The Cost of Healthcare

I read in the newspaper today that the people at the Treasury (that would be the U.S. Treasury – the folks responsible for tracking the coming and going of roughly$3,000,000,000,000.00 of our money each year, as well as a fair number of other tasks) were unable to understand the pay and bonus plan of AIG.

That the execs at AIG are receiving bonuses is absurd. But, frankly, it is such small potatoes when compared to the total amount of cash – our cash – that flows through the Treasury that I can’t worry about it too much. Indeed, what is a few billion dollars when we are watching the Treasury push trillions around? And now they admit that they really can’t figure out a pay and bonus plan? (As an aside, did anyone say” “I can’t make sense of this. Everything stops until you explain it?” My guess is ‘no.’)

What does this have to do with Healthcare? Simply this: the same people who can’t figure out the pay and bonus plan for AIG are now telling us that the Healthcare plan they are helping to push through the Senate and the House will cost ‘only’ $800 billion over 10 years and will actually reduce the deficit.

Believe it if you want.

But here is some simple math: the U.S. spends some $2,000,000,000,000 to $2,400,000,000,000 per year on healthcare (depends on which number you use, and how various folks compute the numbers). That works out to $8100 to $9800 per person for the 245,000,000 Americans who have healthcare. Obviously, there can be great differences between individuals. But, when working with numbers in the tens of millions, these averages will hold.

The new bill winding its way through the Congress promises to add 25,000,000 people to the list of those with healthcare. So far, so good. But, they insist that this will only cost some $80,000,000,000 per year, or just $3,200 person. Now, they will point out that this is the cost to the federal government. But that is smoke and mirrors.

First, the real cost – total cost to the U.S. Economy - will be on the order of $200,000,000,000 to $250,000,000,000 per year – at least (as per the numbers above). Second, they are creating another entitlement program, that is people are ‘entitled’ to it; they get it whether they pay for anything at all and funds are allocated without further action by Congress. So, whether the money is available in the private sector or not, it will be spent. Third, the bill does little to increase the real supply of healthcare in the country (more doctors, nurses, clinics and hospitals). Nor does it do anything to eliminate those items which have continued to push up the cost of healthcare: increasingly complex technology, more effective and precise pharmaceuticals, more sophisticated treatments, increased specialization among healthcare workers (and no growth in the number of healthcare workers), and the impact of law suits on both medical practices and insurance costs.

So, what does all this mean? Simple: the cost will go up: at least $200,000,000,000 per year, every year. Other costs will continue to rise because the bill does nothing to address the fundamentals that have caused healthcare costs to rise, and the government, the same folks who can’t figure out the pay system for an insurance company and lack the leadership to simply say ‘stop, explain this,’ will be responsible for it all.

Swell.