Ronald Pires'  Instablog

I got into health insurance back in 1974, and was well placed in my work there. If you weren't around then, inflation was, in a word, wild. What was far more wild however was healthcare inflation. Trust me, we beat our heads into the ground trying to control costs even back then, and I have no reason to suspect that ever changed after I left.

Much to the dismay of my superiors, I made to a startling prediction back in 1978: We were dying. Oh, we were quite profitable to be sure, but there was simply no way we could continue with healthcare inflation so far above all other inflation. Eventually we would run out of our ability to raise premiums, and we would have to start eating our customers. This is what you are seeing today.

I recently pulled up some charts of healthcare vs. regular inflation covering that period to now. With two notable exceptions, healthcare inflation has continued to outpace regular inflation. In economics, this is called a divergance, and divergances are unsustainable. Think: Bubble. Again, what you are seeing today.

Economics again. When any costs exceed inflation consistantly over a long period of time, something has to be choking off the supply side. Otherwise, the price increases would cause supply to grow to meet the demand. Except this hasn't happened in healthcare. This in fact is why the insurance companies, in spite of their best efforts (and they employ many very talented people), have been unable to control costs. They can only affect demand; not supply. They've done a journeyman's job at it, but it was a fool's errand, doomed to failure.

I mentioned that there were two exceptions to healthcare inflation exceeding regular inflation during this period. They are 1992 and today. Notice anything? Sure, whenever healthcare lands seriously in the middle of the desk in the Oval Office. Which means that healthcare inflation IS controllable, but ONLY when the providers become afraid. If you've got that chart, look at the upward spike right after HillaryCare died.

We are all trained to revere doctors and medical providers in general. It's only natural. They keep us alive. But everytime we bring up the subject of medical inflation, the medical establishment cries poverty and tosses out stories of our impending nation death. This has grown now to absurdity. The horror stories coming forth from our insurance providers, who are not bad people, tell us that we have reached the national limit of how much we can afford to spend to stay alive. Indeed, many have died to show us this limit, and we can only look to more of the same if the chokehold imposed upon us by the medical establishment does not lessen.

It is time to attack this problem square on where it exists; on the supply side. Congress, but for small and by comparison insignificant efforts, is attacking only the demand side. And just like back in 1978 when I first made my startling prediction, their effort too is doomed to failure.