Back of the envelope calculations

Note: Just some scattered thoughts on universal health insurance. This is not particularly organized, or even expressed well, but I wonder if anybody has thought five minutes about it.

At any rate I thought five minutes about it... you could probably argue that I should have thought ten.

$548,112,577,632.36

Thats my back of the envelope calculation of what universal, single payer, health insurance might have roughly cost in the year 2000. How did I calculate it? I took the cost of an HSA plan with a $3000 deductible and $183.01 per month premium over a year. I then multiplied that by the number of households according to the year 2000 census (105,480,101).

I'm assuming (a pretty big assumption) that the HSA plan is rationally priced to cover the risk of a large pool of the insured. I also assume that each household is pretty much an equal unit (in reality they are not and quite disparate).

Thus this number is probably not very accurate, but it gives you a handle on what it could cost. If anything the cost will be higher because most of your economic incentives to economize on health care (except for time) will be gone. In a single payer system there isn't insurance, instead its a cost distributing function. Insurance implies that you might not have to pay 100%. Not to mention you pay a penalty in administrative costs. You will never get a dollar in output for every dollar of input.

Also, while people will also call this 'free' health care, it isn't. Somebody has to pay for it, and you will in the form of taxes. If Congress was acting in a rational matter when it instituted socialized health care, it would raise a special tax that would only go to fund health care, and draw no revenues from the general fund. Congress would also not run any sort of deficit, except in maybe a twelve to twenty four month time frame to smooth out variations in tax receipts quarter to quarter (adding yet a higher administrative cost in the sense of having to pay interest and maintain bond issues).

Anyway, lets assume that each household will have a $434 additional tax liability per month. Thats roughly $5200 a year in additional taxes. Roughly 10% of income, for a household with an income of $50,000 a year, and it only gets more regressive with the less a household makes. At $25,000 its roughly %20 of your income for instance. In the interests of fairness, of course, the less wealthy will not be required to pay as much. This will shift the burden upward.

Of course in my scenario you still pay income tax to the federal government...

Assume that if you earn $50k, you have $40k of taxable income at a %20 rate..

Thats $8,000 in federal taxes owed + $5,200 for universal health care...

$13,200, (%26.4 of income) in total taxes to federal government (haven't even factored in state, local etc) Over $1000+ a month.

Federal spending would also rise from 2,656 Billion dollars (2006 outlays) to 3,116 Billion dollars (my estimate). With a GDP of 12,907 billion dollars you are looking at the federal government equal to 1/4 of the economy.



Ouch.

This doesn't even get into the philosophical issues surrounding universal health care, issues such as rationing, central control, and modifying the compact between the people and their government.