Cost-benefit analysis

In a previous letter, I proposed that the issue of a national health insurance or healthcare system should be resolved on whether such a system would “promote the General Welfare.” Promoting, meaning improving, the welfare of most citizens, not that of an elite few nor of each and every citizen, is the stated purpose of our constitutional government.

Determining whether a governmental action improves the general welfare is complicated. Many years ago, as part of the Public Administration program at WVU, I learned of a then new type of analysis to be applied to governmental actions called cost-benefit analysis. Under that analysis, a government program was not justified unless its benefits exceeded its costs. That type of analysis, and not whether an action is good, bad, socialist, capitalist, Christian or un-Christian, should be applied to this issue.

The first step is selecting the components of the prospective program. Most advocates propose national insurance, call it Universal Medicare, and not government healthcare, exemplified by the Veteran’s Administration, meaning government employed health providers. Under Universal Medicare, everybody — rich, poor, young, old, criminal or cop — would receive free medical care from willing private sector providers: doctors, hospitals, nurses, etc. Incorporating the wisdom of the existing Medicare system, there might be a small deductible and basic coverage limited to 80 percent.

This basic system would be paid for the same way existing Medicare is paid for — by taxes. I paid for my Medicare by paying taxes of 2.9 percent (except the few years I was not self-employed, in which case my employer paid half) on roughly every penny of my earned income for about 50 years. I continue to pay the full premium for supplemental insurance to cover the other 20 percent. My Medicare is an entitlement only in the sense that I am entitled to it because I paid for it.

Universal Medicare could not be paid for exactly in the same manner because its use would not be deferred until tax payers attained the age of 65. For the sake of argument, I’m going to make a few assumptions. Assume that such a system could be paid for if every tax payer paid a Medicare tax of 20 percent of earned income. A person making $50,000 annually would pay $10,000 and a person making $100,000 would pay $20,000, but they each would receive the same benefits.

This raises the obvious and natural objection of fairness: Why should a person making $100,00 pay twice what a person making $50,000 pays and yet only receive the same benefits? What if the $100,000 earner doesn’t want to participate? I intend to cover the issues of forced participation, fairness and other costs in an ensuing letter.

Patrick Radcliff