is the "cost" of health care reform positive or negative?

[spoonless]

I have been wondering about this for a long time, but now that the Congressional Budget Office has released the numbers for the Senate healthcare bill, I figure it's a good time to ask.

Every time I read about the "cost" of various health care plans, I wonder what is really meant, and what their definition of a "cost" is and why they feel that's the right thing to label a cost. Here's an example:

http://news.yahoo.com/s/nm/20091118/pl_nm/us_usa_healthcare

So, the Congressional Budget Office says that the senate plan will "cost" $849 billion over the next 10 years. But they also say it will decrease the federal deficit by $127 billion over the next 10 years (and $650 billion more over the following 10 years). I remember having the same reaction to the CBO numbers on the house plans--how can you call it a cost if it is saving us money? Usually, spending more money on a government program you would expect to increase the deficit, not decrease it. With no change in the tax law, I would assume that the most sensible definition of the net cost of any program would be how much it increases the national debt. Here the deficit is decreasing, so the amount of federal debt you have at the end of 10 years would decrease by the same amount. which would mean the cost is negative, except for the fact that the bill does include a tax increase.

To state it more simply, the deficit is federal spending minus federal revenue. If you just increase spending without changing revenue, then I would think the cost is equal to the increase in deficit. If the deficit decreases due to increased spending, then clearly that spending should not be called a "cost", it should be called an investment or something else. When you pay some money and get some service in return, that's a cost. When you pay some money and get more money back, that's an investment that you made a profit on. I would never refer to the money that I give to my bank as the "cost" of banking. I'm giving it to them to hold onto so I can make *more* money. Yes, there is some cost of banking reflected in the difference between the interest they make off of my money and the interest they pay me, but this cost (what I'd call the "true cost") is far less than the total amount I'm paying to them initially... that's just not something that should be called a cost at all, in my book.

Now, this situation is not exactly the same as the bank account example, since in this case, there is a tax hike included in the bill. And I don't know what all the numbers are that went into coming up with these numbers, but I doubt that the increase in tax revenue is the sum of the two numbers they gave ($849B + $127B = $976B). If the new health care system is no more efficient than the current system, then I think their numbers imply that the bill includes a $976-billion tax increase, and that $849-billion of that money will be spent on healthcare while $127-billion will be spent on paying off some of the national debt. Except that one of the main purposes of health care reform is to save money on health care, since costs are spiraling out of control within the current system. The other main purpose is to make sure that more people are covered, which seems equally important, but I think the argument for keeping health care costs down is stronger and appeals to more people so it is usually cited as the primary reason for health care reform. Given this, you'd expect the numbers to not add up quite in the way I've described, since some of the deficit reduction would be coming from the increased efficiency of the new system.

So I guess what I'd like to know is what is the size of the actual tax hike? It seems like that would at least be more useful than the $849-billion number. Surely it isn't really $976-billion, because raising more money than you need and then using some of it to pay off the debt doesn't make much sense and would imply no increase in efficiency. But is it more or less than $849-billion? I would expect it's less, but I guess that depends on what their estimates are for how much waste in the current system is reduced. Whatever that number is, though, is it more correct to call that a cost or an investment? It seems like it is some of each, although mostly an investment. Like my bank account, most of the money is an investment, only a tiny fraction is paying for the actual cost of the service.

Then, another question is how do you figure out the "cost to society" once you know the "cost to the government"? If there's a public option, and you choose to pay your premium to the government under the new system rather than paying your premium to an insurance company, how does that affect the calculation of the cost to the government? If you're paying a lower premium, and getting the same service, then it seems like the net "cost to society" is negative (you were paying more before). And then while the government is presumably not going to try to make quite as large a profit off of your premium as the insurance company would have, if they do make some profit then that reduces the overall "cost to the government" of health care reform, but hopefully not as much as the overall cost to society of healthcare is reduced. Then there are administrative costs to the government, which would have been costs to insurance companies... also making the cost to society much less than the cost to the government.

According to KaiserEdu, the administrative costs of (government run) Medicare are less than 2% while the administrative costs of private health care are about 7%. I wonder if the CBO is assuming the increased efficiency of a government run program will be similar to the improvement you get with medicare, or better or worse. Given that the bloat factor is nearly 4 to 1 in favor of private industry having more beurocratic bloat in our current system, maybe there should be a slogan for the Obama era, "anything that can be done privately can be done publicly for a fourth of the cost".

Anyway, I would make a poll asking "is the true cost of health care reform positive or negative?" but there are so many different potential answers to that question I will leave it up to free-responses for whoever wants to take a crack at it. A related question would be, if you knew the cost was positive, in other words if you knew that society wouldn't save money on net by switching to the new system, would you still be in favor of reform (presumably because it would be a more fair system where everyone can afford health insurance)? I think my answer to this question is that I *think* the net cost is negative, but even if it is slightly positive it may still be worth doing. (And if the cost is large, like hundreds of billions, then it is not worth doing--at least, not in this way.) But if it is slightly positive, then I must admit I'm a bit outraged at the politicians who have all been lying to us, saying that reform is a way to "control spiraling health care costs".

Comments

[ankh-f-n-khonsu.livejournal.com]

In this case, the "cost" they're most worried about is the hit to the Medical Industry's bottom line.

The "cost" they should be concerned with, IMO, is to the People.

All the noise about "cost" is empty rhetoric to keep fools occupied. There's billions for war, but cuts for libraries. It's a shell game.

ah, i think you're mistaken

[roxymartini.livejournal.com]

Except that one of the main purposes of health care reform is to save money on health care, since costs are spiraling out of control within the current system

one would certainly hope so! but the question is "save whose money"? having a public system may help save the average person money (though, this is debatable as taxes are being increased). in fact, what it might do is just help chop of that right end of the health care costs curve (where "costs are spiraling out of control"). but it won't help the government spend less money, because most health care today is covered by employers or privately purchased plans. and it certainly won't save you money if you plan to ever make over $100,000 a year, or even if you have an employer who covers (or would've covered) health care as a job perk.

[roxymartini.livejournal.com]

also, i don't see what the point would be if the cost is positive.

i am okay with people being motivated to have a job rather than not have one.

i'm currently living at the povery line (maybe hovering a little above it) and there seem to be lots of good reasons to stay here. I think i qualify for all kinds of things like low tax rates, free health care, reduced rent, food stamps... and i live a very lazy beach life. i have no motivation to ever make more money than this because my life is very easy.

you know... i have actually personally known people who've begged NOT to get raises because a raise would put them into the next tax bracket and their take-home pay would decrease. i know it's off topic, but what kind of bullshit society would encourage this?

i'm really surprised everyone doesn't just buy a 1 way ticket to hawaii and become a homeless beach bum. free health care, $200+ a month in food stamps, free hot meals 3 times a day, all the surfing and the sunning and the leisure time you could ever want.

[spoonless.livejournal.com]

i am okay with people being motivated to have a job rather than not have one.

What upsets me is that it motivates people to take a job with a large corporation that can get special discounts on its large pool of employees, rather than work for a small company which can't afford health insurance, or to be an entrepreneur and go into business for themselves.

Many of my friends work for themselves, as freelance artists, writers, councilers, massage therapists, motivational speakers, etc. Most of them can't afford health insurance, not because they don't have a job, but because the cost of buying it yourself when you don't have a giant corporation to negotiate the price way down with the insurance company, is insanely high. By insanely high, I mean $500-$700/month, if you want a good plan like what you'd get working for a big company. This is more than most people pay for rent! It shouldn't cost this much, and we shouldn't be providing a strong incentive against entrepreneurs.

[spoonless.livejournal.com]

you know... i have actually personally known people who've begged NOT to get raises because a raise would put them into the next tax bracket and their take-home pay would decrease. i know it's off topic, but what kind of bullshit society would encourage this?

Your friends were idiots then.

You cannot have less takehome pay due to being in a higher tax bracket, it's impossible. You only pay the higher rate on the additional income you made, not on the income you make up to where the bracket starts.

[pazi-ashfeather.livejournal.com]

I'm curious what your definition of "the poverty line" is.

I make just 650 dollars a month on SSDI. That isn't enough to make any reasonable cost of living in any part of the country where I could function. I can't live alone on that income; paying even half my monthly paycheck in rent isn't viable, especially when you consider the costs of utilities like electricity/gas and anything else renters can charge you for. Food and transit look like luxuries. In fact, even if I split rent with roommates, the split is still unworkable -- add more people, and rent goes down but utilities go up.

And it wouldn't work for me anyway. I know from experience that roommates and I are a volatile combination, due to the autism-spectrum issues that've led to my impairment and qualified me for benefits.

I don't currently have food stamps; the agency is denying as many people as possible due to funding issues. For the same reason, I don't have health care (have to wait 24 months from the time SSDI kicks in; 19 to go!) Reduced rent? Don't make me laugh -- Section 8 and HUD housing has waitlists of over a year in most places, and you're often treated like a criminal just for living there by the agencies themselves. To say nothing of the quality of the units, or the neighborhoods they tend to be in.

Sure, I have no income taxes whatsoever. Big fat hairy deal. I need my gall bladder removed (yay, lack of insurance -- and not getting this done could be lethal). I need to eat, and charity kitchen/food bank stuff is not food you'd ever buy at the grocery store if you could afford better -- believe me, I know. I need to make myself presentable for job interviews (not that I ever get any), but just buying a single outfit at a secondhand store is a serious alteration to my tightly-constrained budget -- and although I have a mobile phone, every few months I can't afford to put minutes on it and have to miss out on any opportunities or important things that you'd want to recieve a phone call about. Like the death of a family member, or a job interview.

And being chronically unemployed, my surfeit of time is neither leisurely, nor especially wanted. Not having anything useful to do is about the worst thing that can happen to me. It's PAINFUL to feel like I'm not making a contribution to society. Having been utterly unable to find work, I volunteer just so that the depression doesn't consume me, and make it yet harder to find work.

I'm not sure what planet you're living on, and I seriously question your claim of living "at the poverty line", but since you don't claim to be actually using any of these services, or dependent on them, I feel safe in concluding that you don't know what you're talking about here.

[roxymartini.livejournal.com]

1. i may or may not be using the benefits. but i'd rather keep that ambiguous for my own reasons. let's not assume i'm not poor enough or whatever. i'm using the federal definition of "poverty level" - and i live in honolulu, one of the most expensive cities in the US.

2. you know, i could claim you must not be that badly off if you can afford to be choosy about having roommates!

3. again, you must not be so badly off if you can be picky about where in the country you're living.

4. are you commenting on the poor quality of Section 8/HUD housing? I would be lucky to have that! you're right. the wait is long, but at least it's there. be grateful.

5. charity kitchen/food bank stuff is fine. i know because my mother works closely with a charitable organization that distributes food bank goods several times a week. she tells me these people are LUCKY. she's brought home stuff that even the poor/homeless don't want, and i agree. it's not fancy, but it's certainly not rotten or of poor quality.

6. i also have a pay as you go phone. maybe you spend too much time chatting it up with friends? i find that when i use my phone for strictly professional reasons I spend about $10-15 a month on phone (tmobile togo).

you sound really spoiled and ungrateful. you get $650 a month for doing absolutely nothing. It could be worse.

i can't stand that people like you are demanding that they get even MORE free stuff when they're apparently so completely useless that they can't even find a job.

[pazi-ashfeather.livejournal.com]

1. "The Federal definition", but I notice you scrupulously avoid numbers.

2. I can't afford to be choosy. I am FORTUNATE enough to have a life partner who's much more stable than I, financially -- and even then, I spend over half my income on rent and food we both eat, because she's not wealthy enough to simply cover my costs. If she and I weren't together, I'd be in dire straights.

3. I was born in the Pacific Northwest, one of the more expensive places in the US to live. I now live in Minneapolis, which is still hardly cheap. But I can't exactly go live in rural Wyoming or the deep South; it costs money to travel too. You need money for the actual transit, however you do it, plus money to support yourself on arrival and get established. I can't afford a car, so I need to live someplace where there's mass transit and where I can feasibly walk most anywhere I need to go. Otherwise I'm essentially a shut-in, and it's hard to look for work if you never leave the house.

4. You'd be lucky to have that? According to your userinfo you live in Berkeley (but you claim to be in Honolulu; out of curiosity, are you using the Federal Poverty level for the state of Hawaii, or for the continental US?). Something's not adding up here, and since your description of life at the poverty line reeks of stereotypes about poor people rather than lived experience, I'm going to doubt this claim. And those waiting lists mean that the housing is useless to most people who need it. I've been homeless before -- you don't need a roof over your head in a year or two. You need it yesterday, or you're going to suffer for it.

5. It often IS rotten and of poor quality. Very often the expiry is long since past; foodborne illnesses are common and when produce is available at all, it's often already bad, or even in an advanced state of decay. Meat is similarly risky; frozen stuff that may have been re-thawed any number of times and looks and smells emphatically unsafe (leading to the fun choice of whether you eat it, and risk food poisoning, or toss out food that MIGHT not have caused problems). I've had to live on this stuff before. You're out of touch.

6. As it happens, I don't chat with friends on the phone. I use IM for that. Despite your desire to believe that really I only have myself to blame for my difficulties, I am diligent about using phone minutes for important business, and saving money where possible.

As for your parting comment: that attitude is a big part of the reason why people like me (and possibly you, although the inconsistencies make me doubt you're being sincere) are stuck in situations like this.

[spoonless.livejournal.com]

you sound really spoiled and ungrateful

You are hilarious. Pot? Meet kettle.

[roxymartini.livejournal.com]

1. i don't memorize these things. FPL is about 10,000 a year? 12,000 for Hawaii? that's my guess. I'm a little over it, but just barely.

2. i'm glad. but wait, even with a life partner you're still getting benefits? and you're not needing to spend all of it? why are you being paid then? interesting.

4. haven't updated the userinfo for a while. berkeley was undergrad. i've been poor all my life. i had 2 jobs through college. my mother and i lived in an illegal 1 bedroom basement apartment with no living room and no bath tub for most of my childhood. don't you dare tell me i haven't had "lived experience." you sound so self-righteous, like you deserve everything and even more from the government, etc when i don't think you do at all.

5. i'm not out of touch. i've had to eat it too. it's perfectly fine. maybe you've just had a better situation in the past? something to compare it to?

6. i'm saying something doesn't add up. you get $650 a month, you only use half of it on food and rent and yet you can't afford $10 or $15 a month for a phone to take job interviews?

we're not stuck. one day i'll have a decently paying job. the day i decide that it's worthwhile to pay 1/3 of my salary in taxes so that i can provide services for ingrates like yourself. i AM poor. but at least i'm thankful for everything that I get. and i recognize that it's not fair that people who ACTUALLY WORK have to pay for my bum-like existence.

[roxymartini.livejournal.com]

really? i didn't think i was whining about not getting enough in government benefits and services ...

[plymouth.livejournal.com]

i can't stand that people like you are demanding that they get even MORE free stuff when they're apparently so completely useless that they can't even find a job.

I missed the part where pazi_ashfeather demanded ANYTHING.

[roxymartini.livejournal.com]

ok. i guess he was just implying that what he was currently getting wasn't good enough. if not a literal demand, then a not-so-subtle implication that what he's currently entitled to is worthy of his scorn? and therefore that he deserves more/better from the government or god or... ?

[spoonless.livejournal.com]

Something's not adding up here, and since your description of life at the poverty line reeks of stereotypes about poor people rather than lived experience, I'm going to doubt this claim. And those waiting lists mean that the housing is useless to most people who need it. I've been homeless before -- you don't need a roof over your head in a year or two. You need it yesterday, or you're going to suffer for it.

I think she's likely confusing the individual income with family income definitions. I happened to see the number for a family of 3 today, which is $18,000. That's about what I was making in grad school, and I assume that's about what she is making. However, I was single (and as far as I know, she is too) so the poverty line is much lower. I have lived off of that for the past 6 years, and always spend half my income on rent (but part of that is because rent is so expensive in California). However, I never felt like I was living in poverty. It was by no means "roughing it", I had plenty of comforts and luxuries. When I was making much more than that before grad school, I still spent about the same amount, I just invested the rest in the stock market (which I later used to live for a year and a half without working, before I started grad school).

[plymouth.livejournal.com]

Actually, I got exactly the opposite out of that. What I got was that she was refuting your assertion that living off public assistance means "no motivation to ever make more money than this". I think she seems pretty motivated. She described a series of sucky things about it that provide motivation.

[roxymartini.livejournal.com]

ohhh coool! then i guess we're all in agreement to say that there being no services (no $650/month, no free food, etc) would be an even greater motivation ?

sorry if i misread the tone or intention, but it did seem like she was saying "I need even MORE from the government in order to get myself a job or live how i'd like to live - money for interview clothes and to pay my phone bill." but maybe my impression was wrong.

[spoonless.livejournal.com]

I think she's likely confusing the individual income with family income definitions. I happened to see the number for a family of 3 today, which is $18,000.

I wrote this before seeing her guesses; so my impression was wrong, it appears that roxymartini was not making that confusion.

[plymouth.livejournal.com]

Greater motivation, sure, but lesser ability. I think the goal of public assistance is to provide just enough to make it possible to climb out of poverty but not so much that people are content to just stay there. Of course the actual dollar figure for that is going to vary person to person, so there are going to be some mooches. I don't think pazi_ashfeather sounds like one of those, but I've never actually met her so I'm basing this on nothing more than what I've read here.

[roxymartini.livejournal.com]

ah, i see. no, it doesn't seem like public assistance is much good for the goal of getting off public assistance. whether we take it grudgingly or gleefully.

perhaps a more useful route would be doling out jobs? government jobs seem to be pretty easy to come by. i should know -- they keep hiring me. (=

[spoonless.livejournal.com]

FPL is about 10,000 a year? 12,000 for Hawaii? that's my guess. I'm a little over it, but just barely.

huh; I assumed you would be making more than that in grad school. Is it because you are taking the summers off and not working?

I just searched and it looks like your numbers are pretty right on. These were the numbers for 2008:

http://www.census.gov/hhes/www/poverty/threshld/thresh08.html

I saw $18,000 earlier today for 3 person family in 2009, so the 2009 numbers must be a little bit higher.

For the 6 years I was in grad school, I generally made about $20,000/yr gross (and gross is what you should be comparing to the poverty line), except for 1 year where I didn't work for half the summer, when it was a little bit less.

[roxymartini.livejournal.com]

you got me. i don't work summers. i'm a lazy bum. which is kinda my point, i guess! the poverty level's not that uncomfortable and it baffles me that people pity themselves so much. i mean, no one in particular. it's just a general outcry of self-pity i have some impression of. people who eat themselves into obesity at McDonalds and then blame their poverty, people who complain that they don't get paid enough to get themselves on their feet, etc etc

[spoonless.livejournal.com]

If you don't see how spoiled you come across as in this whole thread, try imagining the following... something which could happen to you any week:

You get in a car accident, and part of your brain is damaged so you can no longer do math. You can't find a job, and everyone thinks you are worthless. So you get on disability insurance and have to live on $650/month. You have yet to say exactly what your rough "barely above the poverty line" conditions really are, but when I was in grad school, I took home about $1450/month after taxes. That was plenty to live off of, even in California where the standard of living is very high. $650/month is a totally different ballgame; it's nearly impossible to live off of something like that.

The reason I called you hilarious is not because you are saying you want free services, but because you are comparing your own spoiled easy life to someone who is truly struggling to get by, as if they are at all the same thing.

Re: ah, i think you're mistaken

[easwaran.livejournal.com]

Note - there is no tax on planning to make over $100,000 a year. You don't pay a cent of tax until you actually make that money.

Also, the idea is that tax increases only go to people making more than $250,000 a year, not $100,000.

If your plan was to make $250,000 a year at a tax rate of 33% (or whatever it is), can't you just plan instead to make $260,000 a year at a tax rate of 37%?

[easwaran.livejournal.com]

As evidence, the plan I get from USC costs me $435.52 a month while I'm paying for it entirely myself through COBRA - the amount they actually withdraw from my salary when I'm officially employed is less than half that, I believe.

[easwaran.livejournal.com]

There's a difference between temporarily living "at the poverty line" while a healthy, young, single graduate student, and living at that level when your work situation requires you to have a car (or other stable means of transit), and you may have some health issues, and you have children (with all the changing requirements they have) and perhaps some debt from the past. Especially since someone in graduate school doesn't need to worry about saving, since they can be pretty much assured that some day they'll have an income that is significantly above the poverty line.

There are lots of costs associated with chronic poverty that you don't experience if you're only temporarily poor. While poverty might have a technical definition in terms of annual income, the more meaningful notion of poverty would also take into account what sort of social network you have (do you have any close friends or relatives that are substantially outside of poverty that can occasionally give you food or a place to stay, or can serve as an insurance policy if you were to suddenly get injured?) and what your reasonable expectations of future income are.