tax break for Americans who currently buy health insurance on their own. (There are about 18 million of these people as compared with about 160 million who get insurance from an employer.) Under current law, people who buy health insurance for themselves (for example, a farm family or a musician) cannot deduct their premium payments from the income they report to the IRS; but people who get insurance from an employer can. There is no question that this disparity in tax treatment is unfair and that Bush’s proposal would end that disparity by giving individual (nonemployer) purchasers the same deductions he proposes to give people with employer-sponsored insurance—$7,500 for individuals and $15,000 for families.

But the justice done for individual buyers will be offset by new injustices done to the sick and the lower-income. Bush’s crude definition of “gold-plated” makes no allowance for the fact that the health insurance industry charges higher premiums for sicker groups and individuals. The sick are far more likely to wind up paying a disproportionate share of the new taxes. Also, as is the case with all tax deductions, the deductions Bush is proposing will mean a lot more to the rich than they will to the middle and lower income classes.

The White House estimates that making the new deduction available to individual buyers will cause 3 to 5 million of the 47 million Americans who currently don’t have health insurance to buy it on their own. Whether the proposal will have even this much effect is debatable. The reason is obvious. Many of the uninsured pay so little in income and payroll taxes (payroll taxes are also reduced under Bush’s proposal) that the Bush deductions are meaningless. Even among those households that will enjoy a substantial reduction in their taxes, say $5,000, many will still be unable to hand over $13,000 or more to the insurance industry.

Comedian Steven Colbert articulated this defect in Bush’s proposal quite succinctly: “It’s so simple. Most people who can’t afford health insurance are also too poor to owe taxes. But if you give them a deduction from the taxes they don’t owe, they can use the money they’re not getting back from what they haven’t given to buy the health care they can’t afford.”

Whereas Bush’s deduction proposal at least has the redeeming value of eliminating the disparate tax treatment of employerversus individually-sponsored insurance, Bush’s second “initiative” has no redeeming value at all. Under this proposal, federal dollars that currently go to public and teaching hospitals that treat an above-average portion of the uninsured would be funneled to insurance companies via the states. The money, which the White House calls “affordable choices grants,” would go only to states that promise to use the money to subsidize the purchase of high-deductible policies from insurance companies. High-deductible policies are “affordable,” get it?

Bush’s rationale for shifting money from hospitals to insurance companies is that if people have insurance, they won’t be showing up at hospitals seeking free care. But by shifting money from hospitals to insurance companies, the actual dollars available for patients shrinks. That’s because hospitals use nearly all of the money for patient care, whereas insurance companies will waste 20 percent of the money on non-medical expenses such as advertising, underwriting, “managing” care, profit, lobbying, and rich perks for executives. Hospitals can ill afford to see 20 percent of their revenues siphoned off to pay for insurance industry overhead.

The minor effect of the two money-shifting “initiatives” Bush announced during his State of the Union address will be swamped by his proposed cuts in Medicare and Medicaid. Granted, these cuts are not reductions in total dollars for Medicare and Medicaid, but are, rather, cuts in the projected rates of growth in expenditures if current law governing coverage and eligibility is not altered. Nevertheless, we may call them cuts because enrollment in both programs is growing and inflation in health care costs these programs have to pay for is high and unrelenting.

Rising expenditures on Medicare and Medicaid are essential to our increasingly sick health care system for the same reason an ever-expanding tourniquet is essential to someone with an ever-expanding wound. The unrelenting increase in health care costs, a problem Bush has done nothing to address in his six years in office, is driving employers and individuals from the health insurance market. If it were not for government-financed health insurance programs, of which Medicare and Medicaid are by far the largest, the percentage of the U.S. population without health insurance would be much higher.

To give you some idea of the protective role Medicare and Medicaid play, consider the results of a study that examined how insurance status changed in this country between 2000 and 2004. Over that period, the percent of nonelderly Americans without health insurance rose from 16.1 to 17.8. The 2004 figure would have been 20.4 percent, not 17.8 percent, if Medicare, Medicaid, the State Children’s Health Insurance Program, and smaller public health insurance programs run by the states had not acted as the safety net for some of the four million Americans jettisoned by the private health insurance industry during the 2000-2004 period. At a time when our safety net is not big enough to catch all the people being tossed from the ranks of the insured, it is irrational to propose cutting the safety net.

Judging from the contemptuous reactions of the Democrats who chair the health committees in Congress, Bush’s little money-shifting “initiatives” are going nowhere. Pete Stark (D-CA), who chairs the health subcommittee of the House Ways and Means Committee, dismissed Bush’s plan to tax “goldplated” insurance as a “new tax proposal [that] would shift health care costs to working families.” Even some Republicans agreed.

But Democrats will find it more difficult to ward off all of Bush’s proposed cuts in Medicare and Medicaid. They would find it slightly easier to do if they were to stop the overpayments to HMOs that participate in Medicare and Medicaid and much easier to do if they brought the Iraq war to a quick end and let a substantial portion of Bush’s 2001 tax cuts expire in 2010 as scheduled. Americans would be well advised, however, not to hold their breath for these events to come to pass.

With polls indicating threefourths of Americans support universal health insurance and twothirds support achieving universal coverage with a single-payer (or Medicare-for-all) system, it is difficult to endure the sight of Democrats dickering with Republicans over whether to cut Medicare and Medicaid. In a democracy less influenced by money, we would be watching Congress debate HR 676, the single-payer bill sponsored by Rep. John Conyers (D-MI). Hopefully, that day is coming.

ip Sullivan is a health systems analyst with the Minnesota Universal Health Care Coalition. He is the author of The Health Care Mess (AuthorHouse, 2006).


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s



RSS Gray Panthers in the News

  • An error has occurred; the feed is probably down. Try again later.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 590 other followers


%d bloggers like this: