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Healthcare Reform and State and Local Budgets

By       (Page 1 of 2 pages) (View How Many People Read This)   5 comments
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Message Doug Rogers

The latest hammer is about to strike in our increasingly distressed economy.  This one is sure to affect nearly everyone as state and local budgets begin to face massive cuts.  New York State finds itself in one of the worst positions as a huge portion of its revenue stream was staked to Wall Street’s steady rise.  Now that the downstate bubble has burst, Albany’s budget threatens to fall into line with upstate’s beleaguered standing.

            A three and a half billion dollar cut is being proposed for the state’s healthcare budget and two billion from the education budget.  Job losses for teachers and healthcare workers and cuts to vital services such as libraries and museums are expected.  Increases in taxes and fees are unavoidable.

            Local governments and school districts will feel an extra pinch because healthcare expenses for employees make up the fastest growing segment of their budgets, often as much as one quarter.  Just as with the struggling auto industry, healthcare spending is proving to be the linchpin of our economic woes.

            It is troubling then that the debate among our political leaders and media is failing to draw the obvious connections between our predicament and its possible resolution.  While most people see the new administration of Barack Obama as committed to addressing long needed reform in our healthcare system, too few are cognizant of the limitations that are being placed on the scope of that change.  While president-elect Obama and Health and Human Services Secretary-designate Tom Daschle are direct in identifying rising costs as a prime culprit in our dysfunctional system their prescriptions fail to address the core of the problem.

            While the almost universal healthcare coverage that they are seeking will be hugely beneficial to the uninsured in this country the runaway cost inflation which is likely to continue may doom the whole enterprise.  The template for their approach can be found in Massachusetts’s experiment in universal health coverage.  Crafted by then governor Mitt Romney to reflect conservative ideals of competition and individual responsibility, that policy left the existing private insurance structure intact.  Health insurance was made mandatory for all individuals with sharp fines for non-compliance.  Businesses that did not insure their employees managed to escape heavy fines.  The poor were put into a special program that was funded by the state.

            The results of this system are ominous for what the Obama administration hopes to achieve in healthcare reform.  The cost of the Massachusetts plan is expected to double within three years of its inception.  This is partly due to the unexpected volume of the uninsured, but mostly because runaway costs were not seriously addressed. 

The direction that Obama and Daschle want to take national reform in emulation of this experiment is therefore going to mean an increased burden on government coffers at exactly the moment when we can least afford it.  While the now looted Federal Treasury will be expected to take on the bulk of these new costs, state and local governments will also face increased mandates for spending along with bearing the continuing ten percent annual rise in healthcare costs.  It is a recipe for the impoverishment of our public institutions.

The corporations who have grown accustomed to having their way in developing government policy will handily exploit this flaw in the Obama plan.  Those on the left and those who fight for healthcare reform will be saddled with the onerous implications of this approach to healthcare.  Once again we will have to be justifying higher taxes, taking resources from other important needs, and will have to live with the unequal disparities in coverage and treatment.  If the effort proves to be a flop, the left and the very idea of healthcare reform will be discredited, even though the inadequacies in the proposal can be traced back to its ideologically conservative components.


The reason that the burden of healthcare expenses on state and local governments is pertinent is because the truly progressive reform, single payer, would deliver a sturdy lifeline for these governments.  By creating a single risk-pool of insurees, single payer achieves savings in numerous ways. 

            Our nation spends about 16% of it GDP on healthcare but only adequately insures about 60% of its citizens.  The task of American reform is to find a more efficient mechanism for allocating resources that brings that overall price tag down to a more reasonable level.  Every other industrialized nation achieves universal health coverage with only about half the cost, 8 to 10%, by utilizing some form of single payer and keeping profit-driven competition in a subordinate role. 

             The disparity in administrative cost overhead can be seen between private insurance companies which eat up about a third of every healthcare dollar they take in and the public system of Medicare which has an overhead of only about three percent.  Savings from single payer would also come from the ability to negotiate bulk contracts with healthcare providers, medical suppliers and pharmaceutical companies.  A single, publicly operated insurer would be funded by a three and a half percent payroll tax for workers and a four and a half percent tax for employers.  These are the figures contained in HR 676, the single payer bill already introduced in the house.

            For local governments, including school districts, this means reducing the cost of covering their employees from upward of twenty percent of their budget down to five percent.  There are other secondary savings as well.  Liability coverage for vehicles and personal injuries will no longer have to cover medical expenses; retired government employee’s health coverage will no longer be on local governments’ shoulders; labor negotiating costs will be less because health benefits will no longer be part of the equation; and state governments will be able to stop having to plug the holes in the system by providing emergency care for the uninsured.

            It is worth noting that all of these benefits for state and local governments will also apply to private industry.  The position of the Big Three auto companies would be put on a level playing field with their competitors in other countries and UAW workers with their non-union competitors in the South.  Single payer also means that workers would be free to change jobs without losing coverage and would be covered if they lost their job as well. 

            On the whole the adoption of a single payer healthcare system would mean doing away with a myriad of complex, intractable problems that weigh our economy down.  It would make life simpler.


What then holds us back from implementing such a truly beneficial program?  I think there are two prevailing attitudes which are easily exploited by the mega-powerful health insurance industry.  The first is good old American antipathy to the term “socialism”.  You can be sure that this label will be attached to any reform package that is put forward, whether it is full-scale “socialized medicine” which single payer is not, or the tepid, conservative reforms that Obama and Daschle have in mind.

            Since there is so much confusion about what socialism actually means it is worth pointing out that insurance itself is a socialist concept.  It’s a simple financial mechanism- each member pays in on an equitable basis but benefits go out to each according to his  needs!  How much more Marxist can you get?  Anyone who buys insurance should be aware that they are subsidizing people who are less fortunate than themselves.  Terrible!

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Doug Rogers is a composer and playwright and for many years designed ladies' sweaters. He is now a student again at Empire State College in Buffalo NY.
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