Did I say secretive? Scratch that. They actually recorded the proceedings, and posted them online.
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Health Care
Truth-Squading Fursbee
I just got a media inquiry from someone who was on a conference call with Obama economic advisors Jason Furman and Austan Goolsbee. According to this source, they claimed that McCain’s health insurance tax credit “will surely prove a trojan horse tax increase on middle class familes” (my source’s words) because the amount of the tax credit would grow only at the rate of the Consumer Price Index (i.e., inflation). That’s much slower than the growth rate for the value of the current tax exclusion for employer-sponsored health insurance, which grows at the much-faster rate of premium growth. (BTW, it also grows with the rate of increase in marginal tax rates. Ahem.)
Others have made this charge before. I’m sorry to hear that Fursbee have picked it up.
Here’s what I wrote to our media friend:
Fursbee are correct, in the sense that providing a tax break that is standardized (i.e., a fixed credit versus an exclusion whose value varies with one’s premiums and marginal rate), and whose growth is limited (to CPI versus today’s unlimited exclusion), would tax currently untaxed activity.
But they’re flat wrong in concluding that would be a net tax increase. The ‘why’ requires some explanation.
Employers provide health insurance principally because those benefits are excluded from income & payroll taxes, while individual-market coverage is not. A recent survey of health economists found that 91 percent agree that workers pay for health benefits through reduced wages. The average “employer contribution” to the average family policy is roughly $9k. That means that if employers weren’t providing health benefits, the labor market would force them to return that $9k to workers. We call the current exclusion a tax break, even though it denies workers the ability to control $9k of their compensation. If government took $9k from workers and used it to provide workers with health insurance, then we would call that a tax. Yet when government effectively takes that money from workers and gives it to employers, we rather curiously call it a tax “cut.”
McCain’s tax credit would level the playing field between job-based and individual-market health insurance. With no tax penalty encouraging workers to let their employer control that $9k, the labor market would gradually force employers to add that money to workers’ cash wages. Letting workers own and control that money is nothing if not a tax cut. And it would swamp the tax-increasing effect of limiting the tax credit’s value to CPI growth.
Fursbee are being too cute by half. And I don’t even like the McCain tax credit.
I might have added that McCain’s credit would encourage Americans to be much more economical about their health insurance, which could restrain premium growth. (Any excess premium growth due to the exclusion is itself a tax.) Or I might have noted that the McCain credit would be a pure tax cut to people without access to job-based coverage.
Or I might have mentioned that Fursbee should know better. They know that tax exclusion for employer-sponsored health insurance is horribly inefficient, that reform is crucial, and that any reform will be imperfect. Assuming my source is correct, they are being selective about their facts, demagoguing a serious effort to fix this problem, and making it harder for anyone to do so.
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Anti-Universal Coverage Club Now on Facebook
It’s an open group, so just search for it and sign up. I don’t know what took me so long.
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Are the Uninsured Free-Riding?
Should government require people to purchase health insurance? My answer is no. Here are three reasons.
- The uninsured bear the health costs of their decision not to insure. If my neighbor doesn’t buy health insurance, that doesn’t threaten my health. (He might threaten my family’s health if he doesn’t get his family vaccinated. But vaccinations can easily be obtained without insurance.)
- As a group, the uninsured bear the financial costs of their own health care. Many uninsured people show up at the hospital, get treated, and then don’t pay their bills. Doctors and hospitals scream an awful lot about having to deliver “uncompensated” care. But two recent studies — one on doctors services by Jonathan Gruber and David Rodriguez, the other on hospital services in California by Glenn Melnick and Katya Fonkych — show that the uninsured who do pay their bills more than make up for the uninsured who don’t. Why? The uninsured pay the highest prices. Gruber and Rodriguez write, “Our best estimate is that physicians provide negative uncompensated care to the uninsured, earning more on uninsured patients than on insured patients with comparable treatments.” Melnick and Fonkych write that in 2005, “uninsured patients as a group still paid a higher percentage of charges, on average, than Medicare and Medicaid.” Note that this is an average: some providers may provide lots of uncompensated care, but that appears to be offset by those that provide negative uncompensated care. As a group, the uninsured appear to pay for themselves.
- The uninsured pay higher taxes. Federal and state governments offer large tax breaks for employer-sponsored health insurance. The uninsured, by definition, do not obtain employer-sponsored health insurance. Because they forgo those tax breaks, they pay higher taxes. Those additional tax payments help fund things like subsidies to hospitals that provide (positive) uncompensated care (see #2).
So it’s not at all clear that when people don’t buy health insurance, they are imposing costs on the rest of us. The uninsured mostly just hurt themselves.
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Simple Methods of Deception
Members of the Church of Universal Coverage claim that government health insurance is more efficient than private insurance because, gosh, Medicare’s administrative costs are a mere 3 percent of claims. I’ve noted before how that’s neither true nor something to brag about: skimping on administration leads to gobs of waste and fraud.
Well, God bless the folks at the Government Accountability Office, because they came up with a wonderful illustration of just how stupid and harmful Medicare’s administrative-costs strategy really is. The following is from a recent GAO report. I recommend reading the entire excerpt, especially if you’ve always nurtured the hope of someday defrauding Medicare of millions of dollars:
Why GAO Did This Study
According to the Department of Health and Human Services (HHS), schemes to defraud the Medicare program have grown more elaborate in recent years. In particular, HHS has acknowledged Centers for Medicare & Medicaid Service’s (CMS) oversight of suppliers of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) is inadequate to prevent fraud and abuse. Specifically, weaknesses in the DMEPOS enrollment and inspection process have allowed sham companies to fraudulently bill Medicare for unnecessary or nonexistent supplies. From April 2006 through March 2007, CMS estimated that Medicare improperly paid $1 billion for DMEPOS supplies—in part due to fraud by suppliers.
Due to the committee’s concern about vulnerabilities in the enrollment process, GAO used publicly available guidance to attempt to create DMEPOS suppliers, obtain Medicare billing numbers, and complete electronic test billing. GAO also reported on closed cases provided by the HHS Inspector General (IG) to illustrate the techniques used by criminals to fraudulently bill Medicare…
What GAO Found
Investigators easily set up two fictitious DMEPOS companies using undercover names and bank accounts. GAO’s fictitious companies were approved for Medicare billing privileges despite having no clients and no inventory. CMS initially denied GAO’s applications in part because of this lack of inventory, but undercover GAO investigators fabricated contracts with nonexistent wholesale suppliers to convince CMS and its contractor, the National Supplier Clearinghouse (NSC), that the companies had access to DMEPOS items. The contact number GAO gave for these phony contracts rang on an unmanned undercover telephone in the GAO building. When NSC left a message looking for further information related to the contracts, a GAO investigator left a vague message in return pretending to be the wholesale supplier. As a result of such simple methods of deception, both fictitious DMEPOS companies obtained Medicare billing numbers…
After requesting an electronic billing enrollment package and obtaining passwords from CMS, GAO investigators were then able to successfully complete Medicare’s test billing process for the Virginia office. GAO could not complete test billing for the Maryland office because CMS has not sent the necessary passwords. However, if real fraudsters had been in charge of the fictitious companies, they would have been clear to bill Medicare from the Virginia office for potentially millions of dollars worth of nonexistent supplies.
Once criminals have similarly created fictitious DMEPOS companies, they typically steal or illegally buy Medicare beneficiary numbers and physician identification numbers and use them to repeatedly submit claims. In one case from HHS IG, a company received $2.2 million in payments from Medicare for supplies and services that were never delivered. The owner submitted these fraudulent claims from March 2006 through July 2006 using real beneficiary numbers and physician identification numbers that he had purchased illegally. The only employee not involved in the scheme was a secretary, who told HHS IG that there was no business activity in the office and that the owner was rarely there. Another case related to an individual who stole beneficiary numbers and physician identification numbers and submitted $5.5 million in claims for three fraudulent offices from October 2006 through March 2007. He operated one of these offices out of a utility closet containing buckets of sand mix, road tar, and a large wrench, but no medical files, office equipment, or telephone.
Simple methods of deception. That’s all you need to fool Medicare. Or for the Church of Universal Coverage to fool themselves.
And they’re hoping that’s all they’ll need to fool you, too.
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Choosing What to Worry About
Paul Krugman’s column in today’s NYT laments the lack of a national policy to combat global warming. He writes:
It’s true that scientists don’t know exactly how much world temperatures will rise if we persist with business as usual. But that uncertainty is actually what makes action so urgent. While there’s a chance that we’ll act against global warming only to find that the danger was overstated, there’s also a chance that we’ll fail to act only to find that the results of inaction were catastrophic. Which risk would you rather run?
He then cites the work of Harvard economist Martin Weitzman, who surveyed the results of a number of recent climate models and found that (in Krugman’s words) “they suggest about a 5 percent chance that world temperatures will eventually rise by more than 10 degrees Celsius (that is, world temperatures will rise by 18 degrees Fahrenheit). As Mr. Weitzman points out, that’s enough to ‘effectively destroy planet Earth as we know it.’”
Krugman concludes, “It’s sheer irresponsibility not to do whatever we can to eliminate that threat” and he calls for opprobrium against those who might impede global warming legislation: “The only way we’re going to get action, I’d suggest, is if those who stand in the way of action come to be perceived as not just wrong but immoral.”
There is merit to the argument that society should consider a policy response to the threat of global warming. A small chance of an enormous calamity equals a risk that may deserve mitigation. That’s why people buy insurance, after all.
However, Krugman doesn’t accept that argument — at least, not when applied to other worrisome risks that trouble people whose politics are different than his. Less than two months ago, he wrote this about another future crisis:
[O]n Friday Mr. Obama declared that he would “extend the promise” of Social Security by imposing a payroll-tax surcharge on people making more than $250,000 a year. The Tax Policy Center estimates that this would raise an additional $629 billion over the next decade. But if the revenue from this tax hike really would be reserved for the Social Security trust fund, it wouldn’t be available for current initiatives. Again, one wonders about priorities. Whatever would-be privatizers may say, Social Security isn’t in crisis: the Congressional Budget Office says that the trust fund is good until 2046, and a number of analysts think that even this estimate is overly pessimistic. So is adding to the trust fund the best use a progressive can find for scarce additional revenue?
Read the rest of this post →Obama, McCain, and Health Care
In the face of widespread public demand for changes in the U.S. health care system, both Barack Obama and John McCain have offered detailed proposals for reform. In the new study, “A Fork in the Road: Obama, McCain, and Health Care,” Cato scholar Michael D. Tanner examines the candidates’ plans, and concludes that, while Senator McCain’s proposal is far from perfect, from a free-market perspective, it appears superior to Senator Obama’s plan.