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FIVE HEALTH CARE REFORM SOLUTIONS THAT MAKE SENSE
Massachusetts, the bluest of states in our union, stunned the nation on Tuesday when it voted to end Washington's unbridled spending and plan for government-run health care. Americans still want health care reform, but they are looking for clear, patient-centered, fiscally responsible solutions. There's a way to make this work, says Dr. C.L. Gray, president of Physicians for Reform.
Sell insurance across state lines:
State mandates drive up costs; health insurance for a 25-year-old male in New Jersey costs nearly six times what it does in Kentucky, largely because of state mandates.
Allowing businesses to purchase insurance across state lines empowers consumers, not Washington, and does not cost a dime.
Let individuals purchase health insurance with pre-tax dollars:
Insurance companies serve businesses, not patients; businesses purchase employee health insurance with pre-tax dollars while individuals purchase insurance with post-tax dollars making their insurance far more expensive.
This reform lets patients buy products that meet their needs and makes insurers more accountable to patients.
Encourage Health Care Savings Accounts (HSAs):
HSAs reduce health care costs without rationing (cutting Medicare); they also let patients control their own money, decreasing health care spending by 13 percent.
During 2005 and 2006, traditional insurance rose 7.3 percent annually while lower cost / higher deductable plans combined with HSAs rose only 2.7 percent annually.
End abusive medical litigation:
Frivolous litigation drives physicians out of medicine; bringing tens of millions of new patients into the system requires more physicians, not fewer.
Frivolous litigation reform lowers cost and improves access to care; Americans spend approximately $124 billion every year because physicians practice defensive medicine.
Cover the uninsured:
We can insure the uninsured without expanding American debt; approximately 25 percent of patients who visit the emergency rooms do not have health care coverage.
A system of tax credits can help the uninsured purchase coverage; this would cost approximately $80 billion annually.
Source: Dr. C.L. Gray, "Five Health Care Reform Solutions That Make Sense," Fox News, January 21, 2010.
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TO STIMULATE THE ECONOMY, CUT TAXES
President Obama has saddled himself with several ideas about the economy and job creation that aren't working, either substantively or politically. And he appears to be too ideologically rigid or stubborn to consider the evidence and jettison the failed ideas, says Fred Barnes, the Executive Editor of the Weekly Standard.
Obama's failed ideas center on the myth that government spending is the most effective method of stimulating the economy, spurring strong growth, and generating new jobs. The president needs to chat with Harvard University economists Alberto Alesina and Silvia Ardagna on this subject. They studied dozens of examples of economic stimulation between 1970 and 2007 in 21 countries, including the United States. Their findings are unequivocal, says Barnes:
Fiscal stimuli based upon tax cuts are more likely to increase growth than those based on spending increases.
The current stimulus package in the United States is too much tilted in the direction of spending rather than tax cuts.
Obama's paltry tax cuts aren't the kind of across-the-board reductions in individual and corporate income tax rates that have revived sluggish economies by incentivizing private investment and stirring job creation.
Another finding by the economists bears on a separate aspect of Obamanomics: deficit reduction. According to Alesina and Ardagna:
Spending cuts are much more effective than tax increases in stabilizing the debt and avoiding economic downturns.
In fact, there are several episodes in which spending cuts adopted to reduce deficits have been associated with economic expansions rather than recessions.
What Obama would learn from a chat with Alesina and Ardagna is pretty simple: Do the opposite of what you're doing now. You want to stimulate economic growth and job creation, then cut tax rates across the board. You want to reduce the budget deficit and slow growth of the national debt, then cut spending. The economists have empirical evidence to support the effectiveness of this approach, says Barnes.
Source: Fred Barnes, "Obama the Slow Learner," Weekly Standard, Vol. 15, No. 18, January 25, 2010.
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WHO WANTS TO TAX A MILLIONAIRE?
Supporters of health care reform need money -- a lot of money -- to pay for it. So it's not surprising that they would try to get it from the people with the most money to spare. Hence the so-called millionaire's tax, a levy embedded in the House health care bill. As House Ways and Means Committee chairman, Rep. Charles Rangel (D-N.Y.), explained, lawmakers are targeting big earners because it "causes the least amount of pain on the least amount of people."
That's the theory, anyway. In fact, the millionaire's tax is a good example of how poorly some politicians understand the policies they propose, says Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University:
The health care bill that the House narrowly approved in November included a 5.4 percent tax on the portion of gross income (which includes capital gains and dividends) that exceeds $500,000 for individuals and $1 million for a couple.
The surtax would apply to tax years that begin after December 31, 2010.
So the first sign that the tax will hit more than millionaires is the fact that it targets half-millionaires from the get-go.
The idea's main selling point, says de Rugy, is that the increase would hit only 0.3 percent of tax filers -- roughly 400,000 people -- yet would raise $460.5 billion over the next 10 years:
Congress' Joint Committee on Taxation estimated that the new rate would affect only 1.2 percent of relatively small business owners, including sole proprietorships (that is, businesses owned by just one person), partnerships (owned by a few people), and S corporations (which have up to 75 shareholders).
But because the tax isn't indexed for inflation, over time it will apply to more taxpayers as inflation affects income levels.
Sound familiar? It should, because this is how the alternative minimum tax (AMT) became such a nightmare, says de Rugy.
According to the Tax Policy Center, by 2019 the number of taxpayers subjected to the health care bill's tax will have doubled. If inflation hits harder than the center's analysts assume, the number will be even higher. Either way, it will keep climbing, gradually assimilating more and more people who never thought they'd be considered super-rich, says de Rugy.
Source: Veronique de Rugy, "Who Wants to Tax a Millionaire?" Reason, February 2010.
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IT'S TIME TO FREEZE GOVERNMENT WAGES
As states and localities continue to fight budget crises, they have an opportunity to close gaps by freezing employee wages. Because public employee compensation rose too fast over the last three years, they should be able to do this while retaining quality employees at least as well as they could back in 2006, says Josh Barro, a Senior Fellow with the Manhattan Institute.
In a recession when wages are stagnating, you would expect governments to capitalize on the loose labor market by holding the line on employee compensation. But public sector compensation (as measured by the Department of Labor) rose 42 percent faster than private sector compensation over the last three years, says Barro:
Since the end of 2006, hourly total compensation (wages plus benefits) has risen 6.5 percent for private sector workers, essentially keeping pace with inflation; but state and local government workers saw their hourly compensation rise 9.2 percent.
Federal civilian workers (about 10 percent of the public sector civilian workforce) are excluded from the above measure, but they did even better, receiving Congressionally-approved wage rises totaling 9.9 percent over the same period.
Why have public sector wages grown so fast, asks Barro?
In some cases, it's because employees are receiving scheduled raises under contracts negotiated before the economic crisis; New York public employees will see a 4 percent pay increase in April, under a contract negotiated in the middle of the last decade.
But in other cases, governments have agreed to pay increases during the recession, or been forced into them by arbitrators.
Transit agencies in New York and Washington, D.C., have seen their budget crises exacerbated by arbitrator-mandated pay increases, leading to service cuts.
And Congress just approved another 2 percent pay increase for federal workers, effective this month.
If states and localities had kept pace with private sector wage growth over the last three years, state budget gaps would be approximately $36 billion less than they are today. Or, put differently, the last three years' excess growth in public sector compensation necessitates an extra $36 billion in annual tax collections or program cuts, says Barro.
Source: Josh Barro, "It's Time to Freeze Government Wages," Real Clear Markets, January 19, 2010.
