We need to have a candid debate about health care in 2008, but the odds are against it. The fact that covering the 47 million uninsured already looms as the centerpiece of this debate is a warning sign that it won't be serious. We're told that the uninsured are our biggest health-care problem, but they aren't. Runaway health spending is. Although politicians pay lip service to that, what they really enjoy is increasing spending.
Why do health care costs keep rising so steeply? Because nobody has a direct interest in keeping them low. As Samuelson points out:
Neither the government nor the private sector has succeeded in controlling health spending. From 1970 to 2005, average spending per Medicare beneficiary rose 8.9 percent a year. For similar services, spending for Americans with private health insurance rose 9.8 percent annually over the same period. The small difference may reflect cost shifting. When Medicare imposes price controls, doctors and hospitals increase prices for privately insured patients…
The politics of health care rests on a mass illusion: Most Americans think that someone else pays for their care. Workers with employer-provided insurance believe that their companies pay. Retirees and the poor think that the government, through Medicare (retirees) and Medicaid (the poor), pays. No one has an interest in controlling spending, because everyone believes that it burdens someone else. Naturally, the health-industrial complex—doctors, hospitals, drug companies—has no interest. Higher health spending raises their incomes and profits.
In practice, the costs are mostly disguised. Because employer-paid insurance is not counted as income for tax purposes, most workers don't realize what they're getting. Companies now pay about $9,000 for a family policy. That limits wage and salary gains. From 2000 to 2006, average compensation for full-time workers rose by $3,500 after inflation, says Brookings Institution economist Gary Burtless. But $1,045 went to health insurance. Similarly, Medicare and Medicaid's effects get buried in the larger budget; since 1990, they've gone from 12 percent to 21 percent of federal spending.
What's Samuelson's solution? He proposes either a dedicated health care tax or the elmination of employer-based health insurance which would require workers pay out of pocket for their health care. In both cases, the public would experience cost increases directly and thus be encouraged to control costs. Actually his proposed health tax would still obscure costs unless it was imposed as a fixed percentage of everyone's incomes and even then the incentive to control costs would be weaker than having individuals pay out of pocket.
Whole Samuelson column here.
*oops. Paul and Robert obviously stored in the same malfunctioning brain cell.