Health Care IS Infrastructure: Best Paid Publicly
Interesting article entitled "Why Taxes Should Pay for Health Care" (http://baselinescenario.com/2012/10/12/why-taxes-should-pay-for-health-c...):
Baumol’s argument, somewhat simplified, goes like this: Over time, average productivity in the economy rises. In some industries, automation and technology make productivity rise rapidly, producing higher real wages (because a single person can make a lot more stuff). But by definition, there most be some industries where productivity rises more slowly than the average. The classic example has been live classical music: it takes exactly as many person-hours to play a Mozart quartet today as it did two hundred years ago. You might be able to make a counterargument about the impact of recorded music, but the general point still holds. One widely cited example is education, where class sizes have stayed roughly constant for decades (and many educators think they should be smaller, not larger). Another is health care, where technology has vastly increased the number of possible treatments, but there is no getting around the need for in-person doctors and nurses.
The problem is that in those industries with slow productivity growth, real wages also have to rise; otherwise you couldn’t attract people to become classical musicians, teachers, or nurses. Since costs are rising faster than productivity, prices have to rise in real terms. Note that university tuition and health care costs are both going up much faster than overall inflation. As a consequence, since GDP is measured in terms of prices paid, these sectors take up a growing share of GDP, just as health care is doing throughout the developed world.
The point is that if you extrapolate from current trends, health care will be a ridiculous proportion of the economy a century from now, even if we do nothing to slow its rate of growth; but because of productivity increases, the non-health care sector will still be much bigger than it is today, so we will still be much better off than today in aggregate.
But that doesn’t mean that everything is fine and dandy. Unlike a lot of things in the light blue portion of that chart, health care is a necessity. If 60 percent of the economy is health care, health care will be a much larger share of the average family’s budget than it is today; and if it’s a huge share of the average family’s budget, then many families with below-average incomes won’t be able to afford it.
This is the basic problem with market-based approaches to our health care problem: in a free market, poor people won’t get any, and middle-class people won’t get very much. Baumol is right that in the aggregate our society will be able to pay for all the health care we need, and plenty of other stuff besides; but with our current level of inequality, many actual families won’t be able to get the care they need.
Now, Baumol himself realizes this. One corollary of Baumol’s cost disease is that as low-productivity sectors get relatively more expensive, it gets harder and harder to make a profit, so they tend to get taken over by the government. Again, consider health care and education. (Classical music, which cannot make a profit but is not a necessity—much as I love it—has instead been taken over by private charity.) And this is just the way it should be: Everyone needs health care, but the law of productivity increases dictates that it gets more and more expensive, so the only sane solution is to keep prices at an affordable level and let the government bear the losses. And by “bear the losses,” I mean distribute them to taxpayers (since there is no entity called “the government” that exists in isolation from the people) through a progressive tax system.
Guess what? That’s what Medicare does today. (The Medicare payroll tax isn’t progressive, but most of Parts B and D are funded through general revenues, which mainly come from the individual income tax.)
Health care is a necessity. So are education, roads, public safety, public health, justice, defense, air traffic safety, and many other public functions. Just like all of those other tax supported services, health care needs to be delivered efficiently to every citizen. It is in the interest of everyone that each patient received efficient and high quality care, no more than need but no less either. This is why we finance the lion's share of health care budgets with tax dollars. $1.5 trillion of tax money annually is raised to pay for health care, out of a national health expenditure of $2.5 trillion. Unfortunately, it is not getting harder and harder to make a profit on health care services, because the health care corporate lobby virtually owns Congress. As has been repeatedly documented on this website, the health care lobby outspends any other in feathering their own nest. The result is a massive corporate welfare program for health care interests. ObamaCare is more corporate welfare. What else do you call a government program which mandates that every citizen purchase a remarkably useless, wasteful, and expensive product (health insurance)? Medicare, as a payer, is far more efficient at paying for health care than is the private health insurance industry, and yet we are making everyone buy health insurance?
We could more easily transform health care delivery by having the federal government serve as the guarantor of a minimum standard while allowing states significant leeway in arranging better and more efficient health care delivery locally. Health care is taking a greater cut of the GDP, but the American way of doing business in health care is significantly more wasteful than anywhere else in the first world. So, we are devoting a much higher proportion of GDP to health care than any other nation and getting much less bang for that buck, while suffering massive opportunity costs.
Isn't it time to reframe the entire national debate about health care?
Dr. Joe Jarvis