Copyright 2000 Federal News Service, Inc.
Federal News Service
April 11, 2000, Tuesday
SECTION: PREPARED TESTIMONY
LENGTH: 1305 words
HEADLINE:
PREPARED TESTIMONY OF DR. BERT LOFTMAN ATLANTA, GA
BEFORE THE
HOUSE WAYS AND MEANS COMMITTEE
BODY:
Mr. Chairman and Members of the Ways and Means Committee:
My
name is Bert Loftman, and I am a physician based in Atlanta, Georgia. I greatly
appreciate the opportunity to present testimony regarding the impact of the
FairTax on the US health care delivery system. I am privileged
to be the only witness testifying on this subject. I can assure you that I speak
for a great many physicians with whom I have discussed the FairTax. I am hopeful
that, at some point, there will be formal resolution by the physician groups.
Attached to this written testimony is a paper of mine from 1994 titled,
"Health Care Reform, An Historic Perspective." This will
supplement what I say here.
During the past few years, Congress has
wrestled with the many problems inherent with our current
health care system, and for good reason. The costs of
health care delivery have escalated exponentially. While it is
often argued we have the best heath care in the world, we have a selective
system. Too many Americans are without health care. What are
the root causes of this and how do you, as policymakers, address these causes? I
suggest that one of the key causes is our tax system that separates the
health care recipient from the real costs of
health care. In doing so, we hold health care
up as one of the few major U.S. industries that is not responsible to consumers.
To turn a phrase, our health care system is in the intensive
care unit.
What are the problems? To begin with, this system has driven
up the costs of health care. In 1965,health
care was 5 percent of the U.S. economy. Now it has risen to over 15 percent.
There are rising numbers of uninsured. These number about 40
million or 15 percent of the population. For them, individual
health insurance is very expensive. They must compete with the
third party payer systems of employer-based health insurance
and Medicare. In the private and governmental sectors, most people have
employer-based-insurance. They face the portability problem, where they must
change insurance plans when they change jobs. They also face the job lock
problem where they remain in unsatisfactory jobs because of the
health insurance coverage in their current jobs.
A few
years ago, the third-party payers paid the providers of health
care with traditional fee for service or indemnity insurance. Now they pay with
a system known as managed care. With this system, the insurance companies make
what they consider the appropriate health care choices. The
problem is that many patients would rather choose the quality of their own
health care and this dissatisfaction has led to political
unrest. Many health care reform discussions center about moving
away from employer-paid health care.
One way is a
single payer system; but those countries with socialized medicine are
experiencing many difficulties. To date, this has not been a popular solution in
the US. Another way is to use the income tax codes to offset the employer-based
health care exclusion that began during World War II. I refer
you to a paper that I wrote a few years back on the history of how this
occurred. These tax code changes include tax equity where the income tax
exclusion of employer-paid health care are removed or
individually paid health care receives the same treatment.
Another innovative way is medical savings accounts that Congress legislated with
the Kennedy-Kassebaum Bill. These have not proved as popular as the proponents
predicted. A major reason was the many restrictions that were placed upon them.
Enter the FairTax into this debate. It is true that The Fair Tax would
greatly impact the U.S. health care system. However, first we
should consider what it would not do. The Fair Tax is designed to be revenue
neutral and would make no changes in Medicare or Medicaid. It would leave intact
the federal safety net for the elderly and the indigent. Most importantly, I
believe, The Fair Tax would remove the income tax exclusion that employer-based
health care now enjoys. This would not require employers to
drop their benefit of health care coverage. However, the
incentive for health care coverage would no longer be
exclusively employer-based.
What would the FairTax do? More people would
likely begin to choose individually-based health care coverage.
They would probably choose non-cancelable policies. This would help bring down
the numbers of uninsured as people retained their individually
owned health insurance policies, even when they were sick. As
people chose individually owned health insurance, the insurance
industry would begin to respond with more individually based insurance policies.
People would likely begin to look more favorably at low cost non-managed care
insurance policies. In other words, they would begin to favor catastrophic
insurance policies.
Of course, there is tax-free savings for
health care and other wants. When people have savings, they can
begin to see the advantages of low cost catastrophic coverage. This would begin
to connect people to the cost of their own health care and this
would begin to bring the cost of health care down. Thus the
Fair Tax would not only move us away from employer-based healthcare with its
portability and job-lock problems; the Fair Tax would likely also lower the cost
of health care and bring down the number of
uninsured. Regarding managed care, individuals would own their
own policies and have a choice of whether they had prepaid managed care or
catastrophic indemnity insurance coverage.Congress also wrestles with Medicare
and its problem of escalating costs. When Congress legislates to control these
costs, it fosters patient and physician unrest. This is because when Medicare
makes the choices, it is a form of rationing. Consider that in 1965 when
Congress enacted Medicare, many people retired without health
care coverage because most was employer-based. They also retired without
adequate savings because the income tax is anti-savings. Under the FairTax,
people would begin to retire with individually owned catastrophic
health care coverage. Perhaps with the Fair Tax, many people
would choose not to change their health care coverage when they
retire.
The Fair Tax would not solve all the problems of the U.S.
healthcare delivery system, and I don't want to leave this impression. Many
people would still choose not to obtain health care coverage.
However, we must compare the FairTax to the present system and not to an ideal.
We must only ask if it helps us get to the idea. In reality, there would likely
be less uninsured than the current 40 million people without
coverage. Many people would probably still prefer a corporate
health care system that manages their care. If so, the Fair Tax
does not discourage this.
The FairTax would likely effect the US
health care delivery system in a way that would lower costs,
decrease the numbers of uninsured, help alleviate the
portability problems, give patients choice and defuse the politics of our
health care system.
I would make a suggestion regarding
professional or trade organization as the American Hospital Association, the
American Medical Association, the American Nurses Association, the American
Pharmaceutical Organization, etc. These organizations heavily lobby Congress but
they have been silent on the impact of taxation on the health
care delivery system. Congress should ask them to study this issue and poll
their members so they can take a stand on tax reform as health
care reform.
A physician's first duty is to do no harm. I believe it is
the job of Congress to do the same. Our current US health care
system of employer-based health care does great harm. I hope
that when you ponder HR 2525 with its Fair Tax and repeal of the 16th Amendment
that you consider its favorable impact on the health care
delivery system.
END
LOAD-DATE: April 13, 2000
