Control healthcare, reduce the deficit

The Federal deficit now exceeds $20 trillion. The pending passage of the Republican tax bill will add $1.4 trillion to this debt over 10 years according to the Congressional Budget Office. As a result, the nation’s debt will reach 85% of our gross domestic product by 2021 according to a recent Goldman Sachs’ estimate. We have exceeded that ratio only one other time, and that was just after World War II, according to a December 2, 2017, New York Times analysis. Most economists agree that we need to reduce this deficit or face disastrous economic consequences. The outgoing Chairwoman of the Federal Reserve, Janet Yellen, recently stated: “The national debt is the type of thing that should keep people awake at night” (New York Times, December 3, 2017). The problem is: how do we enact significant deficit reduction without disrupting the economy? Let’s look at the alternatives.

Raise Taxes – The simplest idea is to raise taxes and apply the increased revenues toward reducing the deficit. However, this is difficult to do in an era of stagnant wages. Only 55% of households paid Federal income tax in 2015 according to the Tax Policy Center. The other 45% either did not make enough or did not have enough taxable income. Also, the Federal Reserve’s 2015 survey of 5,000 households found that 47% could not pay an unanticipated $400 bill without borrowing the money. Given the current financial state of American households, raising taxes significantly seems like a nonstarter.

Cut Taxes – If raising taxes won’t work, maybe cutting taxes will. Under this theory you cut taxes for businesses, corporations, and wealthy individuals. They will, in turn, invest in the economy. The economy will then grow, generating more revenue and thus reducing the deficit.  The beauty of this alternative is it provides politicians with a popular idea while also demonstrating their fiscal responsibility. The problem is that although it sounds good, it doesn’t work. Presidents Ronald Reagan and George W. Bush both cut taxes and deficits grew. The present Republican tax proposal cuts taxes, but the Congressional Budget Office states that, when enacted, the deficit will grow by at least $1.4 trillion over the next 10 years.

Eliminate/Cut Discretionary Programs – If cutting taxes doesn’t lower the deficit, maybe cutting discretionary programs and services will. Discretionary programs include all of the programs/services that must be approved by Congress and the President yearly. They include the military, transportation, the State Department, the Park Service and a host of other appropriations. At least two issues are involved here. First, what do you cut? Each program has a constituency who will fight for its retention. Second, even if you can gain consensus, the actual cuts may be minimal. For instance, foreign aid and food stamps are often cited as areas for reduction. Realize that together, these two programs made up about 3% of the 2015 federal budget according to analyses by Wikipedia and Econofact. You may still want to cut them, but there will be little effect on the deficit. In fact, non-defense, discretionary programs make up only 16% of the Federal budget according to the Center for Budget and Policy Priorities. So you would need to reduce these discretionary programs to near zero to have a significant impact on the deficit.

Control Healthcare Costs – We spend approximately $3.2 trillion yearly on healthcare in the United States. This is one-sixth of our GDP, and it is a huge expenditure (National Health Expenditure Data, 2015). Yet healthcare is a fragmented, uncoordinated, expensive system where we pay more per capita than any other developed countries, but we live fewer years than many in those other countries (Kaiser Family Foundation, May 22, 2017). What if we controlled the way we delivered healthcare to create a more efficient system for every American? A single-payer health system would reduce the deficit and potentially provide medically necessary healthcare for everyone. It sounds impossible, but that is just how inefficient our present system is.

A single-payer healthcare system would reduce costs in at least two ways. It would reduce administrative costs. Overhead costs for Medicare are 1-6% depending on how one defines “administration,” according to a September 19, 2017, Washington Post Fact Check. This is in contrast to private insurers, who average 15% or more in administrative costs, according to Robert Frank in a July 9, 2017, New York Times article. A second important source of cost savings is the ability of a single-payer system to negotiate more favorable terms with service providers than private entities can. For example, the average cost for heart bypass surgery in France is $23,000, while in the United States that same surgery costs $73,000 (New York Times, July 9, 2017). By converting to a single-payer system, the editors of the Annals of Internal Medicine estimated in July 2017 that we could save $504 billion yearly. Think of the implications: we would reduce our yearly spending by over a half a trillion dollars and potentially provide medically necessary coverage for all of our citizens!

How would healthcare be paid for in a single-payer system? The Federal government would pay the bills out of our taxes. And, based on the experience of other industrialized countries, the portion or percent of an individual's increased taxes that would go toward healthcare would be lower than what most Americans who are not on Medicare are paying for healthcare right now.

Not all experts agree on the potential savings, but the economic and societal case for a single- payer system is compelling. If America financed healthcare the way other rich, capitalist countries do, we could reduce our deficit without spending cuts or tax increases. Congress and the President may soon be proposing cuts to Medicare, Medicaid, and/or Social Security, citing our exploding Federal deficit. Instead of reducing these safety net programs, they should be devising a plan to transition the country to a single-payer, Medicare-type system. The road to deficit control runs through the healthcare system, and single payer is the vehicle we can use to gain that control.

Tom Deloe, Ph.D., is a resident of Adams County and a member of the Adams Hanover Healthcare 4 All Task Force.