Do you believe that the new health care bill will save $143 billion over its first 10 Years? If so, I have bad news for you--it won't. According to the Congressional Budget Office, this projected "savings" assumes that Medicare spending per beneficiary increases "significantly more slowly" than it has historically. This assumes that Medicare reimbursements to physicians are significantly reduced.
Rationing can take many forms. Reducing reimbursements to physcians and hospitals, if Congress has the will power to do so, is one form of rationing. Less available care translates into less care.
To put these projections into perspective, when Medicare was signed into law (1965) the projected annual cost of Medicare in 1990, 25 years in the future, was $12 billion. The actual cost of Medicare was $13 billion 10 years later in 1975. It was actually $98 billion in 1990, more than 8 times the projected cost. What does this tell us about the probable accuracy of the projections associated with the new health care bill of a one trillion cost over its first 20 years?
Unfortunately, however, this is just the tip of the ice berg. The current projected cost of unfunded or underfunded future costs of social security and care for the elderly is in excess of $100 trillion. To put that in perspective, the federal government will need to run a $2.0 trillion surplus for the next 50 years in order to cover the costs of these existing programs. What are the odds that will happen?
By now, we should all know that there is no such thing as a "free lunch." Someone has to pick up the tab. In this case, increasing taxes alone will not get the job done. The only realistic solution is to ration care. Is anyone ready to begin the hard work involved in developing a "rational" rationing system?
Monday, March 29, 2010
Wednesday, March 10, 2010
The Cost/Savings Gap
Yesterday, I noted a study showing that 43% of working Americans have less than $10,000 in savings. 54% have less than $25,000 in savings. A newly released study helps put these numbers in perspective.
According to a study released by the Center for Retirement Research at Boston College, the average uninsured lifetime healthcare expenditure for a typical married couple age 65 is $197,000. Notice, this is the "uninsured" cost--the cost after Medicare and any supplement have been applied.
Furthermore, if one factors in potential nursing home costs, the typical couple will spend $260,000 with 5% at risk of having to spend in excess of $570,000. Even at the peak of the stock market in 2007, only 15% of US households had $570,000 in total financial assets.
Assuming uninsured costs will be $197,000, and 54% of Americans have less than $25,000 in savings, there is a substantial gap between future costs and resources available to pay. Does anyone really believe that taxes can be increased enough to cover this gap? Even if costs are contained at 2010 levels, an impossible assumption, the gap remains. Neither increased taxes nor cost containment can solve this problem.
Someone will have to decide how much care will be provided to those who cannot pay for their own care. This will be true for both health care and long-term nursing home care. Do you want to be part of a dialogue that tackles this problem head on, or, do you want to wait for Washington to "solve" the problem?
According to a study released by the Center for Retirement Research at Boston College, the average uninsured lifetime healthcare expenditure for a typical married couple age 65 is $197,000. Notice, this is the "uninsured" cost--the cost after Medicare and any supplement have been applied.
Furthermore, if one factors in potential nursing home costs, the typical couple will spend $260,000 with 5% at risk of having to spend in excess of $570,000. Even at the peak of the stock market in 2007, only 15% of US households had $570,000 in total financial assets.
Assuming uninsured costs will be $197,000, and 54% of Americans have less than $25,000 in savings, there is a substantial gap between future costs and resources available to pay. Does anyone really believe that taxes can be increased enough to cover this gap? Even if costs are contained at 2010 levels, an impossible assumption, the gap remains. Neither increased taxes nor cost containment can solve this problem.
Someone will have to decide how much care will be provided to those who cannot pay for their own care. This will be true for both health care and long-term nursing home care. Do you want to be part of a dialogue that tackles this problem head on, or, do you want to wait for Washington to "solve" the problem?
Tuesday, March 9, 2010
Who will pay for their care?
According to CNNMoney.com, 43% of American Workers age 25 and older have less than $10,000 in savings. This is up from 39% in 2009. The survey found that 54% of those with some form of savings have less than $25,000 in savings.
Obviously, savings in this amount will not, in and of itself, cover the wages lost through retirement. But, even if thanks to Social Security and pension earnings, the Baby Boomers survive retirement, how will they pay for assisted living or nursing home care?
To put this in context, the current average cost of nursing home care is $8,000 per month. In today's dollars, 54% of workers have saved enough to cover about 3 months of care. 43% of workers have saved enough to cover just over one month of nursing home care. In other words, even if we require individuals to deplete 100% of their own personal resources, this will be only a drop in the bucket toward the over-all cost of care.
This leads inevitably to the only two options--generate more revenue through taxes or ration care. In March, 2005, then Federal Reserve Chairman, Alan Greenspan, in testimony before the House, is quoted as saying: "I fear we may have already committed more physical resources to the baby-boom generation in its retirement years than our economy has the capacity to deliver." If that was true in 2005, it is all the more certain in 2010.
This leaves rationing of care as the only realistic option. For those who have not saved enough--over half US workers, who will decide the amount of care they will receive? Who decides who lives or dies? Unless you are willing to leave this decision to govermental agencies and political action committees, it is time for the dialogue to begin.
Obviously, savings in this amount will not, in and of itself, cover the wages lost through retirement. But, even if thanks to Social Security and pension earnings, the Baby Boomers survive retirement, how will they pay for assisted living or nursing home care?
To put this in context, the current average cost of nursing home care is $8,000 per month. In today's dollars, 54% of workers have saved enough to cover about 3 months of care. 43% of workers have saved enough to cover just over one month of nursing home care. In other words, even if we require individuals to deplete 100% of their own personal resources, this will be only a drop in the bucket toward the over-all cost of care.
This leads inevitably to the only two options--generate more revenue through taxes or ration care. In March, 2005, then Federal Reserve Chairman, Alan Greenspan, in testimony before the House, is quoted as saying: "I fear we may have already committed more physical resources to the baby-boom generation in its retirement years than our economy has the capacity to deliver." If that was true in 2005, it is all the more certain in 2010.
This leaves rationing of care as the only realistic option. For those who have not saved enough--over half US workers, who will decide the amount of care they will receive? Who decides who lives or dies? Unless you are willing to leave this decision to govermental agencies and political action committees, it is time for the dialogue to begin.
Tuesday, January 5, 2010
The Scourge of Alzheimer's Disease
A recent article in the Miami Herald states that: "Alzheimer's disease takes a devastating emotional toll on families but it also is one of the most expensive conditions to treat because of its progressive nature, requiring increasing assistance with eating, bathing and other basic activities over up to 20 years."
As we point out in To Tax or To Ration, the main risk for Alzheimer's disease is age. Currently, a new diagnosis is made every 70 seconds. By 2050, when the youngest of the baby boomers turn 84, there could be nearly one million new cases per year. The facts are simple and indisputable--the longer you live, the higher the chances of Alzheimer's disease.
It is this coming wave of Alzheimer's patients, if nothing else, which will ultimately swamp Medicare and Medicaid. Few individuals have personal resources sufficient to pay for 20 years of care. Fewer individuals have family members who can provide 20 years of care.
Assuming that neither personal resources nor family members can provide the necessary care, how will care be provided? By a government already up to its eyeballs in red ink? By "affinity" groups who provide care because it's the right thing to do? Or, will it require all of the above plus rationing too?
In to Tax or To Ration, we maintain that rationing is inevitable. When will our elected officials face up to this coming disaster, one which is far more predictable than global warming? Unless we start speaking up, the answer is they will not.
As we point out in To Tax or To Ration, the main risk for Alzheimer's disease is age. Currently, a new diagnosis is made every 70 seconds. By 2050, when the youngest of the baby boomers turn 84, there could be nearly one million new cases per year. The facts are simple and indisputable--the longer you live, the higher the chances of Alzheimer's disease.
It is this coming wave of Alzheimer's patients, if nothing else, which will ultimately swamp Medicare and Medicaid. Few individuals have personal resources sufficient to pay for 20 years of care. Fewer individuals have family members who can provide 20 years of care.
Assuming that neither personal resources nor family members can provide the necessary care, how will care be provided? By a government already up to its eyeballs in red ink? By "affinity" groups who provide care because it's the right thing to do? Or, will it require all of the above plus rationing too?
In to Tax or To Ration, we maintain that rationing is inevitable. When will our elected officials face up to this coming disaster, one which is far more predictable than global warming? Unless we start speaking up, the answer is they will not.
Monday, December 21, 2009
Medicare and Rationing
As of this writing, it is impossible to know what is in the new National Health Insurance Act. The text has not been released, and even if it were, it will take months to fully analyze all of its provisions.
We have been told that the bill creates a Medical Review Board within the Medicare system. That Board has been instructed to reduce Medicare spending by half a trillion dollars. In theory, its job is to reduce "fraud and abuse" in the system. How will it really accomplish this feat? Not by reducing fraud and abuse, as we point out in our book, they will always be a part of any governmental program
It appears that this Medical Review Board will look at all 7,500 accepted diagnoses of sickness. It will then specify the treatment protocol for each diagnosis which Medicare will reimburse, (thereby limited "abuse"). In other words, you are not limited to the authorized treatment. However, neither Medicare nor your Medicare supplement policy will pay for treatment not specified in the treatment protocol. If you want further treatment, or an "experimental" drug, you will have to pay for it out of your own pocket.
The underlying premise of this protocol is likely to be "quality life years." The procedures or drugs covered will vary depending on how many "quality life years" you have remaining. It is certainly safe to say that if the intent is to reduce health care spending, the effect will be to limit access to care and drugs. Those with the fewest "quality life years"--the frail elderly--will be disproportionately affected.
How ever you look at it, it all comes back to rationing. For a practical discussion of rationing based on "quality life years" read To Tax or To Ration. An entire chapter is devoted to the pros and cons of rationing on this basis.
I wish to emphasize that, as of this writing, the actual details of the bill are yet to be revealed. However, we've been told, repeatedly, that one of the goals of the bill will be to reduce Medicare spending. If so, rationing of care is inevitable.
We have been told that the bill creates a Medical Review Board within the Medicare system. That Board has been instructed to reduce Medicare spending by half a trillion dollars. In theory, its job is to reduce "fraud and abuse" in the system. How will it really accomplish this feat? Not by reducing fraud and abuse, as we point out in our book, they will always be a part of any governmental program
It appears that this Medical Review Board will look at all 7,500 accepted diagnoses of sickness. It will then specify the treatment protocol for each diagnosis which Medicare will reimburse, (thereby limited "abuse"). In other words, you are not limited to the authorized treatment. However, neither Medicare nor your Medicare supplement policy will pay for treatment not specified in the treatment protocol. If you want further treatment, or an "experimental" drug, you will have to pay for it out of your own pocket.
The underlying premise of this protocol is likely to be "quality life years." The procedures or drugs covered will vary depending on how many "quality life years" you have remaining. It is certainly safe to say that if the intent is to reduce health care spending, the effect will be to limit access to care and drugs. Those with the fewest "quality life years"--the frail elderly--will be disproportionately affected.
How ever you look at it, it all comes back to rationing. For a practical discussion of rationing based on "quality life years" read To Tax or To Ration. An entire chapter is devoted to the pros and cons of rationing on this basis.
I wish to emphasize that, as of this writing, the actual details of the bill are yet to be revealed. However, we've been told, repeatedly, that one of the goals of the bill will be to reduce Medicare spending. If so, rationing of care is inevitable.
Trends That Should Receive Attention
There continue to be signs that America, along with all of the industrialized world, is aging. Some new numbers from the Social Security Administration, found in its Fast Facts and Figures About Social Security, 2009, bear repeating.
Between 1962, (the year I graduated from high school), and 2007, the percentage of the US population age 65 and older receiving Social Security benefits increased from 69% to 87%. The percentage of single people and couples with earned income was lower in 2007 than it was in 1962. Note: these numbers cut off before the major market recession in 2008/2009.
What do these numbers tell us? First, the population of the United States is aging, creating problems even before the so-called "baby boomers" retire. Second, older individuals are less likely, or able, to be working. Third, those who have savings are being forced to liquidate assets in their later years.
On the other end of the spectrum, Generation Y, (Americans born between 1977 and 1994), are not saving like their grandparents. In fact, according to a National Foundation for Credit Counseling survey, 45% have no savings at all. It is this same Generation which will be hit the hardest with additional taxes in order to support elderly baby boomers. With no savings of their own, how can they possibly fund the long-term care needs of the older generations?
All of the trends force us to conclude that rationing of health care for the elderly, which is already a fact of life, will continue to expand. The only real question is this: Do you want be involved in developing the solution? Are you willing to live with a solution devised by Washington bureaucrats? In To Tax or To Ration, we provide the information you will need to engage in "national conversation" on the subject of rationing. Read it. Get involved.
Between 1962, (the year I graduated from high school), and 2007, the percentage of the US population age 65 and older receiving Social Security benefits increased from 69% to 87%. The percentage of single people and couples with earned income was lower in 2007 than it was in 1962. Note: these numbers cut off before the major market recession in 2008/2009.
What do these numbers tell us? First, the population of the United States is aging, creating problems even before the so-called "baby boomers" retire. Second, older individuals are less likely, or able, to be working. Third, those who have savings are being forced to liquidate assets in their later years.
On the other end of the spectrum, Generation Y, (Americans born between 1977 and 1994), are not saving like their grandparents. In fact, according to a National Foundation for Credit Counseling survey, 45% have no savings at all. It is this same Generation which will be hit the hardest with additional taxes in order to support elderly baby boomers. With no savings of their own, how can they possibly fund the long-term care needs of the older generations?
All of the trends force us to conclude that rationing of health care for the elderly, which is already a fact of life, will continue to expand. The only real question is this: Do you want be involved in developing the solution? Are you willing to live with a solution devised by Washington bureaucrats? In To Tax or To Ration, we provide the information you will need to engage in "national conversation" on the subject of rationing. Read it. Get involved.
Friday, December 18, 2009
The Perils of an Infinite Progress Model
In an interview by Beth Baker of the Kaiser Foundation, published on December 10, 2009, Ethicist Daniel Callahan makes some interesting observations about the American health care system. Initially, he describes it in this fashion:
"Our whole health care system is based on a witch's brew of sacrosanct doctor-patient autonomy, a fear of threats to innovation, corporate and (sometimes) physician profit-making, and a belief that, because life is of infinite value, it is morally obnoxious to put a price tag on it."
He is quoted in the interview as saying:
"Cost is a symptom of a deeper problem. We have an "infinite progress" model. Nothing is ever good enough. The standard of care is raised higher and higher--but death always wins.
"The National Institutes (sic)of Health is always giving priority to the most lethal diseases--cancer, heart disease, strokes. Things that really make you miserable like mental health [problems] or arthritis don't get nearly as much money. The fight against death has been a very central part of American medicine. It's a weird system where you get saved from heart disease at 65, treated for cancer at 75, and then after that end up with Alzheimer's at 85--this is progress?"
Just this week, researchers announced the complete decoding of the genome for two forms of cancer. They are excited that this will lead to more successfuly treatments for cancer, and this is exciting. But it also means that hundreds of thousands of additional people will reach old age.
His concluding comment mirrors our concerns. "Medicare is going to run out of money shortly, and we're finding more and more expensive ways to keep people alive. So we have to find ways to set some limits." To Tax or To Ration. That's what it keeps coming down to.
"Our whole health care system is based on a witch's brew of sacrosanct doctor-patient autonomy, a fear of threats to innovation, corporate and (sometimes) physician profit-making, and a belief that, because life is of infinite value, it is morally obnoxious to put a price tag on it."
He is quoted in the interview as saying:
"Cost is a symptom of a deeper problem. We have an "infinite progress" model. Nothing is ever good enough. The standard of care is raised higher and higher--but death always wins.
"The National Institutes (sic)of Health is always giving priority to the most lethal diseases--cancer, heart disease, strokes. Things that really make you miserable like mental health [problems] or arthritis don't get nearly as much money. The fight against death has been a very central part of American medicine. It's a weird system where you get saved from heart disease at 65, treated for cancer at 75, and then after that end up with Alzheimer's at 85--this is progress?"
Just this week, researchers announced the complete decoding of the genome for two forms of cancer. They are excited that this will lead to more successfuly treatments for cancer, and this is exciting. But it also means that hundreds of thousands of additional people will reach old age.
His concluding comment mirrors our concerns. "Medicare is going to run out of money shortly, and we're finding more and more expensive ways to keep people alive. So we have to find ways to set some limits." To Tax or To Ration. That's what it keeps coming down to.
Subscribe to:
Posts (Atom)
