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What kind of healthcare reform are we likely to see?

What kind of healthcare reform are we likely to see?

Dr. Paul Freedenberg

Everyone seems to agree that our nation’s healthcare system needs to be reformed, but that is where the agreement ends.

When I was working at the Commerce Department for Secretary Malcolm Baldridge, his advice to me for managing my department was “under-promise and over-deliver.” Unfortunately, President Obama seems to have adopted the opposite game plan with regard to healthcare reform.

First as a candidate, and then as President, Barack Obama promised that he would reform the healthcare system without raising the taxes of anyone who made less than $250,000 per year. He also promised not to add any new debt to our nation’s deficit. This promise cannot be fulfilled, unless the President intended for us to interpret his words in a way that restricts their meaning narrowly to income tax rates alone, thereby failing to include all the additional revenue-raisers that would be required to pay the cost of covering an additional 30 million currently uninsured people (a price tag of approximately $1 trillion over the next decade.)

Now, the Democratic Congress is faced with, at the very least, living up to the letter (if not the spirit) of the President’s promises. They must find new ways to raise revenue while not technically raising taxes. Yet, most of the added revenue-raisers being discussed in Congress would, in fact, impose on many Americans “hidden” tax increases in the form of higher costs passed on to them by health insurers and providers.

Without getting into the details of the House of Representatives’ so-called “public option” versus the Senate’s so-called “healthcare insurance exchange” plans, the biggest problem faced by Congress is how to pay for a system that attempts to cover those 30 million additional people while at the same time outlawing such cost-cutting insurance company practices as refusing to cover people with pre-existing conditions, or dropping “expensive” patients from coverage. However one feels about the moral aspects of such practices, new mandates restricting these insurancecompany operating rules are not likely to lower the cost of insurance to the general public.

Meanwhile, the largest revenueraiser proposed by both Houses of Congress is to eliminate “waste, fraud, and abuse” from Medicare, which the Congress estimates would save approximately $500 billion over the ten-year planning cycle. If this cost cutting were possible, one wonders why such measures have not already been taken. More telling, however, is a comment from someone who was involved in a similar legislative process during the Clinton administration.

In a recent television appearance, Lawrence O’Donnell, who during the last healthcare reform effort, in 1994, was Senate Finance Committee Chairman Daniel P. Moynihan’s Chief of Staff, admitted that when the Finance Committee ran out of revenueraising ideas, they simply asserted without any analytical basis that the remainder of savings would come from eliminating “waste, fraud, and abuse” — leaving the operational details of that admonition vague. If the the current bill’s elusive $500 billion in savings is not found, either taxes or the deficit will be increased. But, that will happen slowly over the next decade, and therefore without much notice.

The greatest concern for smaller manufacturers ought to be a House proposal to raise revenue by increasing taxes on individuals making $250,000 and above. If no exception is granted to small businesses, those taxes also will fall on S Corporations, partnerships, sole proprietorships, and other pass-through entities that file individual income taxes. Add to that possibilty the proposed eight-percent payroll tax penalty for not offering health insurance, and many smaller companies are unlikely to survive the new revenue structure envisioned by Congress to fund healthcare reform.

At this writing healthcare reform is still a work in progress. But, it is legislation that bears close watching because it could have profound effects both on the competitiveness of U.S. companies and the fiscal health of our nation.

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