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Sunday, December 9 , 2018, 11:55 pm | Fair 52º


Harris Sherline: The Health Care Dilemma, Part II

A key component to a national plan is calculating how to pay for universal coverage, but it doesn't add up

How to pay for a national health-care plan is one of the big obstacles the Obama administration must hurdle to reach its goal of providing health insurance for every American. The question is whether it can be done at all without literally breaking the bank — especially on the heels of the nearly $10 trillion in expenditures over the next few years that have already been approved by Congress and signed into law.

Harris Sherline
Harris Sherline

So, how do President Barack Obama and Congress plan to get this done?

First, they talk almost incessantly about $1 trillion to $2 trillion in cost savings that can be achieved in the current health-care system. The problem is there is no way to measure it. Not really. It’s just talk.

A number of other ideas also are being floated to pay for universal health-care coverage, and the ultimate choice probably will include some combination of the following:

» Taxing the “rich”: This source couldn’t possibly cover all of the proposed costs of a national health-care plan. A graphic illustration can be seen in the fact that if you tax away the profits of the entire Fortune 500 list of companies, it would bring in only about $100 billion. In 2008, the number was $99 billion. This assumes that the businesses would continue to operate if everything they earned is confiscated by the government, in addition to the income taxes they already pay.

As for the individual “rich” taxpayers, the result would be much the same. The combined net worth of the Forbes 400 richest Americans is about $1.2 trillion. If the government took everything they have to fund universal health care, it would be only a one-time fix, leaving nothing to tax in the future.

» Taxing health-care benefits that employees receive tax-free from their employers: No doubt this can be accomplished, but not without reducing the incentive employers have to provide coverage for their employees. The idea also includes tinkering around the edges of income-tax deductions on individual tax returns, such as reducing the deductions of various expenses. This can certainly generate more taxes, but hardly enough to pay for universal health care on an ongoing basis.

» Cutting costs in the current health-care system by improving technology, reducing unnecessary or duplicate procedures also can’t really be measured with any degree of confidence. There are simply too many moving parts, all interacting in different ways at different times and continuously changing at the same time.

» Reducing payments to doctors and hospitals for Medicare and Medicaid patients: Contrary to public perception, doctors are already being underpaid by both Medicare and Medicaid, with the result that many physicians are no longer willing to accept patients whose care is paid for by these programs.

Furthermore, the government is known for “slow pay,” especially the state Medicaid programs. In California, MediCal is so slow and underpays for services so severely that many doctors refuse to accept those patients. A true situation I encountered while I was running a hospital illustrates the point: A general surgeon was paid 10 cents for a $50 fee he charged for an emergency room consultation. On another occasion, a neurologist received only 17 cents for an ER consult. Such cases were not all that unusual. So, you can cut payments, but unless you are willing to conscript doctors, you can’t force them to treat patients whose bills are paid by the government.

Lowering the cost of health insurance by creating a program to compete with private-sector insurance plans seems like a good idea on paper. But the reality is that a government-funded health insurance program would have unlimited financing available, which means any losses it might experience would be funded regardless of whether the plan is profitable. The private sector wouldn’t be able to compete with this and eventually would be forced out of business, leaving the government plan the only option. It’s unfair competition, but it wouldn’t be viewed that way by most politicians. There are laws designed to prevent that sort of predatory behavior by private citizens and businesses, but it’s generally OK when the government does it.

It never ceases to amaze me how often people in government seem to think they are smart enough to structure programs that can control and regulate human behavior without imposing autocratic control over people. It has been repeatedly tried throughout history, and it always fails — eventually. The evidence is abundantly clear in the universal health-care plans of other countries that have already adopted such programs.

— Harris R. Sherline is a retired CPA and former chairman and CEO of Santa Ynez Valley Hospital who has lived in Santa Barbara County for more than 30 years. He stays active writing opinion columns and his blog, Opinionfest.com.

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