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Newsflash to the U.S. Healthcare System:

We can't afford you.

Otherwise, we (mostly) like you.

Signs we can't afford you:

1.) The leading cause of personal bankruptcy in the United States is inability to pay for medical bills.

2.) Over 45 million Americans have no health insurance, which does not include the under-insured. Add to this the uninsured non-citizen immigrants.

3.) The cost of a universal health insurance program is a primary barrier to its implementation in the U.S.

4.) Health care expenditures continue to increase at a rate exceeding economic growth, which is unsustainable. For every $6 of income generated in the U.S., over $1 goes to healthcare, or about $7,500 per year for every U.S. citizen. This is over $2.2 trillion per year. In contrast, the current proposed healthcare reform will cost $0.9 trillion over 10 years.

5.) Hospitals are reporting record costs to treat those who cannot pay for their healthcare. In the hospital health system where I work, these uncollectable fees have exceeded the system's capital expense budget for the first time ever.

I want to put the healthcare reform debate in another perspective. Healthcare is already too expensive. There seems to be a public perception that national healthcare reform itself will carry a price tag too great for the country to bear. I argue these costs already exist below the radar, absorbed across multiple areas, such as bankruptcies and indigent care provided by hospitals.

Granted, a universal system will increase total costs short-term, but supporters claim long-term savings. The theory is that by providing less expensive preventative care to the uninsured and under-insured, they will stay healthier longer, be more productive, and avoid the need for expensive medical treatments and emergency room visits they cannot afford (which will be absorbed by the economy one way or another).

Preventative care has long-term healthcare savings by delaying the need for more expensive medical treatment. For example, most chronic health conditions are progressive or degenerative diseases, which increase in severity over time, especially if left untreated. Examples are diabetes, high blood pressure, dyslipidemia, osteoporosis, rheumatoid arthritis, asthma, and Alzheimer's dementia. Such diseases are less expensive to treat early when symptoms are less severe and when treatment can slow disease progression and delay more expensive treatments... but the early stages of such diseases are also easier to leave untreated, and they progress more quickly into expensive, debilitating diseases.

Why I Encourage a Change in Perception

So, why am I saying healthcare is already too expensive? And why do I say the transient cost increases of healthcare reform is not the crux of the issue? Because if the healthcare sector is already too large, then logically, it must contract and shrink. I'm not necessarily saying healthcare professionals must be laid off (on the contrary, there aren't enough of us), but the total costs of healthcare must decrease.

Consider the recent real estate bubble and the tech bubble of the 1990s: whenever an economic sector has a prolonged period of vigorous and unsustainable growth, what is popularly called a "bubble," it is followed by an inevitable crash, as the bubble bursts. Healthcare is a bit different, however. The real estate bubble burst when unsustainable growth made property too expensive, and demand plummeted when the foreclosures began. The tech bubble burst when unsustainable growth and investment failed to produce returns, and demand plummeted when customers and investors pulled their funding.

Other bubbles burst when demand plummeted. But demand for healthcare is increasing, and will continue to increase as baby boomers age. Long-term, demand will decrease as baby boomers die, because the next generation is smaller and will be a smaller elderly population... but I think the crisis will reach a critical point before the baby boomers have died. More precisely, I think the crisis will reach a critical point because of the baby boomers.

The healthcare bubble will burst because healthcare will be too expensive for us to pay for the services we need. How will this play out? Well, if you think public rage over Bernie Madoff and bonuses paid to executives by corporations receiving federal bailout money was unprecedented, just wait until you see what's next.

Hospitals and healthcare systems are terrified by the current proposed healthcare reform because President Obama has said Medicare payments to them will be cut by $500 billion annually. Hospitals don't know how they will remain economically viable. In fact, a study by (I believe) MIT has said virtually all hospitals would operate at a loss if this happens. Of course, this assumes hospitals take no action to improve the efficiency of their cost structure.

But here's the irony: this $500 billion cut that terrifies hospitals, which threatens to make all of them operate at a loss, is a soft landing. It's the best case scenario! If we do nothing, and the bubble bursts, and the public is enraged about the healthcare they cannot afford, one or more of three things will happen:

1.) We adopt a national healthcare policy of the "Have's" and the "Have Not's," where those who can afford it get it, and those who cannot suffer. The U.S. has already implemented this to a degree, but the distinction will become greater. As any public health policy expert will tell you, having so many ill and unhealthy people living and working near well and healthy people is not practical. The spread of disease will be rampant, and this will lead to either #2 or #3...

2.) As a nation, we'll continue to go in debt to pay for unsustainable increases in healthcare expenses, until other nations and their economies stop buying treasury bonds and investing in the U.S. dollar. The dollar will be worthless, inflation will be unimaginable, employment far worse than the 25% it was during the Great Depression. This will lead to #3...

3.) The U.S. government will be forced to implement Draconian cuts to healthcare. Healthcare workers -- including as doctors, nurses, dentists, pharmacists, radiology techs, psychologists, medical office staff, and hospital workers -- will either be out of work or be forced to take drastic salary cuts, or both.

I have no solution to propose, but merely describe the situation as I see it: either we, as a nation, have a bumpy, uncomfortable landing now, or we continue to delay the inevitable, bringing an increasingly catastrophic crash the longer we wait.

When I say healthcare is already to expensive and we can't afford it, I mean there are excessive costs, and they must be absorbed somehow. There are a few basic choices. There is no "ideal" solution, but the best would be a nuanced blend of these. Here are your choices, folks:

1.) Shift the costs to the healthcare system (a.k.a., "government takeover"). Healthcare will be cheaper... which may comes at the cost of fewer services, but also a more cost-efficient system.

2.) Shift the costs to the government. Everyone might get healthcare... but by itself will not reduce rising costs.

3.) Shift the costs to the payers, that is, insurers and patients. Reduces wasteful spending... but also reduces preventative care, and increases long-term costs.

I wish I have it all wrong, but basic economical concepts of limited resource allocation and supply and demand have an uncanny way of asserting themselves. Sometime in the next 10-15 years, between 2020 and 2025, I'll revisit this post, and discuss how prophetic or foolish I am today.

:: Bryan Travis :: 09/29/2009 @ 13:53 :: [link] ::