New York Times July 9, 2004
By PAUL KRUGMAN
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Will actual policy issues play any role in this election?
Not if the White House can help it. But if some policy
substance does manage to be heard over the clanging of
conveniently timed terror alerts, voters will realize that
they face some stark choices. Here's one of them: tax cuts
for the very well-off versus health insurance.
John Kerry has proposed an ambitious health care plan
that would extend coverage to tens of millions of uninsured
Americans, while reducing premiums for the insured. To pay
for that plan, Mr. Kerry wants to rescind recent tax cuts
for the roughly 3 percent of the population with incomes
above $200,000.
George Bush regards those tax cuts as sacrosanct. I'll
talk about his health care policies, such as they are, in
another column.
Considering its scope, Mr. Kerry's health plan has
received remarkably little attention. So let me talk about
two of its key elements.
First, the Kerry plan raises the maximum incomes under
which both children and parents are eligible to
receive benefits from Medicaid and the State Children's
Health Insurance Program. This would extend coverage to many
working-class families, who often fall into a painful gap:
they earn too much money to qualify for government help, but
not enough to pay for health insurance. As a result, the
Kerry plan would probably end a national scandal, the large
number of uninsured American children.
Second, the Kerry plan would provide "reinsurance" for
private health plans, picking up 75 percent of the
medical bills exceeding $50,000 a year. Although
catastrophic medical expenses strike only a tiny fraction of
Americans each year, they account for a sizeable fraction of
health care costs.
By relieving insurance companies and H.M.O.'s of this
risk, the government would drive down
premiums by 10 percent or more.
This is a truly good idea. Our society tries to protect
its members from the consequences of random misfortune;
that's why we aid the victims of hurricanes, earthquakes and
terrorist attacks. Catastrophic health expenses, which can
easily drive a family into bankruptcy, fall into the same
category. Yet private insurers try hard, and often
successfully, to avoid covering such expenses. (That's not a
moral condemnation; they are, after all, in business.)
All this does is pass the buck: in the end, the Americans
who can't afford to pay huge medical bills usually
get treatment anyway, through a mixture of private and
public charity. But this happens only after treatments are
delayed, families are driven into bankruptcy and insurers
spend billions trying not to provide care.
By directly assuming much of the risk of catastrophic
illness, the government can avoid all of this waste,
and it can eliminate a lot of
suffering while actually reducing the
amount that the nation spends on health care.
Still, the Kerry plan will require increased federal
spending. Kenneth Thorpe of Emory University, an
independent health care expert who has analyzed both
the Kerry and Bush plans, puts the
net cost of the plan to the federal government at $653
billion over the next decade. Is that a lot of money?
Not compared with the Bush tax cuts: the Center on Budget
and Policy Priorities estimates that if these cuts
are made permanent, as the administration wants, they will
cost $2.8 trillion over the next decade.
The Kerry campaign contends that it can pay for its
health care plan by rolling back only
the cuts for taxpayers with incomes above $200,000. The
nonpartisan Tax Policy Center, which has become the best
source for tax analysis now that the Treasury Department's
Office of Tax Policy has become a propaganda agency, more or
less agrees: it estimates the revenue gain from the Kerry
tax plan at $631 billion over the next decade.
What are the objections to the Kerry plan? One is that it
falls far short of the comprehensive overhaul our
health care system really needs.
Another is that by devoting the proceeds of a tax-cut
rollback to health care, Mr. Kerry fails to offer a plan to
reduce the budget deficit. But on both counts Mr. Bush is
equally, if not more, vulnerable. And Mr. Kerry's plan would
help far more people than it would hurt.
If we ever get a clear national debate about health care
and taxes, I don't see how President Bush will win
it.
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