Sensible Health-Care Reform (Part 2): Unsustainable Health-Care Growth

This is the second of a series of commentaries examining the state of health-care including the serious problems with health-care delivery, the underlying root causes of those problems, the looming government fiscal catastrophe secondary to health-care entitlement spending, the failure of the recently passed health-care “reform” to address the grave problems facing our nation related to health-care delivery, the harm the recently passed health-care “reform” will cause to our seriously ill economy, and a proposal for a framework to truly, effectively, and sustainably reform our health-care delivery system. This report will review and expand on a previous discussion on unsustainable health-care cost growth.

The author feels obligated to disclose underlying bias: 1. this analysis reflects the author’s strong belief in the efficiencies and fairness of free markets as well in the individual’s right and responsibility of self-determination and of self-reliance. 2. I have 3 daughters, 3 nieces, and 9 nephews who deserve their opportunity to live the American Dream – a dream made possible by the protection of our inalienable rights endowed by our Creator

Unsustainable Health-Care Cost Growth

Returning to the essential issue, health-care costs continue to climb, putting increasing fiscal strain on Federal, state, and local governments, as well as on businesses and families. According to a 2008 Congressional Budget Office report, from 1965-2005, costs have increased by a factor of 9 in inflation-adjusted dollars. Over that same period, health-care expenditure has increased from 5% to 15% of US GDP. A separate CBO statement reports Federal outlays for Medicare and Medicaid have risen 5 fold from 1970 to 2009, as measured as a percentage of GDP. In a recent letter to Senator Kent Conrad, the Chairman of the Budget Committee, the Director of the CBO reports that by 2017, Medicare Part A will have insufficient funds to pay for all covered services. The 2009 Medicare Trustees Reports estimates that the projected unfunded liability (the difference between costs of the benefits promised and the projected revenue from dedicated Medicare taxes and Medicare premiums) is $89 trillion dollars. This gap can only be closed with either significant benefits cuts, significant tax increases or both. That report estimated that a tax solution alone would require total payroll taxes to climb to 37% to meet the retirement promises (Medicare and Social Security (1/5th of the Medicare liability)) made to the young people who today are entering the work force. If payroll taxes don’t rise to cover the deficit, general tax revenues would need to be transferred to cover the shortfall. Currently, 13% of Federal tax revenues are spent to cover the Medicare and Social Security expenses. In the same report, that percentage is projected to grow to 27% by 2020 and 49% by 2030. As more of the budget flows to these entitlements, the other Federal Government services that now receive 87% of the Federal Budget e.g. defense, education, infrastructure maintenance, and the thousands of other federal programs, will consequently be progressively and drastically scaled back with alarming consequences.

Costs have grown faster in the private sector. A recent Kaiser health benefits survey found that employer-sponsored premium costs increased 119% from 1999 to 2008, far outpacing wage growth over the same period. The escalating costs have had significant chilling effects on the general economy and employment. Higher insurance benefits costs result in lower wages and in turn lower consumers spending and savings. For the businesses that provide health-care employee benefits, higher costs for that insurance leave less capital to invest in the business and make those businesses less competitive in the global economy. Broader detrimental economic consequences of these costs were confirmed in a recent RAND corporation study that demonstrated among corporations that provide employee health-care benefits, increasing health-care costs result in greater unemployment and lower industrial output.

The next Dr Right installment will examine value-added health-care cost drivers.

Call to Action: Though passed by an appalling political process and with complete disregard of our Constitution, though containing ineffective and even harmful policy, though disregarding the inalienable rights given to us by our Creator, the passed health-care reform bill is not the end of the debate but rather a new beginning. It is an opportunity to contrast irresponsible policy with prudent policy, to contrast misconceived policy with thoughtful policy, and to contrast policy that places government in the center with policy that places the individual in the center. Get in the fight and stay in the fight. We have learned, the hard way, the consequences of leaving it up to the career politicians. Contact your legislators and demand they exercise the privilege the voters gave them to represent us to effectively address health-care delivery and the other problem facing our state and nation. Learn about the issues and talk to others about the issues. Join your local grass roots organizations like the York 9-12 Patriots, York County Action, York Campaign for Liberty, and others, so we can take back the political process that has become corrupt and ineffective. We must work to bring up, from the grass root level, candidates – principled persons (Republicans, Democrats, and Independents) who will actually solve problems, who will respect the Constitution of the United States, and who will honor the “consent of the governed” entrusted to them by the citizens of our counties, states, and country.