Who Will Pay for European-Style Medical Coverage

Even after ObamaCare, a frequent impulse on the left and in mainstream media remains the shoring up of health-care coverage for millions of Americans by further taxing the rich, however defined. This frame for redressing inequality in the U.S. carries over to other areas of policy, but medical services are the most politically acute.

Turns out the problem of lagging diagnostics and treatment in America is not so simply a miserly hogging of resources by the well-off, IRS be damned. That is not the finding of some magnate-funded think tank but scholars at the World Inequality Lab, based in Paris. For flagging this, I am grateful to a short article in the latest issue of City Journal (it is not yet online) that extracts elements of an academic working paper in advanced draft by economists Thomas Blanchet, Lucas Chancel and Amory Gethin.

The burden of their paper is to show that greater inequality in the U.S. is a function not of failure to even the score by redistribution, but of “pre-distribution” imbalances that in recent decades have grown here, much more than in Europe. That surely has many causes but the authors focus on the lagging (until very recently, at least!) compensation to the lower-tier workforce. Thus, more profits have accrued to the owners of capital, especially in the top wealth brackets. America therefore has gained more “rich” and near-rich while others have trailed off.

This is also a familiar political refrain, often linked to the decline of private-sector unions in the U.S. It may be that because of more “labor flexibility,” including a relatively cheaper workforce, more investment capital has gravitated to the U.S., turbocharging  the profitability push and thereby the inequality in pre-tax income. Whether Europe in light of this enjoys a better society is a lively debate.

But Chris Pope in his City Journal parsing of the Lab’s work is interested in how social benefits like medical care get paid for. To put it briefly, what he sees is that high-income taxpayers cover more of their fellow citizens’ (and noncitizens’) health-care costs in the U.S. than in Europe. Moreover, those subsidies are largely directed toward the poor, elderly and disabled, through Medicaid and Medicare. Indeed, in Europe it is the broader middle of the population that carries more of the burden for government programs. If their incomes have better kept pace with the wealthy—as per the overall working paper—then they have also been more saddled with tax than in the U.S., where personal income taxation is in fact quite progressive and payroll and sales taxes are lower.

The important lesson to draw from this, whatever one’s ideology about the unfairness of financial disparities, is that any concerted effort to widen and enhance the provision of medical (or other social) benefits in America must be bought, literally, by the middle and working classes.  Sure, you can tap the rich for a bit more before they squeeze their way around it, or you can try to dismantle the insurance-company middlemen, but ultimately a modern health-and-welfare state means European-style taxation.  Maybe it’d be best to see first about getting those “fairer” European incomes. –02/01/22

Published by timwferguson

Longtime writer-editor, focusing on topics of business and policy, global and local.

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