Health Care Update – Crazy Costs to Insure Few Additional People
The Congressional Budget Office (CBO) has completed its initial analysis of the various the health care program proposals. The CBO has identified that these proposals will add over $1 trillion to the federal deficit over the period from 2010-2019. Recent headlines in the last two weeks put the total costs between $1.5 and 2 trillion! Various attempts by the various committees to craft legislation continue to move the target, but the reality is we’re talking a trillion dollars.
In addition, the CBO estimates that approximately 39 million people would gain access to health insurance and another approximately 23 million people would lose their current insurance, resulting in a net result of reducing the number of uninsured people by only 16 million.
So that means $1 trillion dollars for insuring 16 million people. That comes to $62,500 per person.
Finally, the plans being pushed to introduce a “government option” will result in millions of Americans being dumped by their employers into that plan, unfairly competing against private insurers through the advantages of large purchasing power and government subsidies, until the Trojan Horse of the government plan is the only viable option, pushing us down the road to the final result of a single provider, government run health care program.
CBO Double-Speak – Raising Taxes On YOU, Not Just “The Rich”
The CBO says, “The government can spur those changes by transforming payment policies in federal health care programs and by significantly limiting the current tax subsidy for health insurance. Those approaches could directly lower federal spending on health care and indirectly lower private spending on it as well.” (CBO letter to Senator Kent Conrad, June 16, 2009, page 1.)
Here’s one thing you need to understand about “government speak.” The government literally accounts for any allowable tax deduction as government “spending” and it considers any reduction in tax deductions (for those of you following the bouncing ball, that’s a double-negative), i.e. tax increases, are labeled government “saving.” Really – I am not making that up.
When a company pays for an employee’s health care and then records that as a tax-deductible business expense, the government defines that as government spending on health care. So the CBO is saying that by eliminating health care as a deductible business expense for companies, the government will “lower federal spending on health care…”
The idea of an income tax is based upon net income – that is what’s left over when you subtract your expenses from your revenues (sorry for the basic primer, but many on the left are oblivious to such basics.) To eliminate the deduction for a company’s expense of attracting and retaining employees, and then call that “lowering federal spending on health care” defies common sense.
So there you have it, the proposals are to increase taxes. While CANDIDATE Obama excoriated Senator John McCain during an election debate on his health care policies, saying that Candidate McCain was proposing to tax health care benefits for the first time ever, now PRESIDENT Obama is the one who is trying to do it, as well as increase other taxes as well!
Number of Uninsured Is Vastly Overstated – It’s Really About 8 million (3%)
The most widely cited data is that 46 million people are uninsured. This number comes from the US Census Bureau’s Current Population Survey (CPS). Other surveys from the same US Census Bureau estimate much lower numbers. Why the difference? The CPS is a “point-in-time” estimate, which includes many people that the casual observer with common sense would exclude. Included in the 46 million are:
46 million uninsured at any one point in time
minus 12 million who are eligible for public programs (Medicaid, SCHIP, etc.)
minus 9 million who earn over $75,000 per year
minus 8 million who earn over $50,000-$75,000 per year
(over half these 17 million already have insurance via spouse or family member)
minus 9 million who are illegal immigrants
= 8 million, which would be 10/300 million Americans, = 3.3%
I think most of us would agree that those four groups of people are fairly independent. That is, there’s not a whole lot of overlap amongst those groups. I think that most of us would also agree that people making $50,000+ could afford some type of insurance if they chose. In addition, Medicaid & SCHIP already cover many of these people. Finally, call me crazy, but I think that most Americans would agree that illegal aliens should not be eligible for U.S. sponsored health care. (La Raza is already pushing hard for Obama to include illegals in health care reform.)
In addition to all of this, about 45% of the uninsured will typically remain uninsured for less than four months. 75% of uninsured spells last one year or less, and 91% last two years or less. Many of the “uninsured” are changing jobs. Many of the “uninsured” are under 25 who are still getting insurance from their parents’ plans or who simply would rather buy an iPhone application than buy insurance because they don’t think they need it.
“46 million uninsured” is simply not accurate. I’m an actuary, and I know statistics. This is a completely bogus statistic.
Health Care Costs in U.S. vs. Other Countries – It Is Not Cheaper in Socialized Countries
Many people will state that the U.S. spends so much more than other countries on health care and gets inferior results. International statistics from the OECD show that median per capita spending in the U.S. was $6,401 vs. $2,759 based on purchasing power parity. Is that accurate?
In a word, no. For just one example, in a study done in 2008 it was found that for a very simple medical procedure, uncomplicated dental fillings, reimbursement data underestimated the total costs by 50% in nine European countries. In addition, other countries account for out-of-pocket and long-term care, overhead, capital costs, and many other factors differently.
In fact, the average annual rate of growth of real per capita U.S. health care spending is slightly below the OECD average over the last decade (3.7% vs. 3.8%) as well as the last four decades (4.4% vs. 4.5%). It doesn’t matter if it’s a private system like the U.S. or a government system, the financing method is unrelated to the costs of health care.
Interestingly, even if you use OECD data, you will find that there are only four out of the 28 countries generally cited in the OECD studies that have lower out-of-pocket expenditures on health than the U.S.
Finally, these cost comparisons do not factor in the lost productivity of time spent on waiting lists. In the late 1990’s 5-10% of English waiting list patients were out on sick leave – you know, waiting for treatment. Norway is actively trying to reduce waiting times to reduce the cost of their sickness benefits and Finland calculates that the waiting costs in their country can exceed the costs of treatment!
Is U.S. Health Care is Inferior to Other Countries? NO – Are You Kidding Me?!?
Despite the press, the answer is a resounding NO. Some examples of U.S. advantages:
From 1998-2002 twice as many drugs were introduced in U.S. vs. all of Europe (when the breast cancer drug Herceptin was proven to be effective in 1998, it was available almost immediately in the U.S. But it took another four years for the U.K. to start buying it for British breast cancer patients)
2,900 drugs are currently being researched in the U.S. today
The top 5 U.S. hospitals do more clinical trials than ALL hospitals in any other country
40% of all medical travelers come to the U.S. for treatment
Survival rates and outcomes for cancer, diabetes, hypertension, spinal cord injuries, etc. are ALL significantly better in the U.S. (“There is nothing inherently different about cancer in the U.S. and Britain to explain why more people are dying here,” said Dr. Karol Sikora, of Cancer Partners UK.)
5 year survival rates for breast cancer 84% in U.S. vs 73% Europe
5 year survival rates for prostate cancer 92% in U.S. vs 57% Europe
U.S. has four times as many CT scanners as Britain (important if YOU need one)
U.S. has three times as many MRI scanners as Britain (important if YOU need one)
Rationing is unbelievably rampant in countries with socialized health care
U.K. has determined not to spend over $22,000 to extend a life by 6 months
U.K. has rejected MANY drugs that currently covered in the U.S.
The list goes on and on. The question is that if YOU, personally, needed serious, life-saving health care, would you rather be in the U.S. or in any other country in the world? If you choose any other country than the U.S., your dogma has successfully overcome your ability to think rationally.
While I’m on the topic of irrational thinking, let’s mention infant mortality. In a recent New York Times article, it was reported that the U.S. lags behind 28 other countries in infant mortality rates, based upon 2004, the latest year for which worldwide data are available.
Let’s stop and think about this. Why would this number be so high compared to other countries? Do other countries really have better medical care for children from birth through age 1? Or could it be that in the U.S. the technology is so astoundingly good that babies that would be tossed out as stillborn in other countries are actually given the best possible treatment on the planet, kept alive, and while a great number of them are nursed on to full health, some of them die from various complications due to premature birth? According to the Times article, “We think the increase in preterm birth and preterm-related causes of death are major factors inhibiting further declines in infant mortality,” said Marian F. MacDorman, the lead author of the report and a statistician at the C.D.C.
While a number of countries report lower infant mortality than the U.S., it has nothing to do with the source of payment for medical care. In Japan, which has the best statistics (3.3 die per 1,000 live births), the national system does not cover normal childbirth—or prenatal, postnatal, and postpartum care (Your Health Matters by Gregory Dattilo and David Racer, Alethos Press, 2006). In the U.S., mortality is only 3.0 per 1,000 for full-term babies weighing at least 5.5 lbs (ibid.). Premature, low-birth-weight babies, who have a much higher risk of early death, have a better chance of survival in the U.S. than anywhere else, because of the excellent medical care they receive here.
Medicare Govt Run Health Care – It’s the BIGGEST Govt Money Loser in the Entire Budget
The 2008 annual report by the trustees & actuaries of Social Security states that:
“Medicare’s financial status is even worse. This year Medicare’s Hospital Insurance (HI) Trust Fund is expected to pay out more in hospital benefits and other expenditures than it receives in taxes and other dedicated revenues.”
There it is, in black in white, straight from the trustees and actuaries of the Social Security. Medicare started losing money last year and is going deeper into the hole at a stunning rate. It is the biggest driver on the fiscal suicide course that our country is currently on.
Medicare is a government run health insurance plan for people who reach retirement age. I’ve got a great idea. That’s going so well, why don’t we do a government program to insure everyone in the whole country! (NOT)
OBAMA’s Health Care Reform Revenue Pitch – Lies, Misdirection and Deception
President Obama’s 2010 Budget proposes to help pay for some of the health care reform plans being bandied about by saving $316 billion over the ten year period by:
Reducing Medicare Overpayments to Private Insurers Through Competitive Payments
Reducing Drug Prices
Improving Medicare and Medicaid Payment Accuracy
Improving Care after Hospitalizations and Reduce Hospital Readmission Rates
Expanding the Hospital Quality Improvement Program
Reforming the Physician Payment System to Improve Quality and Efficiency
I’m sorry to sound cynical, but who really believes that our bloated bureaucracy in Washington will SAVE us money? They’re going to SAVE $316 billion, like the Pentagon saves our money on $600 hammers, like the way they’ve already SAVED a bazillion jobs, according to those who are doing the saving? Just ask them. Right.
The President’s budget also proposes to raise $318 billion by increasing taxes on the itemized deductions of anyone in a tax bracket higher that 28%.
The president tries to soften increasing taxes during a recession by pairing it with “cost savings.” That’s a nice marketing ploy, but the reality is that the savings won’t materialize and the taxes will just keep going up.
CANDIDATE Obama said that he would not resort to an individual mandate to achieve universal coverage. In a campaign debate with Hillary Clinton, he demanded of Senator Clinton, “To force people to buy coverage, you’ve got to have a very harsh penalty… Are you going to garnish their wages?” PRESIDENT Obama now insists that everyone must be covered under threat of monetary penalty.
Big Part of The Problem – An “All You Can Eat Health Care Buffet” Mentality
A tremendous amount of the problem with our health care system is that it’s structured as an “all you can eat buffet” type of plan where doctors and patients prescribe and take every possible test and procedure known to man. Why?
From the consumer’s point of view, you’ve been paying these big insurance premiums, and so once you’ve paid your co-pay of $20, you want to get everything you can get, including the kitchen sink.
Consider this quote from a doctor in Switzerland, “The minute you make health insurance mandatory, people start overusing it,” said Dr. Alphonse Crespo, an orthopedic surgeon and research director at Switzerland’s Institut Constant de Rebecque. “If I have a cold, I might go see a doctor because I am already paying a health insurance premium.”
That’s what I call the “all you can eat health care buffet syndrome.”
The doctor’s point of view is CYA – he is incented to prescribe every test and procedure that he can in order to prevent being sued for malpractice, even though he’s already paying a fortune for malpractice insurance.
In the current system, people are not responsible for their own money. People have dutifully paid their insurance premiums, so when they get a sniffle, it’s time for payback for all of those high premiums you’ve been funding over the years. Off to the medical buffet line to fill up on everything we can get.
Big Part of The Solution – The Health Savings Account, or HSA
I have opted for an alternative approach. For my family of four, I have an HSA medical savings plan combined with a high deductible health insurance plan. This is a plan that puts me squarely in charge of my health, what doctors I use, what treatments/drugs I receive, and how much I pay.
There are two parts to this approach that work hand in hand: a high deductible insurance plan and a health savings account.
The high deductible insurance plan is real insurance – a stop-loss type of insurance that kicks in when I have medical costs that exceed $5,000 per person, or $10,000 for my family. After that, it covers everything 100%. Until then, I’m on my own. So this is real insurance against the risk of catastrophic medical costs. The cost? Very low, around $2,800 per year for my family of four.
The health savings account (HSA) is a savings account that I can put up to $5,950 into in 2009. That money stays in my savings account until I need to pay for medical care. When I need medical care, I write a check out of my savings account. If I get really sick and spend $5,000 from my savings account, the high deductible insurance kicks in and pays for everything from there on.
Now here’s the great thing. If I don’t use the $5,950, it stays in my own personal account and continues to grow, tax-free. It’s always mine and it goes with me regardless of my employment situation. What happens if I have a healthy year and our family doesn’t use up much of those savings? It stays there, and I can continue to put up to the maximum amount of money into the account ($5,950 this year) every year that I want. All the money continues to grow tax free, and comes out tax free as long as it’s used for medical expenses. And the types of medical expenses that qualify are very broad.
If I put in the maximum of $5,950 into my savings account, then the total cost of these two pieces is $8,750 in my first year. That’s about the same, or less than, what I would pay for a typical all-you-can-eat-buffet style of health insurance plan. In future years, if I don’t use up the money in the HSA, I can put in less each year and just maintain a comfortable cushion in my savings account to make sure I have enough money for health care until my deductible is met in the event of a health crisis. That means that my annual costs would generally be much less than $8,750. In fact, after a couple of years of fair health, I could easily have $10,000 in my health savings account and not even need to add any more than whatever my expenses are in a given year in order to stay at that level. So my cost would be $2,800 plus whatever I actually need to spend that year, and my balance in the account would grow with interest.
In this plan, I control all of my medical spending. The bills still go through the claims adjustment process through my high deductible insurance plan (you know, where the insurance company goes through the bill and make the providers reduce their charges for various services). So now, when my son broke his hand, and the orthopedic doctor orders up a full series of x-rays every time we walk in, we just ask the doctor, “We’re paying for this out of pocket – what does he really need? Will the other three x-rays show anything that you can’t see in the first x-ray?” Guess what the answer was? “No, not really. We’ll take an x-ray from this angle, and, if we don’t see anything suspect there, then we’ll know what we need to know.” We just saved $85 x 3 x-rays that weren’t really needed. If the doctor had said she needed 2, 3 or four, we could have said fine, go do it. The point is, we’re in charge of eliminating waste, it’s not difficult, and we get to keep the savings.
Oh, and the cost is LESS than the typical insurance plan, which is often quoted as around $12,000 per year, even if I were to hit my high deductible every single year. I believe that’s about a 25-50% reduction in health care costs right off the bat!
Is There Really A Problem?
Yes, there really is a problem. Health care costs are at 16.2% of GDP and climbing.
Some basics that seem to be self evident to me include:
Fix Medicare First: If we can’t figure out how the government should oversee an insurance program for a subset of our population, why in the world would we want the government to dictate the terms of health care for the entire country?
Help Those U.S. Citizens Who Need It: While health care is not a right (despite Obama’s position that it is), most people agree that it is an obligation of society to help those in need. Our Judeo-Christian heritage (in contrast to the political waffling of today) confirms that our principles include helping others in need.
Reduce Costs: Democrats will argue that the government can do it while Republicans will argue that competition can do it. Where is the final answer? While there are shades of degree to everything, let’s begin by looking at what has made our country the greatest on earth – was it freedom or was it government?
Promote Informed Choice: People must take personal responsibility, but health care reform could include increased opportunities to educate people on what that looks like, without becoming a nanny-state overseer. Case in point – if people have not figured out that their televisions need to be updated by now, they shouldn’t be watching tv – they should be learning to read. There will always be people who are too lazy or apathetic to better their own situation. As I tell my children, “A lack of planning on YOUR part does not constitute an emergency on MY part.” We should not be compelled to insure 100% of the people in the U.S. because 100% will simply not make a rational choice to participate.
Create Appropriate Financial Incentives: The “all you can eat buffet” mentality must go. Level the playing field, giving the same financial/tax incentives to individuals who purchase health care insurance as to large corporations.
Promote Prevention and Wellness: This is something Ben Franklin would agree to – “An ounce of prevention is worth a pound of cure.”
