The United States’ Covid-19 experience as a country provides yet another reason why it would benefit all Americans if there were a way of covering the 30 million to 35 million Americans who still lack medical insurance.
Without a system that provides health care for everyone there will continue to be instances where people come down with communicable diseases but they delay seeking medical care because they are not covered under any health-insurance plan and are concerned that they would not be able to afford to pay out-of-pocket for medical bills.
People in this category are likely to go untreated for a considerable period during which time they have the potential to spread whatever disease that they have through the wider community. That entails costs in further human suffering and also in terms of the monetary burdens for others who have no health insurance – but even for those who do have coverage.
After all, most insurance plans involve up-front costs, out-of-pocket payments generally called deductibles and then, after the deductible threshold, insureds are often obliged to pay part of the medical costs under a co-payment formula: usually an 80%-20% split between the insurance company and the insured person, respectively.
If we accept that in the 21st century it makes sense for everyone in the country to be covered under a health-insurance plan, then the next question is how should this be done.
Many US politicians have said that it should be simply by making Medicare, the existing national health insurance for those 65 and over, available to everyone – in their slogan, “Medicare for all.”
That sounds neat and tidy. But like many things that initially sound appealing, when considered in detail it leaves much to be desired. To begin with, the slogan neglects the supply side of the equation.
The demand side is almost certain to be there from the very beginning, if those 30 plus millions who have no health insurance are suddenly provided with coverage.
But unless the number of doctors, nurses and other health-care professionals is suddenly expanded, along with hospitals and clinics, the strain on existing health care facilities and professionals could be enormous. This in turn might result in a serious decline in the quality of health care across the board.
The answer to the challenge of sheer numbers of new insureds might be an entirely new system designed to care for citizens from birth to age 65 when Medicare becomes available to everyone.
There will be the need, as has been the case in the UK and South Korea as their national health insurance systems were developed, to increase the number of medical schools and other medical training institutions so that there will be sufficient numbers of doctors and other professional health care workers.
The costs will be enormous, but with adjustments to the tax system it can be affordable. One of the easiest means of raising the needed funds might be through the establishment of a national value-added-tax system.
A VAT is a regressive type of tax that hits working people the hardest, but at the same time it tends to be rather environmentally friendly because it discourages excessive consumption.
There are ways of making it fairer and one means for doing so might be to exempt those families earning less than US$50,000 per year from income taxes.
Aside from the introduction of a new VAT, there could be other means of raising funding for national health insurance. A slight percentage increase in Social Security taxes could be considered and a 10% reduction in defense spending could be another means of shifting government resources to medical care.
Even with a 10% decrease in annual defense spending, the US would still be spending more on defense than China, Russia, the UK, France and India combined.
The introduction of a new national health-insurance system in the United States does not mean that existing private health insurance and private hospitals must cease operating. On the contrary, just as is the case in South Korea and the UK, those wishing to continue to be insured in a private system and to use private medical care facilities should be able to do so.
But again as is the case in South Korea and the UK, everyone will be expected to pay the taxes required to support the new system.
If the new VAT were to be set at 10% initially and applied to automobile purchases, that alone might raise over $50 billion each year. And that is just one sector of the economy to which VAT would be applicable.
Aside from the VAT, a 1% increase in Social Security taxes would raise tens of billions in new funding. Fees charged to participants in the new health-care system could bring in billions more.
The funding provided would stimulate the economy as new hospitals and clinics would be built, along with new medical schools and other health-services training institutions.
Visa requirements could be eased to enable qualified foreign medical professionals to come to the US to work and teach in the American health system. Their incomes would be largely spent inside the US, adding to the economic opportunities for all Americans.
There are many reasons to support the introduction of universal health insurance in the US, and if it’s done logically there is nothing to fear and much to be gained.
Hank Morris is Seoul-based special adviser to Erudite Risk (Korea / Singapore / India). Email him at hank.morris@eruditerisk.com