Tuesday, October 18, 2005

Industry & Health Care Costs

Commenting on "the big squeeze" on American wages and benefits, and the possibility that the Delphi bankruptcy will trigger additional bankruptcies in the auto industry, Paul Krugman comments,
If we had a Canadian-style system - which is enthusiastically supported by the Canadian subsidiaries of U.S. auto companies - the big squeeze might be averted, at least for a while. One more reason to be angry with auto executives is that they never threw their support behind national health care in this country, even though such a system is clearly in their companies' interest.
Long-term interest, perhaps, but short-term? The money for a national health care system has to come from somewhere. Granted the Bush Administration believes that deficit spending provides a bottomless pit of cash for anything it wants but can't otherwise afford, but the Republicans are not the party to reform health care (save, perhaps, in the sense of the cliché, "Only Nixon could go to China.") And I don't think any prior administration would have dreamed that they could get away with creating a national health care program without first finding a source of revenue for that program.

Also, national health care would not emerge overnight. It isn't as if you would go to sleep on one night paying for your employer-sponsored health care, wake up the next morning paying for national health care, and never even notice. If a new payroll tax were created to pay for health care during the transition, employees who are already paying a share of their own health benefits would be justifiably aggrieved. A more complicated system of credits and deductions might avoid taxing those who already pay, but would probably take a huge bite out of the paychecks of the working poor. It's hard to imagine a politician who would want to fund health care through an undisguised payroll tax.

Another alternative would be a transitional corporate tax, meant to fund the transition and the initial period where the uninsured become insured, while a new payroll tax (and matching tax) is created to be phased in as employer and employee contributions to existing plans are phased out. The corporate tax should not be presumed to eventually go away, but would likely remain in effect to "make up for" employer contributions that need no longer be paid. Even with a dollar-for-dollar deduction, such that every cent spent on an existing private plan is credited against the transitional tax, some major employers would probably still see their expenses go up as the wages of their contract workers would trigger transitional taxes, and their non-unionized domestic suppliers would face the additional tax. Even if at the end of the day, the dust settles with a less costly, more stable national insurance plan, and a health tax burden significantly less than the present cost of private insurance, the major domestic auto makers (a) have a poor history of long-term thinking, and (b) could have difficulty financing the transition.

Granted, tax policy isn't my forté - is there something I'm missing which would allow the easy implementation of a national health care plan?

1 comment:

  1. Health care costs can be extremely high and I hope we can do something like a national health plan.


Note: Only a member of this blog may post a comment.