Sunday, September 13, 2009

On Nationalized Healthcare

I'm an opinionated guy, VERY opinionated, and I have to say, when it comes to whether nationalized health care is a good idea, I don't have the foggiest idea. Yes, the current system is terribly inefficient and horribly unjust. Yes, it is hard to imagine a government run system doing any better. I think it is impossible for someone without a Phd, MBA AND Political Science degree to possibly understand the ramifications of nationalized health care. I, therefore, believe its irresponsible to yell your opinion at the top of your lungs. Think of the old adage, "better to keep your mouth shut and let people think you're an idiot then to open your mouth and confirm it."

What I do have an opinion on is the context of the argument. The debate at the water cooler IS about how health care should look tomorrow. It SHOULD be about how health care should look in 20 years. The fact is that the current health care system does a pretty decent job, today and it will continue to do so tomorrow. Of course it's not perfect, but it's not bad. The rich get GREAT health care, and hospitals don't turn away emergencies even for the uninsured (most of which enjoy welfare or CHIPs opportunities). The problem is the current system is built for health care costs that represent about 16% to 18% of GDP. That's not as bad as it sounds, and it's downright cheap when you look in to a crystal ball. The congressional budget office projects health care costs will be 25% of GDP in 2025, 37% in 2050 and 49% in 2075. If that sounds like a long way off, recognize that if it's not still in your lifetime, it's likely still in your child's lifetime. If/when healthcare is 25%+ of GDP more pension funds will go bankrupt more employers will stop offering insurance and more unions will be disolved. The current system will go from 10% uninsured to much much much higher.

Why are healthcare costs headed so high? To be blunt here, healthcare costs become 49% of GDP because people don't die. Things that used to kill people instead are treated by expensive medicines, prolonging their life so that they can need to be treated for something else. If that sounds harsh, it's because it is. I'm harsh because I don't believe this country has time to talk about this issue in "nice" terms. It's people being queasy about the real issue here (what health care will look like in 20 years), that is destroying the water cooler debate in this country.

So what are our options for healthcare 20 years from now? I think there are two of them, and I will outline them below. What you can't look for from me is advice on which one is best. They both suck, but part of the price for living longer then mother nature intended, is being stuck with tough decisions.
  1. We institute a socialized health system. The system controls drug and treatment prices and options. This stifles innovation in the medical community because would be innovators aren't inclined to produce medical advances that the government won't pay for. The rate of increase of spending relative to GDP levels off. Everyone has good healthcare, given current technologies, but the life expectancy stops increasing. By 2100 the average life expectancy of a rich person is 110 years and for a poor person it is 100.
  2. We keep healthcare private. As lifetime costs of healthcare skyrocket for those who have elite medical insurance, less and less people have access to top-of-the-line service. Those who don't have access to the higher plans either have lesser plans or are uninsured. With pension funds and companies going bankrupt under promised health care that exceeds the costs anyone could have projected, more and more people become uninsured. This increases the cost of insurance, and the cycle repeats. By 2075 only a handful of people have access to health coverage that covers all life sustaining procedures. Those handful though, have access to the medicine of science fiction novels. By 2075 the average life expectancy of a rich person is a remarkable 150 years but for a person in remains largely unchanged from 2009 at around 85.


Gho Cheng said...

just want to say nice article to read

Schultz said...

I don't know where to begin, burgher jon. Your reasoning for rising health care costs is baffling. I will say that there is a third option, and that is to have a hybrid health care system like the one in France. France has a public health insurance plan alongside of private insurance plans. France is usually ranked #1 overall for health care quality, and they do that by spending much less per capita than we do here in the US. Obamacare is not "socialized" medicine, but an aim to implement something along the lines of what the French have. Here is a related NPR story from last year.

Burgher Jon said...

My rationale for rising health care costs comes from the CBO. It's also one of the key points in Greenspan's book The Age of Turbulence.

The French have a system that works much better then ours in the current economic system, but is also unprepared for a rise in health care costs. I'm NOT saying it's not a better system (intentional double negative), I'm just saying that it doesn't solve the big problem either. Even with a hybrid system like France or England, the pace of medical innovation will slow. Would be drug makers and surgical innovators will not want to create innovations that will not be covered by the "base" system. There will be too few customers willing to go beyond "base" to make such advancements economically profitable.

Again, I'm not saying this is necessarily a poor choice, but it is A choice. The point of my post was not to push an agenda, but to point out that I think it's disappointing that people are only focused on how efficient rivaling systems would be in addressing the CURRENT health care crisis and are ignoring the fact that whatever decision we make about health care will impact how we incentivize innovation in health care for the next 50 years.

Schultz said...

You mean to tell me you got that from Alan Greenspan, one of the architects of last fall's financial meltdown?!

Burgher Jon said...

I'm not saying, I got any of the data from Greenspan. I'm saying that he articulated the point I'm trying to make nicely in his book.

Greenspan did not foresee the economic consequences of some of his actions as well as he could have (same could be said for Bill Clinton and many others). That doesn't mean we should throw out any concept he's ever articulated. That would be to throw out much wisdom and sound economics.