Value-Added Tax and Health Care Reform

[Rubes]

I'm not much of an economist, but I remember there was a discussion here recently about VATs and how some people are promoting them as a possibility here. It seemed, from what I can remember, that there was considerable support for the concept.

 

I bring this up because there is an article in the current New England Journal of Medicine that discusses an interesting system of reform for our health care system that involves the incorporation of a VAT.

 

The system provides universal health care coverage through a system of vouchers. Some of the important points of the system include:

 

1. Universal coverage. All Americans under 65 get a voucher that guarantees coverage for basic health services from an a qualified insurance company or health plan.

 

2. Free choice of health plan from among several alternatives.

 

3. Freedom to purchase additional services (wider choice of hospitals, more comprehensive mental health services, etc) using after-tax dollars.

 

4. Funding by an earmarked VAT. If people want better basic coverage by the voucher, you must support a tax increase to cover it. The tax is based on consumption.

 

5. Reliance on private delivery systems, not for government health care.

 

6. End of employer-based insurance, which few would mourn.

 

7. Elimination of Medicaid and other means-tested programs, since those people are covered.

 

8. Phasing out of Medicare. Current Medicare enrollees continue with this system, but no new people are enrolled. People turning 65 are continued with the voucher system.

 

9. Creation of a Federal Health Board (modeled on the Federal Reserve System) with regional boards to manage/oversee geographic regions, with the responsibility of defining and modifying the basic benefits package, contract with health plans, collect data, etc.

 

 

It's an interesting prospect. I would like to post the article and/or a link, but can't for obvious reasons. I would urge anyone interested in health care reform who has access to this week's NEJM to check it out, at least to read the details of each of those features. It's intriguing in that it does some of the things that really need to be done, such as universal coverage, elimination of Medicaid, elimination of employer-based insurance, and phasing out of Medicare.

 

But I'm not too good with VATs and how that would be implemented, so I'd like to hear some folks thoughts on that proposal.

[KRC]

A few questions:

 

-I see that anyone under 65 gets a voucher, and that Medicaid and Medicare are eliminated. What happens to the seniors?

 

-Who is paying for the vouchers? Tax dollars? If so, how much is this going to cost us to cover everyone?

 

-How are the poor going to afford the additional services above what the vouchers cover?

 

-Number 5 seems bogus. Private delivery but everything is still federalized. They are the ones picking which plans are acceptable. They are the ones choosing the services provided. It is extremely misleading.

 

These are my initial questions. This just seems like another form of Socialized medicine.

[Rubes]

Mind you this is just me interpreting what is said in the article, so I may be wrong.

 

A few questions:

 

-I see that anyone under 65 gets a voucher, and that Medicaid and Medicare are eliminated. What happens to the seniors?

 

Medicare isn't eliminated per se, but is phased out. Anyone currently on Medicare stays on it. No new people are enrolled; as they turn 65, they continue on the voucher system.

 

-Who is paying for the vouchers? Tax dollars? If so, how much is this going to cost us to cover everyone?

 

Funding would come from the earmarked VAT. The cost of the system is difficult to predict right now, since it depends on which services, deductibles, and copayment levels would be incorporated into the universal benefit. Their discussion talks about how the system would result in an increase in the use of health care services by those who are currently uninsured or insured with less generous policies, a dramatic decrease in administrative costs seen with the current system, and other things. The authors acknowledge that, at this point, the idea is a broad outline and more study is needed to determine more precise estimates of the cost of the vouchers, the control of costs over time, and the financing of special services.

 

-How are the poor going to afford the additional services above what the vouchers cover?

 

They didn't go into that very much, other than in one place to say that "services beyond basic care are paid with after-tax income, which ensures that users weigh costs against benefits." Much of this will depend on what is included in the basic coverage, obviously. But it's not unlike what my wife and I see already, where the poor often go without certain non-critical medical interventions because they are too expensive.

 

-Number 5 seems bogus. Private delivery but everything is still federalized. They are the ones picking which plans are acceptable. They are the ones choosing the services provided. It is extremely misleading.

 

Perhaps, but I think that's a bit of an overreaction. The authors state that their proposal "does not call for government health care and would not legislate changes in the current private delivery system." The government (and the public, though the VAT) would determine what constitutes basic coverage (as well as deductibles and copayments). That's what the government will reimburse to the health plans. They are choosing which services are covered, basically, for all people, but a system would be in place to provide more than that.

 

These are my initial questions. This just seems like another form of Socialized medicine.

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Perhaps, but the real question is, is there any form of universal coverage that would not smack, to some degree, of socialized medicine? We have to face the fact that our current system is deeply flawed, inefficient, inequitable, and generates discontinuous coverage. It is a recipe for financial disaster.

 

That's not to say this proposal is not economically flawed, but if you can provide universal coverage while eliminating employer-based insurance, Medicaid, and (eventually) Medicare, I can't help but think it may be headed in the right direction.

[TheMadCap]

Wonder what would happen to folks like me, those who have certain medical conditions requiring lots of meds and frequent trips to the doctors. It always seems I get screwed because I'm "not like the rest" in regard to medical conditions. It always seems like insurance is designed for those who never use it, or need it only when emergencies happen...

[Rubes]

Wonder what would happen to folks like me, those who have certain medical conditions requiring lots of meds and frequent trips to the doctors. It always seems I get screwed because I'm "not like the rest" in regard to medical conditions. It always seems like insurance is designed for those who never use it, or need it only when emergencies happen...

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The article itself is just a broad outline for the proposal, so a lot of details are either not well fleshed-out or not discussed.

 

As for medical conditions, the proposal states that everybody is guaranteed basic health care coverage without means testing or exclusions of any kind. Of course, what services you would get from basic coverage would depend on how basic coverage is defined.

 

Their proposal statest that the universal benefits package "should be sufficiently comprehensive to provide most Americans with most of their care most of the time," and the benefits provided should be those typically provided by large employers (including tiered pharmaceutical benefits).

 

They do not discuss much about specific situations like yours, although the option is apparently there to add additional coverage above that provided universally.

[KRC]

They didn't go into that very much, other than in one place to say that "services beyond basic care are paid with after-tax income, which ensures that users weigh costs against benefits." Much of this will depend on what is included in the basic coverage, obviously. But it's not unlike what my wife and I see already, where the poor often go without certain non-critical medical interventions because they are too expensive.

 

If you are going to have universal healthcare coverage, you need to address this. You mention non-critical but what about critical. For example, if someone has a heart attack and needs surgery but they cannot afford the surgery, do we say "oh well, sucks to be you?" What is going to end up happening is that the rest of the taxpayers will need to pick up the tab.

 

 

 

 

Perhaps, but I think that's a bit of an overreaction. The authors state that their proposal "does not call for government health care and would not legislate changes in the current private delivery system." The government (and the public, though the VAT) would determine what constitutes basic coverage (as well as deductibles and copayments). That's what the government will reimburse to the health plans. They are choosing which services are covered, basically, for all people, but a system would be in place to provide more than that.

 

I disagree. The Federal Health Board along with all the other boards that will be created on the state and local level are going to determine everything from acceptable healthcare providers to coverage. How are people appointed to the board? How is this different from any other government agency? You are going to be paying a lot into the administration of thisprogram before anyone sees one cent of healthcare coverage. It is ripe for corruption since it sounds like only a few companies will be acceptable to the Federal Health Board.

 

 

 

 

Perhaps, but the real question is, is there any form of universal coverage that would not smack, to some degree, of socialized medicine?

 

I doubt it.

 

 

 

 

We have to face the fact that our current system is deeply flawed, inefficient, inequitable, and generates discontinuous coverage. It is a recipe for financial disaster.

 

No question.

 

I am sorry, but I do not like this plan. It still involves the government through the VAT. Get the government out of it and get rid of the Federal Health Board controlling everything.

[Arkady Renko]

VATs shuold only be put into place to replace the income tax, not to act as an additional tax, IMO. Note that VATs help increase the size of government because they hide the rate of taxes that people are actually paying.

 

Economic theory says that a pure tax on consumption will have the same effect as a pure tax on income. Think of it this way, money is only as good what it can buy. If goods are more expensive because of the tax, incomes have gone down just as low as if the incomes were taxed directly.

 

On the other hand, in our imperfect world where there are no perfect, pure taxes, VATs might help our domestic manufacturing. While income taxes are taxing jobs, VATs tax goods. Our exports have the cost of labor (which includes the taxes paid off of that labor) wherever they go. When our domestic goods reach countries that have the VAT, they are taxed the VAT after already having a high cost due to our income tax.

[Rubes]

VATs shuold only be put into place to replace the income tax, not to act as an additional tax, IMO. Note that VATs help increase the size of government because they hide the rate of taxes that people are actually paying.

 

Economic theory says that a pure tax on consumption will have the same effect as a pure tax on income. Think of it this way, money is only as good what it can buy. If goods are more expensive because of the tax, incomes have gone down just as low as if the incomes were taxed directly.

 

On the other hand, in our imperfect world where there are no perfect, pure taxes, VATs might help our domestic manufacturing. While income taxes are taxing jobs, VATs tax goods. Our exports have the cost of labor (which includes the taxes paid off of that labor) wherever they go. When our domestic goods reach countries that have the VAT, they are taxed the VAT after already having a high cost due to our income tax.

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Interesting points, but I think you also have to consider the effect that eliminating employer-based insurance would have on American businesses...not to mention the elimination of Medicaid and the eventual elimination of Medicare.

[Rubes]

If you are going to have universal healthcare coverage, you need to address this. You mention non-critical but what about critical. For example, if someone has a heart attack and needs surgery but they cannot afford the surgery, do we say "oh well, sucks to be you?" What is going to end up happening is that the rest of the taxpayers will need to pick up the tab.

 

Well, there's really no argument that this would need to be addressed, but keep in mind that the article is a 6-page outline of the plan, and really can't/doesn't go into all of the specifics given its limited space. I'm sure that this is an important issue that they have some specific ideas about, and perhaps we'll know more of the details if it garners enough attention.

 

As to the critical health interventions, that has traditionally been less of an issue. The uninsured already receive limited care for their more dramatic crises. As one person puts it, "As a society, we don't want to see childbirth occur in the street or an obivously broken bone ignored. We are willing to pay enough to move the care indoors and out of sight. Bu we are not willing to provide coverage for the chronic conditions and preventive care that might enable the uninsured to lead more productive and happier lives."

 

So we don't say "sucks to be you", nor would we with this plan. And the rest of the taxpayers already pick up that tab.

 

 

I disagree. The Federal Health Board along with all the other boards that will be created on the state and local level are going to determine everything from acceptable healthcare providers to coverage. How are people appointed to the board? How is this different from any other government agency? You are going to be paying a lot into the administration of thisprogram before anyone sees one cent of healthcare coverage. It is ripe for corruption since it sounds like only a few companies will be acceptable to the Federal Health Board.

 

There's no doubt that whoever is responsible for paying for care will determine what they are willing to pay for, whether it's the government or a private insurer. Do you trust a private insurer any more than you do the government?

 

It is clearly a complicated issue. But we need to have a good understanding of the cost of basic health care and how much we would be able to cover with a VAT. And if you aren't satisfied with what is covered under the basic benefit, the VAT can be adjusted. It all depends on how much we, as a society, are willing to cover. And that has absolutely no effect on purchasing additional coverage, which gives you the right to go to a provider of choice or to receive the level of coverage that you want.

 

I am sorry, but I do not like this plan. It still involves the government through the VAT. Get the government out of it and get rid of the Federal Health Board controlling everything.

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I appreciate your position, Ken, given your political views and your ability and willingness to discuss them. But if not the government, then who? The marketplace? Not a chance. To paraphrase the same person, perhaps the appeal of the marketplace is that it cannot directly levy taxes and is therefore less threatening to individuals' interests, but to date, market-based solutions have had only modest success at controlling costs and little to none at providing coverage for the uninsured.

[KRC]

Do you trust a private insurer any more than you do the government?

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It would depend on the market and availability of choice in the marketplace. It is between my company's HMO and the federal government then there is no choice, they both suck. The HMO has me by the short-hairs and they know it. The government is too big to care about the individual. The plan proposed in this article does nothing to address the major flaws of the HMO/Federal government issues that we experience now.

 

Open up the marketplace and allow me to choose what coverage I want and by who. I do not want the government or the Federal Health Board telling me who I can and cannot use for my coverage. Use a similar system that you have for car insurance or homeowners insurance. There are a boatload of companies with varying prices for varying coverages. I want to pick my own company. If I do not like the service or the prices, I go elsewhere.

[Rubes]

It would depend on the market and availability of choice in the marketplace. It is between my company's HMO and the federal government then there is no choice, they both suck. The HMO has me by the short-hairs and they know it. The government is too big to care about the individual. The plan proposed in this article does nothing to address the major flaws of the HMO/Federal government issues that we experience now.

 

Open up the marketplace and allow me to choose what coverage I want and by who. I do not want the government or the Federal Health Board telling me who I can and cannot use for my coverage. Use a similar system that you have for car insurance or homeowners insurance. There are a boatload of companies with varying prices for varying coverages. I want to pick my own company. If I do not like the service or the prices, I go elsewhere.

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Well, under the proposal you can certainly choose how much coverage you want and which provider you want. It just requires you to purchase more than just the basic coverage that would be provided to everyone.

 

It's not a perfect system. A perfect system probably does not exist. But relying completely on the marketplace is not a solution to the problem. We need a solution that provides care for all while reconciling the tension between equality and individual freedom. Some would argue that this proposal could do that better than any alternative proposed so far.

 

I suppose the real question is, Do we really want universal access to health care? How can a country as idealistic and generous as the U.S. fail repeatedly to accomplish in health care coverage what every other industrialized nation has achieved?

[KRC]

Well, under the proposal you can certainly choose how much coverage you want and which provider you want.

 

Actually, no you cannot. You are only allowed to select from the approved providers as determined by the Federal Health Board. Your choices are limited.

 

How can a country as idealistic and generous as the U.S. fail repeatedly to accomplish in health care coverage what every other industrialized nation has achieved?

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Well, if get Canadian results from universal healthcare, then no thanks.

[Rubes]

Actually, no you cannot. You are only allowed to select from the approved providers as determined by the Federal Health Board. Your choices are limited.

 

I'm not sure why you're saying that. According to the proposal, as in point #3, "People who wanted to purchase additional services or amenities, such as a wider choice of hospitals and specialists or more comprehensive mental health coverage, could do so with their own after-tax dollars."

 

So if you want the ability to choose your own coverage or provider, you can do so.

 

 

Well, if get Canadian results from universal healthcare, then no thanks.

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So it's your belief that any system that provides universal health care could be no better than Canada's? Or is that just a reflex response?

[KRC]

I'm not sure why you're saying that. According to the proposal, as in point #3, "People who wanted to purchase additional services or amenities, such as a wider choice of hospitals and specialists or more comprehensive mental health coverage, could do so with their own after-tax dollars."

 

So if you want the ability to choose your own coverage or provider, you can do so.

 

So, how is that different from my system? The only thing I see is that with my system, there is no government involvement (via tha VAT) or the creation of the Federal Health Board and its boards at all levels of government. I am still purchasing the coverage that I want from the provider I want.

 

 

So it's your belief that any system that provides universal health care could be no better than Canada's? Or is that just a reflex response?

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Until I see a viable plan, yes. Right now, the plan you mentioned from the article still will be run like it was the government controlling everything. While it may be a "private" entity, the Federal Health Board and its other boards are no better than having the government run it. It will still be a conglomeration of political BS which will be funded by the taxpayers.

[Rubes]

So, how is that different from my system? The only thing I see is that with my system, there is no government involvement (via tha VAT) or the creation of the Federal Health Board and its boards at all levels of government. I am still purchasing the coverage that I want from the provider I want.

 

It's different from your system in that it actually provides universal health coverage to help out the 45 million people who don't have any. The question is, why don't those people have health insurance? 80 percent of them are either employed or dependents of those who are employed. They can't afford it. The marketplace isn't helping them out.

 

Again, perhaps the real question is, Do we really want universal access to health care?

 

Until I see a viable plan, yes. Right now, the plan you mentioned from the article still will be run like it was the government controlling everything. While it may be a "private" entity, the Federal Health Board and its other boards are no better than having the government run it. It will still be a conglomeration of political BS which will be funded by the taxpayers.

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Well, until there is a plan you agree with, we won't get anywhere. The status quo is leading us down a path to economic disaster. We can keep waiting for the ideal plan to arrive, but three times in the past few decades we tried confronting this issue, and three times we failed. At some point we are going to have to make some tough decisions.

 

If broad access to health care is a real goal, if it is ever to be anything more than a political sound bite, it cannot be a casual commitment. The problem is that, for most of us here, universal coverage is nothing but a benefit to somebody else. It's hard to convince people that there are real economic benefits to covering the uninsured, because those benefits don't directly show up in their pockets. Unfortunately, that's too much to sell to some.

[KRC]

It's different from your system in that it actually provides universal health coverage to help out the 45 million people who don't have any. The question is, why don't those people have health insurance? 80 percent of them are either employed or dependents of those who are employed. They can't afford it. The marketplace isn't helping them out.

 

Again, perhaps the real question is, Do we really want universal access to health care?

Well, until there is a plan you agree with, we won't get anywhere. The status quo is leading us down a path to economic disaster. We can keep waiting for the ideal plan to arrive, but three times in the past few decades we tried confronting this issue, and three times we failed. At some point we are going to have to make some tough decisions.

 

If broad access to health care is a real goal, if it is ever to be anything more than a political sound bite, it cannot be a casual commitment. The problem is that, for most of us here, universal coverage is nothing but a benefit to somebody else. It's hard to convince people that there are real economic benefits to covering the uninsured, because those benefits don't directly show up in their pockets. Unfortunately, that's too much to sell to some.

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Perhaps the problem is the abuse? I am paying for people to go to the emergency room because they have the sniffles.

 

Any universal plan does not need to be perfect in my eyes, but I am not going to support a plan just because it was proposed. This plan has too many holes IMO, and I cannot support it for that reason. Maybe, after further debate those items will be addressed and the plan changes. Right now, I cannot support it.

 

It is obvious we are not going to agree on this, but I thank you for the debate. It was productive and it forced me to think about exactly want I want in helathcare reform. I still do not have a comprehensive plan, but I am closer. Again, thanks for the rational debate. It is something that we rarely see here.

[ExiledInIllinois]

Again, thanks for the rational debate. It is something that we rarely see here.

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It was quickly turning?

 

[KRC]

It was quickly turning?

 

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What was quickly turning?

[Rubes]

Perhaps the problem is the abuse? I am paying for people to go to the emergency room because they have the sniffles.

 

Any universal plan does not need to be perfect in my eyes, but I am not going to support a plan just because it was proposed. This plan has too many holes IMO, and I cannot support it for that reason. Maybe, after further debate those items will be addressed and the plan changes. Right now, I cannot support it.

 

It is obvious we are not going to agree on this, but I thank you for the debate. It was productive and it forced me to think about exactly want I want in helathcare reform. I still do not have a comprehensive plan, but I am closer. Again, thanks for the rational debate. It is something that we rarely see here.

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Thanks, I appreciate that, and it's good to hear concrete reasons why a plan like this would not be supported. The authors definitely make the argument that there are many aspects of the plan that need further research and modification, so it will be interesting to see the editorial rebuttals that arise from the publication.

 

Plus, I think one of the reasons to bring up a proposal like this is not just to convince you it's the right way to go (I'm not completely convinced myself either), but to see if it's a real starting point that could be acceptable given the proper attention to details.

 

I'm interested to hear what your position was on health care reform during your campaign.

[KRC]

I'm interested to hear what your position was on health care reform during your campaign.

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It was what I was discussing in this thread. Privatize it. I know that you do not agree with the position, but I feel it is the best method. Get the government out of it and put the choices on the people paying for the plan. Use car/homeowners insurance as the model. By reducing taxes, it will leave more money for people to be able to afford the coverage. To cover people who still would not be able to afford coverage, I would encourage charitable donations to organizations who would provide coverage for those less fortunate. It eliminates government controlled welfare and puts it down on the local level in the form of local charities. This would give greater oversite into abuse of the system.

 

Once you start creating things like the Federal Health Board, you are just going to be in the same boat as you would have if you Socialized medicine. It is no different from having the government run the plan.