Extending Tax Cuts for the Wealthiest While Repealing Healthcare Law – A Morally Untenable Agenda

Are we really willing, as a country, to assign a higher value to tax cuts for the wealthiest during economically difficult times than preventing the unnecessary loss of tens of thousands of American lives each year?

Since taking back the House, the Republican leadership has discussed two of their priorities; extending the Bush tax cuts to all income classes including the wealthiest and repealing the healthcare law (or at least impeding its implementation through funding denial in the near term while seeking to oust the president) (ref).  Extending tax cuts to the wealthiest, the class who least needs the benefit during these difficult economic times, would be funded by borrowing money at a time when the public is demanding deficit reduction.  The healthcare law is projected to reduce deficits and prevents the loss of tens of thousands of American lives each year due to lack of insurance coverage.

The simultaneous declaration of these two priorities raises a serious moral issue not only for the Republican Party, but for our country as well.  Without reasonable justification, a higher value is being assigned to providing benefits for the wealthiest than preventing the unnecessary loss of American lives.  This is no small matter.  It defines our values and is a statement of our national conscience.  It should be a concern to every American, regardless of party affiliation.

The Healthcare Law

Difficult to Explain, Therefore Easy to Spin

What the law does is complicated, basically because our healthcare system is, and its benefits do not fit nicely on a bumper sticker as Peter Orszag has said.  For that reason the law is easy prey for spin and distortion.

Death panels, a soundbite scare tactic, never existed in the legislation although an argument can be made that such panels existed in the healthcare system prior to reform; coverage could be denied or pulled from those who needed it, and citizens, as they grew older and were at greater risk of developing serious illness, could be forced to either cut back on benefits or get priced out of the market due to escalating premiums.

The fears that the law cuts back on the amount of medical care seniors will receive on Medicare is spin on one of its cost containment measures that targets key drivers of expense, such as chronic conditions, and rewards quality of practice over quantity – for example, penalties exist for hospitals with high rates of readmission and hospital-acquired infections.  This initiative is ‘winning the support of corporate leaders, consumer groups, doctors and health care experts across the political spectrum’ (ref) – and there is interest in spreading this initiative to all patients.

The law also recognizes that reform is not a one time affair but rather an evolving process, as it should be for something as complicated as this, and an Innovation Center has been created to continually explore new strategies.  For those who wish to be better informed in the face of much political maneuvering, I provide links to articles that summarize the law and how it works (ref) (ref) (ref).

Two reasons being used in support of repealing the law are cost and the individual mandate.  Both are addressed below.

The Healthcare Law Saves Money While Expanding Coverage

One element of spin, and thus public concern, has been cost.  Senate minority leader, Mitch McConnell, has even recently used the phrase, ‘health spending bill’ to frame the law (ref).  And the spin has been effective as a poll published in April of this year showed that 60% of America believes the healthcare law will increase the deficit (ref), a key concern for voters this past election whose confidence in the law has been eroded.  Fact is, the law saves money.

The non-partisan referee in this debate, the Congressional Budget Office (CBO), has published that the healthcare law will reduce our deficit by $138 billion in its first 10 years and by $1.2 trillion in the second ten years (an amount that is felt to be conservative based on estimates of GDP growth) (ref).  Additionally, in an August 24, 2010 letter issued to Senator Mike Crapo (R-ID), ranking member of the Senate Finance Subcommittee on Healthcare, CBO estimates that repealing the healthcare law would increase the deficit by $455 billion over the next 10 years (ref).

Peter Orszag, director of White House Office of Management and Budget (OMB) from 2009-2010, is also on record that the health care law “would cut the nation’s long-term fiscal imbalance by a quarter and reduce the projected deficit with Medicare by three-quarters…as long as Congress sticks to its guns and the Obama administration does a good job carrying out the provisions of the law” (ref).

Opponents, such as  Representative Paul Ryan (R-WI), claim that the savings are financial gimmickry; again, easy to say but tougher to debunk as has been done on a point by point basis (ref).  But the public is more easily swayed by simple soundbites than explanations of a complex matter and the spin has been effective in undermining public confidence.

All political posturing aside, both CBO and OMB project that the healthcare law will reduce deficits, and reduce them substantially over the next 20 years while expanding coverage to over 30 million previously uninsured Americans (ref), including 15 million women who are currently uninsured and another 14.5 million women who will benefit from the improved coverage or reduced premiums under the law (ref).

However, if cost saving measures of this law go unfunded, as has been threatened, such a tactic could derail the benefit at the expense of driving up our deficits.

The Mandate Has Been a Republican Idea

One of the key Republican objections to the law is the individual mandate that has been positioned as being unconstitutional and an infringement on individual liberties.  An interesting tactic since the individual mandate actually started as a Republican idea (ref).  Conservatives who now oppose the individual mandate as part of the healthcare law were not long ago proposing it (ref).  Republicans, including John McCain, Tommy Thompson, Mitt Romney, Bill Frist, Orrin Hatch, Charles Grassley, Robert Bennett, and Chris Bond have all been cited as supporting this concept in the past.

In a September 28, 2009 article published in US News and World Report entitled ‘An Individual Mandate for Health Insurance Would Benefit All” (ref), Bill Frist, (a Tennessee Republican, a heart surgeon, and  former US Senate majority leader) made the case for the necessity of a public mandate on a national level, although beginning in a more limited manner with catastrophic coverage, on three issues: fairness, elimination of wasteful cost shifting, and reducing adverse selection including the problem of ‘free riders’ and the ‘voluntarily uninsured’ who do not purchase insurance but pass the cost of their emergency room care onto other policy holders.  All good points.

The Massachusetts Health Care Insurance Reform Law, enacted in 2006 by then Governor Mitt Romney, a leading Republican contender for the 2012 presidential run, includes tax penalties for those who fail to obtain an insurance plan (ref).  We have the opportunity to learn from this prototype of our current law and improve upon it.  With both the ‘public option’ and buy-in to Medicare down to age 55 taken off the table during the Senate debate, the mandate was a concept that actually had some level of appeal on both sides of the aisle.

On October 7th of this year, a Michigan Judge threw out a challenge to the healthcare law’s individual mandate that was argued to be “an unprecedented encroachment on the liberty” of US citizens (ref).

As with any large and complicated program it is not possible to get a 100% perfect plan in place up front and the road forward is never without challenges.  A saying I used in business is a play on a Voltaire quote: perfection is the enemy of completion.  Once a plan has been debated and put into place, problem solving during its execution is an integral part of success.  I have had to do this many times in overseeing complex long-term projects, some being international, during my career.  Teams lacking commitment fail; committed teams make wondrous things happen.  If we approach the improvement of our healthcare system as a process, as we have our Constitution through amendment, a more perfect system will be achieved.

It is time the objections about the mandate as a starting point be taken off the table.

Tens of Thousands of American Lives are Lost Each Year Due To a Lack of Coverage

A study published last year out of Harvard Medical School revealed the obvious; that access to essential care saves lives (ref) (ref).  The study estimated that up to 45,000 American citizens are dying each year because they are uninsured.  That toll was greater than the number of people who die each year from kidney disease.  Those without health insurance had a 40% higher risk of death than those with private health insurance.  That risk was increased from a previous study in 1993 where those without insurance had a 25% greater chance of dying – the increase likely attributable to public hospitals having closed or cut back on services and improved medical care for people with chronic treatable conditions.

A second study (ref) published in 2009 revealed 1.46 million working age military veterans lacked health coverage that resulted in an estimated 2,200 of them losing their lives, six of them every day (ref).  That number of deaths was, at the time, more than 14 times the number of deaths (155) suffered by US troops in Afghanistan in 2008, and more than twice as many that died (911) since the war started in 2001.

Bottom line, lack of insurance coverage is claiming tens of thousands of US lives each year, including our working age vets.

Tax Cut Policy Heavily Favoring the Wealthiest Did Not Live Up to its Promise of Paying for Itself

Supply-side tax cut policy, with the benefit heavily weighted to wealthiest, has simply not lived up to its promise to pay for itself by stimulating the economy and job creation but has substantially driven up our national debt.

There is no evidence that the policy stimulated GDP growth and it actually underperformed periods where progressive tax policy was in place regarding both job creation and real non-residential investment.  Additionally, with the intent of the benefit to the wealthiest being to stimulate investment (which did not occur), there is no control over where wealthy investors place this benefit; it leaked abroad into high growth emerging markets following 2001, sometimes back to where we borrowed from to support the benefit.  Good for the wealthy, ‘Wall Street’ and foreign economies; but not so good for America and our future generations who inherit the debt for this exercise. To avoid redundancy, I refer you to two articles I recently posted on these issues that provide detail of the above points and more (ref) (ref).

During these economically difficult times, we should demand that the defense of extending the tax cuts to the wealthiest be supported by specific evidence of benefit, and that has not been done.

The current proposal being discussed to let the tax cuts expire only for those with taxable income exceeding $1 million might be a compromise that the two sides can come together on.  Whether Republican leadership accepts this proposal, however, should be watched closely as it would conflict with special interests who heavily supported their party in the recent mid-term elections.  It has been reported that a small circle of extremely wealthy Wall Street hedge fund and private equity moguls contributed a substantial portion of Crossroads GPS’ money; donors who bitterly opposed tax increases on compensation that hedge funds pay their partners (ref).

Discussion

The pursuit of borrowing money to support tax cuts for the wealthiest while at the same time seeking to repeal law that prevents the unnecessary loss of thousands of American lives each year and reduces deficits presents a morally untenable position for both the Republican Party and our country.  The message this agenda sends is a reflection of our national conscience and values.  It is a reflection of values that I believe no American should be proud.

Our citizens are required by law to pay taxes to not only support our national agenda (including by far the largest military budget in the world – ref) but the government run benefits programs of our legislators as well (ref).  Our vets put their lives on the line for this country.  But if these contributing citizens and working age vets develop serious health problems and do not have the means or are denied coverage, the result can be bankruptcy or death, and indeed thousands are dying each year.  No other Western industrialized democracy permits this to happen.

When we assign a higher value to extending benefits to the wealthiest than preventing the unnecessary loss of American lives, we should all, regardless of party affiliation, pause and take a hard look at what that agenda says about our values.