Universal Coverage: A Revenue Windfall?
By Anne Underwood
http://prescriptions.blogs.nytimes.com/2009/10/24/universal-coverage-a-revenue-windfall/Arthur Ullian is president of the National Council on Spinal Cord Injury and co-author of two studies in the Proceedings of the National Academy of Sciences on the economics of health care. In a forthcoming analysis, Mr. Ullian, the demographer Kenneth G. Manton of Duke University, the statistician Dennis Tolley of Brigham Young University and others conclude that expanded access to health care will generate revenue and savings for the federal government that are not accounted for in official cost estimates. Mr. Ullian spoke with the freelance writer Anne Underwood.
Q.
You and your co-authors say that over the long term, improved health care will actually contribute billions of dollars to the U.S. Treasury, even without the taxes and service cuts that Congress is considering in various legislative proposals. How is that possible?
A.
There are offsetting dollar gains that Congress and the Congressional Budget Office aren’t taking into account.
Q.
But the C.B.O. projects costs of around $800 billion over 10 years for the Senate Finance Committee bill, and so far that’s the cheapest of the proposals.
A.
The projections are an enormous percent of G.D.P., and they’re not sustainable, which is what everyone is yelling about. But that’s because no one is taking into account the health improvements that will result from covering millions of the uninsured.
Q.
How does that help?
A.
There are two parts to this theory. The first relates to the expansion of the labor force. We know from the National Long Term Care Survey that as a result of improvements in health care, active life expectancy in the United States has been increasing. In 1982, 74 percent of those aged 65 and older were healthy. By 2004, that had gone up to 81 percent. Projections for 2014 are between 84 and 85 percent.
Q.
That’s been happening anyway, even without a health care overhaul.
A.
Yes, but by providing access to care for the uninsured, additional millions of people will also reach the Medicare eligibility age healthier than they do now. People will be more active at a later age and able to remain in the work force longer. That’s important, because the people who form the bulk of the labor force — the so-called prime-age workers — are 25 to 54 years of age. But given the low birth rate in this country, more people are now turning 55 than 25. The group of prime-age workers isn’t increasing at all. We’ll have to turn to those aged 55 and older to make up the difference.
Q.
But people 55 and older are getting laid off now, because they’re relatively expensive.
A.
They’re also skilled. Once the economy kicks in again and businesses need the labor force to grow, you will have to find workers someplace. Without an expanding work force, our ability to achieve the 3.2 percent annual growth in G.D.P. assumed in the federal recovery plans will be virtually impossible.
Q.
How do you know these people will want to remain in the work force?
A.
It’s already happening. More people over 55 and 65 are still working, motivated by a reduction in their personal savings as well as by an awareness of the amount of money required for a long retirement. In 1998, there were 4.1 million people over 65 in the work force. Between 1998 and 2008, an additional 2 million joined, so that by 2008 there were 6.1 million workers over 65, according to the Bureau of Labor Statistics. In 2008, workers over 65 years of age contributed $45 billion to the Treasury in income taxes.
Q.
So that’s where the revenue you’re projecting comes from — income taxes?
A.
We can project the number of those over 65 who will be able to work in the future as a result of improved health, stemming from health care reform and advances in medicine. We can also estimate the numbers who will actually remain in the work force, based on historic participation rates. It then becomes straightforward to calculate the annual income taxes that workers over 65 will pay into the Treasury at today’s tax rates in constant 2008 dollars.
Q.
And how much do you calculate that will be?
A.
We project that by 2020, there will be an additional 8.5 million workers over 65. And by 2030, an additional 16.8 million. That’s the lowest of three projected participation rates. We’re being conservative. The increased tax revenues would add $312 billion to the U.S. Treasury in 2020 alone and $927 billion in 2030.
In addition, if you’re a full-time worker, you’re not in Medicare. Your employer is providing your primary insurance, so there are savings there as well.
Q.
This implies that the Senate HELP Committee bill, with projected costs of $1.15 trillion over 10 years, would actually be the most cost-effective plan, because it would insure the most people.
A.
Yes, it would, absolutely. You have enormous complications in health from people not going to see a doctor when they need one and ending up with far more costly problems later in life as a result. By the way, when you say the HELP bill will cost about $1.15 trillion over ten years, that’s only $115 billion a year on average. We’re projecting $312 billion in revenue for 2020 alone, and that’s at the lowest participation rate, so revenues are way in excess of cost.
Q.
What’s the second part of the theory?
A.
The second part comes from Medicare savings. By providing the uninsured access to health care, millions of people will reach the Medicare eligibility age healthier than they do now, spending fewer Medicare dollars.
Q.
But there will be more of them, which will increase overall costs.
A.
That’s not what we’ve seen so far. From 1994 to 2002, Medicare Part A and Part B went down from 2.45 percent of G.D.P. to 2.40 percent, as the population has grown healthier. Only Medicare Part C and Part D, which were introduced in the Medicare Modernization Act of 2003, have gone up. Part C is the private Medicare Advantage program, which was a total giveaway by the Bush administration to private insurance companies. It allowed them to take over part of the Medicare population and charge them money to run a program. Part D, the prescription drug benefit, is also increasing, because more people are enrolling.
Q.
Even if you take Parts C and D out of the equation, haven’t Medicare costs been increasing in raw numbers?
A.
So have other costs — food, housing, clothes, salaries. You can’t just look at raw numbers. You have to look at it as a percent of G.D.P., which is stable.
Q.
Then why do we keep hearing that Medicare is heading toward insolvency?
A.
Because the Congressional Budget Office and Centers for Medicare and Medicaid Services don’t consider health improvements in their projections. They calculate the population increase that will occur over a given period and assume that health-care inflation will be 1 percent over regular inflation. Their projections are all over the place. They make a 10-year projection and update it every year, so that by the time the original date is one year away, they’re almost correct.
Q.
How do you know your projections are more reliable?
A.
We looked at C.M.S.’s 10-year projection for 1994 to 2004. They projected costs of $361 billion by 2004, but the actual figure ended up at $268 billion. They were 35 percent wrong. But when we started over and factored in health care improvements, we came out only 5 percent higher than the actual figure. If C.M.S. used health improvements, they would have more accurate projections and the system wouldn’t always be seen as on the verge of bankruptcy.
.
So if Medicare Parts A and B decreased in the period you cited from 2.45 percent of G.D.P. to 2.40 percent, how much of a savings is that?
A.
Without improvements in health, Medicare would have cost $91 billion more than it did in 2008. We project that by 2020, the savings will be $242 billion. By 2030, they will be $530 billion.
Q.
If you combine the two factors — the revenue from taxes plus the savings to Medicare — how much is that?
A.
The added plus savings from health care reform adds up to $554 billion in 2020, or $1.457 trillion in 2030. That’s way in excess of what the estimated costs of reform will be.
Q.
You also say there’s a stimulus effect to health reform.
A.
When you’re spending that kind of money to cover millions of new patients, you’re also engaged in economic activity. You’re building hospitals and clinics, employing doctors, nurses and lab technicians, buying CT scanners and M.R.I. machines, purchasing furniture and carpeting. In the short term, that’s money going back into the economy.
Q.
So it works like housing construction does.
A.
There are huge multiplier effects. But the larger benefit is through increased productivity due to increased human capital. In the end, health care reform is revenue-neutral.
Printer-friendly format
Email this thread to a friend
Bookmark this thread
(1000+ posts)
Send PM |
Profile |
Ignore
