Jim Hartung

For over 80 years, systems engineering has helped America
lead in science, technology, industry, and business.

Now, systems engineering can help us address our most difficult
social, economic, envronmental, and political problems.

Question 4

Question 4:  The proposed tax reform (1) balances the federal budget and (2) funds universal health care—without increasing tax rates or the economic burden on taxpayers. How does it do this?

Answer: Medicare Choice reduces cost of health care, compared to the current (inefficient and wasteful) health care system. The cost savings achieved with Medicare Choice is used to balance the federal budget—without increasing the economic burden on taxpayers.

Medicare Choice is funded with a 13% value-added tax (VAT) collected by businesses. This VAT replaces the current 21% corporate income tax, but because it is a broader-based tax, it provides sufficient revenue to fund Medicare Choice. Since businesses collect the VAT, they will pay more taxes than they do now with the corporate income tax. However, they no longer need to fund their employees health care.

Additional Information: I propose that 
Medicare Choice  should be managed like a company with clear cost and health care improvement targets, a board of directors, and annual reports. Their goal should be to provide the best possible health care within the cost target established by Congress and the president, rather than the best health care at any cost.

It will be much easier to manage a single health care system like Medicare Choice than the current hodgepodge of health care systems, which is practically unmanageable. Among ways to reduce cost and improve health care are:

1. Reduce administrative cost: The administrative cost of Medicare is currently about 5% of health care expenditures. The administrative cost (including profit) at private insurance companies is about 15%. Insurance companies can continue operating under the proposed Medicare Choice if they add value and control costs, but not if they are only middlemen.

2. Negotiate fixed prices: A single-payer health care system such as Medicare Choice can negotiate better prices for health care services, products, and drugs. “Fixed prices” can be established in advance so health care providers compete to provide the best service at an affordable price, rather than the best service regardless of price. Of course, fixed prices can vary across the country based on cost of living.

3. Establish best practices: Medicare Choice can define “best practices” to standardize health care using the collective wisdom of health care professionals. This ensures that health care resources are expended where they can do the most good and shields doctors from frivolous lawsuits. Most U.S. companies standardize their key processes, so employees know how to do their jobs. Medicare Choice should do the same.

4. Simplify medical record-keeping: Medicare Choice should use a state-of-the-art, proven database to track patient health care data and pay health care providers. This database can be similar to systems already used in the U.S. and other countries.

5. Enhance preventive health care: Because Medicare Choice provides cradle-to-grave health care coverage, it offers unique incentives and opportunities to focus on improving public health and preventing health care problems.

6. Improve financial incentives: Medicare Choice can improve financial incentives so doctors and patients use the health care system wisely and focus on keeping people healthy. For example, Medicare Choice could require a 20% co-pay until a taxpayer’s out-of-pocket cost exceeds 20% of income reported on their prior year’s tax return. Wellness visits and preventive medicine such as vaccinations could be exempt from this co-pay. High-income taxpayers should pay the co-pay when they receive health care. However, low-income and middle-income taxpayers could be allowed to delay payment until they prepare their tax returns and deduct it from their refundable tax credit and carbon dividends. This will allow them to receive health care with no out-of-pocket expenses. The cost of this co-pay will be far less than most taxpayers currently pay for health care. It will nevertheless help to control health care costs.