Three and a half years after Obamacare passed, three weeks before the Exchanges go live, and coinciding with their 42nd attempt to destroy the law, House Republicans have an official alternative to Obamacare. In fact, Republican Congressman Tom Price, already had a proposal. But a key change from that proposal—eliminating tax credits in favor of only tax deductions—is revealing. It shows that House Republicans are unwilling to take from the rich and therefore unwilling to ensure that all Americans get modern healthcare.
Our biggest problems with health insurance come from something really good—the great stuff health care can do. Once upon a time, a serious heart attack was a sudden death sentence. Today, it generally means by-pass surgery or a stent, followed by decades of playing with grandchildren. Once upon a time, a mother with breast cancer often left her young children motherless. Today, that’s rare. Nor does modern health care just save lives. Cataracts once made it hard to read. Today it means a brief surgery and recovery, before going back to the Internet.
Unfortunately, all this care takes a lot of highly skilled labor. Heart surgery requires a heart surgeon, an anesthesiologist, operating room nurses, and a host of other support personnel for sterile equipment and such. And don’t forget the ICU nurses who tend the Borg-like post-operative patients hooked up a sea of machines. Or the technicians who do the pre-operative scans. Without all that labor—and what we pay them—there would be no heart surgery.
US health care is probably exceptionally wasteful, but cutting the waste won’t get around the basic economics. Even Britain, with by far the cheapest health care among wealthy countries, averages $3400 per person per year. In the US, we spend $8500 per person. And most of that goes on actual care for sick people: more than half the money goes on the sickest 5%. Cost containment and rationalizing our health care system could help us spend less. But nothing is going to provide by-pass surgery, breast cancer treatment, cataracts surgery and such to the cashiers and fast food worker among us, unless we are willing to redistribute. They don’t earn enough and health care costs too much.
And that’s where those missing tax credits—the ones in the earlier Price proposal but not in the recent official alternative—come in. A tax deduction reduces a tax bill. If I owe $35,000 in income taxes and I can deduct $15,000 I spent on health insurance, my tax bill goes down to $20,000. But if I don’t owe any taxes, the deduction doesn’t help me at all. A tax credit is different. If the government gives me a $5000 tax credit for health insurance and I owe no income taxes, the government sends me a check for $5000. That is how the Earned Income Tax Credit works now. For many, a tax credit is not a tax reduction, but really a government benefit by a politically more palatable name.
Many poor and working class people pay little or no income taxes. They support the government mostly through sales taxes and payroll taxes (like social security taxes). A tax credit might help them a bit; a tax deduction does nothing. And the higher your tax bracket, the more a tax deduction helps you. The Republican alternative is good for the healthy, self-employed tech entrepreneur who buys his own health insurance. But it will do nothing for the cashier and her children.
Of course, there are lots of other ways to take from the rich and give to the health care of the poor. Medicaid now provides health insurance for some. But House Republicans don’t want any more government run insurance. Or the government could directly pay for public hospitals and clinics, skipping the insurance altogether. But local governments have been cutting those publicly funded clinics and hospitals. Or we could stick with the capricious “system” we have now: Poor people with heart attacks get cared for with funds cobbled together from all of us, because the hospitals aren’t allowed throw out anyone in unstable condition, while meanwhile some poor people with cancer go without care.
Basic arithmetic dictates that giving poor and working class people health care requires redistribution–taking from the rich. Republicans don’t want to take from the rich. So Republicans can’t solve this health care problem.