We Need a Healthcare Reform Plan that Reforms the Economy

Posted by Michael A. Kamperman on September 18, 2009

The fight over healthcare is keeping on hold any additional attempts to support the economy.  The reason is due to misguided concerns over the size of the federal budget deficit and the size of projected future deficits.  We do not know what the deficit will be over the next 10 years because we do not know what the economy will do over the next 10 years.  Our decision makers have an over-reliance on econometric forecasting models that are based on post World War inflationary trend data that is now irrelevant in the current debt-induced deflationary global depression.  None of the blue-chip economic forecasts predicted the economic downturn and none of them predicted deflation.  We need to make common sense decisions on what will benefit our society the most and not on what healthcare plan is deficit neutral or costs only $900 billion over the next 10 years because that number sounds better politically than $1 trillion.  We need a simple reform plan that benefits the economy.  President Obama should not be pushing a huge back door tax increase on young adult workers disguised as mandatory health insurance premiums.  On the whole 63 year olds need health insurance desperately and 23 year olds do not.  Congress has not thoroughly thought through the negative impact on consumer spending when healthy young workers in their 20’s are forced all at once to pay a couple of hundred dollars a month for health insurance with no increase in income.  And has Congress figured out how the one in 6 workers in America without a real job are going to come up with the extra cash to pay for health insurance premiums?     The healthcare crisis is a financing crisis and not a medical crisis.  Everyone in America with a broken leg gets a cast and everyone with appendicitis gets an appendectomy, even if they are illegal aliens.  The big issue is who is going to pay for it, and how.  Congress should pass 5 simple reforms that people can understand and that will benefit the uninsured yet not harm the economy. 

First and foremost almost everyone agrees an insurance company should not be able to drop someone’s coverage when they get sick based on some technicality and that annual and life-time caps should be eliminated.  Second, we should create a one-time window between now and the end of 2010 for anyone with any pre-existing condition whereby they can sign up with any health insurance company and receive coverage.  After 2010 the pressure needs to revert back on the uninsured to get coverage before they need it or everyone will wait until they get sick to sign up.  Third, rather than a public option we should simply mandate interstate commerce for health insurance to spur competition across state lines creating more affordable health insurance premiums.  Fourth, Congress should allow individuals and small businesses to pool together to get health insurance at the same group premiums as employers and employees of large institutions and Congress should also allow them to receive the same tax break on health insurance premiums.  While these 4 simple reforms will not solve all of the problems, they will move us further down the road towards where we want to go. 

Finally, Congress should be courageous and lower the eligibility age for Medicare to 60.  This will provide a significant economic stimulus boost for employers that provide health insurance for workers between the ages of 60 to 65, for states that provide partial Medicaid funding for the 2 million poor people between the ages of 60 to 65, and for individuals between the ages of 60 to 65 that pay for their own health insurance premiums and for their own healthcare.  Importantly, it will encourage some workers between the ages of 60 to 65 to retire opening up jobs for younger unemployed workers.  We should also lower the eligibility age for Social Security to 60 to further encourage retirement.  This is the age group that needs health insurance the most and now they will have universal coverage.  For the most part they require more medical care than younger workers and they have more savings to protect from potential bankrupting illnesses.  It would cost the federal government approximately $100 billion next year to lower the eligibility age for Medicare to 60.  Higher inflation rates for healthcare is a long-term issue for the economy and the federal budget whether or not the age for Medicare stays at 65 or is lowered to 60.  There will be economic benefits that could reduce the overall cost to federal government.  State budgets will have less pressure and they will need less direct assistance from Washington.  Profitable corporations will see reduced healthcare expenses and higher profits boosting both federal and state income tax receipts.  Jobs will open up for some younger unemployed workers generating further tax revenues and reducing unemployment insurance payments.  It is a common sense plan that benefits our society.

For those interested in further detail on the math for generating the estimated $100 billion cost for lowering the eligibility age for Medicare to 60 it is found in chapter 9 of my book How America Can Escape the New Great Depression.  A portion is excerpted below:

“Lowering the retirement age for Medicare eligibility to 60 would

add 15 million new Medicare recipients to the Medicare rolls. There

are currently 44 million Americans eligible for Medicare. Certain

people who are disabled or who have end-stage renal failure, meaning

they require kidney dialysis, are currently eligible for Medicare

even though they are younger than 65 years of age. Approximately

2 million of the 15 million Americans between the ages of 60 to 64

are already disabled and on Medicare. The total cost for Medicare in

2008 was over $450 billion. The average Medicare recipient costs the

federal budget over $10,000 per year. Simple arithmetic would say

that adding 13 million people to the Medicare rolls would cost $130

billion. However, unlike the case of the costs of Social Security, we

all know that medical costs are not simple. The sickest people spend

the most money for medical care. Some healthy people have virtually

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How America Can Escape the New Great Depression

no medical costs each year and would cost Medicare nothing. Most

of the sickest people between the ages of 60 to 64 are disabled and

are already receiving Medicare benefits. Additionally, the majority

of Americans will spend most of their health care dollars in the last

couple of years of their life. The vast majority of Americans between

the ages of 60 to 64 will not be in the last couple of years of their

life. The pool of Americans who join Medicare will be the healthiest

in the pool and on average the least costly to the program. However,

these new healthier enrollees will be paying the Medicare Part B

premiums to the federal government even though most of them will

not generate significant medical costs. The direct cost to Medicare

for adding participants between the ages of 60 to 64 will be less than

$100 billion per year. To keep the argument simple, we will assume

that adding younger retirees to Medicare will cost the Federal government

an additional $100 billion per year.”