The Case for Broad-based Health Care Funding

08/09/2009 05:12 am ET | Updated May 25, 2011

By Representatives Earl Blumenauer and Jim McDermott

While there is intense and critically important discussion about how to fashion affordable health care access and coverage for all Americans, it is important to reflect on how we pay for it.

Done right, this is every bit as significant as Social Security, and arguably more than Medicare. We should look to the funding lessons learned from those two great social insurance programs where everybody pays and everyone benefits. Social insurance is all of a sudden back on the radar screen after the near collapse of our financial markets and dramatic Wall Street losses. Everyone is thankful that the George Bush initiative to privatize Social Security and put America's "nest egg" into stocks and derivatives is nothing more than a distant memory.

People who, a few short years ago, were clamoring to invest their Social Security in the stock market are today finding that it is the only predictable, guaranteed, inflation adjusted part of their retirement portfolio. We watch employer-sponsored health care for workers and retirees become more problematic. Corporations and businesses are shedding coverage and individuals are too often unable to afford their own health insurance. An affordable, guaranteed public option will create a health care safety net that now is more important than ever.

It is essential that we do not risk health care reform with a jury-rigged financing system. We know that at least half the costs of the system can be achieved by expanding health insurance coverage, modernizing Medicare, and emphasizing health care quality and reducing health care quantity. Extending coverage to some 50 million Americans, making it more affordable and providing life-long guarantees will cost more. An additional investment of $50 billion a year, less than half of what we have been spending on the war in Iraq, is well worth it.

This reform should be financed like the rest of our social safety net with a small increase in the Medicare payroll tax by about a third of a percentage point. For about half of working Americans, this would cost a latte a week ($3) or less. This is a huge bargain, given how health insurance will be made far more affordable and secure.

It is true that someone making $1 million a year would pay approximately $6,000 under this tax and likely already has health insurance. However, there are substantial benefits beyond living in a society that has better health care that should not be underestimated. As a practical matter, even the wealthy benefit from a strong safety net because circumstances can change. What is thought to be a gold-plated, life-long insurance can disappear -- think about corporate melt-downs and what happened on Wall Street. For business owners and investors, an investment in health reform will make them more competitive and provide greater stability for their own finances. And finally, it should be noted that if we dismiss a broad-based tax, the alternatives will inevitably hit the million dollar taxpayer much more heavily.

While there are separate policy questions about tax reform, everybody has a stake in a rational, more precise, broad-based financing mechanism. Jumbling together a hodge-podge, focus-group package may look better at a distance, but are fraught with long-term tax-equity and political issues. That might be the most politically expedient strategy, but it isn't sound, long-term tax policy.

There are also very practical political imperatives as well. While no one is wildly enthusiastic about paying more taxes, singling out a small, select group for more intense treatment unleashes intense political opposition because the stakes are so high for them. Taking on beer, pharmaceuticals, and soft drinks, for example, may appeal on some levels, but these are businesses that are based on marketing. What is a soft drink other than product promotion? Soon you have created a "cumulative no-vote" that has much greater and more focused opposition.

As Congress considers financing options for health reform, we urge a broad, sustainable approach, including the payroll tax. We should all be prepared to make hard decisions -- the American people deserve no less.