In 1986, Congress enacted the Emergency Medical Treatment and Labor Act (EMTLA). The law ensured that those without money would still receive the screening and emergency medical treatment that they needed. It did not say, however, that such medical consumers—however uncollectable at the time of service they might be—could not be charged for such services; they could. If, subsequently, a consumer’s financial situation improved sufficiently, he or she would have a legally enforceable obligation to pay for some or all of the medical expense incurred.
We’re at a different place now. Under both the Affordable Care Act and its proposed replacement, the American Health Care Act, not only has the scope of medical services provided expanded greatly, but the medical consumer that uses them incurs no deferred liability that might be collected at a later time. The service is free. To put it another way, the objective of government-provided healthcare is now not simply to ensure that Americans receive the medical care that they need, but also to ensure that they will not suffer financial hardship, or even bankruptcy because of their receiving it.
Let’s ponder that for a moment. Bankruptcy itself, it must be noted, was conceived as a humanitarian alternative to other possibilities—debtor’s prison, or being burdened by overwhelming debts for the rest of one’s life. While a debtor’s assets are sold in order to cover his or her obligations—certainly, not a happy occasion—the debtor is not left destitute, but is left solvent, for he or she is permanently relieved of paying debts that the sale of assets fails to satisfy. It is, in short, designed not to be punitive, not to be the end of the world, but to offer a new chance for the (former) debtor.
This is not to say, of course, that bankruptcy is not a serious hardship. But, what is the alternative? To make no concession to the needs of the creditor at all? Were that the case, then it would be the creditors risking “bankruptcy.”
What if—as originally conceived in EMTALA—the creditors were, through their fiduciary of government, the taxpayers? There, we have resolved the matter in a clever way. The concerns of the creditors are not ignored, for there are no creditors. Through our federal fiduciary, we simply give the money away.
Under the present version of the AHCA, the strategy is not to stop doing that, but to do less of it. To protect those who have pre-existing conditions, for example, the House bill currently holds that their premiums must be the same as those without such conditions. It also provides, however, that a state may waive this requirement. It may do so, that is, but, if it does, it must create an alternative approach—a “high-risk” pool—that would help higher-risk consumers purchase medical insurance. Toward this and other purposes, the AHCA sets aside $130 billion for the states, and also another $8 billion reserved specifically for such high-risk pools. In rare bipartisanship, however, both Democrats and Republicans agree that this amount will not be enough. But a primary objective of reform is to reduce the cost of guaranteeing medical care, which, at least nominally, is achieved.
It is nominal because something is going to have to cover the shortfall in any case. That may be the states, but, in that case, it would be taking from the same taxpayers who would be paying to the federal portion as well. This is no answer to the taxpayer’s burden, but simply a small shuffling of his or her remittance destinations.
A different solution would be for a state (in contradiction to the age-based approach of the federal element of the AHCA) to make such subsidies subject to means-testing, so that only those who fall below a certain income level would receive them. Certainly, in our political culture, means-testing is hardly a novel concept. Nonetheless, in asserting that wealth is a valid basis for discriminatory application of a law against those who are affluent, it fosters a presumption that the role of government is not to be an objective arbiter between its citizens, rich or poor, but is rather to favor the poor over the affluent. Moreover, the partisanship is guided by no clear, distinct principle of law. There is no guidance on how much the government should favor the poor over the affluent. This is a judgment that can only be arbitrary; it’s an approach that is not very compatible with the rule of law.
It is perhaps on such considerations that, with respect to subsidies for medical insurance generally, the authors of the AHCA replaced the means-based subsidies of the ACA with ones that were simply based on age. Under this approach, consumers of the same age—and so representing the same general medical risk—would receive the same subsidy, rich, affluent, or poor. This may, on the surface, seem to be a pointless policy. Why give someone a subsidy if he or she doesn’t really need it? On the other hand, if it is the affluent (and future affluent) who are paying for the subsidies, why shouldn’t they receive them as well?
If we accept that premise, but argue that the benefit received by the more affluent should be less (or more) than the benefit received by the poor, exactly how much “less” (or “more”) should that be? There is no answer to that question that is not arbitrary. If we are to be guided by a clear legal principle, our options are binary—either the same benefits are received by all, or they are received by none. (As it is commonly said, “We’re all in this together.”)
At the same time, let us recognize that, in real terms—that is, the effect on personal welfare—such equal subsidies would, in fact, be of greater benefit to the poor. This is because, if they did not receive such a subsidy, it would be more likely that they would go without health insurance. If, on the other hand, the affluent do not receive it, it does not mean they will not go without health insurance, but will go without some less critical good or service, such as a new car. The greater need of the poor is really addressed through the demands that their situation places upon them, and that need doesn’t need to be addressed by bureaucrats attempting to determine how much more benefit the poor should receive over the affluent, or vice versa.
Returning to the question of finding a way to finance the extra subsidies for higher-risk medical consumers, we can take a somewhat similar approach. Reverting (again somewhat) to 1986, a state could do with higher-risk medical consumers what it once did with all medical consumers—that is, it can hold the higher-risk consumers accountable for the extra financial subsidies they receive from the taxpayers. And not just the affluent higher-risk consumers, but all of them, affluent or not.
The key word to this proposal is not simply “all,” but also the words, “hold… accountable.” The meaning of these words in this context requires some elaboration. In 1986, they meant that we would treat medical debts no differently than other debts. That is to say, they could damage the debtor’s credit-rating, and/or could incur financial hardship, or even bankruptcy. But we don’t have to give those words that meaning here; we could give a meaning that would create little or no financial pressure on the debtor, or injury to his or her credit-rating. We can do this by subordinating medical debts to all other debts—including debts that were incurred after the medical debt was incurred. In such a way, lenders would not be deterred from providing loans.
Under the logic of such a policy, there would be no interest—no burden slowly but inexorably growing over the years. There would, however, be an adjustment for inflation. And, most importantly with respect to collection of the debt, there would no statute of limitations. Consequently, if the debt were not paid by the debtor, it may be collected from his or her estate. One might think of this policy as a de facto estate tax that is theoretically applied to everyone with medical debt, but is collected only from those whose estates could support such payment.
Subject to the subordination of the medical debt, a state could choose to make provision for enforcing, when feasible, a quicker repayment. Since, however, such debts can be overwhelming, and also because the policy should not discourage debtors from trying to improve their financial situation, any such provision for collection action should be meaningfully circumscribed. The marginal tax rate approach taken by the federal government seems reasonable. That is, assuming no superior debts, a medical debt would be collectible only when the debtor’s annual income/windfall exceeds a statutorily-set annual amount, but even then, it is collectable only at a statutorily-set percentage rate. For example, a state may set an annual income in excess of $40,000 as collectable, at a rate of 15 percent of the excess. And, in excess of $60,000, that rate could increase to 30 percent.
Another administratively simpler option that would encourage quicker voluntary repayment would be to provide a discount for any payments made prior to death— ranging, for example, from 25 percent discount for repayment within the first year, descending by 1 percent annually, but going no less than 10 percent.
In such ways, the burden on current and future taxpayers could be alleviated more quickly. Or, alternatively, since all repayments would be for expenses covered under the AHCA, such repayments might be directed specifically to the AHCA budget. In this way, the objective could be seen not as simply repaying taxpayers at a general, abstract level, but also returning funds to the AHCA so that they can be used to help other medical consumers.
If, however, such an approach were adopted, why should it be limited to covering simply the extra subsidies that higher-risk persons receive? Why not apply it to all subsidies that the government provides for medical insurance? At first blush, such a policy sounds senseless. Why give a person a subsidy if he or she has to pay it back? The answer, of course, is that not everyone will be able to pay it back. But some will.
But what about those on Medicaid—those who don’t buy insurance, but receive medical treatment anyway? Where the AHCA is to provide subsidies for medical insurance to everyone, it’s not clear why there would in fact be a separate Medicaid program—that is, a program designed to specifically address the needs of the poor. But, for the sake of argument let us assume that there would be. If we also adopt the principle that medical consumers should be financially accountable for the expenses they incur, we come to the question: Should not the poor, just as other medical consumers, be accountable in the same way, as well?
An answer may be that the chances of collection from the poor are so small that it would not be worth the administrative expense. But, under such an approach, what administrative expense would there be? Primarily, it would be keeping a record of the expenses that the medical consumer has incurred. But that’s something, of course, in billing the government, medical providers do already. The primary difference would be simply in the recognition that those charges to the government are also records of obligations that medical consumers, whatever their income, owe to the taxpayers. Why would we treat the poor any differently? If we do, we effectively say that they have no hope of paying—no hope of getting a better job, succeeding in business, getting an inheritance, or even winning a lottery. In short, we effectively say that the poor are somehow lesser beings than the rest of us. In short, we would be condescending.
Such a policy needs to apply to all Americans receiving medical assistance, or it should apply to none. And why shouldn’t it apply to all? For it isn’t, after all, as if it would be creating financial hardship for anyone. True, it may, in some cases, reduce the inheritance available for needy beneficiaries, but, before a person bequeaths gifts to others, such person needs to meet his or her own obligations—obligations to those who have helped make the person’s own life possible and productive.
Such a policy would constitute a distinct middle ground between laissez-faire and the welfare state. Medical care would be guaranteed to all; it just wouldn’t be guaranteed for free. It would guarantee medical treatment, but it would also assert, in a meaningful way, the medical consumer’s personal responsibility. This is a moral concept that to which we often profess abstract allegiance. But there is nothing that professes it so clearly (and nothing that, at both personal and public levels, creates an incentive for minimizing medical costs as powerfully) as a statement of specific charges to a specific individual for specific expenses incurred.
The fact that the “creditors” may not be specific individuals, but rather, nameless ones required by law to provide aid—that is to say, taxpayers—does not change this moral responsibility. If, after all, we require taxpayers to cover a person’s medical expenses, and the person subsequently obtains the means to cover some or all of them him or herself, how can we not require repayment? How can we say to the formerly-indigent, “Even though you’re much better off now, you have no binding obligation to those who helped you in the past? How can we say: “We can require others to help you, but we can place no requirement on you, if circumstances permit, to pay them back?”
Bert Peterson is the author of Let Us Raise a Standard. His recent articles have appeared at the American Thinker. He also operates a website at 4thofjuly.info.