Wednesday, October 7, 2009

Health Care Free Lunch

Conor Friederdorf asks "Can someone write an easy to understand blog post explaining to an ignorant non-wonk like me how you cover millions more people, avoid government rationing, and save all that money?" Well, I'll give it the old college try.

In terms of spending changes, the Baucus Bill mainly does two things:
  1. It spends money to help people buy insurance; or in the case of poor people who are currently uninsured, it insures them outright thorugh Medicaid.
  2. It rearranges the way the goverment currently spends money on health care, primarily Medicare and Medicaid, in ways that will reduce spending overall.
To some extent, the second helps pay for the first. But not entirely. To make up the difference, the bill raises revenue in a variety of ways. The biggest one is a tax on "Cadillac" insurance plans, to try to convince these consumers or insurers to find ways to keep their health care costs down. There's also some revenue that comes from taxes on employers who don't provide low-wage employees with insurance, and fines to individuals who don't buy insurance. Between these revenue provisions (plus a few other sources here and there) and the changes in health care spending, the government is spending more money, but it's also taking in more money too, and the new revenues (and spending cuts) outweigh the spending increases.

Note that we're talking about the government's balance sheet here, not America's overall health care spending. Whether or not that goes up or down is a different question. But the experience of Taiwan suggests that it's at least possible to expand coverage without spending more money. After all, the US spends more on health care than any other country, so if we can figure out how to spend that money more efficiently we ought to be able to cover everyone.

How'd I do?
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