Small Business—Be Prepared
Published by Bob Foster
The National Coalition on Healthcare reports that healthcare expenses in the U.S. for 2008 were $7,900 per person. Compare this with the Veterans Health Administration (VHA) who provides health care to 7.85 million patients at a cost of $5,669 per patient. These are historical numbers, and they are probably fairly accurate.
On the other hand, Congress’s cost “goal” for healthcare reform is around $900 Billion over 10 years, or about $90 Billion per year average, to cover 46 million additional people. This equates to around $1,956 per person, or about 35% of the cost of a VHA patient…and about 25% of current U.S. per capita costs. If we drop individual health costs from $7,900 per person to $1,956 per person—what kind of care will be provided? This amount is nowhere near adequate, so obviously, the $90 Billion ($900 Billion over 10 years) per year number is not realistic.
Yes, (you are saying) but what about all the money that is going to be saved by reducing administrative costs and increasing efficiency of Medicare, and improving the way private insurance is administered? Well, here is what Dr. Ezekiel Emanuel, the President’s Healthcare Czar, had to say about increased efficiencies in the healthcare system:
“Vague promises of savings from cutting waste, enhancing prevention and wellness, installing electronic medical records and improving quality are merely ‘lipstick’ cost control, more for show and public relations than for true change.” (Dr. Ezekiel Emanuel, Health Affairs, February 27, 2008)
Apparently, Dr. Emanuel does not believe there is any substantive savings to be realized in the current healthcare delivery systems.
I would think that the 46 million additional insured should get healthcare at least as good as what the VHA offers, shouldn’t they? So, if the cost per additional person covered under the new healthcare plan was only equivalent to the VHA cost of $5,669 per person—not the $7,900 per person of today’s actual cost—wouldn’t the total bill for the additional coverage of 46 million people be somewhere around $261 Billion per year, or $2.6 Trillion over 10 years?
Here’s a recap:
- Current U.S. per capita cost for healthcare is $7,900.
- Veterans Health Administration (VHA) per capita cost is $5,996.
- New proposed healthcare cost for those currently uninsured is $1,956 per person.
- Reduction in healthcare operating costs would only be cosmetic PR steps, with no true change in cost. (Per Dr. Ezekiel Emanuel.)
- To bring the new coverage for the 46 million up to VHA standards would cost the U.S. taxpayers about $2.6 Trillion over the next 10 years.
Leaving out all the politics, lobbying, and high dudgeon at the Town Hall meetings and rallies, it is obvious that the new healthcare bill (whatever it ends up to be) is going to cost every American business, and wage earner, one helluva lot of money. The choice will be to raise taxes or pass the burden onto American businesses. Unfortunately, since small businesses make up over 99% of all U.S. businesses, these are the folks that will take the brunt of the new healthcare costs—so be prepared!
Of course, there is one other possibility—lower the standard of care of currently insured persons to reduce the $7,900 per person cost by two or three thousand dollars, and apply that savings to the cost of healthcare reform. Then we could all have poorer healthcare, even though it would still be expensive.
Any other ideas, or comments?
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New solutions to today’s socio-economic problems are most definitely needed. Rising costs and stagnate wages have been the norm and contribute to circumstances that perpetuate the cycle of poverty. We have spent bazillions of dollars waging a war on poverty for decades with little or no success. I think that these solutions can be found in a few core concepts
1. Much has been written on the causes of this failure and in his Book “The Working Poor David Shipler wrote “many agree the biggest cause is the problems of the poor/woking poor is that the challenges they face are “interlocking” but the solutions are done in isolation”. For example, a good job is one thing but if you are unhealthy and don’t have insurance a job alone is not a solution.
2.In his book “Billions of Drops in Millions of Buckets.” author Steven Goldberg observes that in the world of non profits to much money has been given to to many programs that have made to little a difference. He advocates a “centralized planning” approach for societal change. The same can be said for government spending. Massive bureaucracies handle billions of dollars in “isolated” programs like education, housing with no accountability for the results they produce.
3. Corporations get taxed and receive tax breaks and incentives for a variety of reasons. But again, how this revenue gets dispersed and spent…who knows. Could this be done more efficiently? The “living wage” initiative is something that perhaps could be implemented by better use of revenue generated from companies. To be brief there is a formula used to calculate a wage based on the cost of living in a particular area. If a company doesn’t provide health insurance for example, the hourly wage increases to cover the costs of the employee getting insurance.
Centralizing planning and control of government programs and decreasing the number of “buckets” the money goes into would perhaps be a way to take an integrated, not isolated approach to improving the quality of life for all. A living wage could perhaps be a solution to wage stagnation…
Just a thought!
Dave Wheeler´s last blog ..Strength…
Dave – Thank you for your comment, and I agree with the points you make: the challenges to the poor/working poor are certainly interlocking; our government is absolutely the worst at handling money through their massive bureaucracies—with no accountability whatsoever; and big corporations do indeed run through “mystery” money to the detriment of the wage earners.
But, the thing that really concerns me today, is the loss of jobs in the U.S.—at any wage rate. I just read that 45% of the 27 million small businesses in the U.S. say they are currently not profitable. These businesses make up half the nation’s private, nonfarm GDP. In addition, I’m developing a “working paper” on the REAL failure rate of businesses in the U.S. (it’s much greater than the government acknowledges). Considering these two conditions, I am at a loss to come up with many ways to improve the situations you outlined in your comment.
I wrote a post recently on the continued, if not accelerating, outsourcing of jobs—both white-collar and blue-collar—and am concerned that if we ship all our jobs overseas…what will we have left? Does that mean that the U.S. must reduce its standard of living, and wage rates, to compete with the low labor costs in other countries? I find that intolerable.
So, what can we, and other citizens like us, do to turn this abysmal status around and help provide jobs that pay a living wage to all employees?
Thanks again for your comments—I truly appreciate them.
Bob Foster´s last blog ..Small Business—Be Prepared
WOW!!!! I find that many of my comments here begin with the word “WOW”, as you have such a terrific way of point blanking an issue. The first step in answering your question would be to know what the “root cause” problems are. 45% of 27 million not profitable…scary indeed. In your opinion, what are the top two or three causes?
Dave – Thank you for your comment and kind words. You also pose a tough question. Academics and many business gurus tell us that businesses get into trouble because of poor markets, or lack of capital, or any one of dozens of legitimate problems. However, I believe these problems are the results, not the causes of poor business performance. To answer your question more directly—I believe small businesses perform poorly, or fail, for two very basic reasons:
1. Poor Preparation. I constantly run into small-business people who are so enamored with entrepreneurship that they fail to do proper pre-venture planning and preparation. Jerry Useem, when editor of Inc. magazine, said: “…most (entrepreneurs) are no more in touch with the reality of failure than say, the average 16 year old is in touch with the reality of death.” Entrepreneurs have a dream, and they are so caught up in it, they can only see success—and not the pitfalls that lay in wait for all unprepared businesspeople. Consequently, those pitfalls can be fatal.
2. Lack of Perseverance. Starting and running a successful small business is hard work—usually VERY hard work, and too many entrepreneurs are not up to the demands. Then, when something runs off the track, they don’t have what it takes to go that extra mile to get it back on track. Hard work alone will not necessarily make your business a success, but you can be sure that the lack of hard work is the kiss of death in a small business, especially a startup. Moreover, there is nothing wrong with “failure”—Thomas J. Watson once said that to have more successes, you needed to have more failures. The key in this instance is to “fail hard, and fail fast.” That is; work your business hard to the point of success or failure—don’t just let it wither and die on the vine. Too many entrepreneurs give up at the first real challenge their business encounters.
Obviously, there are many, many specific reasons why businesses perform poorly, but it has been my experience that if you dig down deep enough, you will find that some form of the above reasons are at the root cause of their problems.
Now, how do you think we can help small-business owners overcome these basic weaknesses?
Bob Foster´s last blog ..Small Business—Be Prepared
[...] healthcare costs, for the additional insured only, that totaled $2.6 Trillion over 10 years…check it out here. This analysis assumed that every person brought into the new program would receive care at least [...]