The State of Our Health

Governor Daniels has proposed a 25-cent cigarette tax to fund health insurance for at least some of Indiana’s children who are currently uncovered. It’s another proposed “patch” for our costly, byzantine and inefficient medical system, but it would be something. Real reform would never pass.


Americans don’t want “socialized” medicine—but of course, that is what we have now. Only we have socialized our system through insurance companies rather than through government, and have thereby managed to get the worst of both worlds—highly regulated care that is over twice as expensive as the next most expensive country’s.


Forty-six million Americans are currently uninsured; another forty million will experience lapses of a month or more in any given year. Half of all personal bankruptcies—costing businesses millions—are due to medical bills. Because we make medical insurance an employer responsibility, the cost of American goods is inflated—over two thousand dollars of the cost of each General Motors car covers health care.      


What if we had a “single payer” system like several in Europe—a system that covered everyone, was funded through taxes and administered by existing insurance companies?


There would be an immediate payoff in economic growth. Health insurance (for companies that can still afford it) is the single largest “drag” on new job creation. Aside from the cost of the insurance itself, administering benefits consumes untold hours of HR time. Smaller companies—the real engines of economic growth—are increasingly unable to offer health benefits, putting them at a competitive disadvantage for good employees. If we de-coupled health insurance from employment, companies would be able to add workers and increase wages.


Individuals would save money, too, and not just on uninsured medical expenses. Automobile and homeowners insurance premiums would decline, because underwriting would no longer need to take the costs of medical care into account.


But what about the price tag? Most health economists believe the additional taxes needed would be minimal, and not just because there would be economies of scale. Right now, between programs like Medicaid and Medicare and coverage for public employees—police and fire personnel, public school teachers, and millions of municipal, state and federal employees—government is already paying for the health care of 45% of the American population. Just  standardizing that coverage would save billions.


Medical costs in the U.S. include paychecks for thousands of employees in doctors’ offices and hospitals whose only job is to comply with conflicting insurer regulations, submit or reject claims and collect—or argue about—amounts due. (Thirty percent of total U.S. healthcare costs are administrative; meanwhile, much-maligned Medicare keeps its overhead under 3%.) Eliminating insurance companies’ marketing costs and negotiating with drug manufacturers and other medical vendors for lower prices would generate huge savings. Costs also decline when people  get timely care, rather than costly emergency room attention when they can no longer ignore the problem.


A cigarette tax is like giving aspirin to someone whose appendix has ruptured. There’s momentary pain relief, but he still needs an operation.