Chuck Collins: Healthcare costs, not taxes, are the big hit on businesses
Members of the House GOP were in a hurry on May 4 to pass their bill to gut Obamacare. They rushed it through before anyone even had a chance to check its cost or calculate its impact on people’s access to insurance.
Their urgency, however, had little to do with health care. The real reason for the rush? To set the table for massive tax cuts.
Indeed, the House health plan would give a $1 trillion boon to wealthy households and pave the way for still bigger corporate tax cuts to come, as part of the so-called “tax reform” they’re pushing.
Meanwhile, dismantling the Affordable Care Act will cause up to 24 million people to lose their health coverage, according to the non-partisan Congressional Budget Office. (Though even that estimate is based on the less extreme version of the bill that failed to pass in April. The new plan may be even worse.)
Why would a GOP politician support an unpopular bill that fewer than 20 percent of voters think is a good idea? Why risk angry constituents showing up at town hall meetings?
Put simply, to please their wealthy donors and Wall Street corporations. For complex legislative reasons, repealing Obamacare’s taxes on the rich first will make it easier for them to slash corporate taxes next.
As the “tax reform” debate begins, prepare for sermons about how cutting taxes for rich and global corporations will be great for the economy. Slashing the corporate tax rate, we’ll be told, will boost U.S. competitiveness.
But if Congress were really concerned about the economy, policy wouldn’t be driven by tax cuts. The real parasite eating the insides of the U.S. economy isn’t taxes, billionaire investor Warren Buffett explained recently, but health care.
In fact, taxes have been steadily going down, especially for the very wealthy and global corporations. “As a percent of GDP,” Buffett told shareholders of his investment firm, the corporate tax haul “has gone down.” But “medical costs, which are borne to a great extent by business,” have increased.
In 1960, corporate taxes in the U.S. were about 4 percent of the economy. Today, they’re less than half that. As taxes have fallen, meanwhile, the share of GDP spent on health care has gone from 5 percent of the economy in the 1960s to 17 percent today.
These costs are the real “tax” on businesses. As any small business owner can tell you, health care costs are one of the biggest expenses in maintaining a healthy and productive work force.
Yet the GOP bill will weaken healthcare coverage and regulation, which will increase costs and hurt U.S. companies.
U.S. employers, remember, must compete with countries that have superior universal health insurance for their citizens and significantly lower costs. While health care eats up 17 percent of the U.S. economy, it’s around just 11 percent in Germany, 10 percent in Japan, 9 percent in Britain and 5.5 percent in China.
No wonder Buffett concluded that “medical costs are the tapeworm of American economic competitiveness.”
Buffett observed that the House healthcare bill would give him an immediate $680,000 annual tax cut, a break he doesn’t really need, while only allowing that tapeworm to bore deeper.
For all its limitations, the Affordable Care Act has expanded coverage and the quality of life for millions of Americans. It’s also put in place important provisions to contain exploding health care expenses, slowing the rise of costs.
The GOP plan to reduce coverage and deregulate health care will take us in the wrong direction. That’s a pretty poor bargain for yet another tax cut for the richest Americans.
Chuck Collins is a senior scholar at the Institute for Policy Studies and a co-editor of Inequality.org. He’s the author of the recent book Born on Third Base.
Timothy J. Babineau, M.D.: Study what works well in U.S. healthcare and build on it
American healthcare is expensive. Too expensive. On this, there is little debate. In 2001 the median U.S. household spent 6.4 percent of its income on healthcare; by 2016, the same household spent 15.6 percent of its income on healthcare. That bigger share of the pie leaves less for other essential purchases such as food, education and housing.
The same phenomenon exists at the national level, with spending on education, the environment and social programs getting squeezed. Recent estimates from the Centers for Medicare and Medicaid Services (CMS) have the American healthcare tab coming in at $3.6 trillion for 2016 and projected to continue to soar through 2025. Despite broad agreement that rising healthcare costs are unsustainable, the root causes of the rates of increase and the best ways to combat them remain the subject of some debate and confusion.
Numbers matter. The 80/20 rule—known to healthcare actuaries as the Pareto principle, posits that 80 percent of all medical spending is incurred by only 20 percent of the population. Whether a population is defined as a company, a county, or a country, most healthcare spending is for care of a small minority of individuals. Moreover, the bulk of that spending arises from either largely unavoidable or unpredictable single events (such as trauma or sudden-onset acute illnesses); such chronic conditions such as diabetes; complex episodes of care for such illnesss as cancer, and care delivered at the end of life.
A critical (but often overlooked) point is the fact that as much as 40 percent of spending during chronic and complex episodes is avoidable if providers and systems adhere to established standards of care. Reining in runaway healthcare spending must involve better management of high-cost episodes of chronic and complex care.
A key buzzword in today’s debate is “population health”. Confusion occurs when the term is interpreted as a strategy for controlling healthcare costs when it is applied across our entire population as opposed to the sickest 10 percent or 20 Percent. Wellness initiatives, early detection, the avoidance of emergency room visits, and disease prevention have undeniable value, and should all be pursued, but they will not (by themselves) sufficiently reduce healthcare spending by enough to make the system “affordable”.
As the Baby Boomers swell the ranks of Medicare beneficiaries, the inevitability of illness is the only certainty in an otherwise uncertain world. To be successful, programs, payment systemsand policies to curb healthcare spending must focus on improving the efficiency and effectiveness of care delivered to the sickest subset of the population. This is best accomplished within a completely integrated healthcare-delivery system.
American hospitals and healthcare systems are among the best in the world. Rather than asserting that “American healthcare is broken” and in need of rebuilding from scratch, a better strategy may be to look at what works well within our system and ask how we can build on those strengths while facing the escalating costs head on. Hospital systems are in the health care business, and we should not be reluctant to say so. No matter what wellness and prevention programs we collectively offer, inevitably a small subset of the population will still get very sick, and it is a core mission of health systems—working in close partnership with our primary and specialty providers—to take the very best and most efficient care of them when that happens.
Irrespective of what happens with the Affordable Care Act (ACA), as leaders in health care, we must redouble our efforts to eliminate unnecessary variations and wasteful spending in the clinical care we deliver to patients.
Rather than debate the actual percentage that is “wasteful spending” (now commonly referenced at around 30 percent) we would be better served by continuing the hard work of identifying and eliminating areas within our own systems where needless variations in care add cost without improving outcomes. As Lifespan, the system I lead, continues to evolve into a comprehensive, high-value, integrated healthcare system, we are doing just that.
Timothy J. Babineau, M.D., is president and chief executive of Providence-based Lifespan, a large hospital system, and a professor of surgery at the Warren Alpert Medical School of Brown University.
