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The epic fight

The biggest domestic battle since the Clintons tried to nationalize health care in the early 1990s is about to unfold. Sometime in June the Obama Administration will formally introduce its plan to deal with the problem of the 46 million Americans who don't have health insurance. But the proposal will have far larger - and ominous - implications for the country than the number of uninsured. This will be President Obama's attempt to do what the Clintons couldn't: truly socialize American health care. Make no mistake: Obama's plan will be the Administration's absolute top priority, trumping new energy taxes and the forced unionization of private-sector workers. Irrevocably sinking Washington's claws deep into an area constituting 17% of the economy is too great an opportunity for the Obama Administration to pass up.

The President will propose that the government set up its own health insurance company, a Medicare-for-everyone system. The purpose, as he puts it, will be to provide competition with the private carriers. But this won't be competition; it will be a de facto government takeover. The Administration will portray opponents as heartless for not wanting to do something about the uninsured. It will proclaim that private carriers make too much money and spend too much on overhead and marketing and that a nonprofit government insurer can make insurance affordable for those who currently don't get it through their employer or are out of a job. Health care socialists will declare, "Look at Medicare. Despite its flaws and incomplete coverage it still provides a fantastic, affordable safety net for tens of millions of the elderly. Why can't we do that for everyone?"

Such a scheme would be a disaster. It would destroy innovation and lead to shortages and rationing. All the frustrations experienced with the current higgledy-piggledy system will pale beside the replacement's increasingly subpar care, ever lengthening lines for basic services and ever longer waits for "elective" surgeries. Let's clear up some of the myths. Both Medicare and Medi-caid are heavily subsidized by privately insured patients, to the tune of $90 billion a year. Federal reimbursement in these two programs is far below cost, which is why an increasing number of doctors are refusing to treat or are substantially cutting back on the number of Medicare and Medicaid patients they see. Medicare and Medicaid are rife with fraud. Unlike private insurers, the government refuses to spend real resources on routing out the wrongdoing: overbilling, overtesting and charging for visits not made or tests not given.

The quality of care will decline. Health care "outcomes" for Medicaid patients are substantially below those of similar private-insurance patients. Fees are so low that patients are often treated more like ill, undesirable cattle. Socialized systems are anathema to innovation. Breakthroughs in medications, diagnostic tools and medical devices require substantial capital investment and entail high risk. In the pharmaceutical industry, barely one in 250 promising compounds ever makes it to the marketplace. In the 1960s western Europe was a font of new medicines. But nationalized medicine put a stop to that. Today most of the breakthroughs come from the United States. Even when another country invents something, it is in the United States that the product is fully developed. For example, the MRI breakthrough was achieved by a Brit, but MRIs are much more widely used in the United States.

Medicare is no exception to this anti-innovation bias. As health care expert John C. Goodman, CEO of the National Center for Policy Analysis, has noted: "Almost no one talks to his or her doctor on the phone. Why? Because Medicare doesn't pay a doctor to talk to you on the phone. And private insurers, who tend to follow Medicare's lead, don't pay for phone consultations, either. The same goes for e-mail: Only about 2% of patients and doctors e-mail each other--something that is normal in every other profession. "What about digitizing medical records? Doctors typically do not do this, which means that they can't make use of software that allows electronic prescriptions and makes it easier to detect dangerous drug interactions or mistaken dosages. Again, this is something that Medicare doesn't pay for. Likewise patient education: A great deal of medical care can be handled in the home without ever seeing a doctor or a nurse--e.g., the treatment of diabetes. But someone has to give patients the initial instruction, and Medicare doesn't pay for that."

A federal government insurance company, with its subsidies, will attract more and more people from private plans. Instead of overtly running providers such as Aetna ( AET - news - people ) and UnitedHealthcare out of business, the federal government will take them over through mandating what they can and cannot do, as well as "reinsuring" private carriers for costs above certain levels. In other words, nongovernment insurance companies will become vassals and virtual subsidiaries of the Washington-run system. What are the alternatives to this health care nightmare? There are many positive, nongovernment things that could instead be done.
-- Allow mandate-free insurance policies. True catastrophic health insurance, not the current dollar-for-dollar coverage, is very affordable.

-- Permit people to buy health insurance across state lines. Removing such barriers would sharply increase competition.

-- Make it easier for small businesses to buy insurance in a pool, whether through trade associations or other kinds of affiliations.

-- Equalize the tax treatment of premiums. Companies get a tax deduction for health insurance premiums, as do the self-employed. Why not give that break to employees who choose to buy their own individual policies? They would get a deduction or a refundable tax credit (meaning if they don't have a tax liability they'd get an actual check from Uncle Sam). Many small businesses offer no insurance, or those that do may offer policies some workers find unsatisfactory. These folks should have the ability to easily get their own alternatives.

-- Raise limits on contributions to HSAs and on permissible deductibles.
All of these ideas would substantially cut the number of un-insured. For those truly uninsurable, why not give them the medical equivalent of food stamps and subsidize their catastrophic health insurance premiums through private companies? President Obama says he wants to make health care affordable for all. Applying free-market principles to health care would do just that. Even with private-sector insurance there isn't a true free market--not when most expenses are covered by third parties. The key is to give consumers, not businesses and government bureaucracies, control of their health care dollars. Having businesses put money into workers' HSAs would be preferable to today's system. Once consumers actually control the money, they will apply pressure to get more value for it. After all, it's theirs.

Free-market dynamics have worked in virtually every other part of the economy, spurring production and innovation and helping us get more for less. Food is even more basic than health care. We in the U.S. don't have a third-party-payer system for food (except for food stamps). Result: Today people spend a smaller portion of their income for food than they did decades ago. And the variety of foods is greater than ever. Free markets can do the same with regard to health care; governments manifestly cannot.

At What Price? On tax day, Apr. 15, President Obama declared his belief in simplifying the tax code. His Economic Recovery Advisory Board, chaired by Paul Volcker, has been tasked with presenting recommendations by Dec. 4. Is the flat tax coming? No. Simpler code? Yes. Lower tax rates (plural)? Yes. The catch: The improved income tax code will come with a European-style value-added tax. Choke! Politicians love the VAT. First, because the levy applies to every transaction phase and includes ser-vices as well as products, it is difficult to avoid. It's no surprise, therefore, that the VAT was invented by the French. Second, consumers don't see it. By the time a product hits the shelf, the VAT is embedded in the retail price, unlike a sales tax, which is added at the checkout counter. Thus, in Europe, a $50 item actually includes upward of $10 in VAT.

The White House figures this will be a revenue bonanza that will finance not only the socialized health care system it wants to impose on us but also President Obama's second-term (if he's reelected, of course) big initiative: providing free college to everyone. Remember, this Administration still holds to its obese ambition to remake our capitalist economy into a western-Europe-like socialized economic system, in which government dependency is high, job creation is anemic and cutting-edge innovation in health-related areas and technology is almost nonexistent. A VAT is not just a serpent in a simple low-tax Garden of Eden. it's a nest of pythons.

Dit opiniestuk van Steve Forbes verscheen oorspronkelijk in "Forbes Magazine" en werd nadien ook elders op het web overgenomen.

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5 Reacties:

At 16:38 VVO said...

Als gewezen militant van Vivant snap ik toch niet hoe de auteur bij het idee komt om de invoering van een BTW in de VS 'een nest pythons' te noemen. Mijn kennis van belastingen en hun economische impact wijst net het tegendeel aan. Consumptiebelastingen zijn beter en minder marktverstorend dan belastingen op productiviteit of wat dan ook.

At 01:10 Anoniem said...

Ook een inkomstenbelasting is een vorm van consumptiebelasting. Men vergeet iets te vaak dat ook 'labour' een te consumeren product is.

At 10:35 Geert Van Nauwelaerts said...

Dan Mitchell van het Cato Instituut publiceerde vorige week in de Wall Street Journal een interessant artikel over de BTW-plannen van Obama. Hij vergeleek dat met Europa waar VAT ook tot hogere inkomstenbelastingen geleid heeft. Het debat gaat immers niet zozeer over de BTW maar over de fiscaliteit in haar totaliteit. Als we BTW aanvaarden, verliezen we ook alle argumenten om later belastingverhogingen elders te kunnen verwerpen. Interessant stuk van Mitchell, alleen kan ik het niet meer terugvinden...

At 13:49 Vincent De Roeck said...

@ Geert Van Nauwelaerts

Ik ben ook in de WSJ-archieven gedoken en heb dat artikel van Dan Mitchell teruggevonden. Is inderdaad een mooie samenvatting van wat komen gaat.

At 16:47 Anoniem said...

'because the levy applies to every transaction phase'
Op het einde van de rit is het uiteraard enkel de consument die effectief een belasting betaald en is iedere voorgaande stap een nul-operatie voor de betrokken handelaren.

'Thus, in Europe, a $50 item actually includes upward of $10 in VAT.'
Dat heeft dan meer te maken met de hoogte van de taks dan van het gekozen systeem. Als je de retail-tax maar hoog genoeg zet dan kan dat ook wel 20% van de totale prijs zijn.


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