In preparation for today’s bipartisan Health Care Summit, President Obama released his own version of health care reform earlier this week. The President’s proposal includes several high-ticket provisions for expanding coverage. Since he has promised time and again not to raise taxes on the middle-class in order to pay for health care reform, the President’s bill imposes a Medicare tax on the investment income of high-individuals to off-set some of the cost of expanding Medicaid and financing other provisions of his health agenda.
But, as Heritage analysts Karen Campbell and Guinevere Nell explain in a recent paper, these new taxes would have widespread adverse effects for all Americans, not just the wealthy that they target. This is partially due to the very nature of a tax:
The Cadillac health insurance plan tax is intended to reduce the usage of high-cost insurance plans. Similarly, the President’s proposal’s tax on tanning beds discourages their use; the same is the case with cigarette taxes. In several instances, taxes are imposed as punitive measures. So why on earth would the President impose a tax that would discourage investment, delaying recovery from the current economic downturn?
Moreover, Campbell and Nell lay out several ways in which this tax would hit average American households hard. First, the tax would reduce overall household wealth of American families by $274 billion per year. “The value of the investment portfolios of many households–not just the high-income households that directly pay the tax–are reduced by the tax on investment income.”
Second, reducing investment would decrease capital in the U.S. economy, which would reduce potential for economical growth. This affects not only the rate of job creation and wage increase: it would have a dramatic effect on the ability of the federal government to borrow money. According to Campbell and Nell, “A lower U.S. economic potential also harms the ability of the government to borrow, because investors lend to the U.S. based on the expected potential of the U.S. economy. Thus a lower potential economy puts upward pressure on government interest rates in order to attract financing for the nation’s deficit.” Raising government interest rates will add further to the financial burden on taxpayers.
President Obama’s health care proposal would expand health coverage—but is the detriment to the U.S. economy and the burden on the taxpayer worth the cost?
One common assertion among the left is that other industrialized nations, such as Canada, achieved great success in health care within their collectivist framework. This, then, begs the question: why is the head of an east coast Canadian province coming to the United States for medical treatment?
Newfoundland Premier Danny Williams is seeking heart surgery in the United States, drawing criticism from “local bloggers and people calling in to the province’s immensely popular open-line radio shows.” Yet his actions are hardly unusual for world leaders. Saudi Arabian King Abdullah bin Abdulaziz is known to have his checkups at the prestigious Mayo Clinic in Rochester, Minn. Italian Prime Minister Silvio Berlusconi had heart surgery at the Cleveland Clinic in 2006 . Even middle-class Canadians are utilizing their proximity to the United States to seek treatment here.
A study by Steven Katz, Diana Verilli, and Morris Barer in Health Affairs examining the Ontario Health Insurance Plan from 1987 to 1995 found “evidence of cross-border care seeking for cardiovascular and orthopedic procedures, mental health services, and cancer treatments,” although not widespread. Examples include the governments of British Columbia and Quebec sending patients to the United States for coronary artery surgery and cancer treatment. Shona Holmes, a Kingston, Ontario resident in need of an endocrinologist and neurologist, crossed the border when she was told to wait “four months for one specialist and six months for the other.” Karen Jepp delivered identical quadruplets in Montana “because of a shortage of neonatal beds in Canada,” with the Calgary health system picking up the tab.
Perhaps Canadians’ health care migration patterns are a result of their own centralized system of government health care planning and “free care” crashing into the government’s budget constraints. The annual study “Paying More: Getting Less“ produced by the Fraser Institute, a Canadian think tank, found that government-run monopolies established in each province of Canada (simultaneously barring private operators from competing for the delivery of public health services) produce rates of growth in government health care spending that are “not financially sustainable through public means alone.” Each province’s policy of insulating consumers from price signals, such as premiums, co-payments and deductibles, has naturally led to over-consumption of medical treatment. Thus provincial governments, encountering fiscal restraints, must resort to long queues and the rationing of care.
And wait patients must. A hospital survey of five countries (United States, Canada, New Zealand, United Kingdom and Australia), conducted by Robert Blendon and colleagues in Health Affairs found that “waits of six months or more for elective surgeries were reported to occur ‘very often’ or ‘often’ by 26–57 percent of executives in the four non-U.S. countries; only 1 percent of U.S. hospitals reported this. Half of all Canadian hospitals reported an average waiting time of over six months for a 65-year-old male requiring a routine hip replacement; no American hospital administrators reported waits this long.
Perhaps if Canadian provinces adopted a free-market approach to health care, more of their citizens (and politicians) would seek treatment within their borders. This leaves just one question: if the United States adopts government-run health care system, even remotely like that of Canada, with government control of benefits and financing, plus reams of rules specifying what we can and cannot get, which border are we going to cross to get the care we need?
Vivek Rajasekhar currently is a member of the Young Leaders Program at the Heritage Foundation. For more information on interning at Heritage, please visit: http://www.heritage.org/about/departments/ylp.cfm