|Paul Scott Thomas|
Edge of the World
The US Supreme Court has taken up the issue of so-called ObamaCare: the controversial plan to extend private health insurance to all citizens, with a stiff tax penalty for those who refuse to purchase private health insurance. I know something about it, since I live in Massachusetts, a state that adopted so-called RomneyCare, after Mitt Romney, who was our governor at the time, and is now running for president. ObamaCare is modeled on RomneyCare.
The Supreme Court wasted a day discussing whether the tax penalty is a tax or a penalty, a distinction that's relevant only in the context of some arcane law concerning the litigation of unjust taxes, but lost on everyone, because the penalty shows up on one's tax bill. This point was discussed ad nauseam, so I will not discuss it or any of the other issues relating to ObamaCare that everyone banters about endlessly. Instead, I will say what no-one is saying: Obamacare (and Romneycare) invalidates the notion of health insurance.
First, let's make sure that we are all clear on the concept of insurance. Insurance is generally taken to mean a promise to pay out a settlement (or coverage) in case of a certain event (fire, flood, sickness), in exchange for a recurring cost (premium) and, usually, a deductible (or self-insurance). Insurers weigh the risk of the event against the amount of the settlement. Thus, if the policy is against your spontaneous combustion, with a risk estimated as 1 chance in a billion per year, and you want to insure yourself for $1 billion, then your premium is $1 per year, plus whatever the insurance company wants to charge you for writing the policy. If, however, you are currently engulfed in flames, then the risk goes up to 100% and the premium would theoretically be $1 billion, same as the settlement, but no insurance company would ever write such a policy because the risk is too high.
Now, health insurance is a strange proposition to start with, because everyone dies, and nobody dies healthy, so most people require medical treatment at some point. (A few people spontaneously combust, I suppose. They are still none too healthy during the few seconds before they die, but that's not long enough for them to avail themselves of medical attention. But that's a very rare case.) The point is, if all houses burned down at some point, there would be no fire insurance, and if all houses flooded at some point, there would be no flood insurance. But everyone dies, and yet there is health insurance. How is that?
ObamaCare introduces the provision that health insurers are not allowed to decline insurance coverage to individuals with pre-existing health conditions. That is equivalent to mandating fire insurance for houses engulfed in flames, or flood insurance for houses slowly sinking while floating downstream. In return, insurance companies are assured that they will be able to spread the risk over the entire population, which will be coerced to purchase their product by being threatened with a stiff tax penalty.
Some coercion is certainly required for people to accept such a faulty product. My family's health insurance bill comes to nearly $15,000 a year, with a $2,500 a year deductible. That is, we have to consume more than $2,500 a year in health care before the insurance pays anything. If I am employed, then the employer has to pay 80% of the premium; if I become unemployed through no fault of my own, then the state picks up the 80% for a few months; after that, I have the option of paying even more for an individual insurance plan, or paying somewhat less for the tax penalty but then risk being bankrupted by a medical emergency.
Recently, I called my insurer to ask how much a certain elective procedure might cost. You see, under this system, the doctor bills the insurer, the ensurer “adjusts” the amount, and then I pay the adjusted amount. I wanted to know the adjusted price beforehand, but I was told that they do not give out this information. The adjustments are generated by an inscrutable computer program, which determines the numbers on the spur of the moment based on a set of formulas. Now, normally I don't do business with companies that refuse to quote a price before I place the order. That's where the tax penalty is most helpful to them: it leaves me no choice but do business with, and get robbed by, this company.
As Vladimir Nabokov once pointed out, nothing breaks the human spirit more effectively than consistent bad treatment. To this end, forcing everyone to navigate an infuriating bureaucratic maze with their very health held at ransom is quite an effective strategy. Another is to force everyone to abide a blatant falsehood, such as calling health insurance “insurance” (now preferring, I notice, the more abstract word “coverage”) whereas it is definitely not insurance at all but a tax. Yet another is to force people to make false choices, such as between Romney, author of RomneyCare, and Obama, author of ObamaCare, which are very similar. At this point, the American spirit seems very well broken, along with the economy and the political system, and I do not advise you to squander your precious energies in trying to fix the latter two. I do, however, recommend that you mend your spirit, and stop thinking it necessary to abide a falsehood: health insurance is not insurance.
What is it then? “Insurance” that everybody is forced to buy as a legal precondition of citizenship? Where the risk pool includes the entire country? Where compliance is enforced by a federal agency, the Internal Revenue Service? (But where, if one does comply, the money goes to private entities, to pay other private entities.) What is that? Why, of course, it's a private tax collection service! Under ObamaCare, medical insurance companies become private tax collectors. Now, private tax collectors are not unprecedented in the annals of empire. The Roman senate bid tax collection contracts out to publicans, with mixed results: farmers often opted to abandon their land rather than farm it and have the grain confiscated to pay taxes. But ObamaCare takes private tax collection one step further: under it, the tax collectors not only collect the taxes, but also set the level of taxation as they see fit. That is, the medical “insurance” companies are allowed determine the “health tax.”
What makes this complex scheme of private tax collection so necessary? Its benefits include maximizing health industry profits, which can be recycled as electoral campaign contributions to elected officials who then protect the prerogatives of the health industry, keeping this private tax collection scheme running smoothly. But none of these benefits have much to do with keeping the population healthy. On the other hand, it creates a massive perverse incentive to maximize health care costs, while at the same time institutionalizing a private system of public robbery.
I therefore propose that the health tax be collected
directly by the Internal Revenue Service.
Furthermore, in absence of any competent agency within the US that could be charged with administering a public health care system, I propose that health care be directly funded by the Internal Revenue Service as well, as part of an integrated strategy for maximizing tax revenue: the “Keep American Taxpayer Healthy” plan.
The unambiguous mandate of the IRS is to maximize tax revenues. This it will do by making sure that taxpayers are healthy, so that they can earn the maximum of income and pay the maximum of income tax. It will make it a priority to provide good health care to all children, who are IRS's “seed stock”—the taxpayers of the future. It will also make sure that the health needs of the working-age population are attended to, to make sure that they continue to work, earn, and pay taxes. It will also provide palliative care to the retirees, to keep up the morale, but certainly nothing as lavish as what is available to them now. Since their tax-paying potential is negligible, keeping them alive as long as possible is not a priority from a tax revenue maximization perspective.
Not being specialists in the medical field, but realizing that basic and preventive care have the highest health care ROI and specialist care the lowest, the IRS would probably want to dramatically simplify health care delivery. Huge hospitals and medical centers, with their teams of specialists, support staff, swarms of administrators, billing departments, medical labs, intensive care units and MRI machines, are too complex for the IRS to even audit, never mind administer effectively. It is far simpler to establish neighborhood clinics, and to provide them with a fixed fee per patient per year, to spend in line with the overall mandate.
Provisions would be made for some number of specialists, probably shared between clinics, but with the understanding that, from a tax revenue perspective, specialist care reaches diminishing returns rather quickly. For instance, a triple coronary bypass is hard to justify financially, because the patient's earning potential, even after a full recovery, usually does not cover the cost of the operation.
Also, the IRS might consider actually denying health care to rich people (those with net worth over $5 million) in order for the treasury to reap the windfall from estate taxes when they die. Such people (Mitt Romney is a good example) rarely pay their fair share of tax in any case, being able to hire accountants and lawyers, who exploit every possible loophole. And so, there shouldn't be any free heart transplants for Dick or free brain transplants for George.
Having the health care system administered by the Internal Revenue Service may seem rather inhumane to you. However, I hope I have succeeded in pointing out that doing so would still work better than ObamaCare. This health care system is so bad that improving it is not any sort of challenge at all: I submit to you that even the IRS would do a better job of it.