Healthcare Reform to Reduce Deficit?
I guess I’m just getting dense from information overload about healthcare reform, but I just can’t get my mind around how piling on all the additional costs of healthcare reform is going to reduce the deficit.
First we heard that improving efficiency in healthcare was going to pay for the added cost of the government’s new plan, but that is not going to happen according to the Administration’s major healthcare advisor, Dr. Ezekiel Emanuel, MD. Here is what he had to say about healthcare savings:
“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, MD, Health Affairs, February 27, 2008)
We haven’t heard much about savings from increased efficiency for some time now, so where does this deficit reduction come from? A $1 Trillion reduction in the deficit over the first 10 years of the plan…after spending about $1 Trillion in added healthcare costs?
I am in favor of healthcare reform generally, but I don’t understand how the current plan will reduce the deficit…I guess I have a mental block on this…maybe I can’t see the trees for the forest. Could someone please explain this to me?
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More Costs for Small Business
Well, the House went public with their new healthcare bill this morning. Here are just a few highlights that might interest small business:
—House Majority Leader, Steny Hoyer (D-Md) said, “We will keep our promises and commitment to the integrity of the process by making the bill’s full text, to make sure we have this exactly right, publicly available for 72 hours before the members are asked to vote.” 72 hours—to read, study and analyze a 1,990-page bill from the House of Representatives …before they vote to make it a version of a law. I guess they expect Washington to shut down for 72 hours while everyone analyzes the bill.
“This report, by its very length, defends itself against being read.” —Winston Churchill
—The bill apparently does take a pretty good whack at both the health insurance industry and the pharmaceutical industry. This will certainly shift the people on K Street into high gear.
—More small businesses will be exempted from the mandate to provide health insurance to employees—those with payrolls up to $500,000. This is good news for small business, as the prior House bill capped the exemption at $250,000.
—The cost of the bill will be paid in part by taxing individuals with incomes over $500,000, and families with incomes over $1 Million. First, it is not too difficult for many people in this group to manage their incomes down below the threshold. Second, even if the tax was exorbitant, there are not enough people, technically, in this group to make a major dent in the cost of the new bill.
—The rest of the cost of this new bill is expected to be made up from savings in Medicare. The Seniors are not going to like this part. Doctors today are dropping Medicare patients in droves, because Medicare payments are so low, any doctor treating Medicare patients could likely make more money being a plumber or an electrician.
For a complete copy of this new (1,990-page) bill, click here (Huffington Post—4th paragraph). I’m sure you can have it properly read and analyzed before Sunday, November 1st, at 10:a.m. (72 hours from release).
The good news for small businesses may be short-lived, however, because there is a problem with the government’s math. The Congressional Budget Office pegs the cost of this healthcare bill at something north of $1 Trillion for the next 10 years. Be that as it may, I previously posted an analysis of projected 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 as good as the Veterans Health Administration (VHA) provides.
On the other hand, there are two options to my analysis; (1) reduce the quality of healthcare way below the VHA standard to bring the costs in line with the budget estimates, or (2) increase taxes to pay for the costs above the budget estimates.
Savings? The administration is saying there are savings to be gained by streamlining healthcare—Forget it! Here is what President Obama’s healthcare czar and major healthcare advisor, Dr. Ezekiel Emanuel, had to say about healthcare savings:
“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)
So…small-business folks; as you update your long-range business plan, be sure to include an ever-increasing expense for health insurance for you and your employees. There are not enough wealthy people in the U.S. to pick up the $2.6 Trillion tab, and any savings being talked about is only cosmetic. Yet, the money to pay for everything must come from somewhere—most likely; you, me, and our small businesses.
Small Business—Be Prepared
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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