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Health of Nations

Stop cowering and start taxing.

How quickly times change. Just a few months ago, universal health care was a perfunctory item on the Democratic wish list, more wistful than realistic. But, thanks to John Edwards, Arnold Schwarzenegger, and Wal-Mart--yes, Wal-Mart--a debate over universal health care is suddenly underway. And, to the shock of reformers, they find themselves mulling a previously unimaginable question: Can universal health care actually pass?

Unfortunately, this is where the discussion gets tricky. You can plausibly blame the failure of the last great reform effort, President Clinton's, on any number of factors. But a key impediment, in retrospect, was the widely held perception that the very idea of universal coverage was something foreign and scary. It's "socialism," the critics warned--unaware that the president who probably came closest to signing universal health care legislation was that notorious left-wing symp, Richard Nixon. Alas, history neither deterred the right-wing message machine nor dented the public's wariness of big government. The critics prevailed, and, today, we're still stuck with a dysfunctional health care system.

This season's reformers have already cobbled together genuinely innovative proposals. Whether you're talking about Edwards's plan for an individual mandate or Senator Ron Wyden's idea of junking the employer-based health care system altogether, there are now more than a smattering of serious ideas on the table. But all the novel policy in the world won't make universal coverage happen if the reformers can't shatter the old tropes that conservatives used to destroy the Clinton plan--and will undoubtedly reapply in the next battle. It's time to get rid of those. And the place to start is with taxes.

And, yes, there must be new taxes. In any decent universal health care system, public spending on health care will grow, as taxpayers pick up the cost of insuring the uninsured or--as in a single-payer system--the cost of insuring every single American. This gives the opponents of universal coverage an opportunity to pounce. New taxes mean new financial hardship, they say. And, really, don't you pay enough in taxes already?

But, if public spending on health care grows, then private spending on health care should shrink. Today, the average family insurance policy costs a staggering $11,000 per year. One reason: Private insurance already subsidizes the cost of treating the uninsured, since doctors and hospitals charge paying patients extra to make up for the money they lose on charity care. If government were to start insuring the uninsured directly, then people wouldn't have to pay quite so much for private coverage anymore. And, naturally, if government were to start insuring everybody, then people wouldn't have to pay for private insurance at all.

In other words, raising taxes to finance universal health care isn't tantamount to imposing a new financial burden. It's swapping one burden for another. And there is good reason to believe that, ultimately, the new burden will be smaller. Serious reform schemes have the potential to restrain costs substantially--whether by eliminating administrative waste, bargaining harder on prices, or reducing unproductive profiteering.

In one reform proposal, recently outlined in these pages by Ezekiel J. Emanuel and Victor R. Fuchs, the government could finance a universal voucher system with a value-added tax of 10 to 12 percent ("Vouchsafe," February 19). Yet, even accounting for those higher prices that tax would impose at the checkout counter, Fuchs, who is among the nation's most respected health care economists, predicted that typical Americans would end up better off financially. Among other things, he noted, wages would rise as employers stopped contributing toward employee benefits.

Calculations like these don't even begin to tally the added economic growth that reform might unleash. Among the many failures of our health care system is that it discourages people from changing jobs or starting out on their own by creating a fear of switching coverage or losing coverage altogether. Universal health care would potentially eliminate that damper on entrepreneurship. Indeed, this is the lesson of Scandinavia, where the high taxes that finance welfare states haven't deterred growth--in part, according to the experts, because a secure workforce is more willing to embrace a dynamic, ever-changing economy.

And, if invoking the example of Sweden (or, as is the case, Denmark) sounds suspiciously socialist, then Americans can comfort themselves with the fact that high taxes have been compatible with growth here, too. They need only harken back to the Clinton era--that is, before the Bush tax cuts slashed federal tax rates--when the economy enjoyed one of its strongest growth periods ever.

But it's not just financial benefits that universal health care would bring. It's also peace of mind--the security that comes with knowing your health insurance can never be taken away, no matter what happens to your job or what medical catastrophe befalls you. If you don't think that's worth an awful lot, ask somebody who has had to go without health insurance recently--a group that, according to some studies, accounts for nearly one-third of the entire U.S. population over the course of any two-year period.

Will Americans ever learn to live with higher taxes again? A few prominent politicians seem to think so. Arnold Schwarzenegger has justified the new "fees" to pay for his proposed California health plan by arguing that it's preferable to the "hidden tax" all residents now pay to cover the cost of care for the uninsured. It's a clever formulation that, appropriately, reminds voters of the money they could end up saving under his plan. More courageous, still, is John Edwards. When he unveiled his universal coverage scheme earlier this year, he came right out and acknowledged his plan to pay for it with taxes. The benefit more than outweighed the cost, he said without evasion, as if the concept were self-evident--and firmly in the mainstream of U.S. politics. That's certainly where it belongs.

By The Editors