Saturday, March 27, 2010

Is Health Care Reform a "Big F*#king Deal"? PART 2

A couple of things to add on the first two problems...

I view health care as a product that is fundamentally different than, say, a TV or a car or food, even. It's obvious why it's different than a TV or a car because we don't need them to survive. So let's take that last one, food, because we do need it to survive. If someone all of a sudden loses their job for whatever reason, most people can still buy food because they probably have some money saved up (and food doesn't cost all that much relatively speaking...if you really need help, I think most people could find some food from friends and family). When the first time that you get hungry comes around after you lose your job, all you need to do is go down to the grocery store and drop a few bucks. But if you get hit by a car on your way to the store (after you lost your job) or you all of a sudden start feeling a pain in your appendix...well, then you're screwed (COBRA plans do obviously help here but they also suffer from problems of being too costly and limited to 18 months after you lose your job). Food may arguably be more critical than health care in our ability to sustain ourselves over the long run but we pay relatively small amounts of money each day for it instead of in huge lump sums like we would have to do if we needed serious medical care.

Okay, so what about the third problem: Federal budget issues related to Medicare and Medicaid? Boring, right? Wrong! Let's just spend a little bit of time here.

First, what exactly is Medicare. You may be roughly familiar with it because you see it taken out of our paycheck (1.45% from you, 1.45% from your employer) but let's get down to the details. Essentially, it is the U.S. government's health insurance program for people over age 65, under 65 with certain disabilities, and any age with permanent kidney failure. You might be saying to yourself, "Wow...that sounds an awful lot like socialized health insurance"...and you'd be right. And we've had this since 1965.

There are several parts (A-D) to Medicare. Part A is hospital insurance (inpatient care at a hospital, hospice, etc.) and if you or your spouse have paid payroll taxes towards Medicare for at least 10 years, then this insurance is provided without charge. You essentially paid for it your whole working life and when you retire, it's supposed to be there for you (at least that's the idea). Part B is medical insurance (covers anything that Part A does not, like doctors' services and some preventive services like flu shots), which you have to pay an extra premium of ~$100 per month in order to receive. If you are enrolled in Parts A & B then you can opt for Part C (Medicare Advantage), which provides the same services as A & B  but through a private insurance company that is approved by Medicare. Typically, those that choose to enroll in Part C also pay for additional coverage for prescription drugs, dental, vision, etc. The final part is Part D, which provides subsidized prescription drug coverage. This is what was passed in 2006 under President Bush. You can enroll in this program through the original Medicare (A & B) or Medicare Advantage (C).

Okay, how about Medicaid? Medicaid is government-provided health insurance for the poor and it is essentially provided for free (some small fees may apply in certain situations). Medicaid is funded by state and federal governments, but management is handled by states. Thus, eligibility and program specifics vary from state-to-state. Medicaid is even subcontracted out to private insurers in some states. So Medicaid is even more socialized than Medicare because we really are giving it away for free to those who are just too poor. It's our society's safety net.

Boring, right? Well, okay...But the problem is that these large government-provided health insurance programs are in big financial trouble. One of the big reasons, again, is that overall health care costs are rising (as mentioned in Part 1) but the other is that the baby boom generation is getting old and requiring more services from Medicare. This is a huge part of the problem when you hear about the federal deficit. I don't think everyone truly grasps the enormous amount of money that the government spends on health insurance. Over the last decade it has been around 65% of the total expenditures of the federal government! 65%!! (You can do your own Excel research by downloading all of the data here.) I have railed against the huge increase in defense spending related to the "War on Terror" (and will continue to) but even that (at ~20%) is dwarfed by the amount of money spent for health insurance. Now, it's true that a lot of the receipts that the government takes in as revenue is devoted specifically to health insurance (and it is clearly stated as such on your paycheck for instance) and there is no similar transparency for defense spending (i.e., you don't see that separated out nicely on your payroll or income taxes). But insurance completely dominates federal expenditures.

Bottom line: The government is just not getting enough revenue to cover the increasing cost of providing this subsidized health insurance to those who qualify. It's a friggin' mess!

So what to do? Well, there are several different ways to try and address each of these problems. Part 3 will look at the bill that was just passed in a little bit more detail as it relates to the problems that I just outlined.

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