
How to fix America's financial relationship to healthcare - Mz
http://micheleincalifornia.blogspot.com/2015/12/how-to-fix-americas-financial.html
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rayiner
> My understanding is that health insurance originated in this country as a
> means to plump up employee compensation in a situation where paying more
> wages was not desirable. You could not entice good employees by offering
> them a pay raise because it bumped them up into another tax bracket and it
> just wasn't worth it to them.

Really hard to take the article seriously when it crams so much misinformation
into one paragraph. There is no such thing as "bumping you up into the next
tax bracket." The marginal extra dollar might be taxed at a higher rate, but
the dollars below that will be taxed the same as before.

Moreover, the fact that health insurance isn't taxed now can't explain the
origin of the industry. Initially, health insurance was taxed just like any
other non-cash benefit. A _tax break_ on health insurance was implemented as a
way to offer some relief from the wage controls of WWII:
[http://www.npr.org/sections/health-
shots/2012/12/04/16643424...](http://www.npr.org/sections/health-
shots/2012/12/04/166434247/the-huge-and-rarely-discussed-health-insurance-tax-
break). But such a tax break wouldn't have come about if the industry didn't
already exist.

~~~
eggoa
Employee health benefits been tax free since at least 1954, and the top
marginal rates were _much_ higher then. So WWII controls were an early factor,
but marginal tax impacts were significant too.

~~~
Zombieball
Sorry, could you explain what you mean by marginal tax impacts?

I assume this is something along the lines of:

Employer: "We can offer you an additional $3k/year in income but it will be
taxed at 40%. Or we can offer you 3k in health benefits tax free. Which do you
prefer?"

~~~
eggoa
Sure. Employer observes that they can spend $10,000 on wages to increase the
employee's take-home pay by $1,000; or they can spend spend $5,000 on
insurance premiums and buy the employee an excellent health plan. The employee
and employer both have incentive to take the tax break.

I'm taking about the 1950 here, when the top marginal rate was around 90%.

Edit: grammar.

~~~
ubernostrum
The top marginal rate was 91%, yes, but that rate was for income over $200,000
_in 1950 dollars_ , which is (adjusted for inflation) nearly $2m in today's
dollars:

[http://taxfoundation.org/article/us-federal-individual-
incom...](http://taxfoundation.org/article/us-federal-individual-income-tax-
rates-history-1913-2013-nominal-and-inflation-adjusted-brackets)

Meanwhile, the median household income in 1950 was under $5,000 (in 1950
dollars):

[http://web.stanford.edu/class/polisci120a/immigration/Median...](http://web.stanford.edu/class/polisci120a/immigration/Median%20Household%20Income.pdf)

So although there were very high marginal rates at the top, they applied only
to people making over 40 times the median income. And just to pay a higher
marginal rate than 2015's maximum of 39.6%, one needed to be making around
three times the median income in 1950.

So you'll need another explanation, because it's unlikely that the risk of
being bumped to an ultra-high marginal rate was an issue widespread enough to
spur the offer of untaxed health care. And as others have pointed out, it's
well-documented that the actual reason was a reaction to wartime wage controls
-- given the choice, companies would have simply offered more cash.

------
anigbrowl
Direct primary care is a good thing, and I greatly appreciate you contributing
your experience to this discussion.

On the other hand, having grown up with a public health system (in Ireland,
whose model is almost identical with the UK's NHS), I'm strongly of the
opinion that the necessarily higher rates of income tax are well worth it.
Why? Because when you get sick you just go the doctor, and if the doctor's
clinical opinion is that you need additional care, you go to the hospital.
There is no financial decision-making involved, there's no additional
paperwork to be filled out (not by you anyway), and you don't have to have
conversations about who's in or out of your provider network in the normal
course of events. The only focus is on your clinical care and recovery needs.
Is it perfect, of course not - but when you develop a medical problem, you get
to focus on that rather than having to split your attention between medical,
financial, and administrative worries. My experience of the American
healthcare system is that while there are many sincere and selfless people
working in it, the system itself is badly corrupted and wildly inefficient.

One objection I've heard from opponents of single payer healthcare is that if
going to the doctor is free or almost so, doctor's offices will be filled with
hypochondriacs and genuinely needy patients will be crowded out. I have never
seen any evidence for this claim, and it doesn't match my experience. Most
people don't like going to the doctor because it makes them nervous, it's
icky, and they dislike being around other sick people in the waiting room -
same as everywhere. Of course there are some hypochondriacs out there, and
doctors quickly become skilled at spotting them and running them off. It may
be a bit harder in these days of WebMd, but I am disinclined to believe that a
tiny number of hypochondriacs are the major obstacle to restructuring and
industry comprising 10-15% of our economy.

~~~
pbreit
I think the main opposition to single payer in the USA is that it's counter to
some of the bedrock principles the country was founded on, such as freedom,
independence, limited government and personal responsibility.

~~~
rayiner
"Personal responsibility" is not a founding American principle. There's no
Federalist Paper dedicated to "personal responsibility." Indeed,
"independence" and "personal responsibility" along with "individualism" were
retconned into American history during the settlement of the West.

Moreover, "limited government" in the context of American founding principles
refers to the allocation of responsibilities between states and the federal
government, not the overall scope of government.

There is, in fact, a principled originalist argument for universal healthcare.
First, it has always been assumed that the states have the power to provide
for the welfare of their citizens, as well as to police their behavior and
morals. The states are, in that regard, decidedly not "limited governments" of
"enumerated powers." State-level universal healthcare is contrary to no
founding principle.

Second, the Commerce Clause was incorporated into the Constitution to allow
the federal government to solve what we today would recognize as economic
collective action or free-rider problems. At the time it was aimed to address
the collective action problem of free trade. It's good for the United States
as a whole, but individual states have a short-term incentive to erect trade
barriers. The purpose of the Commerce Clause was to allow the federal
government to counter-act those short term incentives. Precisely the same
problem exists with state-level universal healthcare. Even if most people in a
state want it, they can't enact it because it's too easy for people from
neighboring states to free-ride on those services. The Commerce Clause is thus
properly invoked for resolving that problem at the federal level.

~~~
vonmoltke
> Precisely the same problem exists with state-level universal healthcare.
> Even if most people in a state want it, they can't enact it because it's too
> easy for people from neighboring states to free-ride on those services.

How so? If you are a resident, you get "free" care. If not, you get a bill. Is
this not how Canada works WRT Americans who need to use the Canadian health
system?

~~~
rayiner
Say Arizona doesn't have universal healthcare, and California does. Someone
gets cancer, so they move to California. Under the privileges and immunities
clause, California generally cannot say "hey, you just moved here, so here is
a bill." Consider also a company that doesn't like the extra taxes used to
support universal healthcare. So they hop across the border to Arizona, and
continue selling to California customers. California cannot, without violating
the Commerce Clause, say "hey, you get the benefit of selling to healthy
Californian consumers but you moved just to evade the tax that pays for it, so
here is a tariff on your products."

The Constitution imposes an open market on commerce and movement within the
United States. The Commerce Clause exists to give the federal government the
power to address the economic issues that arise as a consequence of that.

------
pbreit
This post is confused. Employer-sponsored healthcare is excluded from both
payroll and income taxation which makes it very attractive for employers to
offer. The author doesn't understand how marginal tax rates work. Only
incremental dollars are taxed at the higher rate so it's not like you hit some
taxation cliff. If health "insurance" really was "insurance" it really would
be a "bet". Instead, it's become more of a payment plan with an insurance
component. "Real" insurance is now called "catastrophic insurance" and is
dying in the US (I think Obamacare basically outlaws it).

~~~
triangleman
Actually, high deductible health plans ($10k+ deductibles) are on the rise
after Obamacare was passed.

~~~
pbreit
Deductibles are part of it but coverage is the bigger element. What is
typically referred to as "catastrophic insurance" is only available to people
under 30 or with a "hardship exemption". Higher deductibles and higher
coverage (i.e., higher premiums) are basically the worst of the worst
situation.

------
bitwize
My dentist's office offers this. My work didn't offer dental coverage but the
clinic itself offered "coverage" in the form of paying a flat fee and getting
your cleanings and exams taken care of for the year (with discounts for other
care). I was on that like white on rice: my money went directly to the
dentist, no middleman taking their cut out of my paycheck, and my basic dental
care was paid for.

~~~
stephengoodwin
If you don't mind me asking, how much did you pay for the "coverage"?

Did it offer any kind of discount for minor or major dental work (e.g., cavity
removal, wisdom tooth removal)? Or was this covered by your health insurance?

------
mschuster91
What I don't get: why does the private sector have to be involved in
insurance?

In my opinion, as the right to health care is a basic human right, the state
should be responsible for providing its citizens with health care - and as all
citizens are equal, so should the health care be.

Unfortunately, Germany isn't perfect either - privately insured patients get
faster access to specialized MDs, they enjoy better quality of service (esp.
dentals and glasses/eyewear) and the basic insurance (Gesetzliche
Krankenkasse) is in fact a staggering number of distinct insurances, each of
course carrying its own administrative bloat and its own deals with pharma
companies. This may result in a doctor giving two identical receipts for
medication - and because the two patients are insured at different companies,
they get different generics with all the problems this causes (e.g. different
colors of the pills, leading to lower stick-through rate because patients
mistrust changes, or different composition leading to different absorption
rate even though the medical compound is identical).

There's a shitload of money wasted in healthcare, not only in the US, and the
poorest people (as always) have to suffer.

~~~
cpursley
> the right to health care is a basic human right

Calling _healthcare_ a human right is implying that we have the right to take
from others what we need, even if indirectly via the police-power of the state
(i.e., threat of violence or actual violence if necessary). To take this
further, it means we have the right to a portion of another citizens labor.

Now, don't get me wrong. Talking about what governments should provide their
citizens as part of their _benefits package_ is important, but calling
healthcare a right is a stretch. None of the rights on the UN or US Bill of
Rights involve coercion towards other citizens to provide said _rights_.

~~~
ja30278
Whenever someone says that some rivalrous resource is a 'basic human right', I
have a hard time taking them seriously.

As I get older, I have mellowed a great deal, and I understand how smart
people can reasonably disagree about a large number of things...but I honestly
can't fathom how intelligent people can fail to grasp that you can't possibly
have a 'right' to a finite, tangible resource which you yourself don't
produce.

~~~
thescriptkiddie
Healthcare is not a finite or tangible resource, it is a service provided by
medical professionals. It isn't possible to run out of healthcare. It is
possible to have a healthcare shortage, but as long as there is money to pay
for running hospitals and training doctors, that won't happen. You might think
that the amount of money it would take is impossibly large, but other nations
provide free healthcare to 100% of their population for less money per person
than we spend in the US already. If you disagree with the fundamental idea of
taking money (taxes) from some people to pay for services used by others, than
you may actually disagree with the entire concept of government.

~~~
ja30278
Medical professionals and hospital rooms are absolutely finite resources. You
can certainly build more, either by incentivizing their construction
(capitalism) or have the state build them as part of some 5 year plan. Medical
professionals are somewhat harder...we get them now by paying them
handsomely...you could continue to do that, or conscript people into service.
I'm not sure I'd want my heart surgeon to be a draftee..but ok.

How about donor organs? is there some infinite source of hearts and livers out
there I'm unaware of?

Once you accept the fact that a given resource is rivalrous, you have to come
up with some way to distribute it. Currently, that mechanism is money. If you
get rid of that, then you have to replace it with _something_..whether it be
algorithms, favor-economies, or central planning.

Now if you want to argue that insurance companies distort the market, then I
probably agree with you (though I think there is room for interesting
discussion here...). Certainly I think a single-payer solution is preferable
to the current status quo, which mandates that individuals purchase insurance
from private companies.

~~~
serge2k
> Medical professionals are somewhat harder...we get them now by paying them
> handsomely...you could continue to do that, or conscript people into
> service. I'm not sure I'd want my heart surgeon to be a draftee..but ok.

You can also increase the supply by opening up medical schools and giving more
students the chance to attempt to become doctors without needing 10s of
thousands of dollars.

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egoodz
The problem you face with DPC is in the US you'd have to subscribe to 2-3
different healthcare providers, your GP, a hospital and perhaps another
specialist (endocrinologist, cardiologist, etc.) Unless you have a DPC
membership with a provider that supplies all of that. My GP has DPC, but I
still have insurance from my employer that would cover any hospital visits.

