Columns » Warwick Sabin

Held back by health care

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I was in a meeting about higher education when I finally realized just how destructive our health care system is. Some representatives from the University of Arkansas had dropped by to discuss a new report that contains recommendations for how to improve the state’s approach to higher education. Of course, they advocate devoting more public money to colleges and universities. The problem is that, even if legislators are sympathetic to the cause, they have few options for steering money in one direction or another. Most of the money in the state budget is earmarked for certain mandatory expenditures, leaving few resources available for other purposes. Of those non-discretionary budget items, Medicaid stands out. The program, which guarantees health care services to low-income citizens, is administered by the state, although the federal government pays for 75 percent of the costs. Even so, Medicaid absorbs a substantial amount of state tax dollars. Total Medicaid costs in Arkansas represent about 20 percent of the overall state budget. In 2004, our state spent more than $3 billion on Medicaid. About $2.4 billion of that came from the federal match, but the rest — almost a billion dollars — came from general revenue funds and the proceeds from the soft drink tax. Needless to say, the costs of Medicaid are increasing. The budget estimates for the next biennium contain much higher allocations for the program from the state general revenue fund: $557.3 million in 2006, and $670 million in 2007. And now President Bush is proposing to cut $60 billion from the federal contribution to Medicaid. This would shift a greater burden to our state budget, so that even less money would be available for other state priorities, like education, infrastructure improvement, and economic development. Put simply, Medicaid obligations are impeding our progress, and could keep us a poor state. After all, with such a high percentage of poor people, Arkansas already spends a significant proportion of its budget on Medicaid. As that drains money away from developing the very things that can lift people out of poverty, a vicious cycle develops. Nevertheless, solving the problem doesn’t require reducing health care services for poor people. On the contrary, our current predicament should lead people to finally demand the obvious solution: a national health insurance system guaranteeing coverage for all. Some people automatically recoil from the idea of national health insurance, as a result of the political Waterloo suffered by the Clinton administration when it offered a plan in 1993. But think about how things stand today. If you work, a percentage of your salary is deducted from your paycheck specifically to pay for the federal portion of Medicaid (not to mention Medicare, which provides health coverage for the elderly). In addition, your state taxes end up funding a large part of Medicaid’s administration in Arkansas. On top of that, if you have health insurance, your premiums are unnaturally high, because you are already subsidizing the people who do not have insurance. A front-page article in this week’s edition of Arkansas Business leads with the story of an uninsured woman whose $14,400 hospital bill that had to be written off, because she couldn’t pay it. How do you think the hospital covers those kinds of losses? Answer: By raising its overall rates. And that makes health insurance more expensive. So, in the end, people who work and have health insurance — mostly the American middle class — already bear most of the costs of our flawed health care system. In fact, they pay in three different ways: taxes, higher health insurance premiums, and reduced public investment in education, job growth, and other important areas. At least with some kind of national health insurance system, the enormous membership pool in theory could stabilize health care costs and reduce individual premiums. Plus the bureaucracy could be streamlined, so in a sense everyone would be paying a flat rate, instead of being taxed several times and then anteing up more on top of that. Workers and the wealthy would still be subsidizing the health care of low-income citizens, but in a much more progressive and efficient way. Best of all, poor states like Arkansas would be able to spend their limited tax revenues on programs to further enhance life for all of their citizens, instead of being held back in the course of barely providing for the basic health care of the least fortunate. In that way, the disadvantaged would have more opportunities to improve their station in life, and could arrive more quickly at the point where they no longer have to be subsidized. If that happens, a national health insurance system would eventually pay for itself.

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