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Healthcare spending: An alternative

July 30, 2009

Watching Hannity’s Great American Panel tonight, Juan Williams said that he believes many Americans would be willing to make “the necessary sacrifices” if it meant lowering the cost of health care. Specifically, he was responding to Paul Krugman’s assertion in the NY Times that a “Value Added Tax” or VAT, is in our future.

First off, Williams’ argument can’t get out of its own way. If we’re lowering the cost of health care, why should Americans have to sacrifice more money? I’ve yet to have anyone explain to me how a plan spending Trillions of dollars in the near future is a cost saving plan. VAT taxes are, like most liberal inventions, the opposite of what they sound like. Instead of adding value to products, they add to PRICE of products. We’d basically be looking at a national sales tax on top of our existing taxes. Does it really help Americans to “lower the cost of health care” by making them pay more for a loaf of bread or a gallon of gas?

But I was intrigued and inspired by Juan’s main point. He thinks that Americans would be willing to pay more to provide a safety net. And I have some friends who agree with him. They say they’d be willing to pay higher taxes in order to provide the necessary welfare for those in need. I say, let’s put it to the test.

It’s simple. People can opt in or out of the government plan. By opting in, they agree to sacrifice for those who need help, and are also eligible for that help. By opting out, you’re not required to pay for individual services, but you’re also not eligible for those services.   That means no medicare, no medicaid, no social security, no government housing, no government cheese. You would still pay a modest tax to cover community infrastructure and defense, but you would receive no individual benefits from government. What would people choose? Sadly, I think many Americans would in fact choose to buy the safety net. Of course, no matter how many people opt in, the safety net will fail, because people will consume more benefits than they pay in. Such is the lesson of Plymouth colony, of the Hawaiian children’s insurance program, of California, of Massachusetts.

And what would happen to the people who opt out? Without all of the government withholding, they would receive a 50% raise. In addition to having more money available to save for emergencies, they would be able to afford their own insurance. And doctors, who are already starting to avoid Medicare patients, would be eager to serve them.

There’s one HUGE problem with such a plan, and it’s massive enough to render the concept unworkable. When would people choose? Because we’re not all starting from the same point, it would be very difficult to set up an equitable system. If you’ve got a great job, you’d probably opt out. If you’re jobless, you’d opt in. Older people might opt in, because they’ll use more benefits than they’d have to pay in.

So, as much as I’d like to see it, the safety-net option will never be given to us as a choice. But it’d make a GREAT game show. Again, the Plymouth colony points the way. You could have 2 small towns. Say, 20 people each. One town is set up communally, and the other is set up with no sharing at all. Which one would succeed? It would be Survivor Economics.

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