FINANCING
JUST HEALTH CARE
Labor Party Briefing Paper
©2000-2002 LABORPARTY/Publication
No. 706.1
Revised February 2002
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The Labor Party proposes
a national health insurance program for the United States that would provide
universal coverage of comprehensive health benefits for every U.S. resident.
By eliminating administrative waste and profit in the private health insurance
industry, the United States can pay for universal coverage as well as
extensive benefits such as nursing home, prescription drugs and long term
care for the same total amount of money (an estimated $1.213 trillion
for 1999) that we now spend.
The Labor Party proposes to keep most existing government revenues in
place (nearly half the current U.S. health care budget); implement a variety
of mechanisms to make the wealthy pay their fair share; and impose a modest
tax on all employers (a dramatic savings for employers now purchasing
health care).
- Keeps much of
the existing health care financing in place -
the government already accounts for half of health care spending
- Eliminates employer
contributions to private insurance premiums -
replacing them with a modest employer payroll tax of 5.5%
- Eliminates individual
premiums including Medicare Part B and co-payments
as well as 80% of out of pocket costs
- Creates no new
taxes for workers (except for wealthiest 5% of Americans)
- Creates new funding
sources that draw on the incredible wealth
gained by the richest Americans over the last decade
- Protects health
industry workers via a Just Transition
Although we spend more
on health care than any other industrial nation, we are the only one not
to cover all its residents.1 Nearly 45 million
of us - most with full-time jobs - have no coverage whether through the
job or government program like Medicare and Medicaid.2
Many of us lucky enough to have health insurance have inadequate coverage
and forego needed care and medication because of high co-payments and deductibles.
The Labor Party proposes national health insurance: a public insurance fund
(with the federal government as the insurer) and a private delivery system
(health care services - doctors, hospitals, clinics - remain private). Individual
health care consumers will have the freedom to choose their doctors, hospitals
and other health care providers.
From birth to death, all medical care is covered, including:
- doctor visits
- access to specialists
- hospitalization
- prescription drugs
- mental health
treatment
- nursing home and
long-term care
- dental and vision
services
- occupational health
services
- preventive and
rehabilitative services
- medical supplies
and equipment
In 1999, the United
States spent an estimated $1.2 trillion on health care - 12.8% of the Gross
Domestic Product or an average of $4,443 per person.3
The total U.S. health care budget - for all doctors, drugs, dentists, hospital
care and administration - is funded currently by:
Government tax revenues:
$604.5 billion (49.8%)
Taxes (including the employer and employee Medicare payroll tax) fund
government services including Medicare, Medicaid, public health programs,
health care for government workers and the military and medical research.
- Federal programs
- Medicare Payroll
Tax (1.45% each on employee & employer): $121 billion
- Employer contribution
to Medicare for federal workers: $2.8 billion
- Health insurance
premiums for federal workers: $13.8 billion
- Medicaid and additional
Medicare: $185 billion
- Public health
programs: $49.7 billion
- Total: $372.3
billion
- State and Local
programs
- Health insurance
premiums for state and local employees: $57.5 billion
- Employer contribution
to Medicare for state and local employees: $6.8 billion
- State share of
Medicaid and other services: $127.5 billion
- Total: $191.8
billion
- Federal/State/Local
Hospital Construction and Research
- Total: $40.4 billion
- Employers:
$252.1 billion (20.8%)
Employers contribute to employee health care premiums, worker compensation
and company in-patient health facilities.
- Employee health
insurance premiums: $224.5 billion
- Workers compensation:
$23.6 billion
- In-patient health
facilities: $4 billion
- Individuals:
$326.7 billion (26.9%)
Individuals pay all or part of health care premiums, co-payments, Medicare
Part B premiums and out-of-pocket expenses.
- Premiums paid
by households: $83.7 billion
- Part B Medicare
Premiums: $19.9 billion
- Out of Pocket
Spending: $223.1 billion
- Miscellaneous
revenues: $30.2 billion (2.5%)
Funds raised from donations from individuals and foundations contribute
a small percentage of the total budget.
Total Health Care
Budget: $1.213 trillion
By eliminating administrative
waste and profit in the health care system, the United States can provide
comprehensive health care coverage to every resident of the United States
for the same total amount of money (an estimated $1.213 trillion for 1999)
that we now spend.4 The savings from the elimination
of private insurance, however, comes at the expense of the jobs of nearly
1.25 million workers in the health care industry.
- To raise a global
budget of $1.213 trillion and to provide a Just Transition for health
care industry workers, the Labor Party proposes to:
- Keep most existing
government revenues in place (nearly half the current U.S. health care
budget);
- Implement a variety
of mechanisms to make the wealthy pay their fair share; and
- Impose a modest
payroll tax on all employers which will create a dramatic windfall for
employers now purchasing health care. Part of the windfall in the first
three years of Just Health Care will fund the Just Transition for workers.
Government tax revenues:
$533.3 billion (43.9%)
Keep existing federal,
state and local revenues that currently pay for Medicare (employer and employee
payroll taxes - 1.45 percent each or $121 billion) and other federal and
state programs (with the exception of revenues that now pay government workers'
health premiums).
Employers: $255.1 billion (21%)
Implement a 5.5% tax on the payroll of all public and private employers:
$251.1 billion
Keep existing employer expenditures for corporate clinics: $4.0 billion
Employers will be taxed 5.5 percent of their payroll - for a total of $251.1
billion. Today, many employers pay more than 5.5 percent of payroll for
their employees' health care benefits, some pay less, and some employers
do not offer health benefits at all. Under Just Health Care, all employers
will pay 5.5 percent of their payroll to cover the costs of health care
for everyone.
This means that those employers currently spending more than 5.5 percent
of their payroll for health care will see their costs decrease, while those
spending less than 5.5 percent or nothing at all, will see their costs rise.
The annual employer cost on the average wage of $28,861 will be $1,5875.
In contrast, the average annual premium in 2000 was $2,650 for single coverage
and $7,053 for family coverage.
Income taxes on the wealthy: $161.9 billion (13.3%)
The Labor Party believes that the richest Americans should pay their fair
share. Only taxpayers with incomes above $183,200 will see their taxes increase.
Taxpayers with average incomes of $183,300 will be taxed an additional 5
percent. Those with average incomes $763,200 (the richest 1 percent) will
be taxed an additional 10 percent. The tax is on income only and does not
include stocks, bonds and property. Ninety-five percent of taxpayers will
save money.
Tax on stock and bond transactions: $128.4 billion (10.6%)
Anyone who purchases a stock will pay a transaction tax equal to one half
of one percent of the purchase price. For those who invest and hold on to
stocks, the tax will be minimal. For example, a $100 stock purchase will
be taxed 50 cents. If the stock is held for four years and sold for $125,
the tax represents only two percent of the gain. However, speculators who
buy and sell rapidly (such as day traders) pay more. If the same $100 stock
is sold in two months for $101, the tax represents 50 percent of the $1
gain. This will dampen speculation and also provide a healthy revenue stream
for Just Health Care.6 See the box below for
details.
In 1997, about half of all households owned no stocks, not even in mutual
funds or pension plans such as IRAs, 401(k), 403(b) or Keogh plans. The
wealthiest 10 percent of households owned 82 percent of all stocks, including
those in mutual funds or pension plans. Fully 41 percent of all stock is
owned by the richest 1 percent of households.7
| Table
One: Stocks and Bonds Transaction Fees (on projected after tax volume) |
| |
Tax
Rate |
Annual
Revenue |
| Stocks |
.25 each
on buyer & seller |
$36.5
billion |
| Government
bonds |
.1% |
$27.7
billion |
| Corporate
Bonds |
.1% |
$14.7
billion |
| Futures
Contracts |
.02% |
$13.3
billion |
| Currency |
.1% |
$33.3
billion |
| Swaps |
.02% |
$2.9
billion |
| Total |
|
$128.4
billion |
| Source:
Center for Economic and Policy Research, 2000 |
Corporate tax shelter
loophole: $60 billion (4.9%)
According to the Treasury
Department, corporations are getting away with murder when it comes to
avoiding taxes. While profits have soared over the past few years, corporate
taxes have not. For every dollar of profit reported to shareholders, 91
cents were taxable by the Internal Revenue Service in 1990. By 1997, that
number fell to 70 cents on the dollar. In 1997 alone, corporations paid
$60 billion less in income taxes than they would have if they had paid
taxes at the same rate as in 1990. In contrast, individuals paid $80 billion
more than in 1990.
An increase in abusive tax shelters - various accounting methods that
have no legitimate business purpose and are intended solely to lower a
company's taxes - is responsible for a growing share of the shortfall.
Such schemes cost the government at least $10 billion a year (and possibly
much more) according to the Treasury Department.8
Closing these loopholes and making corporations pay their fair share will
raise $60 billion annually for Just Health Care.
Individuals:
$44.6 billion (3.7%)
Just Health Care eliminates
all household contributions to premiums, co-payments, Medicare Part B
and all out-of-pocket costs for services not currently covered such as
dental, vision and prescription drugs. Total household expenditures will
drop from $326.7 billion to $44.6 billion annually. The only expenses
left for individuals will be over-the-counter drugs such as aspirin, and
elective cosmetic surgery. This represents an 80 percent reduction in
current out-of-pocket expenses.9
Existing
miscellaneous revenues: $30.2 billion (2.5%)
Existing funds raised
from donations from individuals and foundations will continue to contribute
a small%age of the total budget.
Total Just Health Care budget: $1.213 trillion
One of the most attractive
aspects of national health insurance is its cost savings in the area of
administration. Unfortunately, these savings come at the expense of the
jobs of workers in health care administration. The Labor Party believes
we have an obligation to provide a just transition for these workers. In
fact, just transition is an integral part of the Just Health Care plan.
Just Transition's goal is to alleviate the financial burden of eliminating
health care jobs and to make it easier to find another job at a comparable
salary. Every worker who loses his or her job because of the transition
to Just Health Care will receive:
- Full take-home
pay and benefits for up to four years, or
- A wage subsidy
for any worker who takes a job that pays less than the old job; and
- Full tuition
for up to four years if the worker chooses to attend school.
Funding Just Transition
The Just Transition
will be funded, in part, by the money "saved" by those employers who previously
paid more than 5.5 percent of their payrolls for health benefits. The
difference between what was paid previously and the amount paid with the
5.5 percent will be taxed over a specific time period as a windfall profit
tax.
The GI Bill
of Rights: Example of a Successful Just Transition
In 1944, faced with
the possibility of mass unemployment when millions of U.S. veterans returned
from World War II, Congress passed the GI Bill of Rights. The idea was
simple: pay returning veterans a living wage to go to school, redefining
"work" while the economy made the transition from war to civilian
production. The GI Bill of Rights provided government funds for education
including tuition, lab fees, books, health insurance and supplies. In
addition to tuition, students received up to $1,440 per year for living
expenses. A 1988 congressional analysis11
of the program showed it to be a major success: for every dollar the government
invested, the return was $6.90. According to the report, about 40 percent
of those who took advantage would not otherwise have attended college.
The additional education led to higher wages for the GIs and more taxes
for the government.
In 1997 the average
household in the United States spent $1,841 on health care - premiums, co-payments,
doctor and hospital bills, prescription drugs and medical supplies - a $700
increase from 1987.12 As health care costs
escalated in the past two decades, employers increasingly shifted health
costs to employees. In 1980, only a quarter of employees who obtained their
medical insurance through their employer were required to contribute for
single coverage and just under half had to pay for family coverage. By 1995,
two-thirds of full-time employees with employer-based medical insurance
contributed to the cost of single coverage and 80 percent contributed to
the cost of family coverage.13
| Year |
For
Individual Coverage |
For
Family Coverage |
| 1980 |
25% had to contribute |
49% had to contribute |
| 1995 |
66% had to contribute |
80% had to contribute |
Under Just Health Care,
income taxes will increase only for those taxpayers with average incomes
of $183,200 and above. Workers will enjoy a lifetime of quality health care
while paying less. By eliminating premiums, co-payments, deductibles and
most out-of-pocket costs, 95 percent of taxpayers will save money under
Just Health Care.
- 1. U.S.
Bureau of the Census Statistical Abstract of the United States 1996.
Washington, DC:
U.S. Government Printing Office, 1996.
- 2. Current
Population Survey. Washington, DC: U.S. Census Bureau, 1999.
- 3. The
estimates for 1999 are derived by taking 1992 data in Cathy A. Cowan
and Bradley R. Braden "Business, Households and Government: Health
Care Spending 1995" Health Care Financing Review (Spring
1997) Vol. 18. No. 3, p. 196 and inflating by the overall rise of health
care expenditures as cited in National Health Expenditures, by Source
of Funds and Type of Expenditure: Selected Calendar Years 1993-2998
(Table 3) Health Care Financing Administration, Office of the Actuary,
National Health Statistics Group. http://www.hcfa.gov/stats/nhe-oact/tables/t3.htm
- 4. David
U. Himmelstein, MD and Steffie Woolhandler, MD, MPH and the Writing
Committee of the Working Group on Program Design "A National Health
Program for the United States: A Physician's Proposal" New England
Journal of Medicine 320:102-208 January 12, 1989. Steffie Woolhandler,
MD, MPH, David U. Himmelstein, MD, "The Deteriorating Administrative
Efficiency of the U.S. Health Care System," New England Journal
of Medicine 1991; 324:1253-8. Steffie Woolhandler, MD, MPH, David
U. Himmelstein, MD and James P. Lewontin, "Administrative Costs
in U.S. Hospitals," New England Journal of Medicine 1993;
329:400-3. Unpublished updates by the authors.
- 5. Average
wage for 1998. National Average Wage Index, Social Security Administration,
October 19, 1999. http://www.ssa.gov
- 6. Dean
Baker. Taxing Financial Speculation: Shifting the Tax Burden from
Wages to Wagers. Washington, DC: Center for Economic and Policy
Research, February 2000.
- 7. "The
Bull Market: Is the Stock Boom a Bust for Workers?" Paycheck
Economics. Vol. 1, No. 2. Washington, DC: Economic Policy Institute,
May 1999, p. 3.
- 8. David
Cay Johnston. "Corporations' Taxes Are Falling Even as Individuals'
Burden Rises." New York Times, February 20, 2000 and David
Cay Johnston. "U.S. Takes Aim at Tax Shelters for Companies."
New York Times, February 29, 2000.
- 9. Edith
Rasell and Kainan Tang. Paying for Health Care: Affordability and
Equity in Proposals for Health Care Reform Working Paper No. 111.
Washington, DC: Economic Policy Institute, December 1994, p. 27.
- 10. Les
Leopold. "The Case for Making Workers Whole: No Net Loss"
Workshop on the Transition to Virtual Elimination: Dioxins and Furans
as a Case Study March 30-31, 1995 International Joint Commission. New
York: Labor Institute, 1995.
- 11. A
Cost-Benefit Analysis of Government Investment in Post-Secondary Education
Under the World War II GI Bill. Washington, DC: Subcommittee on
Education and Health of the Joint Economic Committee, December 14, 1988.
-
- 12. "What
the Nation Spends on Health Care: A Regional Comparison" Issues
in Labor Statistics. Washington, DC: U.S. Department of Labor, Bureau
of Labor Statistics, July 1999. http://stats.bls.gov/opub/ils/pdf/opbils18.pdf
- 13. "Employee
Medical Care Contributions on the Rise" Issues in Labor Statistics.
Washington, DC: U.S. Department of Labor, Bureau of Labor Statistics,
April 1998. http://stats.bls.gov/opub/ils/pdf/opbils18.pdf
|
