Economics Made Simple for the Young and Old

CHAPTER NINE - Healthcare, does it need fixing? In the summer of 2009 the US Congress made a decision to do something about the nation’s healthcare system. Why? Was something wrong with healthcare in America? Many readers may be thinking, “But don’t we have the best healthcare system in the world?” Well, they are right, we do, but for people who are rich, or are covered by very good health insurance plans. And even for those with adequate health insurance plans, medical bankruptcy has been occurring recently at a rate of hundreds of thousands per year. For those people who are neither rich nor possess good health insurance, the situation is a problem. But why is that so? Because America, (unlike Canada, England and most of Europe), has a privately run, for profit health insurance system. People who aren’t insured through their jobs have to buy health insurance on the open market. It is quite expensive and out of the reach of most Americans. So the problem facing Congress in 2009 was to find a way of insuring the 16% of Americans who have no insurance. Are you thinking, “But surely we don’t let the poor die if they get sick and don’t have insurance, do we?” Well, no! The poor and uninsured usually wait until their illness gets to the emergency stage. Then they go to the emergency room at the hospital, where they can’t be refused treatment. It is illegal for a hospital to refuse to treat a person in an emergency, so an uninsured person’s first contact with a doctor is often in the ER. But who pays for that? Well, the hospital charges the 84% who have health insurance for the unpaid bills of the uninsured 16%. So it is true that everyone in America, including the poor and the uninsured do eventually get healthcare. They get it in the ER, which just happens to be the most expensive form of treatment. In addition, waiting until a condition reaches a critical point before seeing a doctor often ends in premature death. It was recently reported in a Harvard University study that 44,000 Americans die prematurely each year because of not having health insurance. But is America satisfied with this arrangement? Is there an urgent need to fix the system? “If it ain’t broke, don’t fix it!” as the saying goes. The problem is that even if we are happy with things today, we won’t be happy in a few years. At an eight percent annual increase in the cost of medical care, (the current rate of increase) healthcare expenditures will double from 16% of GDP today to 32% of GDP by 2019. How do I know that this will happen by 2019? It is easily calculated with the Rule of 72. (The rule of 72 is a mathematical identity that shows that something growing at the rate of x% /period will double in 72/x periods. For example, if healthcare cost rises at 8% per year, the cost will double every 72/8 = 9 years. To test this, take a calculator, put in $100, and then multiply it by1.08. The answer is $108. Multiply each successive answer by 1.08 eight more times. The result is $199.90, about double what you started with) If in 2019, 32% of GDP will be represented by healthcare, how can we afford to pay for it? By most estimates we won’t. People will still have to provide housing, food, transportation, clothing etc for their existence. Today the average household is living to the hilt of its income. At this rate Americans in 2019 will have to cut back severely on housing, food, transportation and everything else just to pay for healthcare. This situation is unsustainable and has to be fixed soon. The Congress has been trying to create healthcare options, but many of the people who stand to benefit from this action are against it. This is so not because they don’t want help or need help, but because they have been persuaded to oppose it by the use of the same buzz words that were used to rile up Americans against Russia during the cold war. During this period, 1945 through 1989, the word socialism was used to mean something evil and sinister that was associated with Russia, China, Cuba and other socialist countries**. In today’s politics the word refers to any program provided by the government, and this also has taken on a negative connotation.