Thursday, April 24, 2014

SINGLE PAYER NY? | Inequality and Health Costs

NYS Assemblyman Richard
Gottfried (D-NYC, Chelsea)
In yesterday morning's edition of The NY Times, David Leonhardt and Kevin Quealy launch a new feature, "The Upshot", by providing new data on rising inequality of U.S. incomes in the United States.

The charts show that incomes have been falling for the lowest 5th percentile in the United States, and while rising in the other percentiles have been rising more slowly than other industrialized countries in the 10th, 20th, 30th and 40th percentiles. U.S. median income is likely to be exceeded now by Canada's.

The implications that the authors draw from the data are reasonable. Their focus on the subject is justified. Their report pushes policy in the right direction...

More Complex Than It Seems

But the chart and its meaning are more complicated than might seem at first look.
  • The intervals in the table are not even. They are 5 percentage points at the top and bottom and then switch to 10 percentage points. 
  • The intervals by years are foreshortened at the recent end from four to two years. 
  • The key to understanding the relationship between the United States and other countries is the slope of the lines for each point in time for each percentile. This requires sophisticated thinking - it's cross-sectional trend analysis. There are pitfalls here because exchange rates are changing for independent reasons.
  • The United States appears to be losing ground only for the 5th percentile. If the chart only showed the 10th percentile, none of the trend lines would point downward. 
  • For the percentiles the United States is increasing but other countries are getting better faster, at least up to the median (50th percentile).
  • The reporters base some of their their conclusions on data not in the chart. In a followup table published online later in the day, the reporters provide a simplified table showing clearly that Canada's median income in 2010 for the first time appears just about to equal the U.S. median income. But the evidence for the idea that Canada has bypassed the United States since 2010 comes from "other data".
These  complications don't negate the results or the headline, but they provide food for further thought. Focusing on disposable income does not provide a final answer to the question: "What goods and services can people at each level of income buy or get access to?" This may help the case for Sweden's poor, but it raises questions about a U.S. average, since states vary in what they provide. Since 1980, for example, has health care become more accessible for more Americans? Leaving Obamacare aside, drug benefits were added to Medicare.

The many online commentators on the Leonhardt-Quealy story point out the following causes of an apparent growth in U.S. income inequality relative to other countries:
  • U.S. education is not maintaining its leadership in building literacy and skills.
  • Government policies encourage more inequality, with a minimum wage that hasn't been raised for years, soaring increases in executive compensation, and The U.S.  
One Cause of Greater Inequality: Growing Health Care Costs

Rapid growth of U.S. health care costs over the 1980-2010 period is another reason for the decline in disposable income for the poorest Americans. Health care costs on average are a higher proportion of the incomes of people below the 50th percentile than above it, and they have been rising steadily for decades.

This reduces discretionary income, especially for the poorest people. Norway, Sweden and Canada have had a national health care system in place. This has to be a significant factor in why their poor are doing better.

An Idea from Richard Gottfried

To reduce health care costs in NY State, Assemblyman Richard N. Gottfried, Chair of the NY State Assembly Health Committee, is trying to emulate the health care systems of Europe and Canada by introducing a Single Payer Health Plan for New York. It recognizes that the national Affordable Care Act (“Obamacare”) is making health care more accessible and efficient, but still leaves a costly layer of administration that should eventually be unnecessary.

His “New York Health” bill (A.5389-A/S.2078-A, sponsored in the Senate by Bill Perkins) will make sure that in NY State, everyone is covered. It will also save billions through a publicly sponsored, single-payer health coverage, like Medicare or Child Health Plus for everyone.

A majority of doctors, nurses, and patients prefer a single payer system, as do many small businesses and unions. The proposed New York Health program would:
  • Provide comprehensive, universal health coverage for every New Yorker and would replace private insurance company coverage.
  • Cover all New Yorkers for medically necessary services, including: primary, preventive, specialists, hospital; mental health; reproductive health care; dental; vision; prescription drug; and medical supply costs - more comprehensive than most commercial health plans.
  • Be funded through a graduated tax on payroll and non-payroll taxable income, based on ability to pay. Today, the same premium is paid by a CEO and a receptionist, and a successful company or a small, new business. For most people, it will be a substantial reduction in what they now spend and most people’s discretionary income will go up.