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1. One follow-up point. We would probably also need to make sure that people with substantial non-wage income (interest, dividends, capital gains, rent) do not get a free ride for their health insurance. At the very least, they should be required to buy it for its full cost or something close to it. This would be similar to the rules starting to phase in this year that require upper income elderly people to pay more in premiums for the Part B portion of Medicare.

2. jd,
   Yes, I’m suggesting we need a 15% payroll tax to cover the 150-160 million people who currently get insurance through their employer plus the 47 million who are currently uninsured. I’m assuming that, to the extent, some of the people who are working for low wages would meet the eligibility criteria for Medicaid, they would either get their insurance through Medicaid or Medicaid money would help pay for their employer coverage. I further assume that the military personnel would continue to be covered by Tricare. I’m also assuming that out of pocket costs for deductibles and co-pays (including tiered drug co-pays) as well as some $68 billion of private payments for long term care remains unchanged.
   As for cost drivers, while I didn’t mention it in my post, I’ve spoken often before about the need for universal living wills and advance directives to reduce unwanted care at the end of life, electronic medical records to cut out duplicate testing and adverse drug interactions (especially in hospitals) and replacing the current jury based malpractice litigation system with health courts. Much more robust pricing and quality transparency tools would also be helpful in controlling costs.
   I also think if people clearly understood how much their health insurance was costing them (the payroll tax), there would be a greater interest in high deductible plans. I would prefer to see the base plan cover what the Federal Employee plan covers, but with a $5,000 per person deductible. Those with incomes below 3X the FPL could get a sliding scale subsidy to buy a separate policy to cover most of the first $5K per person of charges while higher income people could buy it if they want it but could also self-insure if they preferred to. That would further enhance cost consciousness among at least the upper half of the income distribution.
   But you’re the insurance expert, so I’m really more interested in what you think.

3. Barry,
   If I understand you, you are suggesting that without real reform of the cost drivers, the cost of covering everyone will push healthcare from 16% of GDP to 24%. My first response to that is revulsion, though I know full well that this is the path of least resistance to universal coverage and that it will eventually trigger reforms that get the total cost down.
   As for the mechanism for funding universal coverage, I’d like to know more about why you think the payroll tax would be 15%, when France and Germany are only slightly less than that and they spend vastly less on healthcare. Is it because the payroll tax you are proposing would not pay for Medicare and Medicaid, but only for those who are ineligible for these programs? If you can indicate a little more of how you get to this number I’d appreciate it (we’re all uber-wonks here).

4. I was actually surprised by the discussion. My impression was that most people are in favor of universal coverage and generally support community rating. The challenge, and this is where I think the debate has been weak so far, is finding a credible way to pay to cover the uninsured and improve the employer based system.
   The notion that we can free up huge resources by eliminating the private insurers and their administrative costs I think has been debunked on the earlier thread. I think the penalty for not acquiring insurance under the Massachusetts plan is pitiful, and California’s proposed alternative 4% payroll tax is woefully inadequate.
   Suppose we tried to reform the system along the following lines: (1) keep the current Medicare and Medicaid systems basically intact, (2) the magnitude of current insurance co-pays and deductibles remain about the same, (3) long term care remains a means tested benefit under Medicaid and covered, to a very limited extent, under Medicare, (4) employer provided insurance is replaced with a taxpayer funded premium support approach, (5) we provide taxpayer funded insurance to the 47 million people that don’t have coverage now, and (6) employees who lose their job, retire before becoming Medicare eligible, or have their hours reduced are also eligible for coverage evening if they are earning little or no income from wages.
   Setting aside the issue of how comprehensive any basic insurance package might be for a moment, I think it is absolutely essential that the funding mechanism be as visible and transparent as possible and that the broad middle class, as a group, pays to cover the broad middle class. Upper income people will continue to disproportionately pay for Medicaid and Medicare. I think the best funding mechanism would be a payroll tax, which is also used by Germany and France, both of which seem to get high marks for the overall quality and cost-effectiveness of their healthcare systems.
   Excluding potential administrative cost savings that might come from reform, which I think are modest at best (less than 0.3% of GDP), it looks like we would have to raise approximately 8.0% of GDP in revenue, or roundly $1 trillion, to finance the switch from employer coverage and cover the uninsured. Based on national income account data, wages (excluding benefits) plus proprietors’ income combined account for about 60% of GDP. If we apply the payroll tax to 90% of that amount, which is the historical target to which FICA taxes apply, we would need a payroll tax of approximately 15% to get the job done. The tax rate in France and Germany is 13% and 14%, respectively. I think the employee should pay it, but it should not count as either FICA or W-2 wages to which Social Security and income taxes would apply. This is to avoid placing a tax on a tax. Employers who currently provide health insurance pay, in aggregate, about 15% of payroll, so this approach would be a wash for employers as a group. I assume employers raise wages on average by the amount they were previously paying for health insurance. The minimum wage would also have to be raised by 15% to cover the tax, in all likelihood.
   If this is too much to swallow, my preferred backup alternative would be to cover part of the cost with a value added tax in the 5%-6% range which would not apply to necessities. It could raise, perhaps, 2% of GDP. At least it would capture payments from participants in the underground economy which a higher income tax would not.
   I would be interested in any comments from others.

5. Eric–Not a pure Canada style single payer PNHP advocate in the crowd–even though MOST Democrats as polled want that! That’s centrist for you

6. If the share of cost from high utilizers has been steady for 25 years, then they can’t be the “driver” of cost increases. Its not that the sick are that much sicker, its that the cost to serve everybody has gone up.

7. 1. given what that group wants, I am not sure “centrist” is the appropriate word. It also makes me wonder what “left” or “liberal” or “progressive” viewpoints are. Perhaps someone can enlighten me there.
   2. the group missed the recent long debate over administrative costs– a discussion that THCB readers have really got a hold of— but I think everyone is now disabused of the notion, as said in the attached discussion, that admin savings could be up to 30% of total costs.
   3. interestingly, the VA and Military system was brought up as ‘good models’– yet nowhere was a discussion of medical liability included– even though doctors in those environments effectively function under a less punitive medical liability system (and no direct responsibility for ‘paying’ liability premiums) than nearly all of America. But this was just an oversight? Of course not, since substantive medical liability reform is absent from all ‘universal’ ‘single payer’ ‘national’ health plans.
   4. there is no plan offered (frankly by either ‘side’ of the healthcare debate) of how to deal with what we know is the real problem with healthcare costs– (and was just published in the most recent health affairs, and has changed little over the last 25 years)– 1% of the population account for 24% of costs and just 10% of the population account for over 62% of costs. Forget the ‘uninsured’– it is a canard when it comes to health care costs— high utilizers- rich, poor, insured, uninsured, are the drivers of costs.