The Cost to the Economy of Putting Health Care Reform on the Back Burner

by francine Hardaway on February 4, 2010

No matter which side of the political fence you are on, this is a startling situation, reported this morning in the Wall Street Journal— not a liberal rag:

For the first time, government programs next year will account for more than half of all U.S. health-care spending, federal actuaries predict, as the weak economy sends more people into Medicaid and slows growth of private insurance.

The figures show how federal and state spending is taking a bigger role while Congress hesitates over a health-care overhaul.

Government health programs are a growing burden on the federal budget, which is running annual deficits of more than $1 trillion, and rising health costs continue to batter private industry.

By 2020, according to the new projections, about one in five dollars spent in the U.S. will go to health care, a proportion far beyond any other industrialized nation.

“It’s going to be a desperate issue five to 10 years out,” said Gail Wilensky, the former top Medicare official in the George H.W. Bush administration. She said the U.S. will have to decide soon between raising revenue to pay for Medicare or reducing benefits.

Public funds accounted for 47% of the $2.34 trillion of national health spending in 2008, the last year for which figures are available. The federal Centers for Medicare and Medicaid Services estimates in a paper to be published Thursday in the journal Health Affairs that the proportion will rise to 50.4% by 2011. Last year, the federal actuaries had predicted the 50% mark wouldn’t be reached until around 2016.

Obama isn’t making this up. Health care is an issue for the entire economy. Let’s imagine for a moment that we want to reduce Medicare benefits. That might be a way to solve the problem, so we ought to look at it first, because no one likes her taxes raised.

But the Baby Boomers started turning 60 last year. They have paid into Medicare for their entire careers. How do you think they, the largest cohort in our history, would feel if their benefits were lowered just as they were coming in to Medicare? That would be pretty fun to watch. And the Seniors come out and vote if someone even threatens Medicare Advantage, the bloated private program that provides gym memberships and other bullshit that regular Medicare does not, and overpays the private insurers for managing the extra benefits. So anyone who advocates for Medicare cuts gets his head handed to him.

As for Medicaid, its growth is a function of the layoffs in the work force. If you let the working population get sick and die, who will support the economy? Not to mention their children, who are already being rejected by government programs in Arizona.

It’s really hard to avoid the cold hard truth: we need comprehensive reform, whether that takes the government further in or further out. Where things are now won’t stand. And that reform has to address COST FIRST. Cost of delivery, cost of private insurance to individuals and small businesses, cost of new technology, cost of pharmaceuticals, and the inevitable cost of doing nothing. The health care industry — and it has become an industry — has to lower its prices and thus its cost of doing business, or it will go out of business, replaced by a disruptive technology, like Ayurveda or naturopathy.

Every year, Medicare tries to cut payments to providers, and can’t. Why? Because if providers are paid little enough, they won’t continue to provide services (that’s already happening). They hold the government hostage, while taking home their profits. Silly government, outsmarted by the private sector again.
That’s why the simplest thing to do would have been to create a single payer system, in which the cost of everything was pre-determined by the single payer (could be either public or private) and everybody in the supply chain had to accept the price. That’s what Wal-Mart does to keep prices down — it squeezes the suppliers. That’s what Wal-Mart does. Why do you think clinics in Wal-Mart have been so successful?

We like Wal-Mart. We like the every day low prices. So much so that we allow the company to control wages. So why not establish a Wal-Mart system of health care. Cheap, and not necessarily of high quality (good enough).
The last alternative is to raise taxes. That will send people into a tailspin. But I bet it happens, because Americans are not willing to settle for reduced benefits, or reduced quality, or reduced cost of care.
In Denmark, if you buy a car, there’s a 200% tax. Sounds shocking to me, but people continue to live in Denmark. And they have health care. It’s a trade-off.

Posted via email from Not Really Stealthmode

{ 2 comments… read them below or add one }

patelliott February 4, 2010 at 10:48 am

Great points, Francine. I would just add that Government healthcare does little to educate the patient and support responsible use of the healthcare system, which harms the patients and increases costs.

Eric Bell February 4, 2010 at 3:49 pm

I agree with your point about cost and Pat's about patient responsibility.

First things first, Obamacare needs to stay dead. Simply put that plan was about Government takeover of the healthcare industry.
Now lets get serious about reforming the US healthcare system. Rather than rant about what I want (patient centered / patient choice, in a free marketplace) , lets put a select group of experts in a room with the sole purpose of developing the ideal US Healthcare framework. As the outcome maybe three options are created, then this panel presents to America, we have a three month period to digest, understand the costs and ask questions. Then we have national election to pick the path.

This solution may result in our healthcare system undergoing a paradigm shift. With the daily dose of information about healthcare in the last America should be ready to handle this change. Espically if there are no backroom deals!

Your thoughts?

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