Proposed Healthcare Surgery Won’t Heal America
By Ron Robins, Founder & Analyst,Investing for the SoulBlogEnlightened Economics;twitter
First published May 18, 2011, in his weekly economics and finance column atalrroya.comYes, surgery is required for the US government’s Medicare (healthcare) program. Butbefore the scalpel is used to control unsustainable costs, an understanding of whatpromoted the financial disease is required. Unfortunately, that understanding isalmost totally missing in the American debate. The Medicare changes proposed so farwill not heal America.In "Short Term Gain, Long Term Pain", I wrote “unacknowledged as key causes of most developed countries’ growing and unsustainable debt is their citizens’ lack of happiness and well being. This induces people to seek immediate comfort in materialgoods, drugs, and activities and lifestyles that eventually cause them, and theirsocieties, great harm, ill health, and massive debt!” Additionally, consider theimmense psychological distress and impact on individual lifestyle and chronicdiseases when about half of all American marriages end in divorce and 29 per cent of all children live in single parent ‘families.’ Hence, for many tens of millions of Americans, this lack of happiness and well beinginflicts significant psychosomatic (mind/body) based illnesses, accounting for 70 percent or more of costly chronic lifestyle-based diseases.Supporting the view concerning the negative effects of lifestyle-based diseases isMark Bittman, writing in the New York Times on April 12. He said that, “for the firsttime in history, lifestyle diseases like diabetes, heart disease, some cancers andothers kill more people than communicable ones. Treating these diseases—and futileattempts to ‘cure’ them—costs a fortune, more than one-seventh of our GDP… Butthey’re preventable, and you prevent them the same way you cause them: lifestyle.A sane diet, along with exercise, meditation and intangibles like love prevent andeven reverse disease… ” Mr. Bittman also quotes Dr. David Ludwig, a Harvard-affiliated paediatrician and theauthor of Ending the Food Fight, who says, “the magnitude of the [US government]deficit is small when you consider costs of nutrition-related disease; the $4 trillionthat the Republicans want cut over a decade is about the same as the projectedcosts of diabetes over that same period.” Hence, it is clear that what should be done is to put resources into proven cost-effective programs that promote improved psychological health and lifestyles.Unfortunately, the US Congress is probably too psychologically unstable to seriouslyconsider incorporating such programs! Instead it will probably resort to changes inMedicare that mostly attempt to limit healthcare costs. However, changes toMedicare are unlikely to happen until after the 2012 Presidential elections unlessCongressional action comes sooner due to a collapsing US dollar and/or bondmarket, or a miraculous bi-partisan bill that both Democrats and Republicans agreeon.
The starting point in this debate is that the US is dealing with potentially mammothunfunded Medicare liabilities of up to $125tn. over the infinite horizon, according toBoston University’s professor of economics, Laurence J. Kotlikoff. Funding that wouldrequire all 309 million Americans to each write a cheque to the US treasury for$405,000! Clearly, that is not about to happen.President Obama revisited the Medicare cost debate on April 13, by saying thefollowing: “Already, the reforms [to Medicare]… will reduce our deficit by $1tn… Wewill cut spending on prescription drugs by using Medicare’s purchasing power… Wewill change the way we pay for healthcare… with new incentives for doctors andhospitals to prevent injuries and improve results... we will slow… Medicare costs bystrengthening an independent commission of doctors, nurses, medical experts andconsumers who will look at all evidence and recommend the best ways to reduceunnecessary spending…" “… the reforms we’ve proposed… [are] saving us $500 billion by 2023, and anadditional $1tn in the decade after that… [and] I will not allow Medicare to become avoucher program that leaves seniors at the mercy of the insurance industry…” A ‘voucher’ program is at the heart of proposed Medicare reform by US House BudgetCommittee’s Chairman Paul Ryan. It is also favoured by Professor Kotlikoff.Commenting on April 14, a CNN post on President Obama’s Medicare reformproposals and those of Mr. Ryan, Professor Kotlikoff made the following remarks: “This is simply a continuation of kick-the-can down the road, which leaves everlarger government bills for our kids to pay… Obama's speech made no effort to findcommon ground with House Budget Chairman Paul Ryan's plan to address Medicare…” Professor Kotlikoff also writes about his own plan, The Purple Health Plan (PHP),which shares many similarities with Mr. Ryan’s proposal. “The [PHP]… provides allAmericans with vouchers each year to purchase a basic healthcare policy. Those withbad genes or bad luck receive larger vouchers. The vouchers are paid for by ourtaxes. We pay for a basic health plan of our choosing solely with the voucher.Insurance providers of the basic plan can't turn us down… [spending is fixed at] 10per cent of GDP… [the plan] also offer[s] participants financial incentives to lowertheir weight, stop smoking, take their meds, and otherwise improve their health.” Professor Kotlikoff’s PHP is partly based on the healthcare systems of Germany, TheNetherlands, Switzerland and Israel, who the OECD ranks as having some of themost cost-efficient and effective healthcare systems. American per capita healthcarespending is around 50 per cent greater than in those countries, yet with frequentlypoorer outcomes. The PHP has great credentials, being supported by five NobelEconomics’ Laureates: George Akerlof, Edmund Phelps, Thomas Schelling, WilliamSharpe and Vernon L. Smith.Surgery to America’s healthcare system, Medicare, is coming around again. Thechanges that eventually gather the most support may well centre around ProfessorKotlikoff’s PHP, utilising a voucher system and limiting government spending. Hisplan also incorporates some financial incentives to promote improved health. But thePHP, as with any of the other plans being proposed, need to include a majoremphasis on psychological health too. Without such an emphasis, the proposedchanges to Medicare will not solve the massive problem of psychosomatically induced
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Proposed Healthcare Surgery Won’t Heal America
Yes, surgery is required for the US government’s Medicare (healthcare) program. But before the scalpel is used to control unsustainable costs, an understanding of what promoted the financial disease is required. Unfortunately, that understanding is almost totally missing in the American debate. The Medicare changes proposed so far will not heal America.
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