Mr. Obama once again tried to pull his chestnuts out of the fire, and pull the wool over everyone’s eyes, in his speech to stabilize America’s mounting debt and fiscal crisis (April, 13, 2011).
Mr. Obama, now famous for pussyfooting around on the issue, wants US to believe that he has a credible plan to deal with America’s debt and spending problems. Yet, all he offers is pie in the sky and pipe dreams.
Mr. Obama has come down from the mountain and told us that the answer to America’s debt is to raise taxes – on the rich. In America, according to Mr. Obama, you are rich if a husband and wife earn more than $250,000 a year. Mr. Obama believes that ‘raising taxes is cutting spending in the tax code.’ Say what?
Mr. Obama didn’t say that his policies of redistribution of the American taxpayers wealth to the welfare state on the one hand, and banks, hedge funds, public sector unions on the other, are responsible for the trillions in debt that are forecast to drown US in red ink. Nor did Mr. Obama say that the policies of quantitative easing, aka bailouts, to again reward the world’s Bankers and Hedge Fund Managers, by the Federal Reserve Chairman, Mr. Bernanke, who he appointed, further massacred America’s wealth.
All things considered, we can only hope that Mr. Obama’s plan, like most of what he says, comes with an early expiration date.
Thursday, April 14, 2011
Saturday, April 2, 2011
Healthcare cost control is the medicine for what ails America
The first cut at analyzing anything is to place it in its proper perspective. Perspective structures the debate and the public’s perception of the problem. In other words, how we define the problem is how we solve it.
Most would agree that the debate on “Entitlements,” i.e., Social Security, Medicare, and Medicaid is a first-order imperative to deal with America’s debt problem. To take on all Entitlements together is unworkable. By “suboptimization” of America’s Entitlement programs, the problem of America’s debt can be disaggregated into a number of smaller and discrete sub problems.
Runaway spending on Entitlements will drive the debt to unsustainable levels. Social Security, Medicare, and Medicaid spending will soar as 78 million “baby boomers” retire. Peter Orszag, Mr. Obama’s former Budget Director, has indicated that Medicare, Medicaid, and Social Security will together account for 20 per cent of US GDP by 2050 (Medicare 10.0%, Medicaid 4.3%, and Social Security 5.7%). That is more than all federal taxes combined.
I would proffer that Social Security is not the immediate problem, and we should not combine it with Medicare and Medicaid expenditures when seeking solutions to America's catastrophic debt. Clearly, Social Security can be tweaked to reflect the reality of aging. But this can be accomplished to threaten no one. Moreover, most Americans have paid for this meager retirement – it is not welfare. Yet, to propose privatizing Social Security is irresponsible and a fool's errand. Do you really believe we can trust the Stock Market, and Bank and Hedge Fund managers, with our retirement? Do you really believe we can sell that to our senior citizens? The short answer is no.
What ails American is out of control healthcare costs. The need to control costs in healthcare is America's primary fiscal necessity. Healthcare expenditures are growing at an exponential rate as compared to other costs in our economy. Everyone can agree to that. We should also be able to agree that all attempts to rein in spending on healthcare have failed such as HMOs, prevention, improved use of technology, and information technology. HMO's and Insurance companies are viable and profitable because they raise their rates to their subscribers at will. Health care is not an unambiguous and efficient marketplace given the asymmetrical nature of medical knowledge. Moreover, the so-called prevention effect is a fantasy.
There is an old and true axiom in healthcare: the way you pay for healthcare is the way you practice healthcare. But in today’s world there is another: healthcare is practice to protect the provider, i.e., physician, hospital, etc., from lawsuits. By ordering more and more visits, tests, and procedures, not only do healthcare providers protect themselves from litigation, but they also make more money.
Mort Zuckerman in an insightful analysis pointed out (The Financial Times, August 2o, 2009) “cost control, not coverage, is the key to health reform.” Healthcare costs will not be controlled until the insane costs and arbitrary awards of malpractice lawsuits are reformed. Mr. Zuckerman estimates that defensive medicine adds as much as 18 per cent to the total cost of medical care. Trimming even 1 per cent would save $22 billion in healthcare spending in one year (the New England Journal of Medicine, July 2, 2009). Eighteen per cent would yield $396 billion.
Most would agree that the debate on “Entitlements,” i.e., Social Security, Medicare, and Medicaid is a first-order imperative to deal with America’s debt problem. To take on all Entitlements together is unworkable. By “suboptimization” of America’s Entitlement programs, the problem of America’s debt can be disaggregated into a number of smaller and discrete sub problems.
Runaway spending on Entitlements will drive the debt to unsustainable levels. Social Security, Medicare, and Medicaid spending will soar as 78 million “baby boomers” retire. Peter Orszag, Mr. Obama’s former Budget Director, has indicated that Medicare, Medicaid, and Social Security will together account for 20 per cent of US GDP by 2050 (Medicare 10.0%, Medicaid 4.3%, and Social Security 5.7%). That is more than all federal taxes combined.
I would proffer that Social Security is not the immediate problem, and we should not combine it with Medicare and Medicaid expenditures when seeking solutions to America's catastrophic debt. Clearly, Social Security can be tweaked to reflect the reality of aging. But this can be accomplished to threaten no one. Moreover, most Americans have paid for this meager retirement – it is not welfare. Yet, to propose privatizing Social Security is irresponsible and a fool's errand. Do you really believe we can trust the Stock Market, and Bank and Hedge Fund managers, with our retirement? Do you really believe we can sell that to our senior citizens? The short answer is no.
What ails American is out of control healthcare costs. The need to control costs in healthcare is America's primary fiscal necessity. Healthcare expenditures are growing at an exponential rate as compared to other costs in our economy. Everyone can agree to that. We should also be able to agree that all attempts to rein in spending on healthcare have failed such as HMOs, prevention, improved use of technology, and information technology. HMO's and Insurance companies are viable and profitable because they raise their rates to their subscribers at will. Health care is not an unambiguous and efficient marketplace given the asymmetrical nature of medical knowledge. Moreover, the so-called prevention effect is a fantasy.
There is an old and true axiom in healthcare: the way you pay for healthcare is the way you practice healthcare. But in today’s world there is another: healthcare is practice to protect the provider, i.e., physician, hospital, etc., from lawsuits. By ordering more and more visits, tests, and procedures, not only do healthcare providers protect themselves from litigation, but they also make more money.
Mort Zuckerman in an insightful analysis pointed out (The Financial Times, August 2o, 2009) “cost control, not coverage, is the key to health reform.” Healthcare costs will not be controlled until the insane costs and arbitrary awards of malpractice lawsuits are reformed. Mr. Zuckerman estimates that defensive medicine adds as much as 18 per cent to the total cost of medical care. Trimming even 1 per cent would save $22 billion in healthcare spending in one year (the New England Journal of Medicine, July 2, 2009). Eighteen per cent would yield $396 billion.
This is not to say, that this is all we have to do. Other healthcare reforms are needed. For example, we need mandate reform -- we need to give people the choice to choose a basic benefit package(s), and not the expanded excessive one mandated by ObamaCare. The American taxpayer should not have to put a "scooter" in every home.
The Democratic Party has invested substantial political costs in association with America’s Trial Lawyers, and as such is reluctant to abandon them. There is no finer example of this than when Barack Obama announced definitively at the start of the healthcare debate that ‘Tort Reform is off the table.’ Apparently, the Democrats greed for large donations from trial lawyers makes providing affordable healthcare to the American people and controlling America’s ruinous debt, dead in the water. As for the Republicans, why take on America's senior citizens when you can take on America's trial lawyers?
What's it going to be -- reform or fiscal insanity? Tort and mandate reforms will be game changers. Americans need a clear understanding that any plan to reduce the deficit will be fair and responsible. The Administration has clearly failed to present a coherent plan. This is a time for leadership and not campaigning. So, what’s it going to be?
The Democratic Party has invested substantial political costs in association with America’s Trial Lawyers, and as such is reluctant to abandon them. There is no finer example of this than when Barack Obama announced definitively at the start of the healthcare debate that ‘Tort Reform is off the table.’ Apparently, the Democrats greed for large donations from trial lawyers makes providing affordable healthcare to the American people and controlling America’s ruinous debt, dead in the water. As for the Republicans, why take on America's senior citizens when you can take on America's trial lawyers?
What's it going to be -- reform or fiscal insanity? Tort and mandate reforms will be game changers. Americans need a clear understanding that any plan to reduce the deficit will be fair and responsible. The Administration has clearly failed to present a coherent plan. This is a time for leadership and not campaigning. So, what’s it going to be?
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