HEALTH CARE/Joan Retsinas

Proposed: A Health-to-Income Ratio

Let’s concoct an ideal “health-to-income” ratio. Amidst the flurry of “replacement” options, with their promises of “access,” “health savings accounts,” and “freedom to choose,” we desperately need such a ratio, as a guide-stick before we plunge into the thicket of Darwinian conservatism.

Briefly, how much should the “typical American family,” beloved by politicians, be expected to pay for health care? Not just the insurance premiums, but the co-payments, deductibles, and the excluded services.

For housing, bureaucrats use a 30% tab: a household should, in the best of all worlds, pay no more than 30% of income for rent. Federal subsidies use that percentage. (Most low-income Americans pay more). For homebuyers, mortgage-lenders similarly use guidelines that hover around 30%.

Let’s do the same for healthcare. That index would put subsidies into fairer consideration, beyond the rhetorical bombast.

To construct the index, first, consider the costs of an annual premium. Get Aetna, Humana, Blue Cross to come up with a target figure, one that considers the “pool” of all enrollees. (This calculation lets the healthy millenials continue to opt out – “mandating” enrollment is anathema in this Darwinian world). Exclude government or employee subsidies from the calculation. That means excluding the payments on employer bottom lines: employees typically pay only a fraction of the premium-cost. Exclude too Medicaid subsidies, Department of Defense subsidies, and of course all the Affordable Care Act subsidies.

In short, construct a “pure” premium cost. Since the insurance companies are for-profit entities, this number includes not just the costs-of-care, but the hefty salaries, as well as the optimistically hefty returns to shareholders. (This “pure” statistic applies only to the under-age 65 population; older Americans, including the permanently disabled, come under the nonprofit government-subsidized Medicare, where honchos earn government-set salaries).

Now include the deductibles, co-payments, and payments for items that are generally excluded, in today’s comprehensive policies, to give a clearer “pure” figure.

Take that as the total. Is it $10,000? $12,000? More?

You can fiddle with the numbers. You could lower the premiums by reducing benefits (like mental health, contraception, and dental care), but that will raise the costs for those “excluded” services when families need them. Raising co-payments might discourage enrollees from seeking primary care, from filling prescriptions: both short-term savings might cost the family more eventually.

You could also pay hospitals, nursing homes, physicians, and pharmaceutical companies less. But insurers have been bargaining down those costs; indeed, some physicians reject Medicaid patients, citing the low reimbursement.

Take that final figure as plausible.

Now ask: How much do we expect people to allocate for healthcare? Consider a family with two adults, two children, earning $50,000 annually. Can that family pay $12,000 for healthcare — 24% of income? If the family already pays 30% of income for housing, the family is hard-pressed to survive. What member of Congress could live on $23,000 a year?

What is the ideal ratio? Once you determine that, calculate the subsidies needed to bring people to that threshold.

“Subsidies” are a grim word for conservatives; but the federal government already subsidizes food, housing, income, and healthcare. Without those subsidies, many Americans would be living like workers in the developing world – the people who make our cars, our computers, our stuff.

The challenge for this Administration is to find subsidies that won’t cost much, yet will truly help – a chimera. What can the solons in Washington (who get their insurance courtesy of us, the electorate, but who refuse to open that system to us) expect the family to pay? The Affordable Care Act calculated that tab into their income-based subsidies (critics have said that the subsidies were insufficient, they amounted to Ford subsidies for Mercedes policies).

To date, this Administration has proposed meager subsidies.

The Administration, for instance, wants to cut Medicaid subsidies, giving states block grants, which would translate into tighter eligibility requirements, co-payments (the highlight of then-Gov. Mike Pence’s Indiana plan) and reduced benefits. Yet how much more can we expect the poor to pay for healthcare?

Health savings accounts can help upper-income families. What impact would the accounts have on the health-to-income ratio of middle-income families? $5,000 stashed in a HSA wouldn’t pay for an appendectomy.

Ditto for tax credits: they do not help the swathe of the population that pays minimal income taxes (but does pay regressive sales taxes). We could have refundable tax credits, like the earned-income tax credits. The question, though, remains: what impact would that have on hard-pressed families’ health-to-income ratio?

As a corollary, how distressed do we want those families to be?

Where do these solons in Washington want families to cut? To pay for healthcare, should families take money from housing? Food? Transportation? This Administration already plans to cut those subsidies. Should families simply spurn those “accessible” policies? To forego healthcare entirely? The Darwinian world hovers.

Joan Retsinas is a sociologist who writes about health care in Providence, R.I. Email

From The Progressive Populist, April 15, 2017

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