The “Fiscal Cliff” and Health Care

Starting on December 31, 2012, a series of changes will start happening in the Federal budget. The effect of government (especially Federal) spending on the national economy goes by the adjective “fiscal” (“of or relating to government expenditures, revenues, and debt”.)  Federal Reserve actions are termed “monetary”, as it is the controller of our money supply.

The combined effect of the changes will produce such an abrupt decrease in Federal spending, and increase in tax collections, that the event has been termed a “fiscal cliff”. Withdrawing money from the economy via taxes and reduced spending. The net effect on the government’s budget will be to reduce the deficit of revenues over spending – the US gov’t will be going into debt more slowly then it is now.

The net effect on the country as a whole is less easily described. Individual actions are fairly easy to state. For example, doctors will start getting 20% less from Medicare for individual services provided. Taxpayers (“families”) will have less money to spend, as income tax rates will go up, as well as Social Security (“payroll taxes”). Defense spending will decrease, with unknown effects (smaller numbers in the services? fewer weapons procurements? who knows?) Wealthier people will see even greater confiscation: Obamacare will tack on an additional surtax of 3.8% on income over $250,000, and the sale of stocks and real estate will be taxed 33% higher – 20% instead of 15%. That’s one excuse given for why the stock market dropped after Obama’s re-election – presumably people who may have been planning on selling stock after the first of the year, rushed to do it before the new rates went into effect. Other elements include arcane changes to the tax code (adjustments to the Alternative Minimum Tax) and cessation of extended unemployment benefits for upwards of 2,000,000 people.

Some politicians find themselves in a logical jam, particularly Republicans. In the recent past, they have decried to size of that Federal deficit, saying it puts on on the road to national bankruptcy – “We’ll become another Greece!” Looking at the website of one of the leading Republican think tanks, the Heritage Foundation, a sense of schizophrenia prevails. On the one hand, there are dire warnings of the unsustainable course we are on, should we not reduce the federal deficit, and soon. On the other hand, there is a great hue and cry over the dire consequences of doing exactly that – reducing the federal deficit, and soon, through the not-so-gentle auspices of the fiscal cliff.

Of course, the issue is not whether we should bring spending more in line with revenues, but how. And raising taxes (capital gains, Obamacare surtax, income) on the wealthy, according to the right side of the political spectrum in this country, is just as bad as continuing to have massive deficits. They are looking for a “third way”.

And they run into the same roadblock every time: health care spending. With or without the Affordable Care Act, Medicare and Medicaid spending have been rising relentless for 45 years at a rate faster than overall government spending. Anywhere you turn, you end up having to contradict yourself: look more carefully at spending in the last 6-12 months of life? Nope, that’s “death panels”. Attempt to reduce the rate of rise by finding and encouraging best practices? Nope, that’s a government take over of health care. Find more money through increased taxes? Uh, no, that retards job creation. Give Medicare recipients a fixed dollar amount, and have them spend it on private health insurance? Get plastered with a “voucher” slur. Keep physician spending within the limits already set by congress at the end of the last century? Really, do you want to tick off the people who are giving you dangerous drugs or carving up your insides? Let states decide how much to spend on Medicaid? And see the poor flood Emergency rooms (because of another federal law), get care for free, causing hospitals to jack up their rates for the rest of us?

Reminds me of one of my favorite Neil Young songs: “The chains are locked
and tied across the door”. (“Helpless”).

There really is only one solution, and it may happen within this decade, or all the political compromises we’ll see in the next six months will eventually fail. Whoever is elected in 2016 or 2020 in Congress and the White House may find themselves seriously discussing nationalizing the health care delivery and financing system. It’s really not such a radical idea. At this point in time more than half of all health care spending is funded from tax sources already. Medicare, Medicaid, federal, state, local employees and retirees … among them, over 50¢ of every $ spent on health care will soon out of the public trough anyway.

In addition to direct spending on care and insurance, there is a hidden public cost to private insurance provided by employers. All dollars spent on health care and insurance for employees are excluded from federal taxes. And, starting in 2014, not only will employers and the richest families begin paying taxes (as defined by John Roberts’ Supreme Court), but additional dollars will be spent on subsidies for health insurance for those of us who don’t get it provided already by the government or a private employer, and have a family income of up to 400% of the poverty level – a number which may include nearly 20% of the population not already covered by government subsidies for care.

Probably 2/3rds of all care is being paid already by all the public sources of payment and subsidy for health care and insurance.

Whether by design, or just be sheer necessity, eventually, partisans on both sides of the aisle will see that, if they want to preserve their ability to get care at a reasonable cost, they’ll have to start controlling the price of drugs purchased with those tax dollars, insist on specific finance means based on population instead of piece-work, limit what types of care can be provided to only those which actually make a difference on one’s health. I still have hope that, sometime during my lifetime, a leader will have the courage to point all this out, and stake her political legacy on making it happen. She’s already tried once before, and our only reward was the Newt Gingrich Congress of 1994, and the downward slide which still hasn’t ended: repeal of Glass-Steagle, stolen election in 2000, tax cuts in the face of a recession and wars of necessity (2001) and choice (2003), housing bubble (2006) and the subsequent inevitable financial meltdown which scuppered any hope of a swift improvement in either our political or economic dilemmas.

Hilary 2016 – Why not?