THE BLOG
08/13/2009 05:12 am ET Updated May 25, 2011

The Untouchables Are Killing Health Care Reform

Two untouchables in the health care reform debate may condemn it to
failure. The first is the Beltway aversion to broad-based taxes for
social insurances -- like the payroll tax that now funds Medicare.
Without it, the increased costs of extending or mandating health
insurance coverage to everyone look gigantic and the source of funds
for that extension could leave many people who now have coverage worse
off than they were before the reform.

The other sacred cow of the debate is that "single-payer" (i.e.,
Medicare for all), has been taken off the table since early in 2008.
By leaving the private insurance companies as the main payers in the
health industry the swollen cost excesses of their profits, their
executive pay and the paperwork that haunts every aspect of medicine
are all left draining the system of room to change.

Among the danger these two sacred cows creates is that in order to
cover the 15% of the population now without insurance, the 85% with
insurance may find their costs increase. The Senate Finance Committee,
for example, seems intent on making existing employer provided health
benefits taxable. The effect will be to tax workers to pay for the
health care of the poor-not a great way to garner broad political
support.

Presently Medicare Hospital Insurance is funded by a payroll tax of
2.9% divided between the employer and the employee. In 2008 that tax
produced $230 billion in receipts. In addition, Medicare enrollees pay
for supplemental coverage for doctor's bills and yet again for
prescription drug coverage. Medicare patients have free choice of
doctors and hospitals; their federal insurance pays the bills within
broad parameters of cost. Medicare's administrative costs are small
fractions of the private insurance companies "take" from premiums.

As distinct from the British system where doctors are employees of the
National Health Service, there would be literally no change in the
employment structure of doctors under such a plan-and those of us now
in HMOs might actually have more choice in the doctors we can visit.
If such a broad based tax were to fund health insurance, what would be
the fate of those employed who now have really good plans largely paid
by their employers? The employers might then shift money now going to
insurance premiums into wages; or after paying the payroll taxes, if
they and their employees and unions agreed, they could offer various
supplemental types of insurance, as Medicare now does.

While many elderly people and their doctors would like to fix various
aspects of Medicare, there is no uproar to get rid of it -- it largely
works. So why aren't we looking to this pretty good system as a
model? Alas, with or without Obama in the White House, the permanent
government of power brokers and money handlers is alive and well
inside the Beltway. And the health insurance dinosaurs make the
marble columns of government tremble with the impact of money hitting
politics. According to the Center for Responsive Politics' Lindsay
Renick Mayer, since 1998 the insurance industry has contributed $568
million (that's over one half billion!) to political campaigns.
Pretty soon it'll add up to real money. They've spent $19 million just
lobbying though June of this year.

So don't be surprised if, as the pollster Stan Greenberg told NPR,
"it's beginning to feel like deja vu all over again" (in 1993 when he
was a pollster for President Clinton he was getting the same results
he is getting now). People want change, they favor public initiative,
but they are afraid the price of improving the 15 percent will harm
the 85%. Not much coming out of the Beltway is calming that fear and
the reason is Washington won't touch the untouchables.

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