FedUpUSA

CBO: Today’s Lesson In Exponents

CBO Confirms Tickerguy’s Projections…..

Here’s the old sign again…

smiley

(Reuters) – Gvernment spending for Medicare, Medicaid and other healthcare programs will more than double over the next decade to $1.8 trillion, or 7.3 percent of the country’s total economic output, congressional researchers said on Tuesday.

In its annual budget and economic outlook, the non-partisan Congressional Budget Office said that even under its most conservative projections, healthcare spending would rise by 8 percent a year from 2012 to 2022, mainly as a result of an aging U.S. population and rising treatment costs. It will continue to be a key driver of the U.S. budget deficit.

That’s not going to happen, because it can’t.  That number would represent approximately 1/2 of today’s Federal Budget, incidentally.

The bad news is that it doubles again in another eight years.

This is the nature of all exponential functions folks.  Compound growth just is, and it is never, ever sustainable over the intermediate and longer term.  Yet we’ve played this game since 1980, with medical spending by the Federal Government expanding at roughly 9% for that entire 30 years.

What’s worse is that the bolded text is false — in the private sector insurance costs are rising at least as fast as they are in the government.  When I ran MCSNet in the 1990s we were seeing double-digit premium increases every single year, and this is still going on.  The only way to keep it under some resemblance of control was to cut back on the offered services in the plan, but on a “like-for-like” basis there was never a year during my time running MCSNet that we saw increases under 10%. 

Not once.

There is no solution to this problem that can be found with “reform” of Medicare and Medicaid.  The problem lies in the underlying medical system in this country and addressing it must happen there, not through things like Obamacare or changes in the government side.

The ridiculous growth in medical costs have come from ridiculous cost-shifting and obfuscation, along with a completely-unrealistic set of expectations.

Consider the cost of putting a man on the moon.  We can do it, but it’s ridiculously expensive.  Likewise, we can put men in space at the ISS, but on a per-person basis it’s ridiculously expensive.  Ditto for flying in a private jet — yes, you can do it, but it’s ridiculously expensive.

Now consider what would happen if everyone could demand and enforce via government a ride in a moon rocket, a month at the ISS, or the ability to walk into any executive airport and demand that the Lear sitting there immediately take off for Bermuda, irrespective of how much money you had in your bank account!

That’s exactly what we’ve done in the medical system.

Provenge is just one example.  Dendreon developed the drug for late-stage metastatic prostate cancer, a terrible disease.  Statistically it adds 4 months to your life, but costs $100,000.  So for about a quarter of a million dollars per person-year, you can have it — the problem is that you don’t need to have the quarter of a million bucks first, or choose to spend your own funds on the treatment.

Bypass operations and myriad other very expensive procedures, drugs and devices are also part of this problem.  Many chronic conditions have costs in the tens or even over a hundred thousand a year, yet your access to those treatments is not conditioned either by your lifestyle choices that led to the problem (or lack thereof) or your ability and willingness to personally spend the money.

The medical industry capitalizes on all of this and then adds both anti-trust exemptions and intentional forced cost-shifting onto the backs of those who can pay for those who can’t.  This is why the aspirin in the hospital costs $25 — you’re paying for Juanita the illegal immigrant who showed up last night in labor at 7-1/2 months, having drunk and drugged herself during pregnancy while receiving zero prenatal care, and pooped out a severely-underweight kid who’s now in the NICU and is in the process of running up a million dollar tab.  This happens every single day and it is why you can buy the same operation in India, performed by a US trained doctor with US medicines, devices, and operating room equipment with a hospital room that is equipped like a luxury suite in the Ritz-Carlton to recover in for 1/5th the cost of the same procedure here in the United States.

Then there’s defensive medicine.  You show up with a non-specific pain in the abdomen.  The doc checks what he can and rules out appendicitis (an immediate emergency) and a few other things.  Now there’s a problem — he has a list of a dozen things running around in his head that could be wrong with you.  There’s a 10% chance that one of the couple of really nasty ones (such as cancer) are involved but ruling them out will require $5,000 worth of tests.  The odds, however, are 90% that the problem is not serious and is something as simple as a mild case of food poisoning.  Who’s money and risk is involved in the decision as to whether or not to run those tests?  Today, the answer is that they get run every single time because if he doesn’t and you hit the bad dice roll you’ll sue (and win.) 

In short you’re not required to allocate the risk and cost on your own.

There’s no fix for Medicare and Medicaid, nor for the Federal budget, without resolving all of this.  And make no mistake folks, this will blow up and destroy not only the federal budget but privately-provided medical care as well within the next five years if we don’t stop it right now.

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