Thursday, September 10, 2009

The Costs of Health Care

I'm a proponent of universal health care in the U.S. (reasons described in the comments section here). You can sum up my reasons as 'we live in the wealthiest (overall) country in the world and I do believe that health care IS a right of someone in a country with this much "wealth"'. However, there are obvious problems with any proposal at this time (one being the financial costs, but the other being politics). Rolfe Winkler details:

America’s obligations over the next 75 years now surpass $62 trillion, up 8 percent since last year. And a new report released today by the Peterson Foundation suggests that total will go even higher if the House’s health care legislation is passed.

With today’s pliant bond market, it’s easy to pretend we can have things that can’t be paid for. But that’s the kind of attitude that led California into the fiscal abyss. We have to get serious about bringing our expenses in line with our income. Now.

Unfortunately Republicans and Democrats alike are more concerned with winning elections than passing good public policy. Republicans told us “deficits don’t matter,” signed a prescription drug benefit for Medicare that created a bigger fiscal hole than Social Security, waged two very expensive wars financed with debt, and borrowed to bail out banks.

For their part, Democrats complain about the deficit they “inherited,” then proceed to expand the bailouts, pass hundreds of billions worth of “stimulus,” and try to increase our health care liabilities over and above already unsustainable levels.

  • Part A is hospital insurance provided by Medicare.
  • Part B is medical insurance to pay for medically necessary services and supplies provided by Medicare.
  • Part D is stand-alone prescription drug coverage insurance.
Source: Medicare Consumer Guide


  1. When you say healthcare is a "right", on the margin I agree.

    The problem I have is that there are people who can afford healthcare and choose to use their funds otherwise, which is their right, but not prudent in my opinion.

    Another issue is also the problem of people who don't take care of themselves. While I don't wish the morbidly obese any harm, I do feel as though they have made choices that have helped lead to thier condition. I have a problem with those who sacrifice to take care of themselves subsidizing those who do not. You could contend that we are essentially doing that now; however, it the individual’s choice. Furthermore, that leads to another problem entirely - employers, not individuals, control healthcare.

    Ultimately the system needs to be changes with some sort of compromise, but given the state of Congress the possibilities seem very slim.

    In the interest of full disclosure, since we are boxed in I would consider myself right-of-center (although I am really a libertarian). In any event, I find the Republicans attacks on healthcare illogical and hypocritical. Just because we have great care in some instances doesn't mean we can't have better care or that the system isn't flawed. I also don't see how they can justify their administration’s endless bailouts for the wealthiest of Americans, yet call Obama a socialist for trying to get healthcare to the masses.

  2. all great points and i personally don't know the best way to solve the issues.

    though i would disagree with your point that some people that can afford health care have the right not to. i'd argue that it isn't their right if we have to pay for their healthcare in the end (we do... think emergency situations).

    as it is my opinion that health care is a "right", then i think health care should be thought of as a public (i.e. collective) good, rather than a private good in the same way that roads, fire departments, police, national defense, etc... are.

    that doesn't make the solution any easier. you point on individuals taking care of themselve is one which i've debated with friends of mine and i really don't know the answer. one problem is that poverty and obesity are highly correlated. should we be taxing those that are uninformed about health / can't afford healthy food or a gym more?

  3. I will concur on your Medicaid point. I was thinking more broadly, whereas you were thinking more practical. In any event I believe that makes a mandate the most likely choice. While in theory I disagree, the realities we face make that the most sensible option.

    I would imagine the correlation with obesity also exists with drugs, alcohol, cigarettes, etc. Although I wonder if high blood pressure is highly correlated with income.

    Regardless, I think the issues outlined in this back and forth show the complexity of the issue. I don't think it is a simple as single-payer / universal coverage or open up the market place and the system will cure itself.

  4. I'm curious as to how you can reconcile your obvious economic chops with "free" healthcare?

    We are wealthy, for now. But nothing reduces wealth faster than a long line of people eager to spend other people's wealth.

    Maybe you are disciplined and only want to have that approach for health care. But alas, you aren't the only one in line for my money.

  5. This is far from the first time that I've had a wide gap that has needed to be reconciled. The most obvious example being my complete mistrust of the financial industry, the ridiculous salaries in that industry, and the fact that the industry has taken away from the U.S. economy well more than its given vs. the fact that I earn my living (one that I feel is in excess of my personal worth) in that exact industry.

    With that said it is a question of philosophy. Do I feel it is worth MY money for others to have health care in the same way that I feel it is worth MY money to protect this country in times of war? In both case my opinion is yes.

    How do you pay for it? No clue, but if it results in a functioning system yet means higher taxes in the long run for the wealthy, then so be it.

    On the other hand, what if it frees individuals from the fear of starting up a new business (i.e. they won't lose coverage). At the margin, couldn't that add to economic growth and make the cost of health care a smaller % of the economy?

  6. Jake - your courage is applauded. FWIW and before I try to compress enormous complexity might I have you to this little (ahem) gem that shows the dynamics of what's broke and what might happen with the proposals on the table?

    Not up to your standards of clearness, simplicity or elegance but the best my feeble mind can manage.

  7. Well done! Great summary and analysis of the situation at hand.

    Thanks for the heads up.

  8. Roads are a public good because everyone has access to them. The military is a public good because it protects every citizen equally. In my opinion, health insurance is not a public good.

    No one has a "right" to health insurance either. A good rule of thumb is that one person's exercising his "right" does not make someone else worse off (right to free speech, as an example). Health insurance fails this test because it takes money from some and hands it to others. This is just another income redistribution scheme dressed up in a pretty package.

    Since our country is so "wealthy", why stop at health insurance? Maybe everyone has a "right" to own a house. Maybe everyone has a "right" to dependable transporation and we should buy everyone a late model car. And how about air conditioning? In such a wealthy country, it's simply wrong that someone would have to live in that house in Florida with only a window fan.

    I know several people who "can't afford" health insurance, but drive much nicer cars with hefty monthly payments, while I drive a 7-year-old car with 200,000 miles but no monthly payment. Now the government is going to take more money from me in the form of taxes in order to pay for their health insurance? I don't think so.

  9. if you think owning a house is remotely the same thing as getting care when you are sick and/or about to die, then i have no argument that can sway you, as we obviously have very different philosophical views on the issue.

    i would argue that universal health care doesn't make people worse off. in the perfect world (bear with me here as i understand this is not likely), what if the following resulted. individuals no longer fear leaving their company to start their own as they don't need to rely on their old company for coverage. this (in theory) should increase the growth rate for the broader economy (i.e. the "pie"). remaining incomes after the taxes are higher because this "pie" is bigger.

    more importantly, you proved with the example of your neighbor doesn't have health coverage that the current system is broken. he chooses the car, yet WE pay for it still if he goes to the emergency room and cannot pay. with new options, YOUR health care coverage may become cheaper as more people participate in an alternative option.

  10. 1. If you feel healthcare is a moral right, why would you limit the provision to only people of this country? What about illegal imigrants? Is there a moral difference between these groups?

    2. If healthcare is a moral right, how and who decides to ration it? Is everyone entitled to an expensive PET scan or just the cheaper alternative?

    3. Disregarding morals it seems from your charts that the US cannot afford it's current public plan, Medicare. Is $30T more than a $14T economy afford?

  11. all great points / questions. i am obviously no expert, but yes, in the long run (how long? no clue) i do believe everyone should be entitled to the same level of care as everyone else.

    the best way to supply that type of care at a level that society can afford to provide it is also of no clue to me, but we should be working to figure that all out...