Why Reforming Our Health Care System Will Require a Tax Hike

Some of President Obama’s critics have expressed disappointment with his plans for healthcare reform. Why is the president raising taxes to sink more money into an already bloated healthcare system? Why isn’t he doing more to cut wasteful healthcare spending?

Earlier this week, New Yorker writer and surgeon Dr. Atul Gawande testified before the House Committee on Energy and Commerce Subcommittee on Health. 

As usual, he was eloquent, and, as it happens, much of what he said speaks directly to the critics’ objections. But first, consider what the skeptics have to say about the budget. Not long ago The HealthCareBlog’s Matthew Holt declared “There is NO reason to put more money into the health care system.

Holt argues that the president should be able find the dollars needed to fund reform by making aggressive cuts to Medicare and Medicaid spending. Instead, the president proposes raising taxes on couples earning more than $250,000 (less than 2 percent of the nation) in order to raise half of the administration’s $645 billion “down payment” on health care reform. The other half comes from what Holt describes as “modest cuts around the edges of the [healthcare system] system.” This is “limited reform” Holt grumbles. “This is not the “big bang we need to do the job."

Writing on the Health Affairs blog, Bob Laszewski agrees: “In his first budget message, President Obama hasn’t made anywhere near the hard decisions that need to be made . . .. Laszewski believes that the president just isn’t “facing up to the health cost reductions necessary to fix our economic system—whether through direct cuts to what providers and beneficiaries would have received otherwise or incentives with real teeth to force behavior changes toward smarter spending.”

Laszewski acknowledges that in his budget message, the president does say that Medicare’s “current physician payment system needs to be reformed . . . Medicare and the country need to move toward a system in which doctors face better incentives for high-quality care rather than simply more care.”

But the president doesn’t go into details. The budget explains where the administration would find a “down payment” for reform—roughly half to two-thirds of the funds that will be needed—and the president asks Congress for suggestions on where to find the rest of the money. “The Obama administration has basically abrogated health care reform,” Laszewski charges, “leaving the heavy lifting to Congress.”

Why Health Care Reform Requires More Money

Begin with Holt’s first objection: why are we pouring more money into an overpriced and inefficient system? The answer is simple: covering everyone will cost more. Over time, we can make the system more efficient, but the upfront cost of providing care for all will be steep.

In the past, well-meaning reformers have suggested that if we just rolled out “health care for all,” our national health care bill would shrink. automatically, After all, they reason, if everyone is insured, everyone will receive more timely care, and fewer people will wind up needing expensive hospital care.

But the research points in the other direction: “Studies consistently show that when a large portion of the previously uninsured population becomes insured, total health care spending rises by 10 to 13 percent.,” observes Paul Ginsburg in “High and Rising Health Care Costs: Demystifying Health Care Spending.”  a report published last fall by the Robert Wood Jounson Foundation.

This is because, once they have coverage, the uninsured will live longer. Today, they die sooner than the rest of us, saving society the money that might have been spent treating them for Alzheimer’s or other diseases of old age.”