In closed sessions, a handful of U.S. Senators are working on a revised plan to repeal and replace the Affordable Care Act. The nation’s entire population has a stake in the outcome of the process that is ongoing in the Senate and, therefore, everyone has an interest in open debate about the specific items under discussion. Nevertheless, only thirteen (13%) percent of the nation’s senators – members of the least democratic (lower-case “d”) institution in our government – are working in private meetings, avoiding debate and refusing to disclose the details of their work.
Our American experiment thrives only if we are prepared to engage in open debate and to participate in interest-based negotiations, but the primary mission of Mitch McConnell and others, in the context of healthcare reform, is apparently to avoid open debate and to prevent interest-based negotiations. Why the secrecy?
Most Americans are concerned about the rising costs of healthcare, and many erroneously believe that these rising costs are a direct result of provisions in the Affordable Care Act (ACA). In a letter that I received last month, my Congressman addressed this erroneous belief:
Reports that the ACA alone has increased private healthcare costs are false. Insurance premiums were already on the rise, and annual increases of 8% before the ACA have been reduced to 5% — the average family would now be paying $3,600 more on their premium if not for the Affordable Care Act.
The ACA has had the effect of putting some downward pressure on healthcare costs by imposing new standards on insurers. However, the ACA does not directly address the other major drivers of costs: (1) hospital profits; (2) pharmaceutical company profits; and (3) medical device manufacturers’ profits.
Addressing these three drivers directly would require a great deal of political courage or, at least, more courage than is readily apparent on Capitol Hill. So, despite the great potential for cost reduction in healthcare, most of the debate to date has involved a different question: WHO PAYS? By channeling their debate in this way, lawmakers perpetuate the erroneous belief mentioned above – that rising costs are a direct result of provisions of the ACA. From here, it is only a short step to false narratives that connect rising costs to subsidies benefiting the less-deserving among us – those who do not look or think like us, or who do not live where we live. Among various constituencies, emotions heat up, and rational discussion ceases, because so many folks think of “subsidies” as something that benefits others, and not themselves.
When you file your tax returns, and you claim a deduction from your gross income, you are claiming an indirect subsidy from the U.S. Treasury. So, for example, if you are in the 28% tax bracket, and you claim a deduction for $10,000 in mortgage interest paid, you are permitted to keep $2,800 that you would otherwise owe to the IRS. To look at it another way, the U.S. Treasury has helped with your mortgage interest payment. Indirect subsidies, like the mortgage-interest deduction, are meant to incentivize behavior that the government seeks to promote. In the case of this particular deduction, the desired outcome is more home ownership by more Americans. The bizarre element, applicable to all tax deductions, is that those with the highest income receive the largest subsidy.
Health insurance premiums work in essentially the same way, for tax purposes. If you are fortunate enough to have a salaried position with a company, and you receive health insurance coverage through your employer, the cost of those premiums is excluded from your gross income. In other words, you are receiving an indirect subsidy, from the U.S. Treasury, for your health insurance premiums. As your income rises, your subsidy increases. So, if you are a taxpayer with enough annual income to itemize deductions on your tax return, you may well be realizing more benefits from the U.S. Treasury than those who buy subsidized insurance on exchanges set up under the ACA.
CHANGE OF FOCUS
The ACA was enacted with three objectives in mind: (1) insure more Americans; (2) improve the efficiency of health care; and (3) reduce health care costs. The law has been reasonably successful in meeting the first two objectives. Sooner or later, Congress will need to tackle costs. This cannot be accomplished in a conversation over who pays.