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The politics of Healthcare need reform

Goodman Blog  by John Goodman, Jul, 2009

As each new day brings us another set of numbers from the bean counters on Capitol Hill, there is the inevitable commentary from the sidelines on the cost of health reform. Will the total package cost too much? Can a way be found to make the burden more tolerable? Are there cost cutting ideas no one has thought of yet?

Paul Krugman was absolutely giddy the other day when conferees managed to reduce the cost of the Kennedy bill to $597 billion, down from the previous level of $1 trillion plus. Then, in the same column, he admitted that the total cost is likely to be more than double that amount.

Here's a way to keep score without being privy to the behind-closed-doors deliberations: There Ain't No Such Thing As A Free Lunch (TANSTAAFL). Independent analysts pegged the cost of Obama's health plan last summer at about $1.5 trillion over ten years and predicted it would cut the number of uninsured in half. Nothing has really changed since then except the hard-to-believe spectacle of leading Congressional health reformers — for the first time in their adult lives — actually coming face to face with the economic reality of their ritual campaign rhetoric.

When all is said and done the cost is still going to be about $1.5 trillion. The only real question is: who is going to pay that cost?

Here is the best way to think about all of this. The cost of an average employer-provided family plan is roughly $12,000 a year. In terms of wages, that equals more than $6 an hour (and will soon rival the minimum wage of $7.25). President Obama and leading Democrats in Congress want everyone to have a health plan like this. So, we're not just talking about 47 million uninsured. We are also talking about all of the people who have less generous coverage — the "underinsured." Let's concede, for the sake of argument, that the cost of this enterprise is $150 billion a year, although I think it is much more.

So how do we get from here to there? There are only so many possibilities. We could require employers to pay for the entire benefit. That would lead to massive layoffs and threaten to wipe out entire industries (fast food, for example) — oddly enough, while we are in the middle of a deep recession. Another possibility is to tell employers they only have to pay half the cost — the remainder being paid by the employees. That would also cause huge layoffs and, in addition, major reductions in take-home pay for millions of workers. A third alternative is to sock the taxpayer with the cost of the whole enterprise.

There are also other possibilities. We can shift part of the cost to Medicare or Medicaid enrollees (apparently, the hospitals have already agreed to this). We can try to shift a portion to doctors, nurses, hospital personnel and other providers. We can try to foist part of the costs on pharmaceutical firms (another done deal) and other sectors — even though this ultimately shifts the burden to patients.

Here's the bottom line. None of the discussions in Washington are really about reducing costs. They are all about shifting costs. Which is to say, they are about whose ox is going to be gored.