Health plan conceals huge tax increaseSen. Pete Domenici...

the Forum

August 19, 1994

Health plan conceals huge tax increase

Sen. Pete Domenici, R-N.M., is one of the few with the courage and presence of mind to expose the president's health care plan for the gigantic snow job it really is.

Here are some facts gleaned from an article in the Wall Street Journal written by Martin Feldstein, former chairman of the President's Council of Economic Advisers. The figures quoted were calculated by Mr. Feldstein and colleagues at the National Bureau of Economic Research:

* The hidden tax cost for this largest-ever welfare expansion would top $100 billion -- equivalent to raising personal taxes by nearly 20 percent.

* Under the Senate Finance Committee plan, the government would pay the full cost of a standard private insurance premium for anyone below the poverty level and would provide a partial premium to those with incomes up to twice that level. This means that a single parent with one child would receive a subsidy if the family income was below $20,500, while a couple with three children would receive a subsidy with income up to $37,700.

* The increase in tobacco taxes would raise only about $9 billion of the estimated $100 billion cost, according to a study by Gary Becker (winner of the 1992 Nobel Prize in Economics) and Michael Grossman of the City University of New York.

However, this cost would be paid by smokers, and traditionally lower-income people tend to be the heaviest smokers. This, therefore, may be considered a regressive tax.

* The financing plan estimates that $7 billion will be raised by taxing private health insurance premiums. The insurance companies would pay this tax -- but they would surely pass it on in the form of higher insurance premiums to those who pay their own insurance.

* The biggest hidden tax is the proposal to replace Medicaid with subsidized private insurance. The calculation is that the government would save $29 billion -- but private insurers would be required to provide a much more expensive plan for the same payments they now receive under Medicaid.

That amount, therefore, would be added to the annual cost of the insurance companies, which would recover it by passing the cost along to private insurance consumers.

* As presently structured, the subsidy program would have the effect of discouraging recipients from trying to earn more income, since they would receive less in subsidies. Under certain conditions, a worker would get to keep no more than 10 cents of every dollar earned above the maximum allowed.

* The estimated increase in the number of those insured, under the Senate plan, is 20 million. At a cost of $100 billion, this amounts to a cost per individual of $5,000. The cost of insurance is calculated at $2,000 per individual. The $3,000 per person unaccounted for -- paid by smokers and people who pay their own insurance premiums -- represents income redistribution rather than actual health care cost.

It may be time for those of us to contact our elected representatives and ask why the Senate Democratic leadership has been allowed to conceal this massive tax increase from the public.

William A. Butler

Towson

Don't invade Haiti

Once again we are on the brink of invading a country in order to help it. But we can help better by staying out of Haiti's business. It is one thing to have an economic embargo; but to decide that someone's child should go there and possibly die in a military operation is a different story.

Looking back on the gulf war can we say that it was worth the cost? Iraq is still a mess. There are fragments of nuclear material all over. The Iraqi people are suffering and there are still deadly land mines planted all over.

It is time to try to resolve conflicts a different way. We need people-to-people interchange. Perhaps some of our student mediators could do a better job.

I hope Congress will not to support another invasion. We must get out of the invasion business.

Carol Solomon

Baltimore

Runaway reform

As both a physician and patient, recent items in the news tell me that doctors and patients are going to lose unless Congress keeps the giant insurance companies from running away with health system reform.

* Lyn Abramson, CEO of U.S. Healthcare, last year paid himself $10 million, with another $800,000 in salaries and bonuses going to three family members.

* In Baltimore, one woman's HMO refused to let her longtime gynecologist operate after a Pap smear detected problems. The HMO insisted its own doctor repeat tests, and after being bounced from one HMO doctor to another, the woman's relatives put up the cash for her to return to her own doctor.

Something is seriously out of balance here. Unless Congress acts to restore the balance, insurance companies and big business are going to take over the doctor's examining room.

They will limit the kind of care people and families get, no matter what their doctor says. We need legislation to guarantee that hTC patients and their physicians, not insurance clerks, are in charge of making medical decisions.

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