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The Obama administration is currently working to push healthcare reform down the pipeline at an alarming rate. The reason for this is that President Obama is trying to make good on his promise that sweeping healthcare reform will be completed by the end of 2009. I even touched on the fact that this push would come in “Acting Quickly” from June 15th.

What’s really important here though is not whether or not he meets that deadline. Hitting that deadline is actually quite irrelevant as the proposed options to fix the system won’t address the real problems in health care. Even worse yet it seems to me that the administration doesn’t care that the real problems won’t be addressed. Let’s take a look at the healthcare problem, analyze the facts, discuss the proposed solution, and identify what changes REALLY need to be made.

The Facts

As of 2007 there were 45.7 million uninsured Americans; this is where President Obama gets his 46 million people figure. Within that group of people, 20% (just over 9 million) were not US citizens. Also, of that 45.7 million people 36% of them had a family income of greater than $40,000, which is about $20,000 (or more) higher than the 2009 poverty line for a family of 4.

This in my opinion raises significant questions about the relationship between not having access to healthcare and being uninsured. On top of that, 80% of these people were employed (this number has likely fallen due to the Great Recession). As a direct result of this level of employment the average stay on the uninsured rolls was just under 5.3 months. The 45.7 million people represents about 15.3% of the US population, this percentage has remained fairly static since 1993 which may suggest that some of the people on the rolls are voluntarily uninsured (especially when considering the last fact). In this group of known uninsured people, 39% of those without insurance are between the ages of 18 and 39, the group least likely to have medical complications.

The Problem

Since 1999, premiums for a family of four have increased by about 120% and are now at levels which are becoming unmanageable for many Americans. This statistic is a bit misleading as a vast majority of insurance costs are carried by subsidies. Some estimates suggest that as much as 88% of total health care costs are incurred by a third party whether that be an insurance company, an employer, or the US government.

Due to the overwhelming costs increase on insurance and overall healthcare to both individuals and companies, America is also becoming less competitive. This was taken from the Washington Post in 2005 and the figures have since gotten worse:

GM says health expenditures -- $1,525 per car produced; there is more health care than steel in a GM vehicle's price tag – [This is] one of the main reasons it lost $1.1 billion in the first quarter of 2005

[My Comment: Remember that in 2005 GM (GMGMQ.PK) was on the cusp of breaking sales records by peddling 17.4 million cars and trucks. Also at this time GM’s Asian competitors had health care input costs on cars built abroad of around $100 per vehicle.]

…GM says its health care burdens, negotiated with the United Auto Workers, put it at a $5 billion disadvantage against Toyota in the United States, because Japan's government, not Japanese employers, provides almost all health care in Japan. This reasoning could produce a push by much of corporate America for the federal government to assume more health care costs. This would be done in the name of "leveling the playing field" to produce competitive "fairness."

In addition to increasing costs to businesses and society, the so called “Silver Tsunami” is rapidly approaching and will hit the US citizenship. As of 2005 roughly 6% of the US population was older than 75 years of age; that figure will double to 12% by 2050. This is incredibly problematic as the elderly community consumes the greatest amount of medical resources. It is more worrisome for the US government as people aged 65 and upward also rely on Medicare and Medicaid more than any other age group for their healthcare needs. Further, once the silver tsunami hits recent projections show the US will have a shortfall of physicians by 2020. This is due to a gap in the rate of increase between the number of people who will need a physician and the speed at which our educational system is able to make doctors available to them.

Lastly, from a macroeconomic prospective, the current cost of health care is mathematically unsustainable. In 2009 healthcare costs are expected to increase by roughly 5.5%, yet our GDP is expected to fall by an ever increasing forecast amount. To paint a picture of the healthcare burden in dollar terms, during 2008 the US spent roughly 16.6% of its GDP on health care costs. In 2007, where we have hard numbers available we spent $2.2 trillion or $7,421 for every PERSON in the US.

The Government Solution

Taken from the Associated Press in the afternoon of July 8th:

At its core, legislation is designed to achieve twin purposes: expand health insurance to an estimated 50 million who now lack it, and reduce the explosive growth in health care generally.

[My Note- Where did 3.3 million more uninsured people come from since the end of June?]

…there was general sentiment among Democratic leaders that health care legislation must contain an option for the government to sell insurance in competition with private companies, according to these officials. They spoke on condition of anonymity, saying they were not authorized to disclose details of private talks.

Any bill is expected to require insurance companies to issue a policy, without the ability either to deny coverage or charge higher premiums on the basis of preexisting medical conditions.

A long menu of possible tax increases was also in circulation, including one that would fall on the upper-income. Officials said a proposed hike in the Medicare payroll tax had lost favor in recent days. If included in the bill, it would violate Obama's campaign pledge not to raise taxes on the middle class.

[Senator Kent]Conrad said, "We’re looking at other options" to help finance a bill whose price tag is expected to reach $1 trillion or slightly more. He did not identify any.

In a nutshell, the government is looking to tax those making higher wages to subsidize the care of those making lower wages. They want to do this in order to grant health insurance to everyone and create a public health care option. Don’t take my word for it though, read up on Barack Obama’s initial proposal and see for yourself.

Source: America's Healthcare Problems Are Making It Less Competitive