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Supreme Court Healthcare Decision Could Trigger New Approach - Personal Responsibility - to Both Pay for and Slash Costs

21.06.2012 - 14:15

Since smoking costs the American economy about $200 billion annually, imposing a surtax on smokers' health insurance premiums to recapture even a small portion of these costs from the people directly responsible could, without any new taxes or cost shifting, pay for much of the estimated cost of health care reform, suggests public interest law professor John Banzhaf, who first popularized and then legalized the concept of differential health insurance premiums. http://www.lung.org/associations/states/indiana/news/cdc-national-media-campaign.html

Moreover, says Banzhaf, unlike all of the other Obamacare provisions, such a smoker surcharge would reduce the totally unnecessary costs of medical care, saving hundreds of billions of additional dollars in the long run. "Preventing diseases in the first place is obviously far more efficient than marginally reducing the costs of treating them once they've developed, and much better than simply trying to shift the costs to those in no position to reduce them, rationing health care, or stifling economic growth with taxes and regulations," he argues, noting that Obamacare largely tried to simply shift the costs of health care, rather than to actually reduce them.

Smoking costs the American economy about $200 billion a year in totally unnecessary costs, most of which are paid by nonsmokers in the form of much higher taxes (for expenses under Medicaid, Medicare, etc,) and grossly inflated premiums for health insurance paid both by individual workers and by their employers. If smokers were required to pay even half those costs in a surcharge on their health insurance premiums, it would more than pay the entire cost of health care reform, estimated by President Barack Obama at "around $900 billion over 10 years," or less than $100 billion a year. http://www.whitehouse.gov/the_press_office/Remarks-by-the-President-to-a-Joint-Session-of-Congress-on-Health-Care

More realistically, requiring smokers to pay only 25% of the huge costs they now impose on others would cover more than half of the costs of health care reform, and in addition provide a very strong, direct, and immediate financial incentive for smokers to quit - thereby saving hundreds of billions in unnecessary health care expenses.

However, Congress rejected just such a proposal, electing to give any income from a smoker health insurance surcharge to insurance companies. The Affordable Care Act provides federal authorization for companies to charge smokers up to 50% more for their health insurance, without any need to comply with existing federal requirements for so-called "wellness programs." As a result, any money raised by such smoker surcharges will go to private companies, rather than to the federal government to help cover the costs of health care reform.

Ironically, surveys showed that imposing personal responsibility on smokers - making them pay at least a small portion of the unnecessary expenses their smoking now imposes on others - is one of the few fund-raising tactics supported by a strong majority of the public; unlike higher taxes, cuts in medical services, shifting the costs to those who are blameless and cannot reduce them, etc. http://www.prlog.org/11836336-terming-mandate-individual-responsibility-turns-health-law-on-its-head-says-expert.html

"It's ironic that President Barack Obama, HHS Secretary Kathleen Sebelius, many members of Congress, and numerous experts and pundits all stated that imposing personal responsibility was an essential element for effective health care reform, since it is one of the few methods which can be used to significantly reduce disease, rather than simply spreading the costs of treatments to others," says Banzhaf.

For example, a recent report from the prestigious Brookings Institution provided strong support for using a smoker surcharge on health insurance as a component of comprehensive health care reform. The report recognizes that simply making the health care system marginally more effective at treating major diseases is far less efficient than preventing the diseases in the first place. The Brookings report therefore recommends “offering premium rebates to customers who improve their health or eliminate risk factors” - differential health insurance premiums which, Banzhaf notes, are mathematically the same as charging more to those who refuse to eliminate risk factors. Indeed, surcharges are more effective than rebates because they can be much larger, and better because surcharges cost taxpayers nothing, and indeed bring in enormous amounts of money.

Ironically, the White House has started to refer to the individual mandate to buy health insurance as "individual responsibility," even though President Obama rejected that principle despite clear evidence that it would have saved hundreds of billions of dollars, says Banzhaf. http://content.usatoday.com/communities/theoval/post/2012... AND http://www.nationaljournal.com/whitehouse/reeling-white-h...

Moreover, Obama argued during the health care debate that "we've got to have the American people doing something about their own [health] care," and Sebelius repeated the refrain: "personal responsibility extends to lifestyle; that in order to have a healthier America, a more productive America, we need to make some basic changes in what we eat, how much we exercise, getting our kids up off the couch, turning off the video games."

"Imposing personal responsibility on those who through their behavior now impose enormous unnecessary costs on the great majority of Americans is the most effective and efficient way to not only pay for health care reform, but to also actually start slashing exploding health care costs," concludes Banzhaf.

Professor of Public Interest Law
George Washington University Law School,
FAMRI Dr. William Cahan Distinguished Professor,
Fellow, World Technology Network,
Founder, Action on Smoking and Health (ASH)
2000 H Street, NW, Suite S402
Washington, DC 20052, USA
(202) 994-7229 // (703) 527-8418
http://banzhaf.net/ https://twitter.com/#!/profbanzhaf