Sam Uretsky

News Flash: Tax Cuts Cost Money

Ain't fiscal responsibility great? A tax cut that you didn't get cost a child her future, and you paid almost $1,000 for it. Unless, of course, the child was yours, which is increasingly possible these days, in which case the price you paid may be incalculably higher.

In 2001, President Bush pushed through his package of tax cuts, which we could well afford, because the nation was running a surplus, and it was only fair to give the money back. It's true that most of the money went to the wealthy, but that was only fair because the wealthy pay most of the taxes. So, according to Citizens For Tax Justice, the median tax payer saved about $600 a year. For the 78 million taxpayers in the lowest 60% of the income scale, the tax cut averaged $347 a year. But, for those with an average income of $1,117,000, the tax cuts came to an average of slightly over $53,000 each year. The real-life savings may have been even higher, because President Bush has said that the rich hire lawyers to find ways to avoid paying taxes. With this system, you don't have to hire a lawyer, you just buy a politician. They're cheaper.

Unfortunately, the Bush tax cuts, the undeclared war in Iraq, and the political process in general, which follows the words of Ecclesiastes, "Cast thy bread upon the waters, for thou shalt find it in the next budget appropriations bill," resulted in a record deficits. That led to the Deficit Reduction Act of 2005 which tried to make up for the budget shortfall by cutting Medicare, Medicaid and education, and stripped 65,000 people, most of them children, of their health insurance.

Which would mean that children (who can't vote) and the poor (who tend not to vote proportionately to their numbers) are paying the bill for the tax cuts for the rich, who not only vote, but give campaign funds to convince everybody else to vote for the politicians who give tax cuts to the rich. Except that in May, Primara Blue Cross, which provides health insurance in Washington State, released a study which indicates that low reimbursement by Medicare and Medicaid, the public health programs, is forcing up the prices for private insurers.

The study, conducted by Milliman Consultants and Actuaries, estimated that in 2004, hospitals in Washington State charged an additional $738 million to private payers to make up for Medicare and Medicaid underpayments. Physicians shifted $620 million from Medicare and Medicaid billings to private insurers.

A similar Milliman study in California estimated that in 2004, the shift of costs from Medicare and Medicaid to private insurers amounted to $4.5 billion. The shift in costs from public to private payers has been estimated at over $900 per year for each policy.

To recapitulate -- the rich get tax cuts, which they pay for by taking health care away from the elderly and poor, which shifts the cost to the private insurers -- so that you can't blame your insurance company for the high price you have to pay.

Only it doesn't stop there. While Medicare and Medicaid do have low reimbursement rates, which is bad, they also have low administrative costs, which is very very good. In contrast, private insurers have high administrative costs, and in many cases operate at a profit. The California Healthcare Foundation reports that HMO profits rose from $640 million in 1996 to $2.7 billion in 2005.

Also, while insurance companies are cutting reimbursement rates and raising co-pays and deductibles, they are paying their top executives multi-million dollar salaries. In 2000, William McGuire, CEO of UnitedHealth Group, received a reported: $54.1 million exclusive of stock options. His unexercised stock options at the time came to about $358 million, and now hold an estimated $1.6 billion in unexercised options. In 2002, the average for the top earners for the top 11 HMOs, not including stock options, was $15,122,076. Including stock options they averaged $67,707, 013.

By way of contrast, in 2002, the Secretary of the Department of Health and Human Services was paid $166,700, and the administrator of the Centers for Medicare and Medicaid Services was paid $130,000. Neither one got stock options.

So let's see. The HMO executives got a tax cut, which was paid for by taking away health insurance from poor children and paying less money to hospitals, physicians and nurses, who had to make up the expenses by getting more money from HMOs, who passed along the increase in the form of higher premiums and deductibles, which increased their profits, so that the executives were awarded higher salaries and more stock options. It's that simple.

The whole system is a mess. It is beyond repair. And while President Bush made an effort to introduce health-care savings accounts into the mix, that's not the answer. What we need is a government that will ignore the $36,142,743 that the insurance industry gave in political contributions in 2004 (68% to Republicans) and come up with a health-care system that works. This one makes no sense at all.

Sam Uretsky is a writer and pharmacist living on Long Island, N.Y.

From The Progressive Populist, July 1, 2006

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