Healthcare is Sick

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Fiscal benefits of health care reform

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The House of Representatives barely passed a health care reform bill late Saturday night by a 220-215 vote.  The bill would extend health care to 36 million uninsured, covering about 96 percent of the population, and forbid insurance companies from denying care based on a pre-existing condition.

Conservatives from both parties opposed the bill’s cost and the public option it would create.  A statement by the Republican National Committee said the bill would “increase the deficit, increase taxes on small businesses and the middle class, and cut Medicare.”

This statement does not reflect reality however.  The bill would levy a 5.4 percent tax on married couples earning more than $1 million a year or individuals making more than $500,000 a year to avoid raising taxes on the middle class.  Also, the Congressional Budget Office estimates the bill would reduce the budget deficit by about $100 billion over 10 years.

Health care reform would also mean higher wages, as Ezra Klein recently explained on his Washington Post blog.  If reform tamed premium increases, companies would transfer the saved money to wages.  Klein said there is a stronger connection between health-care costs and median wages than economic growth and median wages.  When health care costs go up, wages go down, as the chart below shows.

He cites two studies: one reported “about two-thirds of the premium increase is financed out of cash wages and the remaining one-thirds is financed by a reduction in benefits”, while the other said a 10 percent increase in premiums “results in an offsetting decrease in wages of 2.3 percent.”


A chart from Ezra Klein’s blog –



Written by Chris Russell

November 11, 2009 at 11:39 pm

Posted in Uncategorized

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