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Thursday, November 06, 2008

"Extending Health Insurance Can be an Effective Stimulus"

Dean Baker says we should include health care reform as part of the stimulus package:

How Obama can save the US economy, by Dean Baker, Commentary, CIF: ...The country's economic crisis poses substantial dangers but it also presents enormous opportunities. ... Specifically, Obama can take advantage of the current economic crisis ... to jump-start national health insurance. Extending health insurance can be an effective stimulus that will provide an immediate boost to the economy. More importantly, it will provide the same access to healthcare that people in other wealthy countries have long taken for granted. ...

Economists from across the political spectrum are now calling for a large stimulus package ... The consensus is in the range of 2.0-2.5% of GDP, or $300-400bn a year.

This level of agreement among economists is encouraging, but the reality is that it is difficult to spend $300-400bn a year on short notice effectively. There are some no-brainers...: aid to state and local governments, extended unemployment benefits and extra money for food stamps and home heating oil assistance. This is money that will be quickly spent, boosting the economy, while helping those hit hardest by the downturn.

A stimulus should also include increases in infrastructure spending, which will come about by moving plans forward for projects already on the books. There should also be a substantial green component, involving retrofitting homes, businesses and other buildings...

However, after we get through this list, the sum total ... is probably still in the neighborhood of $150bn a year, at best half of the targeted sum. This ... gap ... will be filled by extending healthcare coverage.

As a basic outline, the government can give a substantial tax credit (eg $3,000) to employers who cover workers for the first time in 2009 and 2010. It can also offer a tax credit ...[to] employers who increase ... coverage. ...Credits can also be given to individuals who are ... not otherwise covered...

If 20 million workers get coverage through this tax credit, that would cost $60bn. If another 60 million get an average of $1,000 in additional healthcare benefits, this would cost another $60bn. If we also ... reduce the healthcare burden for Medicare beneficiaries ... by $1,000 each, this will cost roughly $40bn. The total cost would be $160bn a year...

At the same time..., we should open up the Medicare system, allowing all employers and individuals the option to buy into a Medicare-type plan. This is important, because a well-working public sector plan will be important to controlling costs over the long-term.

After 2010, the tax credits would be cut back, with the goal being a system of subsidies that pay the full cost for low-income people, but phase out at higher income levels. ...

Extending healthcare coverage in this way is effectively eating dessert before dinner, but this is exactly what we want to do to counter the recession. It is important that we spend money now to boost the economy. We will be getting double-value if this stimulus can be spent usefully toward meeting a longstanding goal, like providing national healthcare insurance, rather than just buying things at the mall.

Fixing the healthcare system so that costs are effectively contained will be a long and difficult political battle. ... However, we should be reassured by the fact that every other country has managed to contain their costs more effectively..., and they ... enjoy better healthcare outcomes.

Over the long run, the task of containing healthcare costs is clearly doable. The question for President Obama now is whether he is prepared to take the big leap... This opportunity may not come again.

    Posted by on Thursday, November 6, 2008 at 02:07 AM in Economics, Health Care, Politics | Permalink  TrackBack (0)  Comments (76)


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