Before we can discuss how we will pay for this uniquely American healthcare solution, we must take time to understand how we pay for healthcare, today. In 2009, it is estimated that Americans will spend $2.5 Trillion on healthcare and this money is paid in a number of ways.
Individuals pay:
- Direct fees to providers for medical, hospital, ancillary medical services, and prescriptions not covered by health insurance,
- Deductibles, co-pays, and co-insurance for drugs and services covered by health insurance,
- Health insurance premiums, individual or employee portion,
- Medicare tax at the rate of 1.45 percent of earned income, for those who work
- Federal, state, and local taxes, the portion allocated by units of government for various healthcare programs, including military, public health, and coverage for government employees and legislators.
Employers pay:
- The employer portion of health insurance premiums for company-sponsored health plans,
- An equal portion of the Medicare Tax at the rate of 1.45 percent of payroll,
- Workers comp premiums,
- Some healthcare fees and charges for that are not covered by workers comp or other insurance,
- Costs that are indirectly related to health care, in the form of administrative costs for interfacing with health insurance, managed care, and third-party administrators, not to mention COBRA,
- Corporate income and property taxes, the portion allocated by units of government for various healthcare programs, including military, public health, and coverage for government employees and legislators.
Together, these various payments add up to an estimated $2.5 Trillion in 2009, which amounts to 17.6 percent of our Gross Domestic Product (GDP) and approximately 20.7 percent of Personal Income.
There are four other pertinent facts about this $2.5 Trillion.
- Depending on who we talk to, the estimated portion of those $2.5 Trillon that goes to pay for administrative activity not connect to direct care to patients ranges from twenty to forty percent;
- an estimated fifty million American men, women, and children do not get all of the medical care that they require;
- Healthcare costs over the last ten years have grown at the rate of 10.8 percent, compared to CPI growth at the rate of 2.9 percent over the same time period; and,
- Healthcare costs are expected to grow at the rate of 6.2 percent over the next ten years.
Our objectives, then, are:
- To reduce the growth of healthcare costs to equal the rate of inflation (CPI);
- Simplify the way we pay,
- Eliminate the middlemen so that all healthcare expenditures flow to actual providers of medical and hospital services,
- Insure that individuals and employers pay their proportionate share of health care costs.
One of the features of this uniquely American healthcare solution is that it provides universal healthcare while limiting the role of government to the very few things that government does well. Most of us agree that we do not want socialized medicine and, in this proposal, the government will have no role to play in the delivery of healthcare services to people.
One of the very few things government does well, however, is the collection and distribution of our money. In fact, the government does this with brutal efficiency.
We propose the establishment of a Healthcare Services Fund (HSF) in such a way that neither the executive nor the legislative branches can gain access. Money collected into the HSF will be dispersed directly to primary care physicians, passing through no middlemen, in a manner that will be discussed in detail in subsequent articles. The money paid into this fund is not a tax, rather it is a health services fee that all American’s pay into, proportionately, on the basis of their income, and from which all American derive equal benefit.
We recommend that we utilize the existing Medicare Tax mechanism for collection of HSF, because the mechanism already exists and it has proven itself to be both efficient and effective. (Concerns about Medicare’s imminent collapse have to do with the demographic realities of population and not with the efficacy of the system). We will not, however, require any of Medicare's claims processing or other administrative capabilities; we are interested only in its revenue collection and distribution process.
We propose to increase the current 1.45 percent, now paid into Medicare, by both employees and employers, to a 10.45 percent Healthcare Services Fee. This fee will be charged proportionately to all personal income of American citizens and to all wages and salaries paid by companies that employ American workers.
For individual Americans, this means that we will be replacing the 1.45 percent Medicare tax with a 10.45 percent Healthcare Services Fee, which amounts to an effective increase of nine percent. This nine percent will fully and completely replace all out-of-pocket payments to healthcare providers and sellers of prescription drugs, as well as all payments of health insurance premiums. For the overwhelming majority of American men and women, this will result in a savings, while assuring access to comprehensive medical care and prescription drugs for each and every member of his or her family.
For employers we are saying that, by replacing the 1.45 percent Medicare Tax with a 10.45 Healthcare Services Fee, for the cost of an additional nine percent, we can provide universal access to healthcare. For employers who currently provide health coverage to their employees all of the costs, both direct and indirect, that are currently associated with that health coverage will disappear.
For employers, whether large or small, that do not currently offer health coverage to their employees, this becomes an added cost of doing business that, like every other cost of doing business, will be passed on to the consumer. We encourage these employers to ask themselves a simple question. If they could be assured of access to comprehensive healthcare and prescription drugs for themselves and their families, as well as to their employees and their families, would they be willing to offer a 9.0 percent across-the-board pay increase to each and every employee?
Everyone with personal income, irrespective of source, will be expected to pay their own way (10.45 percent). This includes retired persons with pension and investment income and also social security. It includes families on welfare. Everyone pays their own way. Is this an unfair burden on those with fixed incomes, whether the poor or the elderly? Given the value for which this relatively small amount of money is exchanged, and the peace of mind that comes with it, it seems like a pretty good deal.
Yes, once again, the wealthy will be asked to pick up a large portion of the tab. The significant difference, however, is that this is a proportional fee and not a progressive tax, as is the case with income taxes. Most importantly, unlike in so many instances in which the wealthy pay to support programs from which they derive no benefit, these prosperous Americans will benefit equally with respect to healthcare services.
We want it to be as simple as it can be: Everyone pays their fair share, proportionate to income, irrespective of source.
The obvious question is: does this plan provide sufficient revenue to provide healthcare to all Americans? Based on Personal Income data for 2009, we can expect to generate approximately $2.1 Trillion in the first year for the HSF. This is slightly less than the $2.5 Trillion that we currently pay as a nation but because 100 percent of the funds flow to providers, it will result in a net increase in the amount of money paid to providers. So, right away, this program results in a $400 billion aggregate savings for the American people.
In the next article we will show how all individuals will enroll for coverage and how the funds are allocated and paid to providers.
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