Tuesday, July 28, 2009

Are tax increases and gov't control always Orwellian?

Just a quick bump to MediaVortex's comment last week on impact of the new health legislation to ERISA:

"A big battle right now in the Senate Finance Committee centers around the idea of "actuarial equivalence." My conversations with a couple of actuaries leaves me with the conclusion that "actuarial equivalence" will be the weasel words that enable the "health choices commissioner" (don't you love the Orwellian irony of that title?) to not only effectively kill consumer-directed care, but provide Congress with the loophole to add special interest benefits to the plan to garner votes. Over time, this will drive up the cost of a public plan rather than reduce it. This will of course be followed by tax increases and the eventual government control of 1/5 of our nation's economy."

A way to protect the public plan from interest group politics would be to create an semi-autonomous entity like the Fed to run the program. Of course the Fed is catching a lot of heat right now, with new demands for accountability.

Assuming we do get increased taxes and government control of 1/5 of the economy, is that such a bad thing? First, in the higher income brackets, does tax policy really need to avoid creating a disincentive for hard work? It may be that it would be better for families and society if people making more than $250,000 did have a disincentive to put in that 81st billable hour -- more progressive taxation could accomplish that.

Second, some economists show that government spending has a multiplier effect on GDP greater than private spending. On what else might those funds be spent? "Gas and toys from china? Once that money is spent it is out of our economy and no longer grows GDP. That decrease our GDP by a factor of 7 to 20 depending on what they are buying. Besides healthcare and housing what other expenditures keep more money in the US? Is a Chinese made big screen really a better purchase? That is where our discretionary spending is being spent, people are choosing to purchase excessive healthcare. If we eliminate that then they will purchase excessive electronics or eating out or other non essential items. Our HC spending is not resulting in people starving in the streets."

1 comment:

  1. We already have one - the Medical Payment Advisory Commission (www.medpac.org). Unfortunately Congress has chosen time and again to ignore recommendations of this in order to advance special interests.

    Problem with our tax policy is that the loopholes that allow the very rich and corporations to pay single digit effective tax rates pretty much gut the rather progressive tax structure we already have.

    You point out a problem with buying foreign goods, not private spending. If I can get a quality hip replacement in Mumbai for 1/3 the price of one here and a vacation for my family to boot, my healthcare spending dollars go with me.

    Additionally much of the technology that is driving up the cost of healthcare is built overseas by companies such as Philips, Hitachi, etc.

    If the endgame is to get more quality care to more people, then making individuals personally responsible for and invested in the consequences of their own healthcare choices would allow reallocation of our healthcare resources to those in need.

    Here's something to think about: What countries or societies have the highest rates of obesity in those in the lowest income brackets? Is there any connection to the generosity of the government entitlements they enjoy (welfare and Medicaid, for example)? What sort of effect does it have on GDP to enable the behaviors that having such an entitlement system encourages?

    Our HC spending is bankrupting our country's entitlement programs (Medicare and Medicaid). The people are not only not starving in the streets, they are filling our healthcare emergency rooms with thousands of cases of obesity-related diseases such as diabetes, high-blood pressure, heart disease, etc. which allows doctors and hospital execs to buy a bigger Chinese-made big screen than us.