The federal debt exploded last year. Between a battered economy and trillions in stimulus spending, it will take years to shrink the debt back to a manageable size. In the meantime, the Bold Centrist still wants to fix this country. The challenge is how to fund the repair job without adding to the public debt.
Short answer: increase US tax revenues from almost a quarter of GDP to a third of GDP. That’s close to what Canada and the UK collect and is well below the average take for developed countries, e.g. Germany (38.8% of GDP), France (45.4%), and Denmark (46.3%). How much extra money would such an increase in tax revenues yield if applied to the 2020 US GDP of $21 trillion? Almost $2 trillion a year*. I’ll take it.
I’m going to assume an annual budget of $2 trillion (inflation-adjusted) of additional federal spending to tackle six problem areas: healthcare, infrastructure, poverty, social mobility, housing, and threats to the biosphere.
Let’s start with healthcare. The challenge is to come up with a high-quality, affordable universal healthcare system that doesn’t eat up my budget. Easy - the The Urban Institute has done most of the work already, in their 2019 analysis, “From Incremental to Comprehensive Health Reform: How Various Reform Options Compare on Coverage and Costs”. Reform Option 5, aka the Enhanced ACA Coverage with Public Option, pretty much does the trick. Here are some features:
Improves the current premium and cost-sharing subsidies under the Affordable Care Act (ACA) and adds a reinsurance program for the individual market to protect insurers against very high claims.
Restores the ACA’s individual mandate penalty and reversal of the Trump administration’s expansion of short-term, limited-duration plans.
Closes the Medicaid eligibility gap for adults with very low incomes in states that have not expanded their Medicaid program.
Introduces a limited autoenrollment mechanism for most people receiving benefits from the Temporary Assistance for Needy Families (TANF) or Supplemental Nutrition Assistance Program (SNAP) programs.
Caps provider payment rates in private nongroup insurance plans.
Enables workers to opt for subsidized nongroup coverage instead of their employer’s insurance plan and introducing a mechanism through which all legal U.S. residents are deemed insured.
Includes a public option for the nongroup market.
Per the Urban Institute’s analysis, just $108 Billion in additional annual revenue is needed for their proposed reform: a drop in the $2 trillion bucket. But even this reform option leaves a lot of waste in the US healthcare system. A 2019 JAMA study found that roughly $1 out of every $4 spent on health care in the U.S. annually is being wasted. Given that U.S. health care spending reached $3.8 trillion in 2019, that’s almost $1 trillion of unnecessary spending. Here’s a summary of where the wasted money goes:
Overuse of Medications (e.g., antibiotics)
Overuse of Screening Tests (e.g., colonoscopies)
Overuse of Diagnostic Tests (e.g., endoscopies)
Overuse of Therapeutic Procedures (e.g., cardiovascular, knee replacements)
Overuse of Aggressive Care for Dying Patients
Failures of Care Coordination
Administrative Complexity
Fee-for-Service Incentives
Defensive Medicine
Overuse of Specialists (insufficient gatekeeping)
Underuse of Primary Care Nurse Practitioners
Plus an estimated 10% of Medicare/Medicaid is lost to fraud, a much higher rate than what’s found with private insurers. Why so much fraud? Partly because the Medicare billing system is easy to game (see, for instance, “upcoding” and “inflated risk scores”) and partly because Medicare doesn’t require preauthorization as a condition of payment for medical services and items.
I refer you to an earlier post for a list of reforms that could cut US healthcare spending by almost a trillion dollars a year, with no reduction in quality of care. But even if just half these reforms were implemented, that’s still a substantial savings. And it would mean the US could get to universal healthcare and save money in the process. Think about it: the US could have a healthcare system where everyone is covered and everyone’s paying less.
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* $7 trillion (33.3% of GDP) minus $5.1 trillion (24.5% of GDP) = $1.9 trillion.
Links and References:
Berwick DM, Hackbarth AD. Eliminating waste in US health care. JAMA. 2012; 307 (14):1513–1516. DOI: 10.1001/jama.2012.362
Blumberg, Linda J. et al “From Incremental to Comprehensive Health Reform: How Various Reform Options Compare on Coverage and Costs” The Urban Institute October 16, 2019
Brownlee, S., Chalkidou, K., Doust, J., Elshaug, A. G., Glasziou, P., Heath, I., Nagpal, S., Saini, V., Srivastava, D., Chalmers, K., … Korenstein, D. (2017). Evidence for overuse of medical services around the world. Lancet (London, England), 390(10090), 156-168. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5708862/
Shrank WH, Rogstad TL, Parekh N. Waste in the US Health Care System: Estimated Costs and Potential for Savings JAMA. Published online October 07, 2019.