Healthcare is taking center stage once again as the political arena heats up. This will not be a political treatise, however. Instead, we will focus on the long-term problems in the U.S. healthcare system and potential solution to be found using the tax code.
Medicare for all is something that always appealed to me. When the politics are stripped away there is a lot to like in the idea of expanding Medicare coverage to everyone.
Currently about half the people get some form of Medicare benefit. The old, very young and poor qualify for the Medicare or Medicaid programs. Unfortunately, the Medicare system is set up backwards. The people who pay for it are not the people receiving benefits and the people receiving benefits don’t pay for it (with the exception of people age 65 and older).
Even the elderly who pay a Medicare premium for some parts of the program are still subsidized by those earning a wage or salary, the very people who don’t qualify for benefits.
The inefficiency of the U.S medical system has created the most expensive healthcare system in the world by far with sub-par results. For most illnesses it is better to travel to another country for treatment if you want better odds at living.
Solutions have been hard to come by and the Affordable Care Act hasn’t delivered on it’s promise while costing taxpayers plenty. Medicare for all is a solution more people are clinging to with good reason. But it must be done right to work!
Medicare for all will fail if simply enacted as another government entitlement to add to the budget. I propose there is a solution that increases American business’s competitiveness, covers all Americans with Medicare coverage and reduces taxes even more on all businesses.
Identifying the Problems
Small businesses struggle to afford healthcare for employees if they offer it at all and large employers are at a competitive disadvantage when competing against foreign firms that don’t spend major resources providing healthcare to their employees.
More and more small businesses have either stopped offering medical insurance as a fringe benefit or have seriously curtailed the benefit. Large businesses constantly deal with the large cost of medical insurance. If wages are the biggest expense for most corporations, then employee benefits—of which medical insurance is almost always the largest—are certainly the second largest expense or close to it.
Small businesses and large corporations alike get a tax deduction for providing medical insurance to employees. However, a deduction is worth less when there are fewer profits due to the added burden. (Corporations pay 100% of the benefit expense only to receive a faction of the expense back in tax savings.)
There is also a worry about turning over the vast majority of medical insurance over to the government. People say they don’t want the government involved with their medical decisions. They want their medical care choices to be between them and the doctor.
Except it doesn’t work that way! When you reach 65 you are on Medicare. If it is so bad we should maybe eliminate Medicare completely. (For the record, I am NOT recommending this and neither are the naysayers!)
The argument also falls flat when you realize your employer now makes those decisions for you! If your employer needs to downsize you are on your own medically. And God forbid you have a preexisting condition.
It isn’t often that we can have our cake and eat it to, but this could be one time when it could happen. If we got your employer out of the medical business (unless they are a doctor or medical facility) and let them do what they’re best at (providing the goods and services they are in business for in the first place) and could cover everyone with basic medical care at a cheaper cost we might be on to something.
Left and Right
The left generally pushes the idea of Medicare for all, but the right likes the idea too; President George W. Bush signed into law the largest expansion of Medicare since its inception with Part D.
The left is currently pushing the Medicare for all agenda. They love the idea since it covers everyone, eliminates waste (hopefully) and helps the uninsured, unemployed and those with preexisting conditions. It is easier to change jobs if medical insurance isn’t an issue. Early retirement is easier, too.
The right hates the idea because it promises massive new levels of government spending. There is something to be said about these concerns.
But nothing happens in a vacuum. Just tossing out Medicare for all would be a disaster! Yes, it would cover everyone with a minimal level of health care, but it could easily bankrupt the government or force taxes seriously higher. This is a major problem that must be resolved before we can grant every American basic healthcare and remain solvent.
Facts and Circumstances
Medicare for all can be coupled with massive tax cuts for businesses, increasing American competitiveness around the world and keeping the government solvent. Tariffs and other strong arm measures might force a temporary trade imbalance reduction, but until U.S. businesses increase their competitiveness the problem will not go away.
To see how this intractable problem can be resolved we need to review some facts.
This means about 20% of the cost of an employee is in the form of just one benefit: medical insurance. (I know I took some license here. Household income doesn’t equal what each employee makes, but it does skew the data against my thesis so no one can accuse me of fudging the numbers to prove a point.) Yes, American businesses cough up around $1.2 trillion per year providing healthcare benefits to their employees and their families, about the same amount Medicare and Medicaid spends combined each year.
Call it what you want, but this is nothing more than a huge hidden tax!
Let’s put this into perspective. Corporation paid $341.7 billion in income taxes in 2015. The cost of healthcare is nearly four times what corporations pay in taxes!
When you consider how American businesses need to compete in a global environment it is easy to see why foreign corporations have competitive advantages. Not only do American corporations pay $341.7 billion in income taxes, they also pay $1.2 trillion in healthcare expenses.
You see, we already have nationalized healthcare! It is costly and inefficient with everyone trying their hand at dealing with the issues. In the U.S. we have corporations do what the national government does in most other nations.
We can fix this.
Tax Code to the Rescue
We have identified most of the major issues surrounding healthcare in America. It is a huge tax on businesses and is inefficient.
If all we do is add Medicare for all we still have a massive mess. Employers would still fork over for benefits above and beyond Medicare benefits.
The solution requires a tax bill as draconian as the Tax Cuts and Jobs Act of 2017. Only the focus would be on a single issue: solving the American healthcare crisis.
First, we have to stop draining corporate coffers of $1.2 trillion every year, a cost that is growing at a rate many times the rate of inflation.
For Medicare to offer universal coverage at current rates we would need to change the tax code. Medical insurance and all employee benefits related to medical can no longer be deductible. In fact, we would need to make medical coverage by an employer illegal so corporations could not shift the deductible expense to a nondeductible expense.
This would save businesses $1.2 trillion this year alone which equates to a massive tax cut. Corporations would have a real cost reduction, opening the door to real wage growth going forward.
To pay for Medicare for all is straight forward. If businesses have $1.2 trillion less in expenses they will pay more in tax because they are more profitable. Even Wall Street would love such a plan as the stock market would climb smartly on such earnings growth.
Corporations would not be allowed to keep all of the $1.2 trillion tax cut, however. A 2% or so additional Medicare payroll tax would need to be instituted, paid by the employer only. (The current Medicare payroll tax is 2.9%, half paid by the employer and half by the employee. I propose the additional payroll tax be levied against the employer only since the employer just saved $1.2 trillion by getting out of the healthcare business.)
Winners and Losers
There would be lots of winners under my plan with only one real loser: insurance companies.
Medicare returns around 98% of premiums in benefits while medical insurance companies return somewhere in the low 80s. The increased efficiency of a centrally managed healthcare system would be tremendous, saving the American economy (that is you and me, kind readers) massive resources better utilized elsewhere. The savings alone could dwarf the trade deficit!
Businesses and employees are easy winners under my plan. A recession doesn’t bring the added risk of lost medical coverage for employees either.
Medical treatment centers would not have to deal with untold numbers of payment providers.
Business owners would not squander valuable resources anymore trying to make medical decisions when they are not in the medical business. The added focus alone would increase American business effectiveness which should add to economic growth and competitiveness.
Insurance companies are not complete losers either. Medicare is basic medical coverage. Insurance companies can still play a crucial role in benefit administration. They can also provide supplemental insurance as they do now to the elderly.
I also propose, under my plan, that Medicare benefits be handled as they are now for those 65 and older. Certain benefits are free to all American while some benefits have a small premium (Part B, C and D, for example) based on income level. Insurance companies would still play a role in this arena also as they do now for older Americans.
Putting it Together
Here are the simultaneous steps to institute my program to provide all Americans with basic medical coverage:
- Medical insurance benefits no longer deductible for employers.
- It would be illegal for employers to provide medical insurance, even if nondeductible, unless they are a medical facility.
- Businesses would save over $1 trillion in costs this year alone. Part of these saving would be paid into Medicare to pay for Medicare for all.
- Medicare Part A would cover all Americans while a small premium would be required for Part B, C and D based on income.
How You Can Fix Healthcare in America
This is my back-of-the-envelope plan to fix the healthcare crisis in America. It isn’t a perfect plan and I’m certainly open to adjustments, improvements and suggestions.
Do you like my plan? How would you modify what I offered above?
I think this is something we can all agree would make America great in a global economy.
And nobody has to get sick over it.
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Eight years ago Barack Obama was hitting full stride in his first term as President. The economy was in tatters. The banking industry was only beginning to come to terms with the level of bad loans they had on their books. The largest insurance company (AIG) required a bailout to survive; the largest domestic automakers needed a bailout to preserve jobs; nearly every bank required assistance and every money center bank actually took assistance to weather the storm. This easily could have been another Great Depression.
So what did President Obama do in this desperate environment? Why, tackle health care reform, of course.
Every President has a short window of opportunity to build a coalition at the beginning of their Presidency to pass a key piece—or if lucky, several pieces—of legislation. These are the tough issues, things like major infrastructure investments and tax reform.
President Obama chose health care reform. The country needed, and still needs, major health care reform. The country also needed economic stimulus. Badly! Unemployment was high, income inequality was expanding at a rapid pace, while the nation’s bridges, roads, sewer lines and water works crumbled.
It was an honorable effort, but a tactical error that prevented any additional large, and necessary, legislation. (Yes, I am aware banking reform was passed along with other legislation. This will all become clear in a minute as I illustrate why the most pressing legislation never happened.)
And President Trump is making the exact same mistake.
A New Man
Presidents get two terms max in the United States. After eight years it is time to bring in some new blood. If you loved the old guy, wave goodbye nostalgically; if you hated him, bid him good riddance. President Obama served his two terms and it was time for the new guy. The American people choose (well, the electoral college chose) Donald Trump.
Break out the confetti. A new guy on the job means another opportunity to pass significant legislation early in his first term. And what did President Trump choose as his key legislation? Why, health care, of course.
You would think Trump would have learned from Obama how easily healthcare can bog down your agenda. A litany of problems to solve devolved into a serious fight extending longer than anticipated when Congress went to work on a health care replacement plan.
Obama was lucky. He was able to pass major health care legislation, the Affordable Care Act. It was an improvement, but far from perfect. Many more people now have insurance and pre-existing conditions no longer leave you uninsured regardless of ability to pay.
The ACA also has serious flaws which need addressing. Insurance premiums are exploding and many markets have few, and in some cases no, insurance choices.
Eight years ago I explained to anyone who would listen that President Obama was making a mistake when he addressed healthcare first while the economy is what really needed attention. Fix the economy and the money would be there for healthcare reform, even a single payer option so coveted by the Democrats.
Donald Trump ran on a platform promising four key things: immigration reform, repeal/replace the ACA, tax reform and infrastructure investment. All four areas need attention, no doubt.
President Trump addressed immigration with executive orders which ended up bogged down in the courts. And there was no wall erected. The wall was a stupid idea anyway. We don’t need a wall. Remember President Reagan? “Mister Gorbachev, tear down that wall.” The Republicans should have been listening to their leader.
Then came the real first attempt at legislation. Tax reform and infrastructure would have to wait (and wait and wait) regardless how necessary legislation was needed. Health care, and more to the point, repeal of President Obama’s key piece of legislation, was first on the list. Once again it was a stupid idea with expected results.
Obama was lucky. With the economy in dire straits he was able to muster the votes to pass the ACA. With a large part of his political capital spent and the midterm elections costing the Democrats the majority in the House, any additional major legislation was impossible. To hell with the American people, not to mention the world economy.
Time to Play Trump
Time to let President Obama enter the history books and play the Trump card. Obama is no longer President and has no hand in passing future legislation.
The issue here isn’t politics. Your opinion of Trump doesn’t matter. He is the President and if things are going to get done he has to take the lead.
By picking repeal and replace (or just repeal) of the Affordable care Act it was inevitable the President’s agenda would struggle in the deep quagmire of mud the runs down the halls of Congress. It was also the worst choice Trump could make.
Trump watched Obama spend every drop of political capital on health care while the Federal Reserve was the only game left in town to deal with the economic issues punishing the country. It was a bad choice then; it’s a bad choice now.
Since it is always easier to play armchair President, I will share what Trump should have done to save his Presidency. (Obama should have taken the exact same path and he would have kept the House and passed serious additional legislation of his liking.)
Trump has it all backwards. He is right about the issues needing attention. Health care and immigration are important. Tax reform is beyond desperate need. And infrastructure is embarrassing the nation as our roads and bridges crumble like those of a Third World nation. We can do better.
If Trump would have hired me I would have advised a different approach, one that would have given his entire agenda a fighting chance of being passed.
My advice to the new President would be this: Turn the whole process around. Attack infrastructure first. A trillion dollars of infrastructure spending would have caused an economic boom with plenty of good paying jobs here at home. The increased economic growth would not stop at the jobs dealing with the infrastructure. High-speed transportation (once again so we can join the 20th Century—you read that right), better roads and updated airports would increase productivity.
Business would boom for decades. Trump would be an easy two-term President with this single change of policy. The advantages to the economy would continue into the foreseeable future.
The tax revenue would pour into the government coffers! Now you have the money to fund health care initiatives and tax reform. Who would argue with a President who produces such success? He would have been a demagogue! (Opps! That part he covered himself already.)
Think about it. The only way to move forward in this country is to start doing things differently. President Clinton wanted to tackle health care out of the gate and went nowhere. Obama managed massive legislation on health care at the expense of the remainder of his agenda. Trump is nearly out (if he isn’t already) of political capital.
Trump’s only chance to save his Presidency is to do a 180 degree about face, dropping all issues save infrastructure.
The Republicans might actually go along with it; the Democrats would salivate over the prospect. The Republicans are so desperate for a win (or any legislation to pass Congress) this crazy idea might just work.
An Open Letter to President Trump
Mister President, it is time to stop screwing around. Stop hiring idiots with no training or idea on how to run the U.S. government, the largest organization on the planet. Stop draining the swamp! The swamp is there for a reason. Get rid of all the wetlands and the wildlife dies! Time to let the swamp do what it does best. Use that to your advantage.
Focus on infrastructure. Provide massive financial support to each state to fund projects of their choosing. Also demand certain projects get attention. The trillion dollars of spending is spread out over many years. The increased tax revenue will lessen the impact on the deficit, but make no mistake, the deficit will go up to pay for this.
We need high-speed rail and other advanced forms of transportation to compete with the world. It is time to pull out heads out of our arses in this matter. Time to act like a world leader instead of playing catch-up all the time. Use your unique way with words to get Congress to do the right thing this time.
Part of infrastructure is rolling out an overhaul of the electric grid and converting our society to renewable sources of energy. We can always sell our oil to countries less enlightened. We will lead the world once the transformation is complete with the lowest costs of production. Jobs will be outsourced around the world to the United States as we will be the best choice for business.
Solar and wind energy must be part of the mix. Considering the entire infrastructure program, solar and wind installations will be a small part of the expense. Battery storage and transmission lines must also be including in the process. This will bring down energy costs for the American people and businesses.
Tax incentives for businesses and homeowners to invest in battery storage technology and energy production will power the economy forward without the government footing the entire bill. Citizens and businesses will be partners with the government in transforming this great nation of ours.
The rapidly growing economy will be the envy of the world. The expanding tax base and increased government revenues will allow for tax reform, and (gulp!) dare I say it, tax cuts.
Health care will be easier to tackle once the real problem has been addressed. Hard to get emergency medical care when the road is so bad you can’t drive on it or the bridge is out.
Immigration is the least issue, but does require attention. We don’t need a wall; we need an effective partnership with our neighbors so they have opportunities at home. There is nothing wrong with allowing people from around the world (even Mexico!) to dream of coming to America. Isn’t that what it is all about?
Gives you that warm and fuzzy feeling, doesn’t it, Mister President? And it is all yours if you can find a way to put the swamp to work productively. You do know how to make deals, don’t you?
Or, if you prefer, we, the American people, can sit around all day and complain about your performance.