March 1, 2010

Can We Afford This Health Care Reform?

Despite the odds, Obama cut through the political posturing at the health care summit and created some actual discussion at moments. Anyone could see and hear in those moments that all the pundits' previous coloring of this summit had been upended and made wrong.

Obama listened well and then spoke directly to Republicans, sparking a thread of actual dialogue that began with whether reform could be incremental -- whether preexisting condition and cost reforms could be done independently of comprehensive reform....

And then the discussion veered suddenly into the real issue of the summit.

In response to Obama's clear listening and response, Rep. Eric Cantor finally just desperately grasped at something substantive.

Cantor resorted to asserting the nub of this issue in many Americans' minds -- perhaps the most significant issue underlying all the political noise.

"We just can't afford this."

(Firefox users might need to watch this at the Kaiser page here.)

Cantor then used this presumption that America cannot afford bringing everyone into a basic minimum level of health insurance (which is most of the cost in the current proposed reform) to conclude that reform should be only step-by-step pieces focused on cost control and reducing health cost inflation.

(To which Obama pointed out that cost control needs most everyone insured. This is due to such cost-inflation causes for instance as undetected or untreated diabetes and other easy-to-treat illnesses not getting early treatment which costs less than waiting for Emergency Room visits.)

So, Cantor is asserting America cannot afford $120 or $150 billion a year (by 2017) to improve the health care of many tens of millions of Americans. This seems a plausible assertion (see why paying for reform is more complex than at first glance further below -- *).

Let's consider this.

We know that America will expend about 5% of its GDP, some $680 billion this year, in one year, on defense. Even while our active, genuine enemies number only in the thousands, and could be fought with well less than $100 billion/year.

Few Americans can estimate in their own minds just how much defense spending is truly needed. $100 billion and $500 billion are the same number to Americans in general. It's just a large number.

But the nearest possible competitor to American defense spending is China. Intelligence estimates of Chinese military spending are 2% of its GDP. Contrast this to current American spending at 5% of our GDP.

What could the U.S. do with that 3% of GDP difference, that we are spending, and China is not, on defense?

It could be strategically invested in our secure future -- education, worker health, science, and technology.

China is investing in its future.

Will we be secure if we invest less in our future than China?

In contrast to our current $680 billion/year for defense, the affordability subsidies (to allow Americans to afford health insurance) would likely cost about $150 billion per year in 2017, or in the neighborhood of 1/5th (or less) of expected defense spending in such coming years.

Yet, such basic health insurance for everyone would save far more lives than were lost on 9/11/2001 in the World Trade Center (Update: more than 275,000 adults nationwide will die over the next decade because of a lack of health insurance).

Reform could save huge numbers of lives through catching more illnesses early in doctors' offices, while treatments can still help. Reducing illness across the population also reduces the drags on the economy of lost productivity and lost skills.

Now, the proposed reform bills do have pilot programs to try out every known idea that has been thought up by health care economists and experts to reduce health cost inflation.

Still, Cantor has a point about costs. A point based in the real feelings of many Americans.

The unspoken real issue is that most American families feel on the edge financially (discussed here a year ago).

More than half of American households feel that increased taxes, even just modestly increased taxes, could be too much of a strain on their already tight budgets.

Now, we know that under reform average middle class families would not have increased total health and tax costs versus the status quo -- they would actually have decreased total costs, due to insurance premium subsidies middle and lower income households would receive in the individual market while those with employer-based insurance would likely see a slight decrease in premiums also under reform (CBO). Only wealthier families/individuals would have increased total costs (the sum of health premiums and new taxes) -- the wealthy would pay for many low and middle income families and individuals to be able to get the new minimum level of health insurance.

Still, we have a large federal budget deficit, so if a part (even a modest part) of our room to raise taxes is used up on health care reform, it makes intuitive sense to many Americans that less would then be available to close the wider federal deficit.

* --
Middle class families believe that if the deficit isn't sufficiently closed in future years, that other taxes will eventually be imposed on them.

Thus they consider the costs of the proposed health reform to be ultimately their own costs in the long run.

If you think about it, the implication of Eric Cantor's "We just can't afford it" is really that....

America cannot truly afford our current and projected defense spending, which is far more massive, a far larger cost, than this contemplated health care reform.

While it's common sense to question whether we should spend more than 5 times the cost of fully implemented health reform on defense annually when we are not in a true large-scale war (against a major nation), the question could become moot in coming years.

The hard fact is this current level of defense spending already in place is beginning to place the U.S. into serious financial straights, and into economic decline.

We can't afford to mould Iraq. We can't afford so many rich weapon systems as a normal ongoing cost.

That's what the numbers say.

But, if we became conservative on defense spending, like traditional conservatives in American history, then...

Then, we could afford to invest to gain the long-term cost savings of switching more uninsured and underinsured Americans' health care out of emergency rooms and into doctors' offices.

And, this, along with other parts of the proposed health care reform, would create overall national savings by setting us up to bend the cost curve over time, 7, 10 and 15 years out, and thus help with the most serious threat to the future federal budget: Medicare health care inflation.

In other words, middle-class American families cannot afford anything less than some kind of truly comprehensive reform, such as Obama's proposed reform, followed up by actually implementing the successful pilot programs created under Obama's plan across all of the massive Medicare health spending.

We can't afford not to.

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