A Systemic Solution to the Healthcare Crisis

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    "Only for the Good of My Patients"

    A Systemic Solution to the Healthcare Health Care Crisis



    Norman G. Kurland, Michael D. Greaney, Dawn K. Brohawn


    Executive Summary

    There is a growing sense that America's health care system is financially unsustainable and too many Americans are left out or cannot afford quality health services. But . . .

    * What if every man, woman, and child in America could receive a minimum of $3,000 of "interest-free" capital credit each year through a local bank to invest in America's growth and new technologies?

    * What if every citizen could accumulate tax-free over a lifetime a "capital homestead" of $200,000 that would pay an annual dividend income of $30,000 to meet his or her retirement needs, plus $750,000 in dividend incomes from birth to age 65?

    * What if this could be done without using any taxpayer dollars and without taking away anyone's wealth?

    Impossible? We think it's entirely possible and completely feasible to go even further. Setting aside any doubts for a moment,

    * What if a typical family of four paid no income, Social Security, Medicare, or any other tax levied on income or consumption until aggregate family income exceeded $110,000?

    * What would be the effect on America . . . on the world, if people from all parts of the political spectrum, and of any philosophy or belief system could unite on an issue as fundamental as universal health care?

    * What if this could be done without intrusive State coercion, and with respect for the rights and dignity of each individual?

    * What if the means existed right now to ensure not only full and democratic access to health care, but to cover the cost of comprehensive, universal health insurance through reliance on the free market and with minimal State regulation?

    * What if no government or health insurance bureaucrat stood between you and your doctor when decisions had to be made on your life and wellbeing?

    * What if, instead of adding to the tax burden imposed on every man, woman, and child in America, there was a politically and financially feasible means for every American, including the poorest of the poor, to pay for universal health care insurance?

    * What if there was a way to decrease the amount most people pay in taxes?

    * Finally, what if there was a way to reduce the complexity of the tax code and its regulations down to something that an ordinarily intelligent person could understand?

    The taxation philosophy, as well as specific estimates, rates of taxation and definition of terms, are explained in more detail in the Appendix, "The Single Rate Tax Proposal in Brief." Essential elements of the proposal are, using average amounts for a "typical" family:

    * An increase in the "personal exemption" to $10,000 each for a taxpayer and his or her spouse and $5,000 for each dependent of a taxpayer,

    * A maximum "deduction" of $7,000 per citizen per year to pay for $6,000 in health insurance premiums and $1,000 in out-of-pocket health costs for comprehensive health care coverage, an amount equivalent based on the per capita costs of all health-related expenses,

    * A combined household maximum "deduction" of $3,000 per citizen per year to cover the per capita costs of education, and

    * A maximum "tax deferral" of $10,000 per year for amounts put into a "Capital Homestead" or other tax-sheltered savings account.

    * An aggregate of the above reforms that would leave free from all forms of Federal taxes the first $30,000 in the average taxpayer's income, or $110,000 for a family of four.


    The Crisis


    Throughout the nation there is a growing fear that America's health care system is financially unsustainable. Forty-seven million Americans today are not covered by any form of health insurance or cannot afford quality health services. Meanwhile, health care costs continue to rise at faster rates than family incomes. As economic commentator Robert Samuelson recently observed:

    "Health spending already totals more than $2 trillion annually, about 16 per cent of national income (gross domestic product). By 2030 it could easily exceed 25%-one dollar out of four-projects the Congressional Budget Office. . . . Most Americans think that someone else will pay for their care."[1]

    Only a small fraction of these projected cost increases will be due to the demographics of a rising aged population. Most of the future cost hikes will be tied to advancing health technologies and pharmaceuticals, and other anticipated costs of providing universal health care.

    All of the candidates seeking to occupy the Oval Office in 2009 have elevated the health care issue to the top of America's political agenda. None of the proposals being debated, however, address the systemic flaws underlying the crisis. All of the proposals reflect conventional economic thinking that will inevitably continue to increase the powers of the Federal government vis-à-vis the individual citizen.

    Needed: A Fundamental Systemic Reform

    This paper proposes a radical free enterprise alternative that would restore the soundness of the American health care system while reversing the tendency toward concentrated government power. It would decentralize economic power, in such a way that all Americans, including the poorest of the poor, could pay for their own high quality health care through universal health care insurance provided by the private sector.

    With minimal government intervention, this new approach would lead to a restructuring of the Internal Revenue Code, Federal Reserve monetary and credit policies, and other basic economic institutions. This would be in ways that could provide universal health care, promote sustainable growth, and provide new private sector jobs and second incomes for all Americans through universal access to participation in private ownership of America's future capital formation. In the process of solving the health care crisis, the restructuring changes needed would also create a genuine "ownership society," lifting up "have-notes" without taking property rights away from "haves."

    Rather than blindly following the conventional solutions that would increase levels of income or wealth redistribution, perhaps the time has finally arrived for America to return to its roots and founding ideal of universal access to ownership of productive assets as a fundamental human right. Solving the health care crisis could be the bridge to restoring America's status as a global exemplar for economic justice and economic democracy. Thus, a cure to America's health care system would also help cure other systemic ailments in our free enterprise system.

    The Cost of Health Care in America

    The cost of healthcare health care in the United States is a crisis approaching epic proportions. According to figures reported by the United States Department of Health and Human Services and analyzed in the Appendix, the annual per capita cost of healthcare health care in America is in the neighborhood of $7,000 for every man, woman, and child in this country - a total of approximately $2.1 trillion. Some alarmists are predicting massive increases of as much as 300% to 1,000% over the next decade.

    Nearly 47 million Americans, approximately 15% of the total population, lack health insurance, approximately 15% of the total population. If such individuals do not have private resources or qualify for private charity or public redistributive welfare, the only recourse for many of them in the event of a serious illness is to die - with the cost of funerals also beyond the means of many people.[2] Consequently, some people can afford neither to live nor die.





    A "hidden debt" in the form of $74 trillion (approximately $250,000 per man, woman, and child) is projected for the deficit present value of the under-funding in Social Security and Medicare, according to reports from the Social Security and Medicare Trustees in early 2004. This has resulted, from an entitlements package amounting to two-thirds of the total Federal budget.[3] This is in addition to healthcare health care cost increases considered separately.
    Government Spending is a Taxpayer Cost

    Obviously, anyone looking to the Social Security and Medicare systems to take up the slack in other government entitlement programs is living in a fantasy world. A March 9, 2005 Associated Press article reporting on debates concerning getting the budget under control quoted David Walker, who recently retired as head of the General Accountability Office, as saying that this debt and other Federal deficits are unsustainable:

    The partisan differences persisted despite sobering testimony from Comptroller General David Walker, the leadoff witness at the first Social Security hearing of the year at the House Ways and Means Committee.

    While the program faces no immediate financial crisis, he told lawmakers, "time is working against us. The sooner you act, the less dramatic the changes that have to be made."

    Beyond that, he said Congress faces a larger challenge. Social Security, Medicare and Medicaid combined "represent an unsustainable burden on future generations," said Walker, who heads the Government Accountability Office, a nonpartisan congressional agency.

    "Absent meaningful changes to these programs, the nation will ultimately have to choose among persistent, escalating federal deficits, huge tax increases, and/or dramatic budget cuts."[4]

    In response to this grave concern, the interfaith Center for Economic and Social Justice ("CESJ") developed a proposed "Capital Homestead Act", for comprehensive Federal tax, monetary and other badly-need reforms,[5] needed to lift artificial barriers to higher rates of non-inflationary growth and address the unsustainable flaws in Social Security, Medicare, Medicaid, Veterans Health, S-CHIP and other health-related and retirement programs.

    The Magnitude of the Problem

    To quantify the magnitude of the problem, CESJ has been using $2 trillion as a rough estimate of the value of the annual "growth ring" of new capital formation in the United States, or approximately $6,500 per man, woman, and child in America.[6] This included new plant and equipment, new technologies, new rentable space and new infrastructure added each year in both the public and private sectors. The annual cost of medical care thus exceeds the annual investment in new capital that produces the goods and services that generates the income to pay for food, clothing, shelter, education - and medical care. As a recent article in the Wall Street Journal noted,

    According to the Kaiser Family Foundation, 60% of businesses offered health benefits in 2005, down from 69% in 2000. Employer premiums for family coverage rose 81% since 2000 to $11,480 annually.[7]

    Obviously these figures can only approximate the magnitude of the cost of healthcare health care in the United States. They are based solely on reported government figures (many of them estimates to begin with), not on audited financial or population data.

    These estimates do, however, allow us to grasp the magnitude of the problem. They highlight the fact that doing nothing, applying traditional solutions more intensely, or implementing universal healthcare health care through the private sector without a fundamental restructuring of the entire economic system is courting widespread disaster, a recipe for a political and financial meltdown. What is to be done?
    A Blueprint for Reform

    The first step is to have a viable framework for a solution. The Center for Economic and Social Justice ("CESJ") promotes an approach that is neither left (Socialism) nor right (Laissez-Faire Capitalism) on the ideological spectrum, but positions itself at the radical center, embracing a moral philosophy called the "Just Third Way"[8] and a revolutionary theory of economics known as "binary economics." The policy framework for the Just Third Way and moral foundation for binary economics is based on what we call the "Four Pillars of an Economically Just Society" -

    * Restoration of Free and Open Markets for determining just prices, just wages and just profits,

    * Limited Economic Role for the State,

    * Restoration of the Rights to and of Private Property, and

    * Universal access to direct ownership of the means of production, especially in private sector enterprises.

    These "pillars" are more fully explained in Capital Homesteading for Every Citizen.[9] The last-named "pillar" is ignored or tacitly and often erroneously rejected by so many otherwise well-intentioned and serious commentators on the right as requiring some form of "redistribution".[10] Paradoxically, it challenges the anti-property biases of the left and threatens the traditional adversarial wage system bargaining patterns of between organized labor and corporate management, in which labor costs continue to rise with no increase in the productiveness of labor inputs. The last labor statesman to see this point over 40 years ago was the late Walter Reuther, who as head of the United Auto Workers, stated: "Profit sharing in the form of stock distributions to workers would help to democratize the ownership of America's vast corporate wealth. If workers had a definite assurance of equitable shares in the profits..., they would see less need to seek...increases in basic wages."[11]


    Both "the right" and "the left," however, assume a conflict between workers and owners over the fruits of ever-advancing technology and system improvement. (As advocates of redistribution and government regulation of market forces, socialists, Keynesians and modern liberals are classified in this paper as "the left", while "the right" includes most libertarians, Chicago and Austrian School monetarists, followers of Ayn Rand's objectivist philosophy, and other laissez-faire thinkers.) Rejection of or blindness to the need for every citizen to enjoy equality of opportunity access to the power and profits of capital ownership when new means of production are added or change hands provides a convenient battlefield on which both the right and the left perpetuate class divisions.
    Power and Property


    Well-intentioned people on the right soft-peddle the concentration of economic power under monopoly capitalism, and refuse either to recognize or address artificial barriers to universal access to the means of acquiring and possessing private property stakes in wealth-producing assets. Equally well-intentioned socialists highlight these barriers as reinforcing and perpetuating the ever-widening gap in income and economic power between the few who own and the many who do not own, allowing the left to justify an ever-growing citizen dependency on government with its endless array of tokenistic redistribution and job creation schemes.

    The moral flaw on both the right and the left is that neither view equal access to the means of acquiring and possessing private property as a critical and just means for closing the wealth gap. They do not, therefore, acknowledge the need to lift systemic barriers to equal ownership opportunity and the financing of sustainable cost-saving health and other life-enhancing technologies. This proposal attempts to demonstrate that efficient delivery of universal quality healthcare health care should be based on mandatory universal access to affordable private sector health insurance, a minimal role for government and private sector intermediaries between physicians and patients, but and maximum freedom of choice of for every citizen to pay for and choose his or her own doctorinsurance plans and , other health care providers, and health providershealth insurer.

    The proposed reform of the health care system in the United States will in large measure depend on 1) a radical simplification of the Federal tax system to leave more disposable income in the hands of middle- and lower-income households, 2) health vouchers for the poor, and 3) monetary and tax reforms that enable every citizen, as a fundamental human right, to invest in and share profits associated with the multi-trillion dollar costs of financing the ever-advancing technologies needed by health care industry and the private sector generally over the next fifty years.

    First, however, we need to look at some goals and principles of what we can reasonably expect in a reform of the healthcare health care delivery and insurance system.

    Principles and Goals of Healthcare Health Care Reform

    The principles and goals of our private sector, citizen-owned and -controlled alternative for universal health care are consistent with the four pillars of an economically just society and would:

    Free and Open Markets (i.e., full access to adequate healthcare by all people)

    * Preserve the Hippocratic Oath.

    * Maximize true empowerment of physicians, patients, and other stakeholders of the healthcare health care system.


    ·Empower physicians to mobilize behind a "grand strategy" for Universal Health Plan through free enterprise initiatives.

    * Encourage Pphysicians to lobby as "Doctors for Social Justice" to advance Capital Homesteading reforms to "heal the sick and unsustainable American economy."

    * Promote universal comprehensive health cost coverage by private insurance or voluntary self-pay options.

    * Enact tax reforms to enable all individuals to pay for their own health care choices.

    * Institute universal guaranteed access to health insurance coverage.


    * Offer health care vouchers for low income individuals.


    * Restructure, simplify and remove the ownership barriers in the Federal tax system.

    * Eliminate complex tax filing requirements.


    * Eliminate all payroll taxes on workers and employers.

    * Balance the budget through a "single rate" tax on income from all sources above a generous poverty or subsistence level.

    ·The healthcare exemption (estimated at $4,000 in this paper) would be contingent on the willing ness of the citizen to pay for a minimal premium to cover a standardized health insurance policy, with freedom to choose a high deductible policy not to exceed the citizen's savings in a Health Savings Account (HAS), Individual Retirement Account (IRA), Capital Homestead Account (CHA), or in any other approved savings vehicle.


    Eliminate employer-provided healthcare coverage in order to reduce the labor costs for giant corporations as well as small businesses to enable them to become more competitive in global t

    * Eliminate multiple taxes on profits by making dividends deductible at the corporate level.

    * Democratize access to financing the expansion and transfers of capital assets.

    Preserve the Hippocratic Oath

    The Hippocratic Oath is an ancient statement of the basic tenets of the practice of Medicine. First and foremost among these tenets is that physicians swear to act only for the good of their patients. As this is the whole intent and purpose of the practice of Medicine, it is critical that this orientation pervade any reform of the health care system, not political or financial considerations.
    Maximize Empowerment of Physicians, Patients, and Other Stakeholders

    ·By "maximize true empowerment of physicians, patients, and other stakeholders of the healthcare health care system," we mean restructuring the system so that a patient's means or lack thereof do not determine the level of healthcare health care offered. Economic empowerment of individual physicians and patients will maximize personal responsibility of all stakeholders to make wise and voluntary choices.
    Encourage Physicians to Lead in Lobbying for Capital Homesteading

    So that all citizens can begin to earn more incomes to pay for their own health care needs, physicians need to take the lead in pushing for the necessary legislative changes in our tax and health care systems. Physicians are in a strategically critical position to lead, rally other Americans, and surface new political leaders to market the systemic changesfor the Grand Strategy outlined in this paper, including the enactment of a Capital Homestead Act to create major tax reforms and Federal Reserve banking and insurance to achieve a more just and free market environment to grow the economy where no citizen would be deprived on income grounds from receiving the highest quality of health care services.[12]
    Promote Universal Health Care Cost Coverage

    Physicians and other stakeholders must promote universal comprehensive health cost coverage by private insurance or voluntary self-pay options ("self insurance") with guaranteed issuances of insurance for all applicants, regardless of their health conditions. To minimize the "free rider" problem for those not willing to pay for health insurance premiums or have too little in savings to cover extremely costly medical bills, the system would require all citizens, except for those who, like the Amish, conscientiously object to any insurance, to purchase relatively inexpensive catastrophic health care to cover a single problem costing over $2,500 or annual costs exceeding $5,000.
    Enact Tax Reforms to Enable All Individuals to Pay for their Own Health Care Choices

    Substitute for employer-provided and other third-party payments for health care coverage by enacting tax reforms that would enable all individuals to assume responsibility to pay for their own health care choices and to reduce the rising benefit costs for workers in giant corporations as well as small businesses, thus improving the competitiveness of American companies in national and global trade.
    Offer Health Care Vouchers for Low Income Individuals

    Provide low-income individuals with health vouchers based on their reported incomes to cover all or part of the premiums they pay to provide for comprehensive health care coverage and out-of-pocket health care expenses for themselves and their dependents.
    Reform the Federal Tax System

    Simplify and reform the Federal tax system in ways in which all citizens would cover their fair share of government costs by paying a single percentage of their income from all sources (above amounts left in their pockets to cover basic subsistence, shelter, voluntary comprehensive health care insurance or mandated catastrophic health insurance, educational costs and access to income-producing assets), with the rate set to balance future government budgets and gradually pay down decades of previous non-productive government debt.
    Eliminate Complex Tax Filing Requirements

    Enable all citizens, including the poor, to report their personal incomes from all sources subject to the single rate tax (salaries, wages, commissions, dividends, interest, inflation-indexed capital gains, bonuses, gambling winnings, gifts, inheritances, etc.) on a "post card" sized tax return, and to determine eligibility and amounts for health vouchers and other income supports for the poor.
    Eliminate Payroll Taxes

    Eliminate all payroll taxes on employers and workers for Social Security, Medicare and other entitlements in order to leave more consumption incomes in the pockets of all workers to meet their health care needs in a more just and participatory free market system. Keep all entitlement promises to workers who contributed to the current unsustainable pay-as-you-go Medicare and Social Security Systems through revenues from the single rate of taxation on all consumption incomes above basic subsistence levels from all sources.
    Institute a "Single Rate" Tax

    The single tax rate would be calculated to balance the budget while sheltering from any Federal taxes incomes to meet every citizen's common domestic needs and charitable contributions.

    Each non-dependent taxpayer and spouse could therefore insulate from taxes to meet his or her own subsistence needs up to the first $20,000 of earnings (plus up to $15,000 per dependent), consisting of a standard living exemption of $10,000 per individual ($5,000 per dependent), a maximum health care deduction of up to $7,000, and a combined maximum household education deduction of $3,000 per household member.

    Beyond this front-end untaxed income, all other personal tax deductions, credits or other so-called "tax subsidies" would be eliminated, radically reducing the complexity of the Internal Revenue Code. In addition, to encourage personal savings for retirement, taxpayers would also be allowed to defer taxes on an average of $10,000 annually per household member for income channeled to tax-sheltered health and education savings accounts and income-producing productive assets in Individual Retirement Accounts (IRAs), Employee Stock Ownership Plans (ESOPs), cooperatives and the proposed Capital Homestead Accounts (CHAs) and Community Investment Corporations (CICs).

    For example, a family of four (two adults and two dependents) would (assuming each family member uses an annual average of $10,000 to finance the acquisition of capital assets in a CHA[13]) pay a single Federal tax rate only on incomes from all sources above the $70,000 in "untaxed incomes," plus an additional tax-deferred savings of up to $40,000, for a total of $110,000 in aggregate family income before paying income taxes, as described in the Appendix.
    Institute Universal Access to Health Insurance Coverage

    Leaving an averageProviding a tax deduction of up to $7,000 to cover health care costs of each household member would leave that amount of income per household member of household income in the pockets of most taxpayers (with the poor qualifying forwhose incomes exceed poverty levels (and thus do not qualify for health vouchers) would to enable every citizen above the poverty level to choose among three health care options:

    (1) Conscientious objectors and those with over $2 million in savings in an approved personal savings account could choose to self-insure,

    (2) Those with more limited savings could purchase a nationally mandated standardized catastrophic health insurance policy to cover single illness charges over $2,500 or annual costs over $5,000, and self-insure for any additional out-of-pocket health care needs, or

    (3) For mMost citizens could choose, to pay premiums of about $6,000 annually, plus $1,000 deductibles to enroll in a nationally standardized comprehensive health insurance policy, with freedom to choose a high deductible policy not to exceed the citizen's savings in a Health Savings Account (HSA), Individual Retirement Account (IRA), Capital Homestead Account (CHA), or in any other approved savings vehicle.
    Democratize Access to Financing the Expansion and Transfers of Productive Capital.


    To grow the private sector economy in ways that enable workers to supplement their labor incomes with increasing capital incomes, the proposed tax and monetary reforms would democratize the process of creating money and allocating productive (i.e., self-liquidating or procreative) credit to provide more equitable access for all citizens to acquire, receive property incomes and participate as owners of productive capital assets, including technologies and facilities needed for supplying quality health services.

    Access to leveraged self-liquidating credit financing to purchase productive capital assets in well-managed enterprises is common in the business world. Based on the historically sound assumption that productive capital is expected to pay for itself from future profits, the Federal Reserve System should activate the Section 13 discount powers of regional Federal Reserve Banks to create interest-free, asset-backed "new money" to enable local banks to make self-liquidating, non-recourse, privately-insured loans to personal Capital Homestead Accounts (CHAs), Community Investment Corporations (CICs), ESOPs and cooperatives.

    Such low-cost financing would enable doctors, other health care providers and citizens generally to invest in, among other income-generating investments, newly established mutually- or cooperatively-owned comprehensive health care insurance companies and in the growing technology and facility needs of doctors, hospitals and others in the private sector health care industry.
    Make Dividends Tax Deductible at the Corporate Level

    Like leveraged ESOPs, dividends and profit distributions to CHAs and CICs would be tax-deductible at the enterprise level (a socially positive incentive for avoiding corporate income taxes) but tax-deferred at the individual level for repaying capital acquisition loans to CHAs and CICs. Default risks for self-liquidating capital credit would be covered by private risk insurers.

    The policy would also reduce the private sector's dependency on "old money" and existing accumulations for financing growth and assets transfers in the private sector, yet leave


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