Social Justice, Libertarianism

Beyond Obamacare: The Seven Percent Solution

ObamaCare is dead, long live — what?  The House Republican plan achieved the rare feat of displeasing fellow conservatives almost as much as Democrats before dying stillborn.   Does it follow, as numerous commentators have intoned, that ObamaCare ought to be retained?  No, for it too is multiply flawed and has been rejected by citizens in most polls.  So what is to be done?

This isn’t a wonkish question about design but rather a plea for radical rethinking.  America makes three demands on its healthcare system that, unfortunately, are jointly incompatible.  First, no one should be deprived of healthcare.  ObamaCare made universality a core component, but even before its passage America offered an ungainly mix of private insurance, Medicare, Medicaid, other governmental programs, charity clinics and, if all else fails, guaranteed access at the emergency room door.  Second, high quality care must be provided to all regardless of financial means.  As a society we insist that the poor be guaranteed access to minimally adequate necessities such as housing and food.  We are not much troubled by the fact that the wealthy do markedly better.  However, medical treatment for the poor is to be substantially identical to that afforded the affluent.  Once in the clinic or hospital, all patients must get the best. Third, it’s acknowledged that resources are not infinite and that therefore economizing on health care expenditures is necessary, as indicated by the (somewhat fanciful) name “Affordable Care Act”.

Any two of these can be straightforwardly achieved.  Withhold health care services from those unable to pay and costs will be kept down.  Or provide only a minimal standard of care to those who cannot afford better and, again, costs will be contained.  Finally, if we adopt a cost-be-damned attitude, high quality health care can be extended to all, at least until the economic machine starts to break down, as eventually it will.  Despite the asseveration of the singer Meat Loaf that “two out of three ain’t bad,” it’s not likely that the public will accept any of these compromises.  Therefore, we need to ask: how can this roadblock be eliminated?

It can’t.  That’s what ‘inconsistent’ means.  As another spinner of songs announced, “you can’t always get what you want.”  The most that can be done is to sequester one of the conflicting elements.  That is what this proposal offers.

I propose that the federal government establish a national health care budget in the amount of seven percent of GDP (based on the preceding year’s economic statistics), the sum to be expended in accord with the priorities of a governmental agency – let’s call it the National Health Commission (NHC) –  whose sole task is to decide which services will be covered and which excluded.  All individuals lawfully within the country’s borders will be eligible for care on terms of strict equality.  What the NHC may not do is access or direct any funds beyond the seven percent.  Therefore it will have to make hard decisions, some of which no doubt will be excruciating.  The program so designed will satisfy the criteria of universality and economic stringency.  But because it isn’t entirely open-ended it will not always provide state of the art services.

Beyond the realm of the NHC people will be at liberty to make whatever health care arrangements they prefer.  For many the desired amount will be none.  The quantity and quality of health services that a well-functioning NHC can provide will be good enough.  Others will choose to direct some amount of their resources to securing additional health care goods, either via direct purchase of services or some type of insurance.  The role of the government will be restricted to ordinary protection against force or fraud.  It will neither require nor forbid any arrangements beyond those it itself affords.  Specifically, it will not subsidize any non-NHC services either directly or through favored tax treatment such as currently is extended to employer-provided health insurance.  To oversimplify just a bit, the government will bear 100% responsibility for NHC and 0% for the remainder.  The private realm will satisfy the criterion of making available the very highest quality services as defined by available technology, and it will be strongly responsive to economic considerations because providers will need to convince individual consumers that what they have on offer is worth purchasing.  What it will not do, of course, is achieve universality.

Why seven percent?  That amount actually is close to the proportion of GDP devoted to health care by the governments of Canada and the United Kingdom, both devotees of single payer delivery systems offering very high standards of care.  Indeed, the greater wealth of the United States will allow the government to spend on healthcare a greater sum per capita than does either of these countries.

Of course the seven percent stipulation is somewhat arbitrary.  Because I am a libertarian I would prefer a ceiling of five  percent, the remainder to be consigned to private arrangements.  Those of a Bernie Sanders persuasion would be more comfortable with the governmental share set at ten percent.  I believe that to be excessive but nonetheless an improvement over the ObamaCare scenario or, indeed, American healthcare delivery prior to Obama.  More crucial than the precise level of governmental responsibility is setting a budget that forces decision-makers to confront difficult choices, knowing that every service funded comes at the cost of some potentially worthwhile service forgone.  They will have to think hard about how to set priorities and will be incentivized to drive hard bargains with would-be providers.  The slack that is everywhere in current procedures will be driven down to a minimum.

The other minimum is the role of government in the private realm.  It will not subsidize or forbid any particular arrangements, nor will it distort the tax system.  What private insurance covers or does not cover will simply be excluded as a legitimate concern of the state.  Individual mandates will be a thing of the past, as will restrictions on interstate medical commerce.  The upshot is that both consumers and providers will be keenly responsive to questions of quality and cost, precisely the opposite of current practices.

I am under no illusion that this change will be painless or not encounter opposition.  For example, although transitioning from Medicaid will not bruise many vested interests, Medicare will require special handling as the country moves from universality only for the old to universal access for the whole population.

Some will loudly complain that it is wrong to leave everything above the 7 percent threshold to the mercies of the market.  I agree.  Healthcare traditionally has been the beneficiary of extensive contributions from charities and nonprofits.  Under this proposal incentives for giving will actually be enhanced because there will be less crowding-out by governmental programs.  However, we should reject the implication that markets in healthcare are unseemly or unnecessary.  Rather, they are a necessary element in a system that honors universality, high quality and efficiency.  Perhaps after current efforts to reform health care fail, as predictably they will, the seven percent solution will be given its chance.

Loren Lomasky is Cory Professor of Political Philosophy, Policy & Law at the University of Virginia.

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  • Theresa Klein

    However, medical treatment for the poor is to be substantially identical
    to that afforded the affluent. Once in the clinic or hospital, all
    patients must get the best.

    Do people really think this?
    Some people might, but I hardly think there is a society-wide consensus that “all patients must get the best”. Most people, even those supportive of universal health care, tend to think that the poor should get their “basic” health care needs met, but not necessarily the latest and most expensive treatments. I think a lot of people are just concerned that poor kids should get wellness checkups and antibiotics for common illnesses. They don’t think people should die from easily curable illnesses. And if those things were covered, a lot of the support for people demanding “everyone gets the best” would evaporate.

    • urstoff

      Plus, I’m not very confident that “the best” is actually any better in terms of health outcomes than “the bare minimum”.

      • Sean II

        You’re right. The big differences in health outcomes between rich and poor in America are explained by behavior, not access to care.

        The rich take better care of themselves at baseline, and are much more likely to comply with treatment, make lifestyle changes.

        The poor go out and spend their metformin money on hostess cakes.

        • AP²

          *either because they lack self-control or because they just don’t get why that’s a bad idea, or both*

          I certainly won’t blame you for not having experienced poverty, but the lack of imagination is inexcusable. Not that those reasons don’t often apply, but either/or?

          What about wanting to eat something more tasty than what you can personally do in your poor (or inexistent) kitchen? Or actually, have any kind of pleasure at all that fits within the very tight constraints of a life without money?

          Sex aside, healthy pleasures are expensive. Even a trip to the park might require gas money you can’t afford. Hostess cakes are cheap, and you can often even buy them with “food money”, rather than spending real money.

          I know this has been around, but it’s a short but insightful read on that topic: http://killermartinis.kinja.com/why-i-make-terrible-decisions-or-poverty-thoughts-1450123558

          • Sean II

            Metformin is $4. For a patient who needs it, hostess cakes are poison.

            Nothing tastes as good as not having your foot amputated feels.

          • Theresa Klein

            Ugh. So wrong. Have YOU experienced poverty? I’m certainly wondering after reading this post. I don’t think Sean II is entirely right either, but the idea that “healthy pleasures are expensive” or that you can’t cook tasty food for less than the price of Hostess cakes are both so unfathomably wrong I have difficulty imagining that you have ever experienced poverty.

            And incidentally, the post you linked to? Was written by a Democratic political organizer who went to private school. Her parents bought her a house. She may have made shitty life decisions, but she doesn’t come from poverty.

            http://www.nationalreview.com/corner/365376/left-falls-revealing-poverty-hoax-david-french

            There are few facts you should know.
            1. It’s WAY cheaper to cook your own food than to buy anything prepared. Universally. A cake mix costs $1, a box of hostess cakes costs $3. And you’ll get more cake out of the cake mix.
            2. National parks, and state parks, and even better, national forests, offer extremely cheap vacations. All you need is a tent and a sleeping bag. We’re talking like a $5 fee per car in some cases. We could get crazy and say $35 for a weekend at a nice beach site. You just put the same food you would otherwise eat into a cooler and drive. Gas money yes, but still. You can have a healthy vacation hiking in the mountains for under $100 per person, easy.

            Now the one thing I would say is that poverty does really change your risk calculations. When you are poor, you tend to be a lot more risk-averse, which may lead to some stupid behaviors, such as hoarding, unwillingness to move to find employment, and unwillingness to try new things, which might break old habits.
            There some other things – if you’re really worried about where rent is going to come from it’s hard to focus on longer-term goals. Many middle-class kids get help with housing from their parents. Poor people often come from situations where that’s not an option. You can’t really go to school to get a degree without having rent covered. Risk-aversion will make you unwilling to take out student-loans (despite the fact that they are generous and easily obtainable).

            Still a lot of poor people figure it out. Many don’t. Behaviors like buying junk food, drinking, drug abuse, aren’t rational responses to poverty. They are behavior problems that cause poverty. The poor people who don’t have these behavior problems figure out how to cook for themselves, eat healthy, take cheap vacations, and make long-term plans, and they get out of poverty.

          • Sean II

            Excellent comment.

            The first step in caring for the poor is having a realistic view of their behavior.

            The temptation to valorize and make excuses for that behavior is characteristic of people who only care about seeming to care.

            Those who work with the poor cannot help noticing the options they forego, the choices they make, the counsel they refuse, the preventable harm they inflict on themselves again and again. You notice these things BECAUSE they are always the most potent obstacles to effective aid.

          • Theresa Klein

            Having just reread the blog post on poverty, it strikes me how much the post is not really a description of what is like to be poor. Just a description of what it’s like to be THAT PERSON. Not every poor person is incapable of making rational long term choices. Just the people who tend not to get unpoor. Worth noting the author didn’t start off poor. Also she’s in school and hence obviously making some temporary sacrifices so it’s somewhat internally contradictory.
            Actually, I suspect some sort of mental illness, which is probably true of many poor people. So, it isn’t a description of poverty. It’s a description of mental illness resulting in poverty. Realistically, if you want to get that person out of poverty, you have to treat the mental illness, not just give them money and expect them to make better choices.

          • C4TWOMAN

            Kindly go f*ck yourself, “Milord”. I know of no one who is poor or struggling making all the reckless bad choices you aledge. All the people I know work over time, are very thrifty and do the best with what they have. Where did you learn about “teh poors”? Britefarts? FOX Noise?

            Perhaps you’re confusing working class/poor with abject poverty, but that would require me to give you the benefit of the doubt that you’re not willing to.

            Also too, people that poor can hardly be expected to make better choices until there’s better education. And I’m guessing you don’t want to fund that either.

            I have a suggestion: why don’t you move to a nice Libertarian Paradise like Delhi or Shanghai? You can make a ton of cash. Mind, the air and water sucks, but environmental regulations are for those pesky liberals anyway.

          • Peter from Oz

            Have you ever read the work of Theodore Dalrymple? He has similar view to the one you express.

          • AP²

            Yes, I know that. But you can’t simply replace “buying a box of cakes” with “making some cakes”. That requires time, knowledge, personal energy, etc that many of us – of any income – often don’t have for days.

            And that’s my point: not that it’s somehow impossible to have an healthy live as poor, but that contrary to the hypothesis that poor people have less self-control than others, the same lack of self-control in a non-poor person is much easier to manage thanks to the options that money gives them.

            By the way, having a working stove when you can bake cakes is itself a luxury not reachable by everyone. We spent some time without one.

            As for the gas money, the mind reels a bit. You do know that millions in the US don’t even own a car, right?

            The most recent 2013 Census numbers shed additional light on their commuting habits, showing how more than 6.3 million workers don’t have a private vehicle at their home.

            Even those who do, they often have beat up cars who they can’t risk to indulge in that kind of trips. A broken car is fucking expensive, and you need it to get to work.

            I do have to admit that as a non-American, our experiences differ quite a bit. Gas is quite a bit more expensive this side of the pond, which changes the equation. Still, it’s not exactly free there either.

            In any case, we’re quibbling over nothings. I never claimed Sean was wrong. I’m quite sure many poor people *are* stuck in poverty due to lower-than-average self-control or knowledge that Hostess cakes are bad. I said that wasn’t the whole story, and it isn’t. Hell, you said it yourself!

          • Theresa Klein

            There are all sort of ways to manage time to cook for yourself – you make a large batch of one thing and then freeze it in individual servings, so you can take one out and microwave it for a quick dinner.
            Also many healthy dinners are very fast. Salads take very little time to prepare, fish only takes a few minutes to fry in a pan. Frozen vegetables (not the steam in bag kind) are cheap and only take 10 minutes to cook.
            If you don’t know these things, that’s probably because you’ve never been poor. Poor people who don’t do these things really do lack self-control.

            As for cars, it only takes one car to transport 3-4 people on a camping trip. You might not have a car, but you might have a friend who does.

          • AP²

            I’m not sure what you’re arguing against anymore. You’re attacking some weird argument I never made. I certainly never wrote that poor people can’t make healthy dinners.

            It seems like you’ve read my posts, and rather than reading the part where I try to summarize my point, you rather inferred some position you thought I was making and argued against it.

            By the way, regarding the camping trip, that’s mostly what we did. We had the car, our friends didn’t, so we paired up as two families. That became hard to coordinate, so it was mostly a summer vacation thing. Still, I think the most important difference is that here gas costs about $6.5/gallon (converted). Plus any decent road has steep tolls – about $12.5/100 miles. So the $100 doesn’t really stretch that far.

            In any case, this is just nitpicking, not really address the main concern of my post.

          • Theresa Klein

            You wrote that “healthy pleasures are expensive”, and implied that poverty itself causes people to make poor choices.
            I’m mostly taking issue with the idea that healthy pleasures are expensive. So not true. Generally, being healthy involves NOT spending money – not buying junk food, not doing drugs, not drinking, not overeating. And getting exercise is effectively free – you don’t need a gym membership to go for a jog or play frisbee in the park.

            I actually have a hard time thinking of ANY healthy pleasures that are expensive. If your idea of a healthy pleasure is spending $100 at a spa getting a
            massage and a body scrub, well, those things are really luxuries for
            rich people with money to burn.

            Now, there are some ways that poverty does distort decision making. I just don’t think the inability to make rational, cost-effective, and healthy food choices is one of them. The linked post is so much a person rationalizing their bad choices – I blow money on smokes because it’s an appetite supressant. (Yeah, no.) I work two jobs and go to school, but why bother because I’ll always be poor. I’ll never get a decent job because I look like shit because I can’t take care of my body. This might be a description of clinical depression, but it’s not a description of rational responses to poverty. Plenty of poor people are capable of economizing and refraining from eating a box of hostess cakes because that’s supposedly their only source of pleasure.

    • Sean II

      “Most people…tend to think that the poor should get their “basic” health care needs met…And if those things were covered, a lot of the support for people demanding “everyone gets the best” would evaporate.”

      Wrong. All they’d do is redefine the term “basic health care” to include more stuff. The history of socialism and/or welfare statism very clearly teaches us one thing:

      There is no condition under which the Left will ever say “mission accomplished!” and stop asking for more wealth transfers. There will always be a demand for more programs and for growth in existing program budgets. And this will always be sold as a matter of basic or urgent necessity among the alleged recipients.

      • Every BHL and Niskanen Center author needs to read this comment, and then re-read it, and then re-re-read it, and then re-re-re-read it. And then do it again.

        • Sean II

          Basic Needs 1967 – “Maybe we could give surplus army cheese to starving moms?”

          Basic Needs 2017 – “Mobile high speed internet access is A HUMAN RIGHT!”

          • Theresa Klein

            You will note that there movement to grant mobile high-speed internet access as a human right does not exactly have mainstream support. They can shift the goalposts, but it doesn’t mean society is going to shift with them.

          • Sean II

            Oh, give it a few years. The Bernie Bro generation is coming up nicely. The next economic crash will give them a turn at the controls.

          • Theresa Klein

            Well, it’s hard to imagine who could be worse than Trump, but we seem to be veering to the insane extremes lately so who knows.
            I’m thinking Oprah Winfrey will be the next President, personally.

          • jdkolassa

            Nah. It’s gonna be Mark Zuckerberg.

          • Sean II

            Ticket formed.

      • jdkolassa

        Yes, this.

      • Theresa Klein

        Yes, the Left will always demand total equality, but the mainstream middle will stop far short of it. The Left does not comprise the consensus view of American society. It is just a faction, and the majority aren’t necessarily going to go along with constant goal-post shifting

      • King Goat

        It’s almost like norms can be, like, relative and stuff! People used to think not starving was ideal, and now the whiners talk about USDA deficiencies! So let’s dismiss the latter out of hand!

        • Lacunaria

          You’re missing the underlying point. It’s not that sensitivity increases and such norms change, it’s that people impose them politically and are often ignorant of the trade-offs and moral calculus.

          • King Goat

            That some people play politics with that sort of thing shouldn’t obscure that for many, if not most, it’s closer to my example. At the least dismissing all such movement of targets as the former is going to be wrong a lot.

          • Lacunaria

            If you are not referring to the politics of health care (that’s the topic here, right?) then what are you talking about? What is “closer to your example”?

            Both charitable giving and taxes and regulations have increased as society has become more prosperous and sensitive. The former is fine, even laudable, but the problem is that the left does not see the moral hazard of state compulsion, so their hypersensitivity becomes tyrannical.

  • Simonjh

    This proposal is not dissimilar to what actually pertains in the UK (not Canada, where private treatment is largely prohibited). Believe me, it us far from being unproblematic. Everyone expects free treatment, via the NHS) as if by right. And costs ever escalate in the private sector. Competitive forces do not appear to operate in a significant way. And forget changing insurance company if you suffer from a chronic illness – unless you wish to have that illness excluded. So you are entirely at the mercy of your existing coverer until death do us part. I suspect the best way of trying to square the circle (I agree it can never be squared) is via a voucher system. But social insurance systems – as pertain in much of continental Europe (for example in The Netherlands and Switzerland) – seem to provide more acceptable solutions than those pertaining in the UK and USA.

    • Jerome Bigge

      Effectively they are “community rated” systems where individual health conditions due to pre-existing conditions are covered in the same way as those without these conditions. While top level US care is probably superior, what is provided likely satisfies most people.

  • DBritt

    Just for reference on the 7% number, the US government currently spends ~11% of GDP on healthcare. Germany spends 8.7%; France, 8.9%; Italy, 7.1%; Japan, 7.2%. It’s probably unrealistic to expect the US to be on the low end compared to these countries given our historical domination of this spending category 😉 I’d advocate 8.8%, which would already constitute a 20% cut to government spending. The program is bound to have growing pains, and you don’t want a the perception to be too negative or it will simply fail out of the gate. Other than that I like the idea quite a bit. Both sides could potentially claim it as a victory, since it would be a major reduction in the size of government (as measured by budget) along with a universalization of healthcare.

    • Jerome Bigge

      The total amount spent on health care in the US is 18% of our GDP. However there are easy no cost ways to reduce this. Repeal of prescription laws, repeal of the laws regarding the import of medications for one’s own use from other countries. That would drop costs.

      • DBritt

        the US *government* currently spends ~11% of GDP on healthcare. The rest is non-govt.

        • Jerome Bigge

          About two trillion dollars a year. Total US spending is $3.4 trillion. Per capita cost for people on Medicaid (not seniors) is about $3500 a year. US total costs per capita work out a bit over $10,000 a year. Far above that of the rest of the developed world. The Swiss come the closest to the US on a per capita basis with a system somewhat similar to our Obamacare both with a mandate and the use of private insurance as providers of coverage. Note however that their tax systems are different than ours and health care costs are also effected by how they finance medical education along with having different legal systems. Malpractice for example is treated differently in the rest of the developed world than it is here. Much harder to sue your doctor “there” than it is here. That effects how medical treatment is provided…

  • So it’s a UBI for health care. Would this be above and beyond the other UBI, which is supposed to replace other forms of welfare, or do we now need two UBIs, one for health care specifically, and another for everything else? If the latter, should we also consider a UBI for food, another for housing, perhaps another for unemployment, one for disability…?

    Do you think this is maybe how we ended up with a myriad of social services in the first place?

    • Jerome Bigge

      Government agencies do not appear to be paragons of efficiency. The private enterprise system can deliver the same level of services for a lot less money. Also we now have a parallel system where both state agencies and federal agencies do the same thing. The major difference is the federal agencies cost more to do the same tasks because Uncle Sam can do deficit financing, something the states can’t do. Private agencies however can easily beat out both so far as cost per service is concerned. Government simply isn’t “efficient”.

  • MARK_D_FRIEDMAN

    Damn! I just hate it when libertarians formulate absolutely brilliant policy proposals, then fail to appreciate the full extent of their greatness. The author is right, healthcare is an essential human need, and he correctly notes that so is food and housing. Sure, but education too! I love this idea, but please, apply it across the board: x% of GDP for food, y% for housing, and z% for K-12. The we’ll have various Commissions decide just what should be purchased with these funds.

    Now, some nervous Nellies might say that this is exactly what ww tried with Medicare, the Great Society funded sordid housing

    • SimpleMachine88

      You have exceeded your government-determined quota for sarcasm, citizen. Please report to the nearest education center for rehabilitation.

      • MARK_D_FRIEDMAN

        No sir, I am completely innocent. I treated this proposal with every bit of the dignity and respect to which it is entitled.

    • King Goat

      Black household poverty pre-Great Society, 55%, post Great Society, 22%.

      • Peter from Oz

        post hoc ergo propter hoc

  • geoih

    You were doing pretty good until “I propose that the federal government establish …” . You recognize the conflicting goals quite nicely, but then try to magically make these conflicts disappear, but you’re really just ignoring them. Ignoring reality doesn’t make it disappear. So, you end up with another statist solution that will be manipulated by politics to the benefit of those in power and only make the problem worse. And since GDP by definition includes spending by the State, increases in spending will become self-perpetuating.
    It all reminds me of when I talk to corporate executives about worker safety. The executives all want to support safety as the top priority. So I ask them to define safety, and they usually ramble on about some utopia where nothing bad ever happens because all risks are eliminated. I then tell them how much of a budget they’ll need to do that and they all get very quiet. Eventually, they have to come up with a definition of ‘safety’ that allows for their business to stay in business.
    It’s the same for health care. Scarcity is. No amount of utopian vision or central planning or debt spending is going to change that. As long as people refuse to recognize reality, they will continue to be disappointed with their results.

  • SimpleMachine88

    — deleted, sry wrong discussion

  • M Lister

    However, medical treatment for
    the poor is to be substantially identical to that afforded the
    affluent. Once in the clinic or hospital, all patients must get the
    best.

    This is far from what’s true now (even post ACA), and I don’t see any reason to think that there is anything close to a consensus that it’s a necessity. You’re building a straw man here, and won’t have a good argument until you deal with better positions.

  • j_m_h

    While I got a great chuckle from Mark’s response (and agree on a number of levels) what I’m struggling with is the why this proposal solves something. The problem is that politically we cannot establish the suggested commission so how with such a solution solve the political problems we’re facing? Seems like there’s some circular reasoning hiding in one of the unstated assumptions (or perhaps merely unread by me assumptions as a scanned through the post 😉

  • Lacunaria

    It’s actually a good proposal, relative to our current system. The left should embrace minimal universal healthcare, but the problem for the right (and libertarians) is that your threshold will not be kept. So, it fails to address what you yourself say is the most crucial issue. That said, even a failed 7% solution seems better than what we have now.

    Also, about half your language comes across as not-libertarian. You’re contradictory on all patients getting “the best” vs. some minimum, not giving free healthcare is not “withholding” it, and charity is part of the market, not separate from it.

    I did chuckle at the title “The Seven Percent Solution” for healthcare, though. 🙂

  • IEIUNUS

    By his beard, Loren’s here!

  • Somaticism

    You’re dreaming, Lomasky. You must not know of public choice economics. 🙂

  • Cowboydroid

    Of course the seven percent stipulation is somewhat arbitrary. Because I am a libertarian I would prefer a ceiling of five percent, the remainder to be consigned to private arrangements.

    Yikes!!!

  • ThaomasH

    I favor giving everyone the same government subsidized health insurance. I would start at defining what is covered by the insurance to achieve today’s level of subsidy, but ultimately whatever people are willing to pay for (with a consumption, not a wage tax) is OK with me.