The Unfinished Business of Healthcare Reform

I plan on finally resuming regular postings on here by next week.  Before I begin, however, the following is a post I made in January 2013 on MSU Roosevelt Institute’s blog.  It argues that healthcare reform in the United States is far from finished, and proposes that new federal measures be enacted to help address chronic deficiencies within the system.  While it is certainly not comprehensive, and does not necessarily reflect my current views on what needs to be done in regards to healthcare, it still provides a good framework for an in-depth discussion on the subject.

 Of the many issues facing the United States today, few are as controversial as the issue of healthcare.  For years, debates have raged across the country as to how to properly address perceived deficiencies within America’s healthcare system, with opinions severely polarized as to how healthcare should be delivered, payed for, and what role (if any) the federal government should play. The recent passage of the Patient Protection and Affordable Care Act (PPACA) on March 23, 2010 seems to have only intensified the debate further.  This should not be viewed as a negative consequence, however; quite the contrary.  For healthcare reform is – and should be – an ongoing, gradual process; no single action can solve all the problems immediately.  Indeed, given the importance of an adequate healthcare system to the well-being of societies everywhere, it would be desirable for the debates to become a regular part the national status quo.  Truly, the importance of a good healthcare system cannot be understated: not only does it help to increase the overall health and wellbeing of a nation’s citizenry, but it also helps to ensure that they remain active and productive members of the economy as well.  It is this higher productivity that is vital for sustained economic growth and higher living standards for everyone.  Unfortunately, as any American will readily admit, the US system does have some serious flaws that threaten this vision unless bold modifications are undertaken.  Specifically, these flaws include exceptionally high healthcare costs (and high cost growth rates), a glut of uninsured individuals, a lack of insurance portability, and perceived threats to quality.  Despite the passage of PPACA (whose vices & virtues this post will not be discussing), many of the roots of these overarching weaknesses remain unaddressed.  What are they, then?  Although the causes are many, three of them especially stand out.  First, because the federal government has exempted employer-sponsored healthcare benefits from an employee’s taxable income, many employees are encouraged to select more health insurance/costlier coverage as opposed to higher wages, and effectively feel insulated from the cost (thinking they are spending someone else’s money).  Because this tax exemption does not apply when people attempt to buy individual insurance, the federal government is also effectively incentivizing people to stick with employer-sponsored insurance as opposed to the (more portable & transparent) individual insurance plans.  A second major cause of the US’ healthcare problems is the inability to buy insurance across state lines.  This effectively creates localized monopolies that drive up the price of insurance.  Lastly, the negative consequences of American eating & exercise habits are a major burden on the system.  Given the entrenched nature of these causes, it is naturally quite difficult to find solutions that are deemed acceptable to everyone across the political spectrum.  However, because they address elements of concern for both sides of the aisle, the following proposed solutions, when considered, do have the potential to gain widespread support:

  • Remove the federal tax exemption for employer-sponsored insurance; cut income taxes to offset cost.  Repealing the distortionary tax exemption will decrease artificial demand for healthcare (thus lowering cost pressure, something both sides would like) and will encourage the individual purchase of portable plans. It has the added benefit of hitting high earners the hardest, which should make it more appealing to liberals.  A cut in income taxes to offset the cost would appeal to conservatives, and such tax cuts have the added benefit of being adaptable to maximize progressivity.
  • Encourage states to loosen barriers that prevent the out-of-state purchase of health insurance by offering them increased Medicaid funding in return.  Loosening barriers to allow cross-state purchases of health insurance would encourage competition between insurance companies, lowering costs.  These lower costs have the added benefit of offsetting the need for increased Medicaid funding.
  • Mandate and appropriate funding for the annual creation and delivery of specialized pamphlets that notify citizens of the importance of healthy lifestyles, allow them to easily estimate the impact their habits and choices have on both their own wellbeing and society’s, and offers guidance on the do’s and don’ts to becoming healthier.  The cost of funding should be offset by tax increases or spending cuts elsewhere in the budget.

When combined, such reforms not only have the potential to gain substantial bipartisan support, but will make great progress in permanently strengthening America’s healthcare system for many, many years to come.

– Tyler Leighton

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