The Senate Finance Committee (SFC) is considering partly funding health care reform with a booze tax. And while one of my Wonk Room colleagues calls the idea “plain bunk” because he is a “poor blogger,” my other colleague Matt Yglesias is a long-time booze tax enthusiast:

But what if we could raise some revenue by taxing something else? Like, say, cigarettes. Or soda. Or booze. Well, then the case for doing the taxing remains similar—you can fund useful programs with it. But the case against looks a lot weaker, since reducing consumption of cigarettes or soda is not so bad. You introducing a little bit of allocative distortion into the economy, but not a huge amount, and you’re improving public health which is going to be beneficial.

Indeed, the costs of alcohol use far exceed the revenue from existing alcohol taxes. In 2005, the federal government “pulled in about $8.9 billion from alcohol excise taxes.” By comparison, the economic and social costs of drinking burden “society with an estimated $184 billion per year in health care, criminal justice, social services, property damage, and loss of productivity expenses.” According to the Marin Institute, “annual health care expenditures for alcohol-related problems amount to $22.5 billion. The total cost of alcohol problems is $175.9 billion a year (compared to $114.2 billion for other drug problems and $137 billion for smoking)”:

- In comparison to moderate and non-drinkers, individuals with a history of heavy drinking have higher health care costs.

- Untreated alcohol problems waste an estimated $184.6 billion dollars per year in health care, business and criminal justice costs, and cause more than 100,000 deaths.

- Health care costs related to alcohol abuse are not limited to the user. Children of alcoholics who are admitted to the hospital average 62 percent more hospital days and 29 percent longer stays.

Currently, tax rates differ depending on the type of alcoholic beverage. This particular proposal would simplify the tax code by imposing “a rate of $16 per proof gallon on all alcoholic beverages.” As a result, “beer taxes would go up by 48 cents a six-pack, wine taxes would rise by 49 cents per bottle, and the tax on hard liquor would increase by 40 cents per fifth.”

How much revenue would this raise? Not enough to fully fund health care. According to a 2008 Congressional Budget Office report, “modestly increasing and reforming federal alcohol taxes could generate more than $28 billion in new revenue over five years. Resulting reductions in problem drinking would produce further significant savings in health care expenditures (for both the drinker and affected family members), and decreased law enforcement and other alcohol-related costs.”

Funding health care reform will require a mix of different revenue streams, but if the booze tax is seriously considered “poor bloggers” shouldn’t worry. According to the Center for Science in the Public Interest, since 80 percent of all alcohol consumers are moderate drinkers, they will pay “a negligible amount of alcohol taxes.” “Heavy and addicted drinkers, for instance – who account for most of the alcohol consumption in the U.S. – rightly pay most in taxes since their drinking imposes the greatest costs on society.” Here are the estimates:

- 35 percent of adults pay nothing at all.
- 80 percent of drinkers pay at most $26.50 per year, about 7¢ per day.
- Half of beer drinkers pay at most a penny a day.
- The heaviest drinkers (top 5%), who average some 11 beers per day, pay on average $215 a year, about 60¢ per day.

The main thrust of the Republican health care bill is an argument against greater government spending on health care. By completely repealing the employer-tax exclusion for health care benefits, they’re redistributing money already in the system and giving it to Americans in the form of refundable tax credits.

The argument is this: after the employer exclusion is repealed, employers will convert the money they spend on your health care benefits into higher wages and you’ll be able to use that increase and the ($2,290 per individual or $5,710 per family) refundable tax credit to purchase health care coverage in the new State Health Insurance Exchanges or the existing individual market.

Since everyone would have “universal access” to coverage, greater government involvement in health care would be counterproductive. Government rots the system, and Americans know this, they argue:

In solving our health care crisis, Americans already know that government will not work…Patients should be able to choose from a variety of private insurance plans. The Federal government would run a health care system — or a public plan option — with the compassion of the IRS, the efficiency of the post office, and the incompetence of Katrina.

Therefore, greater government involvement must not only be avoided, but existing government involvement should be phased out. Low-income families with dependent children should shift out of Medicaid and into “higher quality private plans through direct assistance that will be coupled with a tax credit.” Medicare Advantage — the program that contracts with private insurers — should be “reformed” and possibly expanded.

But today, the Commonwealth Fund released a new survey indicating that “elderly Medicare beneficiaries reported greater overall satisfaction with their health coverage, better access to care, and fewer problems paying medical bills than people covered by employer-sponsored plans.” “The findings bolster the argument that offering a public insurance plan similar to Medicare to the under-65 population has the potential to improve access and reduce costs,” the organization concluded:

- Medicare beneficiaries report easier access to physicians. Ten percent of Medicare beneficiaries’ physicians did not accept their insurance, compared with 17 percent of respondents with employer-sponsored plans.

- Medicare beneficiaries are less likely to report not getting needed services. Twelve percent of elderly Medicare beneficiaries reported going without care, such as prescribed medications or recommended tests, because of cost restraints. Of individuals with employer-based plans, 26 percent reported experiencing these cost/access issues.

- Medicare beneficiaries are sicker and poorer but report fewer medical bill problems.

Medicare beneficiaries were less likely to report a medical bill problem than those covered by employer plans.

Within our hybrid public-private system of coverage, public plans compliment private insurers — providing services to vulnerable populations more efficiently. Today, talk of “government-takeover” conjures up images of health care rationing in Great Britain or Canada. If, however, Democrats are able to shift the frame of reference to an expansion and improvement of Medicare, then they may very well win this debate.

Rep. Paul Ryan (R-WI) released a new Republican health care plan (The Patients’ Choice Act) that’s fraught with questions and contradictions.

We pose the following queries:

- Are the State Health Insurance Exchanges voluntary? The two-page summary notes that “The Patient’s Choice Act of 2009 would encourage states to establish rational and reasonable consumer protections.” The more detailed summary says, “The Patients’ Choice Act would ensure that the federal government partners with states to create State Health Insurance Exchanges.”

- Is the GOP embracing European-style health care boards? To control premiums the report suggests “a model that works in several European countries.” The “independent board” would “penalize insurance companies that cherry pick healthy patients while rewarding companies that seek patients with pre-existing conditions.” How would this ensure affordability?

- Are the tax credits adequate? The tax credit for families is $5,700, far below the average $12,300 that families are paying today. More importantly, how will the tax credits grow over time? Will they keep up with skyrocketing health care costs?

- What happens to the individual health insurance market? The plan establishes State Health Insurance Exchanges outside of the existing individual market. How will the individual market be regulated? Will insurers be able to offer standard benefit packages within the State Health Insurance Exchange and more porous policies in the individual market?

Today, Rep. Paul Ryan (R-WI) and Sen. Tom Coburn (R-OK) unveil the Patient Choice Act, their alternative to President Obama’s health care reform initiative. Using Sen. John McCain’s (R-AZ) health care plan as a foundation, the new plan proposes taxing the full value of employer health benefits, issuing (inadequate) refundable tax credits — of $2,290 per individual or $5,710 per family — and expanding the use of Health Savings Accounts. (DOWNLOAD A SUMMARY OF THE PLAN HERE AND HERE)

States are encouraged to “establish rational and reasonable consumer protections” by forming State Health Insurance Exchanges to give Americans a choice of “different” private “health insurance policies” and issue standard benefits, offering “coverage to any individual regardless of age or health.”

The plan privatizes the health care system without controlling health care spending. Employers will react to the elimination of the tax exclusion by dropping some Americans from their employer-sponsored health plans and the Republicans build an inadequate safety net to catch the newly uninsured. Americans will have the option of purchasing coverage in the new State Health Insurance Exchanges, should the state choose to establish it. But here, the same problems that plagued McCain’s health care plan are also evident in this proposal. The Republicans protect private health insurer’s monopoly over coverage, but provide no safety net or affordability measures.

Americans can choose a private health insurance plan from the State Health Insurance Exchanges, but that doesn’t mean they’ll be able to afford it. The Republican proposal allows private plans to charge sicker Americans higher rates for coverage. While they include European-style “non-profit independent board ” that “would penalize insurance companies that cherry pick healthy patients while rewarding companies that seek patients with pre-existing conditions,” they do nothing to prevent higher prices based on sex, age, occupation, or medical condition. To finance these higher prices, Americans can rely on the meager tax credits or money they’ve stashed away in a Health Savings Account.

All in all, the plan is dead on arrival. The idea here is to strengthen the private insurer’s monopoly over coverage while doing very little to lower overall health care spending. It’s an alternative steeped in reactionary ideology and political purpose, not a viable solution to the health care crisis.