Quick Back of the Envelope: Health Insurance
Or And a Pony Too

Commenter JA offers:

I’m suggesting that the federal government buy insurance for those who legitimately cannot afford it and pay for it by raising taxes on the rich.

By quick googling, the count of uninsured is about 47 million in the US. The “rich”, defined by Mr Obama are those making over $250k. A google search on the number earning that much didn’t come up with good answers, but suggests that it is less than 2%, let’s be generous for now and say there are 1 million people earning that much. Health insurance costs in excess of 10k per year … so … each of our earners will need to contribute in tax, $470,000 just on healthcare to cover this gap. However, healthcare isn’t all that the Obamacons want to get the “rich” to fund, there’s also basic poverty needs and other sundry items, which likely double the bill. So, basically Mr Obama and his supporters are suggesting that those earning more than $250k, each pay about $1 million per anum in taxes. While were at it, let’s buy each of the poor a pony, no?

And remember, these programs when implemented will not, no no never, require raising taxes on those making less than that. Bah.

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  1. Boonton says:

    To be fair JA was talking about his ideal program. One possible saving grace might be to note that he only called for the gov’t to buy insurance for those who ‘legitmately cannot afford it’. This means that this number is less than the 47 million uninsured. There are, after all, people who can afford it but don’t buy it.

    On the other side typical health insurance today costs $10K. But this is what sells to big employers & such. The gov’t could buy a bare bones policy for anything it wants, if it spent $5000 it could buy a policy that covered major diseases and maybe some preventative stuff and that’s it. Individuals would have to buy supplemental policies. So looking at this the tax burden on the $250K+ could be cut dramatically from your worse case scenario.

    My objection to JA’s idea has more to do with dynamics. If you say you’re only going to cover people who don’t have insurance then businesses that are on the edge will be tempted to drop coverage to save money. That 47M might jump to 57M or more by the time the plan is implemented.

    A universal voucher model dodges this problem. Everyone gets a voucher (say $5000) they can use against their employers plan or to buy their own plan or directly buy healthcare while unused portions accumulate (similiar to the health savings account model). Insurance companies would have to agree to roughly equal treatment of all policy holders to collect the vouchers (in other words, like your employer plan the guy with a bum ‘genetic profile’ won’t be priced out of insurance by demanding $75,000 premiums).

    You’re right, such a plan could not be paid for by just taxing the rich. It would have to be a broad based tax that more or less everyone would pay (not unlike social security or unemployment insurance). I would make the voucher equal to the amount raised by the tax, though, so the entitlement problem is eliminated. If people want better universal coverage they have to pay more in taxes, if they want less in taxes they have to eat a smaller voucher.

    It’s hard to say who would win and loose under a program like this. Businesses would win big time because they could compete with other developed countries that have universal coverage provided by the gov’t. Likewise the economy, IMO, would become more efficient because people would not be as tied to jobs just for the benefits. You could take a chance working at a start up because you could still get some type of policy. I suspect health insurance premiums might go down since there will be more money coming into the pool. At the same time, unlike the McCain plan, it would preserve what many people are comfortable with and appears to work for many, employer purchased insurance. You also preserve competition between healthcare providers and insurance companies.

  2. Business Week:

    The Commonwealth Fund, a nonprofit that studies health-care issues, estimates that McCain’s plan would reduce the number of uninsured Americans by 1.3 million over the next decade, at a cost of $1.3 billion, while Obama’s plan would reduce the uninsured by 34 million and cost $1.63 billion. The Lewin Group, a health-care market researcher, figures that McCain’s proposal would cost $2.05 trillion over 10 years, and Obama’s would cost $1.17 trillion. Both campaigns dispute all these estimates, saying costs would be lower and coverage higher.

    Those first two “billions” must be “trillions.”

    You’re being coy about the taxes on people who make more than $250k. They don’t split it evenly, it gets even more progressive from there. It’s really about when incomes get into the six figures that the taxes really go up under Obama’s plan. And by “up” of course, I mean back to where they were before Bush cut them.