OU Economics Professor on Obama Health Care

Over the past several weeks health care reform has been a major topic of discussion in congress and it has been generating a lot of controversy. As many already know, President Obama will be appearing on ABC in order to discuss his health care policy tomorrow night, so I thought it would be a good time to ask Oakland University professor of Economics and Management Miron Stano what his thoughts were about Obama's policies.

Professor Stano has a few concerns with the Obama plan, mainly revolving around the potential cost and its effectiveness. Obama originally estimated a net additional cost of $50-56 billion for health care reform, but Professor Stano believes this is too low. “One independent estimate projected costs of $1.63 trillion over the 10-year period ending 2018 while still leaving 33 million people uninsured in 2018 compared with the projected 67 million under current policy.” He cites another recent estimate which says full year coverage would cost at least $123 billion per year, and “if more generous plans become the minimal standard, and fees increase as a result of additional demand for health care, the projected costs would be correspondingly greater.”

Obama plans to cut health care expenses by utilizing electronic medical records (EMR), as well as reducing payments to pharmaceutical companies, hospitals, and other health providers. Professor Stano is not convinced that EMR will be effective in the short run, although they have good potential long term. He says that analyses of EMR have only shown minimal improvements to patient safety so far, and that “it may take many years before any IT investment will pay off.” Reducing spending on pharmaceutical companies and hospitals sounds like a great idea at first, but there are drawbacks, and Professor Stano believes that these cutbacks may slow down innovation, and potentially lower the quality of care patients receive.

If health care reform is indeed on the way, and reducing costs or taking on new debt will not be the method of funding, then we will be looking a new tax of some kind to pay for the system. Which tax would be best? Professor Stano says no matter what method of taxation they choose to fund these reforms, ultimately the cost comes back to the individual in the form of lower wages, higher prices, or higher taxes. With this in mind, he believes “It is probably time that we look at a value added tax to deal not only with health care but also Medicare and Social Security. Even though a VAT is regressive, it may well be the best option.” The issue of a regressive tax can be dealt with by offering additional income tax credits to lower income families.

Although there may be problems with Obama’s health care plan, Americans want something to be done with the system. The professor cited a study that showed 16% of Americans thought the US system needed only minor changes, and 34% believed the system should be totally rebuilt. With numbers like these it appears Obama has a mandate to do something, and that “Americans are ready for change.”