Capitalism is the Solution

The vast majority of the hate mail we receive from the Moore worshippers are people from Europe who have been fooled by their idol into believing that the only option to the current disastrous US healthcare system is the European socialist model.  This is, of course, completely untrue.  Everyone knows that the old system of employer-provided insurance, in place wince WWII, does not work in today’s world and needs to be ended.  The question is, do we replace it with the socialist model, which is clearly just as bad in many respects and vastly worse in others?  The following article from Reason explains how we can end the ridiculous system we have now without adopting the socialist welfare disaster of Europe and Canada.

Unfortunately, the CED proposals go quickly off the rails when the group recommends that every household receive a fixed-dollar credit sufficient to purchase an approved low-priced quality health plan. This health insurance credit would not be means tested and would be financed by some kind of broadly based tax—perhaps a payroll, value-added or environmental tax. Such taxes, like Social Security and Medicare payroll taxes, are likely to be regressive, which means the poor will pay a larger percentage of their incomes than the rich. In fact, two-thirds of taxpayers paid more in social security and Medicare taxes than they did income taxes.

For example, today every wage-earning American pays a Medicare payroll tax of 2.9 percent. That tax is supposedly divided so that employees and employers each pay 1.45 percent. Of course, employers would give employees the other 1.45 percent if they were not paying the tax, so in reality the employees are paying the whole tax. The same thing goes for the Social Security Ponzi scheme.

The CED proposal is chiefly a ploy to get employers out from under the increasingly heavy burden of buying insurance for their employees. That’s a laudatory goal, but it shouldn’t be done by imposing yet another tax on employees. The good part of the CED proposal is that employees would purchase private health insurance in a competitive market. If households could find a policy for cheaper than the credit, they could pocket the extra money for themselves. The CED argues persuasively that this kind of competition would tend to keep health care costs down.

But why advocate a tax to pay for the credits? One advantage of such a health insurance credit is that it would avoid the administrative and enforcement costs of coercing people to buy insurance. Such enforcement has proved problematic in other insurance markets. For example, although auto insurance is mandatory, more than 14 percent of motorists are uninsured.

However, there is a better way to expand private health insurance and to obtain the benefits of competition as a way to keep medical spending down. First, retain the CED proposal that health insurance be mandatory. But, instead of a new tax, allow employers to hand over the money they currently spend on health insurance to their employees in the form of money wages. Then, in order to create a level playing field, expand the current tax exemption for employer-purchased health benefits to all individuals. Maintaining the tax exemption helps enforce the mandate because taxpayers will have to report annually how much they paid for their health insurance when they pay their taxes.

What about the poor Americans who do not make enough to afford medical insurance? Give them vouchers to buy private medical insurance and pay for the vouchers by abolishing Medicaid. In 2005, the Federal government and the states spent $316 billion on Medicaid to cover around 17 million households. That works out to about $18,500 per household per year. The annual premium for family coverage in 2007 averaged just over $12,000. Due to increased competition, average premiums for the minimum private plans will drop. This means that some money should be left over from Medicare to pay for the currently uninsured poor. There will be some administrative costs involved with determining voucher eligibility, but the health insurance vouchers themselves would essentially be self-enforcing. The experience of Switzerland, in which nearly one-third of the population receives subsidies to purchase private insurance, suggests that very few would fall through the new health insurance safety net.

God bless the free market.