In fact, any type of reform will fail to deliver affordable health care unless nearly all of the cost of a basic plan is subsidized for most people, and a 40%-50% of the public funding comes from the top quintile of income earners.Why? Because healthcare is expensive, and beyond the affordable reach of 60% of Americans (without yet defining what “affordable” means)
Fact: the bottom 3 quintiles of non-elderly people privately pay an average of 17.66% of their income on health care. The top quintile pays 6%.
Fact: the bottom 3 quintiles of elderly people privately pay an average of 25.33% of their income on health care. The top quintile pays 7%.
Fact: the bottom quintile of non-elderly pay 22% of their income privately on health care (after public share of 66%). This is 366% more of their income than the top quintile pays.
Fact: the bottom quintile of elderly pay 35% of their income privately on health care (after public share of 81%). This is 500% more of their income than the top quintile pays.
(with that said, the upper quintiles contribute more to funding the public portion, but the public share still falls entirely short of what is needed to make costs affordable for the lower earners)
http://www.federalreserve.gov/pubs/feds/2005/200560/200560pap.pdfSo in terms of “Affordability”, I hope that we can accept the premise that 17.66% and 25.33% of one’s average $30K income is not an affordable amount for bottom 60% of income earners (after taxes, food, housing, and necessary goods). Even if achievable, it leaves nothing left over to promote social mobility, and therefore “unfair”.
And for the top 20% of earners, I think it is fair to state that 6% to 7% is quite affordable for those averaging about $168K a year.
Clearly, just due to costs, if you cannot find a way to fund health care that creates an affordable burden for all people, across all quintiles, then you will create a system which limits access to some group.
If a group of people cannot afford to purchase or use care due to co-pays/fees/deductibles, they essentially do not have access to health-care (and they self-ration). So without promoting the concept of affordability to all, universal access is not achievable.
The Solution: essentially the answer is to create a funding system with a redistributive effect. The US currently does fund a lot of health care publicly, but not in a way that leaves it affordable for the lower income earners.
Obama’s reform includes an idea of sliding-scale subsidization, but will it be funding from the correct people, and subsidizing amounts to close the gap? The likelihood is that it will not go far enough for 60%+ Americans in need, and hence, some people will lose access or self-ration care.
But how far does it need to go to create affordable care? Imagine there is a household of only 5 best-friends. Their earnings are (much like the quintile averages):
Aaron: $11,300
Burt: $28,750
Charlie: $48,250
Derek: $76,350
Earnie: $168,100
They would all like to see each-other healthy, but they find out it would cost $7025 a person annually, and they only have their own income to pay for it (no corporate earnings, or anything else of the sort for this example). Aaron, Burt and Charlie could not put up $7025 at all for health care after all expenses, so Earnie, being the good guy he is, tried to come up with a good way to pay for everything and make everyone happy.
First thing, Earnie made some calls and finds out if they “reformed” their bills and paid at once, it would be 5% less and only $33,275 all in all. Now Earnie, being a staunch Ron Paul Fair-Tax lunatic (with a soft spot) comes up with a “regressive” funding system for a progressive redistributive effect. Earnie thinks that it would be fair if everyone paid a flat 10% of their income on average into a pool. They paid:
Aaron: $1,130 (3.4% of the costs)
Burt: $2,875 (8.6% of the costs)
Charlie: $4,825 (14.5% of the costs)
Derek: $7,635 (22.9% of the costs)
Earnie: $16,810 (50.5% of the costs)
Now, while it could be argued that it is still more affordable for Earnie to pay 10% of his income than for Aaron, for the sake of simplicity, Aaron decided to cut his losses and let it be, as he figures for he is way ahead of where he was yesterday. And for the sake of simplicity, I used the per capita health costs pretending that it is simply limited to what an individual pays (rather than public health facility funding, etc).
Now, while this may appear like I am supporting Single-Payer healthcare with this example, I am rather supporting funding of comprehensive subsidization that has a significant progressive redistributive effect. While single-payer can easily do this inherently in its structure, single-payer can just as easily fail if it isn’t funded properly; that being, if the lower quintiles are taxed more than an “affordable” amount for the service.
While single-payer may control costs more effectively, I am completely forgetting that variable for the time being and focusing on who is paying what.So could Obama’s reform really succeed in delivering affordable care? Oh yes, it potentially can, so perhaps my title is more provoking than anything, but, nonetheless, it will not (true redistributive funding isn’t on Congress’ radar). For Obama’s plan to succeed on this criterion, an individual’s tax contribution added to their private spending cannot exceed some finite percentage of their income (for their earning level). And for the most part, the only way to really make this equation succeed, is to ask the top 20% to kick in the lion’s share of the subsidization, and to have the subsidization cover such a large portion of the costs for the lower earners that “affordability” is not in question. Remember, a 66% subsidization for non-elderly lowest quintile still leaves 22% of their income spent privately. Due to the disparity in wealth and the expense of healthcare, there is no other option than to fund it in this manner, mostly from the top 2 quintiles.
Obama’s reform could tailor the subsidizations to cover 100% of the costs of a basic public/private standard plan for everybody, with their only costs being either their tax contributions or their choice to upgrade their plan. This would leave a multi-payer system in place, with a generic single-payer subsidization wrapper to preserve those very important corporate profits. Any cost cutting techniques or negotiations employed in the reform could significantly lower the tax contributions to the subsidization plan, and in the end, everyone (cept the top quintile) wins; the top quintile wins from having healthy workers and non-bankrupt consumers that buy their products.
And still, it fails: Why?
Exceptions to the rule. Plans have set costs (and hence, a subsidization check mailed for every American family would have a static price based on their dependents). But exceptions come from those who need more service (more co-pays) and those who have a health catastrophe (75% of which go bankrupt when insured currently). The problem with simply subsidizing the buy-in costs of the consumer in a redistributive manner, is that it doesn’t really look at the exceptional costs that are an integral part of the system. And as long as this occurs, some exceptional people will still need to self-ration or go bankrupt in the mostly private, multi-payer system.
The only foreseeable way to handle exceptional costs in a mostly private, multi-payer system is to draw a firm line in the sand as to what is truly “affordable”. Once done, simply pay 100% of all out-of-pocket costs incurred beyond that limit for some earner, at a certain bracket, with a certain number of dependents. That being, a catastrophic single-payer safety net to handle all cases in which the private system fails individuals (and this happens very often currently). This mechanism would cost nothing as long as the reforms succeeded as a whole.
The Bottom LineAs long as there are entire demographics or simply exceptions who have to pay over some finite amount (“affordable”) of their income for health care, there will be bankruptcies, untreated people, self-rationing, and those who are uninsured. Only by firmly defining what each person should be expected to pay for some basic plan,
and ensuring, by some blend of private/public spending, that they will
never pay more, the system as a whole will not be equitable and will fail to provide affordable and accessible care to all (hence: not universal health care).
Until people start looking at the underlying mechanisms that make a multitude of different unique systems around the world work, that being, their funding, America will remain hopeless to reform the problems out of its own system. Even if health costs are cut by up to 30% to 40%, depending on who is subsidized, how much they are, and from who, any reform will fall short of delivering affordable and accessible health care to everyone.
People need to wake up and realize that through all the convoluted details of the current reform, this very important point is not really in the forefront (besides the talk of the sliding-scale plan which will not be substantial enough without a strong push).
In my opinion, this is more important than some “public-option” (which is more about cutting costs). Although the debate is steered conveniently around it, there is still a chance to address this aspect of reform.