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Thursday, June 18, 2009

THE US HEALTH SYSTEM AND THE US TAX SYSTEM: WOULD WE WANT AN EU-LIKE STATE HEALTH SYSTEM IF IT REQUIRED AN EU-LIKE REGRESSIVE TAX SYSTEM?

Today's Buggy Post Deals . . .

with a subject treated at length about 11 days ago (June 7th, 2009), only it now links the progressivity of the US tax system to the desires of many in this country to switch to a single-payer state-run health system.   For good or bad, those EU welfare-state systems all entail a much more regressive tax structure than the US's --- which relies heavily on income-and-property taxes, as opposed to the EU's widespread use of a regressive set of consumption taxes --- mainly VAT . . . the value-added-tax. 

As a generally thing, the more advanced the welfare-state in the EU, the more it relies on a regressive set of consumption taxes.  By contrast, as the buggy post found at Economist View today shows --- click here ---- the US tax system turns out to be the most progressive in all of the high-income industrial countries.  Essentially, only liberal and social-democrats on the left and some conservatives on the right would like to switch all the same to such a regressive system. 

For the former left-wing enthusiasts, concealed taxes are a good way to supply large streams of predictable revenue for government spending.  For the right-wing enthusiasts, they hope to cut the burdens of an unusually progressive system . . . with the top 1% of American income-earners paying almost 40% of all federal income-tax.

No Reason for Complacency about Our Health System Follows:

Almost everybody agrees, it's true, that the US system is unusually costly as a percentage of GDP; involves too many non-portable health-insurance plans tied to a specific firm for which people work; and has too many people, about 46 million, who aren't covered by existing insurance-plans. . . for whatever reason, including the choice not to buy a plan even though they have much higher than average income.  (Unfortunately, unless these latter pay the entire medical bill, one way or another the costs get passed onto the rest of us --- such as their using emergency rooms and public clinics).

If there is any health-system in Europe that we'll probably emulate in the end, it's likely to be in a rich country not in the EU --- Switzerland.

What the Swiss government does is require everyone to buy at least a basic health-insurance policy offered by competing private insurers.  If someone ends up paying more than 10% of his income, then the Swiss government subsidizes the difference.  In the meantime, those who want and can afford more have a wide choice.  And even those with a basic insurance policy will have even costly operations covered.

The Upshot?

The Swiss are as healthy as any of the other European populations in the EU ---- and somewhat more healthy than Americans (though we have a more diverse population, ethnically and racially) --- and they get by paying less than 12% of GDP on health care every year. Here's a breakdown of spending as a percentage of GDP for five rich countries (2004, except for Switzerland).

 

              Health-Costs % of GDP 

  1970 2004
 USA

 7/0%

 15.3%
 Canada 7.0%   9.9% 
 Germany 6.2% 10.6%
 Britain 4.5% 8.1%
 Switzerland ? 10.3%

Please Note:

The lengthy buggy analysis left at Economist View is not about the good or bad sides of the US health-care system.  Its does have its virtues compared to the European systems or Canada: very high quality doctors, very innovative medicines and medical procedures, a better record of longevity for certain illnesses, and fairly fast access to specialists.  The system, moreover, isn't just private.  Medicare and Medicaid are government run and rely on taxes mainly. 

What is clear --- as is every instance of much higher government spending in the advanced welfare-state countries of West Europe --- is that we would almost certainly have to overhaul our tax-system and switch to more covert taxes like the EU VAT . . . which is not only highly regressive, but would have t overcome large barriers in American public opinion that block ever increasing government spending as a percentage of GDP.