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Monday, October 29, 2007

A universal health care program?

In Iowa, former North Carolina Senator John Edwards stated that he has a plan to create a universal health care program, funded by the federal government, to bring health care to every American citizen if elected president. This plan was explained after he said rural areas were the hardest hit in the country for inflated prices to insurance companies. The article stated, "The average overpayment for the Medicare Advantage plan in Iowa is 24% ," which prompted Edwards to say that the excess federal subsidies to private HMOs should be eliminated.

Edwards universal plan might insure that low-income individuals and rural seniors would have immediate access to health care, but could not provide a figure on how much these individuals would save from this plan. The plan itself would work like "'health care markets,'" which would be operated by the government, and be based on what region the individual lived in. In these "markets," people could be assisted in selecting the best plan for the person, whether private insurance or government. The estimated costs might only be about $90-120 billion which would come from the taxes applied to the people making more than $200,000 (Edwards would repeal the tax cut President Bush placed on these citizens). Edwards stated that he would issue an ultimatum to congress if elected to, "'Bring health care to all Americans by July of 2009 or risk losing federally funded health care.'"

In my opinion, the argument presented in the news article did not appear economically sound. One, if only one state was having a problem, why does the current system needed to be reworked for the other 49 states? Two, if everyone were to be insured, either by private insurance companies or the government, there would be two main issues. The first issue would be that there might be an increase in insurance rates to help spread the risk around and so that the companies could still make a profit. If the companies, which are businesses at heart, have to accept "more risky" people because of a presidential decree, the cost for that firm will likely increase. This increase in cost would decrease the supply of insurance available. The firm then has two options: either leave the market or increase the price of the plan. For example, if the costs have increased then to remain at a profit or "break-even" stage, rates for those individuals and all others would likely have to increase to balance the increased demand. This would shift the graph back into equilibrium between the supply and demand.

The second issue was the funding for the government-run health care program. As mentioned before, Edwards would repeal the tax cut to pay the program. Wouldn't this be just a transfer of the tax burden onto these other individuals and not solve the issue at hand? Another problem with this idea for funding was if those individuals knew that this tax cut would disappear, this might discourage them from making the $200,000 income because they might then have to pay more in taxes and their own insurance. If this were to happen, the economy would be worse off overall and the program would experience a decrease in the funding needed for the annual health care budget. Once the program was implemented it might not be easy to change or create another, so the income source would have to come from somewhere else, such as the average tax payer. While the idea of a universal health care program sounds nice, it might not benefit those it was targeting and the people and the insurance businesses would not be better off. At most the plan could do is increase the amount of money one would have to give up to obtain the same or less amount of benefits as they get today.

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