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COLUMN RIGHT/ PAUL CRAIG ROBERTS

Health Care Will Be a New Entitlement : And the only private source left for financing of these reforms is pension funds.

September 26, 1993|PAUL CRAIG ROBERTS | Paul Craig Roberts, former assistant treasury secretary, is chairman of the Institute for Political Economy in Washington.

The first central fact of President Clinton's health-care proposal is that it comprises a massive new entitlement program with no visible signs of financing at a time of swollen budget deficits.

This is true even if we pretend, along with Clinton, that bureaucratizing health care will reduce paperwork and generate huge savings. There is no way to transfer these savings from where they might occur--for example, lower insurance premiums or hospital administrative costs--to where they are needed, such as to pay the cost of government health subsidies to small businesses and low-income workers and coverage for the unemployed.

The second central fact is that once the plan passes, there will be no going back. The institutions of health-care delivery would be fundamentally altered. Moreover, some people would have coverage for the first time, and that coverage will be as permanent as food stamps and rent subsidies.

The third central fact is that when the reality of the enormous cost of the new entitlement becomes clear, financing will have to be immediately found or the budget deficit will explode. There is only one source of private wealth left that could be tapped to pay for the health entitlement: private pension funds.

If Clinton's health proposal becomes law, it will mean the end of the tax deductibility of pension contributions and the tax deferral of pension fund earnings. Americans should understand that the cost of Clinton's health plan is a substantial reduction in their pension-fund assets and retirement income.

Despite the centrality of these three facts, I predict that they will play no role in the debate over Clinton's plan.

The Republicans in their typical "me too, but less" fashion have a plan of their own--and no way of financing it either.

The public has been conditioned by a media barrage to believe, in Clinton's words, that "this health-care system of ours is badly broken and it is time to fix it." The endless stories that pull at the heartstrings about the plight of the uninsured have contributed to an emotional atmosphere in which any change is considered an improvement. Clinton expressed this non-think perfectly when he said "our purpose in this dynamic age must be to change."

Some economists will point out the employment costs of sticking businesses with more mandates, but these complaints will be addressed with subsidies.

Thoughtful health-care experts will note that Clinton's plan to give "every American a health-care security card that will guarantee a comprehensive package of benefits over the course of an entire lifetime roughly comparable to the benefit packages offered by most Fortune 500 companies" will lead either to a great increase in health-care spending or to a reduction in quality.

Since the next President will have his own new program for which he will need funding, the most likely outcome will be a reduction in quality in the form of waiting lists, less diagnostic testing and, as writer P. J. O'Rourke puts it, an increase in dying. But these concerns will be swept under the rug in the enthusiasm to do something about the health-care "crisis" or countered by arguments that currently the poor die disproportionately, an inequity that must be redressed.

Having pointed out pitfalls, what positive suggestions can be made?

First, be suspicious of an Administration and a political party that raised marginal income tax rates 30% in the name of deficit reduction and then follows up with a massive new entitlement without financing. Be especially suspicious of a plan that adds $72 billion in a new Medicare prescription-drug plan and $80 billion for a new long-term care program and simultaneously claims Medicare cuts of $238 billion.

If such vast inefficiencies exist in Medicare (plus the $47 billion in other federal programs), why did Clinton hurt job growth by raising income taxes? Why not cut the inefficient programs before raising taxes?

This brings me to my positive proposal. Let Clinton first secure the savings from his reforms of Medicare and other government programs. With these in hand, begin extending coverage to those in need. And put an end to the abusive malpractice claims that force doctors to practice the expensive defensive medicine that Clinton confuses with "greed." This would be an honest start and, with the experience under our belt, we could go on from there. This way, we wouldn't have to sacrifice our pensions for health care.

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