On Manufacturing More Costs: How to Keep Health Care Costs from Killing Us DEAD.

by Jefferson Pinto

July 2009, Issue 16: This column is not for everyone. Don't Ask your Doctor if it is right for you. Although side effects are rare, a small number of readers have experienced increased appetite, increased tolerance for forked-tongued politicians, and the desire to pay higher taxes for lower service levels. If you experience depression or feelings of helplessness that last more than four hours, seek verifiable facts immediately. [Editor's Note: The following Health Care Cost Analysis was written pre-Obamacare, signed into law in March of 2010]. Quick Link (This Article): http://bit.ly/2hPRtBh

But seriously folks, the health care reform debate is flaring up again. Current proposals and debates are hasty and half-baked – throwing out (or throwing up) solutions without first defining the problems and the causes. And so now is the time to ask the tough questions; What exactly are we fixing? What is the core problem? What are the associate symptoms, causes, and potential side effects? I can only hope the approach to the fix isn't as fragmented as our current health care system.

We are NOT suffering from a lack of technology, qualified health care professionals, labs, pharmaceuticals, hospital beds, or imaging machines. Plain and simple - the fundamental problem is high cost. The primary cause is an absence of downward pressure being exerted on costs. Runaway costs are driven by fear, greed, and ignorance.

Cost Accounting 101 Let's say two years ago you bought 100 gumballs for a dollar; they cost one penny each. Ahh, that's an easy one. The next year, you bought 125 gumballs for $2.50.

Question #1: What were the two causes the total cost increased? First you bought more gumballs (quantity variance), and secondly, the unit cost went up from one cent to two cents (price increase) per gumball.

Cost for each unit (gumball) is escalating: each MRI/CAT scan, each lab test each pill, each office visit, etc., procedure. The primary reason is a lack of competition and no “economic down force” pressure on prices.

"I'm not advocating socialized medicine for one second."

Secondly, the quantity (number of gumballs) scans, lab tests, prescriptions, office visits, surgeries are also increasing. The primary reason is due to an increase in the number of people receiving health care.

This sort of begs an ethical question. Who ought to be treated and how do we pay for those who can't pay for themselves?

Well folks, in the U.S., it is my personal belief, there ought to be a minimum standard of care (including emergency care) provided to every citizen irrespective of their ability to afford it. Hold your horses! I'm not advocating socialized medicine for one second. We are a nation of people, not money-grubbers, and if the richest country in the world can't "take care" of its sick people, then maybe we aren't really the "richest" country after all. Moreover, if the land of opportunity lacks the ability for 95 percent of Americans to pay their own way, there-in lies yet a bigger problem.

"The cruel economic reality is public policy does indeed put a price tag on a life."

Pretend, for a moment, that we all agree everyone ought to have transportation. What minimum standard ought we, the tax payers, foot the bill? A bus? A Hyundai? A Mercedes Benz? Does the new luxury car really provide more effective transportation? Nicer and more prestigious yes; more effective, no!

Currently, our health care system is operating at the Mercedes Benz standard. That's too high a standard than the taxpayers can afford. However, if you choose to upgrade your transportation with your own money, go for it.

The cruel economic reality is public policy does indeed put a price tag on a life. And clearly we could save countless lives by lowering the maximum speed limit to 25 miles per hour. You see, we do trade dollars and convenience for lives.

What if there were just 100 people in this country suffering from the same ailment? What if the cure would cost one trillion dollars each, should the rest of the citizens pay? NO! That would cost more than ten times the national debt. My point? There is a dollar limit to save/extend a life.

Current “Solutions” Won’t Work Because They Don’t Address The Problem

Forcing everyone to buy health insurance: The first flaw with this approach is it fails to reduce costs; it only spreads the costs around.

If I go on a road trip, take the ice chest out of the back seat and put it in the trunk did it reduce the overall weight of the vehicle? No, it simply redistributed the weight.

The proposed quick fix to make everyone pay only spreads the cost around. The second problem is the indigent can't pay which means those who can pay end up paying for those who can't pay in the form of higher health care premiums. Sort of like how it's done today. This is sort of nice for the government because it shifts the cost to the insurers and off the federal books.

The third problem with everyone paying an "equal share" is still no downward pressure is exerted on prices, and costs will undoubtedly continue to escalate until the U.S. gets to be like other countries who have implemented this approach. (Like Sweden, with a 70 percent marginal tax rate). Criminy! That's gonna leave a mahk!