The Flinchum File

Thoughtful Economic Analysis and Existential Opinions
Subscribe to the Flinchum File
View Archives

Good Intentions Are Not Enough

01/11/2013

With my interest in health care issues aroused recently, I noticed the Centers for Medicare and Medicaid Services (CMS) just issued their report on 2011 expenditures, reporting that the U.S. spent $2.7 trillion or about $8,680 per individual. That is a whopping 17.9% of the economy, as measured by GDP.  The government’s share of expenses was 45%.

Looking at trends, the increase is only 3.9% — still twice the rate of inflation but much lower than normal.  It is thought this is due to the increased number of unemployed and uninsured who received less medical attention during 2011.  The CMS estimates government expenditures will increase 7.4% in 2014 when ObamaCare offers health insurance to another 22 million Americans, before averaging 6.2% growth in expenses each year from 2015 to 2021.

Also, while the government’s share of healthcare expenses was 45% in 2011, it was only 30% in 2002.  This rapid growth was before ObamaCare and the Baby Boomers entering Medicare.  The government’s share can be expected to continue rising.

Paul Ryan’s plan to end Medicare by giving everybody a $7,000 voucher to shop for their own insurance would still leave the average Medicare patient with a “pay cut” of $1,680.  (Frankly, shopping for health insurance was one of the most difficult, complicated purchases I ever made — far more complicated than buying a house or car or even picking a spouse!)

Who was the rocket scientist that said “that which is unsustainable cannot be sustained?”  While I’m delighted to see more Americans getting medical attention, the cost curve must be bent . . . soon!

It is not fair to say the government does not try to control the costs.  Medicare imposes strict limits on the price they will pay for drugs.  According to an FDA report, the number of drug shortages increased from 61 in 2005 to 251 in 2011, because companies won’t invest more capital into making drugs with artificially low prices.  (Companies will always allocate capital where they can make the most profit, not the least.)

Choices have to be made.  Recently, I heard an elderly Medicare recipient, who has never worked, argue that a certain infrastructure improvement should not be made, as the money should be saved for Medicare spending.  I just shook my head.  Choices do have to be made, indeed.

Most churches I know would love to take care of every poor person they can find but are constrained by the cold, hard reality of economics.  So is the government!

We are a fee-only advisor providing best interest fiduciary services to clients
in Chesapeake, Newport News, Norfolk, Suffolk, Virginia Beach, Williamsburg, and the surrounding areas of Hampton Roads.

CONTACT BAY CAPITAL ADVISORSWe Will Respond Promptly

Contact Us Bottom