None of this necessarily means that health reform is not worth doing...But we should not forget the cost of translating that noble aspiration into practical policy.
In Greg Mankiw's Times column, he discussed the marginal tax rates implicit in the Senate Finance Committee version of the health reform bill. CBO has just released some numbers on the version of health reform being considered in the House of Representatives.
The bottom line: The implicit marginal tax rates are even higher in the House bill.
If you are interested in a more specific comparison, here is what I wrote about the Senate Finance bill on Sunday, with the new numbers for the House bill added in brackets:
A family of four with an income, say, of $54,000 would pay $9,900 [$6,200] for healthcare. That covers only about half [a third] the actual cost. Uncle Sam would pick up the rest.And remember: This implicit marginal tax hike of 32 percent is added on top of the explicit marginal tax rate the family already faces from income and payroll taxes. Read more here at Mankiw's Blog
Now suppose that the same family earns an additional $12,000 by, for example, having the primary earner work overtime or sending a secondary worker into the labor force. In that case, the federal subsidy shrinks, so the family's cost of health care rises to $12,700 [$10,000].
In other words, $2,800 [$3,800] of the $12,000 of extra income, or 23 [32] percent, would be effectively taxed away by the government's new health care system.
Economics alone cannot settle the debate...
What areas of health spending are high (and low) in the United States?
The question moving forward on healthcare reform is: "does the proposed reform address the following problems cited by the WHO"?
- In-patient spending is higher than in other OECD countries
- Out-patient care spending is also highest in the United States
- Administrative costs are high.
- There are fewer doctors and hospital beds than in other countries.
- Pharmaceutical spending is higher in the US than in any other country (30-50% higher than in the rest of the OECD)
- The cost of same-day surgery is high and growing rapidly…
Conclusion The United States spends much more on health than any other OECD country on a per capita basis and as a share of GDP...all evidence suggests that prices of health goods and services are significantly higher in the United States than in most OECD countries, and that this is the main cause of high overall health spending.
The extra $750bn that America spends on health more than expected is not due to greater 'need' due to aging or sickness.
The biggest difference in spending by category is in out-patient care.
Within this, it is day surgery that has seen the most rapid growth in spending...although out-patient spending is a particularly striking difference between the United States and other OECD countries, health spending per capita on in-patient care, administration, medical goods (including pharmaceuticals) and investment is also higher than in any other country, and spending per capita on long-term care and prevention policies is high.
The US has an exceptionally complex system...
It is a system which introduces new technology rapidly – at a price. It delivers (in some areas at least) high quality of care, together with greater innovation and choice than in most other OECD systems. But it is not a system set up to bend the cost curve, unlike many other OECD countries. This is one of the major reasons why costs are high: the US system leaves patients largely indifferent to the price eventually charged for a medical good or service. Those who have insurance know that their costs will be covered.
All other OECD countries have more mechanisms built into their health systems to restrict expenditures than is the case in the United States, even though most if not all people in these other countries are covered by health insurance. This is done either by regulating quantities or prices or both, including the dissemination of new technologies, or by requiring a greater proportion of costs out of pocket..., the result is that other countries are able to afford universal health care access at a lower cost than in the United States.
Read full OECD report here and CBO report here
Who will win in healthcare reform? Hint -It is a number$ game... not you.
- True Health Care Reform: 10 Missing Pieces
- Why are they rejecting single payer?
- Health Care Reform? Not about health and no one cares....
- Billions gone and never mind over 20,000 Americans die every year...
- True Health Care Reform: 10 Missing Pieces
Cost estimate for the amendment in the nature of a substitute as introduced on November 3, 2009