With all of the “debate”…with all of the money that’s necessary…when you sit down and crunch the numbers, there are few sensible solutions and only one that is fair.

Some Number Crunching

There are a lot of figures to handle when dealing with healthcare. As with most large systems, they are frequently employed to obfuscate the big picture. With that in mind, will keep it simple and look at as few of the main numbers necessary in order to keep the big picture in focus.

You start with the two numbers that mean anything (I’m mostly relying on the 2009 Statistical Abstract of the United States for the figures):

Total national personal earned and unearned income (2007):  $11.66 trillion

Total national healthcare costs (2007 proj): $2.246 trillion

You can also add in GDP as a sort of baseline:

GDP (2007): $13.841 trillion

The thing is that there are some bookkeeping items that cause the GDP to be a little higher than reality, and tends to be adjusted to a national income figure which is $12.221 trillion–which is sufficiently close to the personal income total that we might as well go with the personal income figure as the practical bank from which healthcare will be paid.

Through simple math we find that the percentage of total personal income that is paid to healthcare is 2.246 trillion/11.66 trillion ≈ 19.3%

Wow. That’s a lot. And it’s considerably more than that 15.3% of GDP that has been thrown around for a while (if you do the math with the GDP figures, you get 2.246 trillion/13.841 trillion ≈ 16.2%)

The number we are looking at is the 19.3% of total national personal income. That’s how much we, as the American population, pay for healthcare (at least as of 2007…it’s higher, now).

OK. So, we are paying about $2.246 trillion on healthcare. $1.207 trillion is paid either out-of-pocket or via private insurance companies. $1.039 trillion is paid for publicly (Medicare, Medicaid, VA, etc.). Of the overall total, $1.531 trillion goes to pay for: hospital care; physician and clinical services; prescription drugs; and nursing home care. That leaves a total of $715 billion (or 31.8%) to pay for whatever is left…of which the overwhelming majority is administrative costs, the rest being research and other ancillary items.

If we start with the $2.246 trillion and then subtract out 20% of the non-public total (to take care of the 20-25% difference of administrative costs between the public and private options so often quoted), we reduce the private cost to: $0.966 trillion, which when added to the public costs gives us a total adjusted healthcare cost of about $2 trillion even–which is a nice round figure. If we divide that into national personal income, we end up with a percent of 17.2%.

That’s pretty much the lowest, reasonably accurate, national healthcare figure you are going to see and is the key to what I propose.

The Fair Healthcare Solution

The solution is very simple. All healthcare is paid for from an off-budget, otherwise untouchable, trust of money that is the result of a flat 18% tax on all earned and unearned personal income. There is no poverty line. There is no ceiling. If you make $10,000 a year, then $1,800 of that will go into the national health trust. If you make $200 million, then $36 million will go into the trust. If you make $3,000 a year, then $540 goes into the trust. It’s an automatic tax. You never see it…which isn’t really any different than when your insurance costs are deducted from your paycheck.

As this is a flat tax on all income, everyone is proportionally hit fairly. No ladders. No hiding of money in savings or investments. If you get income, a percentage goes to the pool. If it isn’t this way, then the lower an middle classes are subsidizing the wealthy. The only way to make this fair is for everyone to take the hit.

Is it socialism? A little bit. But when you’re working on a farm and have your hand cut off by a baler, or if you are a working mom with three young children and discover you have breast cancer, or if you are a CEO and are injured when your limo is sideswiped… well, that’s when the socialism works for you. Most of the time, just like now, you’re just paying out money to “the system”. Whether you call it a paycheck deduction, an insurance premium, or a tax is really just semantics.

From this trust there is a tier of payment. Doctors, care units, and emergency/crisis needs get paid first. Labs get paid next. Researchers next. The last to be paid will be the drug manufacturers–this to give them an incentive to balance the costs of their products.

Obviously there will need to be torte reform so that medical care can procede without fear of unfair lawsuits while also allowing the public a method for those cases when deliberate, possibly systemic, negligence occurs.

But that’s it. That’s the solution. The eighteen-percent solution. It’s a fixed rate changeable only with this formula: for every percent or fraction of a percent change to the rate, up or down, Congressional pay will be frozen and reduced by 10 times that percentage for a period of three years (e.g., a 1% change in the trust results in a 10% reduction of pay for all Representatives and Senators for three years). Should there be excess funds, they will remain in the trust for contingency use.

Obviously there will need to be oversight to reduce the players from gaming the system, but that’s the case in any bureaucracy. It’s part of the administrative costs.

But…Some Will Complain

But…some will complain: what of the private insurers? I answer: what of the private insurers? What, exactly, to they contribute to healthcare? What do they do other than collect fees and needlessly complicate the lives of medical professionals? What lives are they saving? How is what they do, and how they do it, better than what I propose?

But…some will complain: why isn’t business paying? That was one of the reasons why I wanted to show you that most of the GDP, and almost all of the useful GDP, is pretty much derived from personal income. Besides, shifting this to business tends to beget a lot of corruption. That’s simply reality. Better to get it in the most direct manner possible. It’ll effect businesses indirectly soon enough.

But…some will complain: doesn’t this hurt the poor most of all? No, not really. If anything, the chronically unemployed and unbenefitted maybe the biggest beneficiaries, it’s not going to be that big of a hit. If it is, then we have bigger problems than healthcare. Also, there was the problem of managing a poverty cut-off. Then you have to calculate people in a household, and then there is the problem if say, the cutoff is $16,000. Your neighbor makes $15,995 and you make $16,500. That means that your neighbor, who is below the cutoff, would pay nothing while you would pay $2970. Your circumstances are only $505 dollars different, but your neighbor actually come out $2465 ahead of you. Hardly seems fair. Better if it’s just the same for all.

But…some will complain (again): it’s socialized medicine. What, exactly, bothers you with that? It isn’t any different than now. The doctors will still see you. The pharmacist will still give you drugs. It isn’t about restricting care. The only thing it is about is who you pay, and who pays who helps you. No medical committees in Congress.

But…some will complain: they’ll perform abortions with MY MONEY! No…they’ll perform abortions with MY MONEY. I’m OK with it. If you aren’t…then don’t you get a frakkin’ abortion. Seriously, people, why does what YOU want have to be all that others get to have? Have a little charity for human frailty and the variety of viewpoints, why don’t you?

But…some will complain: that flat tax is way more than I pay in a year. Yeah, it probably is, but it reflects the actual cost of healthcare. It isn’t being foisted in employer-paid premiums, or Medicare taxes, or the medical part of employee compensation deductions. That’s stuff that’s been paid without you seeing much of it, but the costs have been passed down into higher prices, lower wages, etc. So, you’ve actually been paying it, you just didn’t know it. Even with the co-pays and the deductibles and all of that, you’ve been paying it. With the medical-bill-caused bankruptcies you pay for it because the ceditors are going to recoup their money some way…and it’s via higher costs to you. So, you’ve been paying it.

But…some will complain: it will bankrupt the country! No. It won’t. You know the taxes that pay for Medicare and VA? They are cancelled because this pays for them as well. Those premiums you (and your employer) have been paying…goes into this system. That’s it. Same amount of money just paid to one place in a clear and direct way instead of being paid to thousands of places and distributed in ways few if any understand.