A Better Way to Fix Health Care

By Speaker Paul Ryan
abetterway.speaker.gov, June 22, 2016

Our Principle

In a confident America, everyone has access to quality, affordable health care.

Our Challenge

Obamacare is making things worse by the day. It drives up premiums and deductible costs for individuals, families, and businesses. It forces people off the plans they like. It fuels waste, fraud, and abuse. And it cannot be fixed. Its knot of regulations, taxes, and mandates cannot be untangled. Obamacare must be fully repealed so we can start over and take a new approach.

Our Vision

Over the years, House Republicans have put forward hundreds of ideas to improve health care, ranging from targeted proposals to full alternatives to Obamacare. This is the first time we are unifying these efforts into a single health care plan.

This isn’t a return to the pre-Obamacare status quo. And it isn’t just an attempt to replace Obamacare and leave it at that. This is a new approach. It’s a step-by-step plan to give every American access to quality, affordable health care.

Our plan recognizes that people deserve more patient-centered care, not more bureaucracy. That means more choices, not more mandates. You should have the freedom and the flexibility to choose the care that’s best for you. Insurers should compete for your business, and treat you fairly—no matter what. You and your family should have access to the best life-saving treatments in the world. And as you get older, Medicare should give you more choices too. At every step, you should be in the driver’s seat. This is a better way.

A Better Way to Fix Health Care – Snapshot (3 pages):
http://abetterway.speaker.gov/_assets/pdf/ABetterWay-HealthCare-Snapshot.pdf

A Better Way: Health Care – Policy Paper (37 pages):
http://abetterway.speaker.gov/_assets/pdf/ABetterWay-HealthCare-PolicyPaper.pdf

***

Comment:

By Don McCanne, M.D.

As their vision states, the House Republicans have organized their previous concepts on health care reform into a single policy paper. It is heavy on rhetoric that is deceptive and bordering on dishonesty in that their proposals are cloaked in language suggesting that these are beneficial policies when many of them are actually detrimental.

The report includes a rehash of familiar proposals: health savings accounts, selling insurance across state lines, association health plans, medical liability, Medicaid block grants, and converting Medicare to a premium support program. There is really not much new here.

But what is missing are the details that would allow for an objective analysis of the impact were these polices converted into legislation. However, it is easy to translate their rhetoric into what they are really proposing: they would reduce the role of the federal government in financing health care, shifting responsibilities to the states and especially to the the markets, while sharply increasing the financial burden on patients.  Since more of the responsibility for paying for health care would shift to the individual, it is likely that the greatest impact would be to significantly impair access to health care due to financial barriers, especially the lack of cash on hand.

Just one example of their rhetoric:

“Currently under Medicare, for example, beneficiaries and physicians (and other providers) are not allowed to agree to a different treatment regimen for a Medicare covered service. Our plan would develop a personalized care demonstration program that would give beneficiaries and health care professionals the ability to voluntarily enter into an arrangement for items and services outside of the Medicare system. While participating in this voluntary demonstration project, Medicare beneficiaries would still retain their Medicare benefits. With the proper oversight, this is a common-sense approach to giving our seniors the opportunity to make medical financing decisions with their physicians without direct interference from Washington. These freedoms can also help to ensure that Medicare beneficiaries maintain the access to health care professionals they deserve by increasing flexibility and thus the number of physicians who participate in Medicare.”

Sounds great – freedom to purchase the care you want instead of that dictated by the federal government. No, that isn’t the point. The policy they advocate for here is to allow physicians to charge Medicare patients full fees for authorized services. That currently is not allowed unless a physician totally opts out of the Medicare program – not a practical consideration for most physicians. Why do they have this rule? Without it a two-tiered Medicare program would be created – a concierge tier for the wealthy, and an underfunded welfare program for the rest of us.

But how about a little perspective here? The Republicans propose repealing the Affordable Care Act and then replacing it with slight variants of many of the policies contained in the act. They leave in place most of the health care financing infrastructure: Medicare, Medicaid, employer-sponsored plans, individual plans with public and private exchanges, and private payment. They merely tweak the existing system. The tweaks cause private insurance to become even less effective in providing financial security; the profound administrative waste is perpetuated, and oversight of the outrageous pricing in health care is reduced.

We’ve already had enough of this. It’s time – past time – to demand reform that works, that would make health care affordable for everyone who needs it. It’s time for a single payer national health program – an improved Medicare for all.

PNHP note: Physicians for a National Health Program is a nonpartisan educational organization. It neither supports nor opposes any candidate for public office.

A Better Way to Fix Health Care

By Speaker Paul Ryan
abetterway.speaker.gov, June 22, 2016

Our Principle

In a confident America, everyone has access to quality, affordable health care.

Our Challenge

Obamacare is making things worse by the day. It drives up premiums and deductible costs for individuals, families, and businesses. It forces people off the plans they like. It fuels waste, fraud, and abuse. And it cannot be fixed. Its knot of regulations, taxes, and mandates cannot be untangled. Obamacare must be fully repealed so we can start over and take a new approach.

Our Vision

Over the years, House Republicans have put forward hundreds of ideas to improve health care, ranging from targeted proposals to full alternatives to Obamacare. This is the first time we are unifying these efforts into a single health care plan.

This isn’t a return to the pre-Obamacare status quo. And it isn’t just an attempt to replace Obamacare and leave it at that. This is a new approach. It’s a step-by-step plan to give every American access to quality, affordable health care.

Our plan recognizes that people deserve more patient-centered care, not more bureaucracy. That means more choices, not more mandates. You should have the freedom and the flexibility to choose the care that’s best for you. Insurers should compete for your business, and treat you fairly—no matter what. You and your family should have access to the best life-saving treatments in the world. And as you get older, Medicare should give you more choices too. At every step, you should be in the driver’s seat. This is a better way.

A Better Way to Fix Health Care – Snapshot (3 pages):
http://abetterway.speaker.gov/_assets/pdf/ABetterWay-HealthCare-Snapshot.pdf

A Better Way: Health Care – Policy Paper (37 pages):
http://abetterway.speaker.gov/_assets/pdf/ABetterWay-HealthCare-PolicyPaper.pdf

As their vision states, the House Republicans have organized their previous concepts on health care reform into a single policy paper. It is heavy on rhetoric that is deceptive and bordering on dishonesty in that their proposals are cloaked in language suggesting that these are beneficial policies when many of them are actually detrimental.

The report includes a rehash of familiar proposals: health savings accounts, selling insurance across state lines, association health plans, medical liability, Medicaid block grants, and converting Medicare to a premium support program. There is really not much new here.

But what is missing are the details that would allow for an objective analysis of the impact were these polices converted into legislation. However, it is easy to translate their rhetoric into what they are really proposing: they would reduce the role of the federal government in financing health care, shifting responsibilities to the states and especially to the the markets, while sharply increasing the financial burden on patients.  Since more of the responsibility for paying for health care would shift to the individual, it is likely that the greatest impact would be to significantly impair access to health care due to financial barriers, especially the lack of cash on hand.

Just one example of their rhetoric:

“Currently under Medicare, for example, beneficiaries and physicians (and other providers) are not allowed to agree to a different treatment regimen for a Medicare covered service. Our plan would develop a personalized care demonstration program that would give beneficiaries and health care professionals the ability to voluntarily enter into an arrangement for items and services outside of the Medicare system. While participating in this voluntary demonstration project, Medicare beneficiaries would still retain their Medicare benefits. With the proper oversight, this is a common-sense approach to giving our seniors the opportunity to make medical financing decisions with their physicians without direct interference from Washington. These freedoms can also help to ensure that Medicare beneficiaries maintain the access to health care professionals they deserve by increasing flexibility and thus the number of physicians who participate in Medicare.”

Sounds great – freedom to purchase the care you want instead of that dictated by the federal government. No, that isn’t the point. The policy they advocate for here is to allow physicians to charge Medicare patients full fees for authorized services. That currently is not allowed unless a physician totally opts out of the Medicare program – not a practical consideration for most physicians. Why do they have this rule? Without it a two-tiered Medicare program would be created – a concierge tier for the wealthy, and an underfunded welfare program for the rest of us.

But how about a little perspective here? The Republicans propose repealing the Affordable Care Act and then replacing it with slight variants of many of the policies contained in the act. They leave in place most of the health care financing infrastructure: Medicare, Medicaid, employer-sponsored plans, individual plans with public and private exchanges, and private payment. They merely tweak the existing system. The tweaks cause private insurance to become even less effective in providing financial security; the profound administrative waste is perpetuated, and oversight of the outrageous pricing in health care is reduced.

We’ve already had enough of this. It’s time – past time – to demand reform that works, that would make health care affordable for everyone who needs it. It’s time for a single payer national health program – an improved Medicare for all.

PNHP note: Physicians for a National Health Program is a nonpartisan educational organization. It neither supports nor opposes any candidate for public office.

In U.S., Healthcare Insecurity at Record Low

By Jeffrey M. Jones and Nader Nekvasil
Gallup, June 20, 2016

Fewer Americans reported not having enough money in the past 12 months to pay for necessary healthcare and/or medicines for themselves or their families than at any point since Gallup and Healthways began tracking this metric in 2008. From 2008 through 2013, the percentage of Americans who experienced difficulty in the past 12 months affording healthcare and medicine was fairly steady, hovering near the average of 18.7%. Since then, the average has been 16.4%, including the new quarterly low of 15.5% in the most recent quarter.

The increase in the percentage of Americans having health insurance is likely a key reason why fewer Americans are struggling to pay for healthcare. Generally, those without health insurance are at least three times more likely to report not having enough money for healthcare/medicine than their counterparts with health insurance. In the most recent quarter, 41.8% of the uninsured said they had struggled to pay for healthcare costs, compared with 12.3% of those with insurance.

Bottom Line

Although roughly one in six Americans report having times in the past year when they were unable to afford the healthcare or medicine they needed, this is down significantly from just three years ago. The expansion of health insurance coverage to millions more Americans under the Affordable Care Act is likely a major factor in the decline of healthcare insecurity, demonstrating a concrete benefit of the law.

At the same time, there are growing concerns that health insurance costs are set to rise in many parts of the country, as insurers and states adjust to the new healthcare market. These increases would mostly affect Americans who do not qualify for a health insurance subsidy under the Affordable Care Act.

http://www.gallup.com/poll/192914/healthcare-insecurity-record-low.aspx

***

Comment:

By Don McCanne, M.D.

The headlines reporting the results of this Gallup survey are celebrating the decline in health care insecurity (e.g., “Fewer Americans Are Having Trouble Paying Health Care Bills, Gallup Finds” – Kaiser Health News). Although any improvement is always good news, a 17 percent decline in health care insecurity is not much to celebrate (declining from 18.7% to 15.5%). Filling the glass less than one-fifth full is disappointing when we could have had a full glass.

The graph in the article shows a very modest decline, but even it is deceptive since it is truncated. The bottom of the graph is cut off at 10% and the top at 24%, but imagine showing the range at 0% to 100%. The curve would look quite flat, demonstrating visually how unimpressive the gain is.

Although it is shameful that 41.8% of the uninsured are struggling with medical bills, 12.3% of those who are insured still face health care insecurity, and many of the insured who are not have simply been fortunate enough to not require a significant amount of health care. So having insurance is not working well for many of those who do need health care.

The health care insecurity described refers only to medical bills; it does not refer to other costs of illness such as lost income. But a well designed single payer system with first dollar coverage for all essential health care services could virtually eliminate medical bills (though a person might still be responsible for charges for services and products that might not be appropriate for a taxpayer financed system). Removing financial barriers is a crucial step toward improving health care access.

Let’s enact single payer. Then we can celebrate.

In U.S., Healthcare Insecurity at Record Low

By Jeffrey M. Jones and Nader Nekvasil
Gallup, June 20, 2016

Fewer Americans reported not having enough money in the past 12 months to pay for necessary healthcare and/or medicines for themselves or their families than at any point since Gallup and Healthways began tracking this metric in 2008. From 2008 through 2013, the percentage of Americans who experienced difficulty in the past 12 months affording healthcare and medicine was fairly steady, hovering near the average of 18.7%. Since then, the average has been 16.4%, including the new quarterly low of 15.5% in the most recent quarter.

The increase in the percentage of Americans having health insurance is likely a key reason why fewer Americans are struggling to pay for healthcare. Generally, those without health insurance are at least three times more likely to report not having enough money for healthcare/medicine than their counterparts with health insurance. In the most recent quarter, 41.8% of the uninsured said they had struggled to pay for healthcare costs, compared with 12.3% of those with insurance.

Bottom Line

Although roughly one in six Americans report having times in the past year when they were unable to afford the healthcare or medicine they needed, this is down significantly from just three years ago. The expansion of health insurance coverage to millions more Americans under the Affordable Care Act is likely a major factor in the decline of healthcare insecurity, demonstrating a concrete benefit of the law.

At the same time, there are growing concerns that health insurance costs are set to rise in many parts of the country, as insurers and states adjust to the new healthcare market. These increases would mostly affect Americans who do not qualify for a health insurance subsidy under the Affordable Care Act.

http://www.gallup.com/poll/192914/healthcare-insecurity-record-low.aspx

The headlines reporting the results of this Gallup survey are celebrating the decline in health care insecurity (e.g., “Fewer Americans Are Having Trouble Paying Health Care Bills, Gallup Finds” – Kaiser Health News). Although any improvement is always good news, a 17 percent decline in health care insecurity is not much to celebrate (declining from 18.7% to 15.5%). Filling the glass less than one-fifth full is disappointing when we could have had a full glass.

The graph in the article shows a very modest decline, but even it is deceptive since it is truncated. The bottom of the graph is cut off at 10% and the top at 24%, but imagine showing the range at 0% to 100%. The curve would look quite flat, demonstrating visually how unimpressive the gain is.

Although it is shameful that 41.8% of the uninsured are struggling with medical bills, 12.3% of those who are insured still face health care insecurity, and many of the insured who are not have simply been fortunate enough to not require a significant amount of health care. So having insurance is not working well for many of those who do need health care.

The health care insecurity described refers only to medical bills; it does not refer to other costs of illness such as lost income. But a well designed single payer system with first dollar coverage for all essential health care services could virtually eliminate medical bills (though a person might still be responsible for charges for services and products that might not be appropriate for a taxpayer financed system). Removing financial barriers is a crucial step toward improving health care access.

Let’s enact single payer. Then we can celebrate.

NBER Working Paper 22353: Insurance and the High Prices of Pharmaceuticals

By David Besanko, David Dranove, Craig Garthwaite
National Bureau of Economic Research, June 2016

Abstract

We present a model in which prospective patients are liquidity constrained, and thus health insurance allows patients access to treatments and services that they otherwise would have been unable to afford. Consistent with large expansions of insurance in the U.S. (e.g., the Affordable Care Act), we assume that policies expand the set of services that must be covered by insurance. We show that the profit-maximizing price for an innovative treatment is greater in the presence of health insurance than it would be for an uninsured population. We also show that consumer surplus is less than it would be if the innovation was not covered. These results show that even in the absence of moral hazard, there are channels through which insurance can negatively affect consumer welfare. Our model also provides an economic rationale for the claim that pharmaceutical firms set prices that exceed the value their products create. We empirically examine our model’s predictions by studying the pricing of oncology drugs following the 2003 passage of Medicare Part D. Prior to 2003, drugs covered under Medicare Part B had higher prices than those that would eventually be covered under Part D. In general, the trends in pricing across these categories were similar. However, after 2003 there was a far greater increase in prices for products covered under Part D, and as result, products covered by both programs were sold at similar prices. In addition, these prices were quite high compared to the value created by the products – suggesting that the forced bundle of Part D might have allowed firms to capture more value than their products created.

From the Introduction

While our model is too stylized to offer precise numerical predictions, a canonical example that broadly fits real world data confirms some of the model’s surprising implications. First, we show that the profit- maximizing price for products is far greater in the presence of health insurance than it would be for an uninsured population, and consumer surplus is lower. The decrease in consumer surplus is quite large and exceeds the consumption smoothing benefits of health insurance for these products. We further show that this negative effect on consumer welfare grows as the number of innovative products increases. In fact, as the number of innovative products covered by insurance increases, the high prices they charge for their products eventually cause some consumers to not purchase insurance, resulting in a decrease in total surplus. We note that these results do not rely on moral hazard in that it exists even when customers never buy a product at a price that exceeds its value. Therefore, these results show that even in a situation where insurers could eliminate moral hazard (either through well designed cost sharing or effective managed care organizations) there are still other channels through which insurance can reduce welfare.

We note that the ability of firms to capture more value than they create solely results from regulations requiring an insurance bundle and that without these regulations, even in the presence of moral hazard, a monopolist selling an innovative product would be constrained by the effect that its price would have on insurance premiums.

From the Conclusions

While health insurance bears many similarities to more traditional financial insurance products, it also conveys the important benefit of breaking the liquidity constraint that many consumers face when attempting to purchase costly but valuable medical goods and services, including high priced pharmaceutical treatments. Previous work has asserted that this increase in access represents a benefit for consumers. However, our results, which endogenize the prices charged by the monopoly manufacturers of high value products, demonstrate that consumers may actually enjoy less consumer surplus, even in the absence of moral hazard. This occurs because insurance allows firms to more fully price out the expected benefits that their drugs generate for consumers, charging prices that may be far higher than what they would select if patients had to pay the entire price of their drugs out of pocket. This not only reduces consumer surplus, it may also reduce total surplus if some consumers are liquidity constrained from purchasing insurance. Thus, regulations requiring insurers to provide coverage for all new high-value products, such as the minimum insurance definition of the ACA, can decrease consumer surplus and, potentially, decrease total surplus.

While there may be worries that attempts at price controls in pharmaceuticals will be welfare reducing through reduced innovation, our results suggest that some existing regulations may provide incentives for innovation that are themselves not welfare maximizing because they are based on prices that exceed value.

http://www.nber.org/papers/w22353

***

Comment:

By Don McCanne, M.D.

Although this paper is quite technical, the conclusions are straightforward. Health insurance makes expensive products and services affordable for patients and thus they will use them – a desirable policy outcome since patients will then receive the care they should have. But beyond that, by bundling services and products into the same insurance package, it allows monopoly manufacturers of high value products, such as expensive pharmaceuticals, to charge prices that exceed the value their products – an undesirable policy outcome.

The authors indicate that the mandate to include certain benefits in insurance products, such as the essential health benefits required by the Affordable Care Act, allows the firms to capture more value than their products created (i.e., charge prices greater than the value of the product).

Those preferring market solutions might suggest that specific mandated insurance benefits be eliminated thus creating a greater sensitivity to high prices. But since far too many patients do not have enough liquid assets to pay these high prices (they are “liquidity constrained”), they would have to do without beneficial health care services and products that are truly unaffordable in the absence of insurance. This is yet one more example of why the tradeoffs in depending on a market of insurance plans can lead to excessive prices and financial barriers to care.

A single payer system does not depend on markets to set prices and make determinations on coverage. Rather they include all essential services and products and use government-administered negotiated pricing to be sure that prices do not exceed value. Patients get the care they need without an excess drain on our collective funds.

NBER Working Paper 22353: Insurance and the High Prices of Pharmaceuticals

By David Besanko, David Dranove, Craig Garthwaite
National Bureau of Economic Research, June 2016

Abstract

We present a model in which prospective patients are liquidity constrained, and thus health insurance allows patients access to treatments and services that they otherwise would have been unable to afford. Consistent with large expansions of insurance in the U.S. (e.g., the Affordable Care Act), we assume that policies expand the set of services that must be covered by insurance. We show that the profit-maximizing price for an innovative treatment is greater in the presence of health insurance than it would be for an uninsured population. We also show that consumer surplus is less than it would be if the innovation was not covered. These results show that even in the absence of moral hazard, there are channels through which insurance can negatively affect consumer welfare. Our model also provides an economic rationale for the claim that pharmaceutical firms set prices that exceed the value their products create. We empirically examine our model’s predictions by studying the pricing of oncology drugs following the 2003 passage of Medicare Part D. Prior to 2003, drugs covered under Medicare Part B had higher prices than those that would eventually be covered under Part D. In general, the trends in pricing across these categories were similar. However, after 2003 there was a far greater increase in prices for products covered under Part D, and as result, products covered by both programs were sold at similar prices. In addition, these prices were quite high compared to the value created by the products – suggesting that the forced bundle of Part D might have allowed firms to capture more value than their products created.

From the Introduction

While our model is too stylized to offer precise numerical predictions, a canonical example that broadly fits real world data confirms some of the model’s surprising implications. First, we show that the profit- maximizing price for products is far greater in the presence of health insurance than it would be for an uninsured population, and consumer surplus is lower. The decrease in consumer surplus is quite large and exceeds the consumption smoothing benefits of health insurance for these products. We further show that this negative effect on consumer welfare grows as the number of innovative products increases. In fact, as the number of innovative products covered by insurance increases, the high prices they charge for their products eventually cause some consumers to not purchase insurance, resulting in a decrease in total surplus. We note that these results do not rely on moral hazard in that it exists even when customers never buy a product at a price that exceeds its value. Therefore, these results show that even in a situation where insurers could eliminate moral hazard (either through well designed cost sharing or effective managed care organizations) there are still other channels through which insurance can reduce welfare.

We note that the ability of firms to capture more value than they create solely results from regulations requiring an insurance bundle and that without these regulations, even in the presence of moral hazard, a monopolist selling an innovative product would be constrained by the effect that its price would have on insurance premiums.

From the Conclusions

While health insurance bears many similarities to more traditional financial insurance products, it also conveys the important benefit of breaking the liquidity constraint that many consumers face when attempting to purchase costly but valuable medical goods and services, including high priced pharmaceutical treatments. Previous work has asserted that this increase in access represents a benefit for consumers. However, our results, which endogenize the prices charged by the monopoly manufacturers of high value products, demonstrate that consumers may actually enjoy less consumer surplus, even in the absence of moral hazard. This occurs because insurance allows firms to more fully price out the expected benefits that their drugs generate for consumers, charging prices that may be far higher than what they would select if patients had to pay the entire price of their drugs out of pocket. This not only reduces consumer surplus, it may also reduce total surplus if some consumers are liquidity constrained from purchasing insurance. Thus, regulations requiring insurers to provide coverage for all new high-value products, such as the minimum insurance definition of the ACA, can decrease consumer surplus and, potentially, decrease total surplus.

While there may be worries that attempts at price controls in pharmaceuticals will be welfare reducing through reduced innovation, our results suggest that some existing regulations may provide incentives for innovation that are themselves not welfare maximizing because they are based on prices that exceed value.

http://www.nber.org/papers/w22353

Although this paper is quite technical, the conclusions are straightforward. Health insurance makes expensive products and services affordable for patients and thus they will use them – a desirable policy outcome since patients will then receive the care they should have. But beyond that, by bundling services and products into the same insurance package, it allows monopoly manufacturers of high value products, such as expensive pharmaceuticals, to charge prices that exceed the value their products – an undesirable policy outcome.

The authors indicate that the mandate to include certain benefits in insurance products, such as the essential health benefits required by the Affordable Care Act, allows the firms to capture more value than their products created (i.e., charge prices greater than the value of the product).

Those preferring market solutions might suggest that specific mandated insurance benefits be eliminated thus creating a greater sensitivity to high prices. But since far too many patients do not have enough liquid assets to pay these high prices (they are “liquidity constrained”), they would have to do without beneficial health care services and products that are truly unaffordable in the absence of insurance. This is yet one more example of why the tradeoffs in depending on a market of insurance plans can lead to excessive prices and financial barriers to care.

A single payer system does not depend on markets to set prices and make determinations on coverage. Rather they include all essential services and products and use government-administered negotiated pricing to be sure that prices do not exceed value. Patients get the care they need without an excess drain on our collective funds.

Progressive redistribution without guilt

By Josh Bivens
Economic Policy Institute, June 9, 2016

What this report finds:

Boosting income growth for the bottom 90 percent requires a policy agenda that explicitly aims to halt or reverse the rise in inequality in the United States in recent decades. The economic evidence shows no generalizable relationship between rising inequality and faster growth. This is important good news. It means that an agenda based on progressive redistribution can unambiguously raise living standards for the bottom 90 percent and even likely be better for overall growth than the agenda promoted by those who are opposed to strong efforts to check rising inequality and instead want to focus solely on spurring overall growth.

Why this matters:

The lack of a general relationship between inequality and growth means that specifics matter in policy debates. And the specifics of the modern “growth only” agenda will fail. Policies such as cutting top tax rates, deregulating industries, and signing more trade agreements will both fail to appreciably boost growth rates and continue to send a disproportionate share of income gains to the top 10 and 1 percents. The “growth only” agenda has already been tried, and the results have been slower overall growth and sluggish income gains for the vast majority in recent decades.

How we can fix the problem:

Income redistribution over the last few decades has been a zero-sum process, with gains at the top essentially coming straight out of the pockets of the bottom 90 percent of Americans. This zero-sum dynamic means that intelligent policies—including but going way beyond smarter and fairer taxing and spending—can convert these lost potential gains for the bottom and middle into actual income increases without harming overall economic growth. We should:

*  Use the levers of macroeconomic policy (monetary, fiscal, and exchange-rate policy) to target genuine full employment.

*  Make investments that markets are not making—in early childhood education, infrastructure, school construction, energy efficiency, and public health care.

*  Strengthen antitrust regulations and look for other opportunities to introduce competition to private markets, such as public options for health insurance and retirement savings.

*  Reregulate many activities of the financial sector to squeeze out the activities that don’t enhance productivity or create efficiency but simply enrich well-placed actors within finance. A financial transactions tax is the clearest example of a policy that can stop this income skimming.

*  Enact climate-change mitigation measures—realizing that policies beyond simply increasing the market price of greenhouse gas emissions can play large and useful roles.

*  Strengthen regulations and institutions that help shift bargaining leverage from capital-owners and corporate managers to low- and middle-income workers. Key examples include higher minimum wages and labor law reform that allows willing workers to join unions and bargain collectively.

http://www.epi.org/publication/progressive-redistribution-without-guilt-using-policy-to-shift-economic-power-and-make-u-s-incomes-grow-fairer-and-faster/

***

Comment:

By Don McCanne, M.D.

Health care costs for the typical working family of four now average over $25,000 (2016 Milliman Medical Index). The only way low- and middle-income individuals and families can afford health care is through progressive redistribution. How are we doing?

With Medicaid we are doing quite well. The majority of lower-income individuals in states that participate in the ACA Medicaid expansion have their health care paid for through taxes, especially progressive income taxes. Wealthier individuals pay a higher percentage of income in taxes than do lower income individuals, and the lowest income individuals pay no income taxes at all. That certainly represents progressive redistribution as far as low-income individuals are concerned, though not for those with average incomes.

Medicare is funded primarily by general revenues which tend to be progressive, and by payroll taxes which tend to be proportional to income and thus not as progressive as income taxes since the rates do not increase with income. The exception is that individuals with incomes over $200,000 do pay an additional 0.9% Medicare tax on wages, making it more progressive than it had been before ACA. However, most of the income of the wealthy is not from salaries but rather from tax-advantaged sources, thus the impact is not as great on them as it otherwise would be.

Private plans purchased through the ACA exchanges by lower-income individuals are eligible for subsidies and credits indexed to income and thus are progressively funded for this sector. But middle- and upper-middle-income individuals do not receive these subsidies and thus bear a disproportionate share of our collective (pooled) health care spending (disproportionate as a percentage of income). The latter also is true for those purchasing individual plans outside of the exchanges. For them, funding is regressive since the percent of income paid for heath care decreases as income increases.

By far the largest source of health insurance is through employer-sponsored plans. Almost all economists agree that these are paid for by the employee through forgone wage increases (certainly a contributing cause to flat wages of the last couple of decades). This funding is quite regressive since, as income increases, the percentage of wages devoted to health insurance premiums decreases. Further, premiums are subsidized by tax expenditures (the deductibility of premiums for employer-sponsored plans) which increase as the individual’s income increases. High-income individuals receive very generous government subsidies for their health insurance plans whereas lower-income individuals may receive little or none at all. Thus health financing for the majority of us is quite regressive.

The article by Josh Bivens is quite long but well worth reading if you want to understand policies that will shift us to progressive redistribution without having to feel guilt. The economic improvement for the great majority of us, creating a more robust economy, is well worth the trade off of expecting the wealthy to accept more progressive redistribution, which would certainly never negatively impact their very comfortable or even indulgent lifestyles.

Health care? Based on the examples above, we can certainly adopt policies that would significantly improve progressive redistribution so that health care is affordable for everyone. That is exactly what a well-designed single payer system does. No guilt, just ghastly politics.