Jake Towne, the independent candidate for the 15th District congressional seat held by Charlie Dent, responded to my recent column on health care. His comment is below, along with my thoughts:
Thanks for the post. "Most Americans, an overwhelming number, favor private insurance. They just fear the cost and the denial of claims. Address those issues. All candidates need to move toward the center on this one. They have all missed the bull’s-eye." Well, the bull's eye is no government involvement in health care beyond addressing fraud, and that does mean private insurance, so I think we are in agreement. Here are the proposals I have, feel free to comment: 1) I would introduce tax relief legislation to allow individuals and families to reduce their federal income tax nearly dollar-for-dollar by the amounts they spend out-of-pocket on private health care premiums. 2) I would seek to remove the insurance state portability barriers that Congress has erected to protect the insurance cartels and raise costs. 3) I would seek to provide a sound currency to halt rampant price inflation, so health care costs take up a smaller percentage of household income. 4) I call for the state legislatures to remove state mandates that add 15-40% to Pennsylvania's health care premiums, and to pursuit tort reform to reduce the costs of defensive medicine. 5) I would introduce a bill to suspend the obligation of individuals suffering from terminal illness or cancer to continue paying the Social Security tax on their income. 6) I would introduce a bill to reduce federal income taxes dollar-for-dollar by amounts spent out-of-pocket by parents for their children with terminal illnesses, major disabilities or cancer. 7) I have pointed out the dangers of state restrictions - via licensing and restricted seats in the medical school system - artificially restricting the supply of doctors just when the baby boomer explosion will need them the most. 8) Supporters of mine have also sent in great ideas such as Health Care Sharing Ministries that voluntarily pool risk. towneforcongress.com/economy/health-care-solutions
1) I think that is a good start. I still worry about those who pay no income tax and can’t afford insurance. If you’ll make it a refundable credit, then it becomes a government subsidy because you’ll get the money back whether or not you pay tax. I can get behind that. Without it, the working poor are still unable to pay for insurance because they pay no income tax.
2) Actually, I don’t think congress erected those barriers. Jake can correct me if I am wrong but I think those barriers derive from the 10th Amendment and the right of states to regulate insurance within their borders. In fact, Nancy Pelosi would love to see congress be able to act in that area.
3) Removing mandates will reduce premiums for those who don’t need the coverage but those mandates are now part of the overall premium pool. If insurers don’t get the experience benefit of covering a sterile male for OBGYN visits as they do today, then they need to raise overall premiums. All those mandates do today if shift premiums among insureds. If you remove them, insurers will need to increase premiums. Their payment experience will not change by definition so they must increase premiums for base coverage to keep revenue stable. Unfortunately, simply mathematics trumps many of the cost savings ideas. The only way to cut insurance costs is to cut the cost of the underlying medical care.
My biggest problem with Jake Towne’s responses is that he seems to focus too much on the cost of insurance. If we assume insurers are going to reap some profit on their experience payouts, all they are adding to the cost stack is their profit. They claim it is in the 3% range. So, cutting out profits, if we could, would still leave the 97% of the cost in the stack. Eliminating coverage mandates will impact who pays for what but does nothing to impact that overall cost stack and therefore the insureds as a group will still pay the same total—although the allocation within the group with change.
The big focus, as Towne alludes to in his 4th point, should be on reducing the cost of health care. If you cut heath care costs by 40%, you’ll cut insurance costs by 40%. If you don’t reduce the cost of health care, your ability to cut insurance costs is limited to the profit margin of insurers.