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Original critical analysis from a fact-based perspective
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What $800 Billion Could Buy Us

by John Burnham

 

The U.S. pays 50% more per person for healthcare than any other country in the world. We pay almost double the amount per person that people in most other modern countries in the world pay for their healthcare. This includes both what we pay individually and what the government pays on our behalf; this is ALL healthcare expenses, public and private. And our life expectancy is 29th in the world and our infant mortality is 34th in the world, well BELOW AVERAGE for a modern, industrialized country. 

 

We have tried tinkering with the private insurance system we have had in this country for the past century, and it just doesn’t work. When I was involved in the healthcare reform debate in the 1990’s, I went into it thinking we could tinker our way out of the emerging crisis in healthcare costs. It was my job to read and keep up with what was being discussed, various solutions and analyses of the issues connected to healthcare reform and I ended up reading about 500 or 600 articles. These readings including articles and op-ed pieces in major newspapers like the New York Times, the Wall Street Journal, etc., as well as longer, more thoughtful articles in magazines like Time and Business Week and The Economist, and white papers and peer-reviewed articles in scholarly journals in economics and medicine. But the more I read about it, the more I realized our private insurance system was fundamentally flawed (See my post “Who REALLY Pays for Healthcare?” for why). 

 

The difference between the U.S. and the rest of the modern world that makes our healthcare so expensive and ineffective is that every other modern country in the world has some form of universal healthcare system that covers preventative care. When you translated this into the economy at large: The U.S. currently spends about $2.6 trillion per year on healthcare. If we could just get our costs down so that we still spent more per person than any other country (a modest goal, don’t you think?), we would save our economy more than $800 billion per year. This is money we could otherwise spend on healthcare research, education, building better roads, bridges, public transportation, fundamental science research, developing more efficient, cleaner renewable energy or just taking better vacations. 

 

Just to bring home the point, here are a few possible uses for $800 billion per year:

On the federal government expense side, $800 billion is equal to ALL OF THE FOLLOWING *COMBINED*: 
International Affairs ($63 billion) 
General Science, Space and Technology ($32 billion) 
Energy ($23 billion) 
Agriculture ($19 billion) 
Commerce and Housing Credit ($24 billion) 
Transportation ($105 billion) 
Education, Training, Employment and Social Services ($106 billion) 
Veterans Benefits and Services ($125 billion) 
Administration of Justice ($59 billion) 
NET INTEREST ON THE DEBT ($225 billion) 

 

The list above is basically what the federal government spends on helping our economy maintain our infrastructure and competitiveness, plus stabilize food prices, maintain foreign policy diplomacy, take care of our veterans who fought for our freedom, maintain law and order and pay our debt. $800 billion accomplishes a lot when it isn’t going to waste for an inefficient healthcare system. 

 

$800 billion is slightly more than what we spend on Social Security. It is 65% more than what we spend on Medicare. 

 

$800 billion is about 12% more than what we spend on national defense. 

 

Or, perhaps it is more appealing to fiscal conservatives if we compare the $800 billion in savings to how we could reduce out taxes.

 

That $800 billion in healthcare savings is the equivalent of eliminating all federal corporate income tax ($237 billion), all federal excise taxes (which are very inefficient taxes) ($79 billion), all customs duties (yes! Truly free trade!) ($31 billion), all federal estate taxes (including the tax that Republicans call the “death tax”) ($11 billion) and then, with what is left over, REDUCE INDIVIDUAL INCOME TAXES BY 38% from where they are now. ALL of that combined is equal to the savings the U.S. economy would realize if we meet that modest goal of reducing out healthcare expenses to be ALMOST in line with other modern countries, but still the most expensive. 

 

Or, we could just limp along with the broken system we had before Obamacare. Which do you think is better? 

 

Note: All budget items are for the actual 2012 year budget, as enacted.

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Who REALLY Pays for Healthcare?

by John Burnham 

 

It’s really alarming that so many people have it 180 degrees reversed about who pays for healthcare under Obamacare. Before Obamacare, you and I paid for people’s emergency care through higher premiums. But here’s the real story of what happened before Obamacare and after: 

 

Before Obamacare:

 
Someone who is self-employed or unemployed or employed part-time (maybe in multiple part-time jobs) usually could not afford health insurance because they did not have an employer who paid for it and the individual rates are sky-high and based on whether the individual buying it is sick or has a history of being sick. Now, if these people got sick or if they or someone in their family had some kind of pre-existing health condition, then they could be denied health insurance altogether. Or, if they were not denied it, their premiums would definitely be beyond the ability of most people to pay, even well-compensated skilled workers employed full-time. So, if you could be denied health insurance if the doctor discovered something in a routine exam or test, are you going to get preventative healthcare and routine medical exams? 

 

Probably not. What you are going to do is wait for something to get really serious and then show up in an emergency room, where they HAVE to treat you by custom, professional ethic rules and sometimes law. And this treatment will probably be at least ten times, and probably one hundred times more expensive than if it had been detected early and treated then. Now, if you were insured, the insurance would pay (and this gets figured into their costs and how they determine premiums and passed on to the rest of us in the form of higher premiums), and then, depending on what the health issue was, your premiums would skyrocket and become unaffordable or else you would be cut off from your insurance and not be able to renew and become one of the uninsured. 

 

But if you do NOT have insurance, then there’s a good chance you won’t be able to pay your emergency room bill. The hospital will then spend more money trying to get money out of you, then finally write your expenses off. The hospital will then include that in their overhead on which they base their fees for their healthcare services, mark the now vastly inflated expenses up a bit, and that becomes the higher prices for medical care. But it doesn’t stop there, it gets worse, because the health insurance companies mark up those higher medical care costs when they calculate our premiums. 

 

In the larger picture, this means that the U.S. healthcare system is now paying at least 10 times the amount of what we would have if the system did not have deterrents to getting preventative care, and that this 900% higher cost is then marked up another 50% or so because of how the system is structured, meaning that the U.S. healthcare system is paying about 1,400% more for these emergency room treatments than we would if people could get preventative care without fear of losing their insurance or going bankrupt. 

 

Does THAT make any sense? Of course not. And this is why the U.S. pays 50% more per person for healthcare than any other country in the world. We pay almost double per person what people in most of the other modern countries in the world pay for healthcare. This includes both what we pay individually and what the government pays on our behalf; this is ALL healthcare expenses, public and private. And our life expectancy is 29th in the world and our infant mortality is 34th in the world, well BELOW AVERAGE for a modern, industrialized country. 

 

Under Obamacare: 

 
Everyone pays into the system, unless they are truly poor, and even many of them pay a little bit into the system; more than they do now. The system into which we all pay covers preventative care and prohibits cutting people out of the system because of pre-existing health problems. Using preventative care to avoid much of the costs of serious illness and emergency medical care increases the efficiency and effectiveness of the healthcare system, reducing total costs. It also increases the healthiness of the nation, reducing sick days, disabilities due to illness, and thereby increasing the efficiency and effectiveness of the workforce. And, unlike the current system with its 40 million+ who are not paying into the system, most of those 40 million people now WILL pay into the system under Obamacare, reducing the costs for the rest of us who have been paying into the system. Fairer, don’t you think? 

 

And just consider the effect on the employment decisions: Working for small start-ups and entrepreneurial companies becomes less risky because of the fear of losing health insurance due to sickness or pre-existing conditions. People who are trapped in large, sluggish corporations that innovate only as much as they have to in order to keep their market share will have more viable choice to leave these obsolete behemoths and work for smaller innovative companies or even start their own businesses. This should spur more innovation and help the economy, too. 

 

So, what is the difference between the U.S. and the rest of the modern world that makes our healthcare so expensive and ineffective? The answer is that every other modern country in the world has some form of universal healthcare system that covers preventative care. When you translated this into the economy at large: The U.S. currently spends about $2.6 trillion (yes, with a “t”) per year on healthcare. If we could just get our costs down so that we still spent more per person than any other country (a modest goal, don’t you think?), we would save our economy more than $800 billion per year. This is money we could otherwise spend on healthcare research, education, building better roads, bridges, public transportation, fundamental science research, developing more efficient, cleaner renewable energy or just taking better vacations. 

 

Having universal healthcare really is a no-brainer. It’s amazing that it’s taken this long for America to wake up.

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