More Health Care Thoughts

This part two of a thought experiment about the US Health Insurance industry.

I am employed by a not-for-profit organization that provides medical and dental insurance to its employees. Employees are required to share in the cost of this program, and a variety of competitive options are provided. I opt for the so-called “80/20 plan,” in which essentially 80% of costs are covered following a $20 copay, subject to an annual deductible. I have approximately $50 withheld pre-tax from my paycheck every two weeks, for a cost to me of about $1,300. In addition, I have a Flexible Spending plan available to reimburse me for the things not covered by the plan, including vision care as well as the aforementioned copays and deductibles. For 2009, I am withholding $750 from my pay to co-insure myself for healthcare.

In all, my insurance will cost me over $2,000 this year. (Of course, my employer is also bearing a significant amount of the cost of my coverage, an amount unknown to me.) Let me reiterate – the amount of your copays and deductibles also comprise the cost of your health insurance. These are the conditions imposed by the insurance company to provide healthcare coverage. They won’t pay the bill until you pay these costs above and beyond your premiums.

Unfortunately for me, in addition to my normal checkups (physical, eye exam, two dental exams) I had one trip to the Emergency Room last winter, and I broke a tooth later in the year, which have added over $1,000 out of my own pocket to the total bill. But fortunately I am in generally good health, with no chronic issues to deal with.

The Federal Government will withhold about $5,600 in estimated income taxes from my paycheck this year. My actual final bill will likely be less than that, but for purposes of this discussion let’s use the higher number. My health insurance costs - not including the emergency situations - equal about 36 percent of my annual federal income tax bill. If the Federal Government became the sole provider of health insurance in this country, but the result was a 30% increase in my Federal income taxes – it would save me money.

Let me repeat that – I would be better off with a 30% tax increase it the tradeoff is that I have no medical bills to pay.

This is a very simplistic calculation, to be sure. For one thing, every employer is different in the amount that they ask employees to pay. Some people pay no premiums out of their own pockets, while others pay significantly higher amounts. But I have a competitive plan, and I earn more money than the average worker in this country. I also am not covering anybody else under my plan, unlike many who cover spouses and children. I suspect that most people pay more than 36% of their federal tax bill in health insurance costs.

It is for this reason that I don’t understand why a tax increase is anathema to so many. For most US citizens, publicly-provided health care coverage would put more money in their pockets. Quite the opposite to the message promoted by the conservatives, this would be an economic boon rather than a burden. Some people would have higher tax bills as a result, but those people would be the mega-rich of this country. I submit that adding a few hundred or a couple of thousand dollars to the pockets of the average American will result in greater economic stimulus than keeping it in the investment portfolios of our country’s wealthiest citizens. The middle class are far more likely to actually buy stuff with their extra cash.