Replies to post #44342 on Biotech Values

[spartex]

<Life expectancy is not only lower in the U.S. than in all three of those countries, it's below average for all industrialized countries.

In short, the rest of the industrialized world does a better job of rationing health care than we do.

Sounds like the education system in the U.S. versus the other industrialized nations. Ours is the most expensive, and our students test lower than many of these other countries.

I'm afraid our nation and corporate America doesn't have the discipline of earlier decades. We're fat and happy and expecting someone else to pay for it.

[jessellivermore]

Dear Dew,

With all due deep respect for most of your opinions IMH disagree with your contention "rationing" is a system very similar to free markets.

I was born in 1941 and can remember rationing that resulted from WWII. I was in the RVN in 72-73 when cigarettes and booze were rationed. Rationing is normally instituted during periods when essentials, eg. fuel, food, or materials are in short supply. Rationing is a specific remedy to the short comings of a free market system in these conditions. Rationing allows a more equitable distribution of critical supplies. Rationing is controlled by government and includes specific prohibitions against the twin "ugly sisters" of shortages, Hording and Gouging. Unlike a free market the rationed items do not go up in price. Do people subvert rationing? Of course,,,when this is done an illeagle market,Black Market is created.

Comparing rationing to Sports tickets or Mercedes auto prices is flawed. These are nonessential "luxury" items which could never be subject to rationing.

[DewDiligence]

Medicare Meltdown

[To be read in conjunction with the article in #msg-18495262 and the chart in #msg-16968419.]

http://online.wsj.com/article/SB117867132495096646.html

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By THOMAS R. SAVING
May 9, 2007

What's going to happen when the money runs out for Medicare? A recently released report by the program's trustees found that within seven years Medicare taxes will fall short of Medicare expenses by more than 45%. What's more, Medicare and Social Security combined are on track to eat up the entire federal budget.

…Until a few years ago, Social Security and Medicare were taking in more than they spent, on the whole. Thus they provided revenue for other federal programs. That situation is now reversed, and last year the combined deficits in the two programs claimed 5.3% of federal income tax revenues. In 15 years. these two programs will require more than a fourth of income tax revenues: In other words, in just 15 years the federal government will have to stop spending one out of every four non-entitlement dollars in order to balance the budget and keep its promises to the elderly.

As more and more baby boomers reach retirement, the financial picture will deteriorate rapidly. By 2030, about the midpoint of the baby boomer retirement years, these two programs will require almost one out of every two federal income tax dollars. By 2040, they will require nearly two out of every three federal income tax dollars. Eventually, the deficits in these two programs will absorb the entire federal budget.

Could we force the elderly to pay for future deficits with higher Medicare premiums? Monthly premiums in constant dollars would more than quadruple by 2020, and be almost 30 times their current level by 2080. At that point, the required monthly premiums would consume more than the entire Social Security benefit (from which they are automatically deducted) for average-wage earners.

Using taxation to fund the projected Medicare shortfalls is equally unpalatable. We would need a 10% increase in all nonpayroll taxes by 2020 and a 50% increase by 2080, the close of the trustees' 75-year projection period.

So what else can be done? In general, no reform should be taken very seriously unless it is specifically designed to slow the rate of growth of health-care spending. On the demand side, someone must choose between health care and other uses of money. That is, someone must decide that the next MRI scan or the next knee replacement, for example, is not worth the cost. Such decisions could be made by seniors themselves, by the government (as it is in other countries), or by private insurers operating under government rationing rules. On the supply side, the way health care is produced must fundamentally be changed, replacing cost-increasing innovations with cost-reducing ones.

…If nothing is done, Social Security and Medicare deficits will engulf the entire federal budget. If our policy makers wait to address the growing deficits until they are out of control, the solutions will be drastic and painful. Let us hope that the current wake-up call is not ignored.

[Mr. Saving is a public trustee of the Social Security and Medicare system, director of the Private Enterprise Research Center at Texas A&M University, and a senior fellow at the National Center for Policy Analysis.]
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[DewDiligence]

Apropos to the thread on universal healthcare, this post from three months ago is a good, short read, IMO: #msg-18495262.

[DewDiligence]

Healthcare Cost Control for Dummies

[This op-ed piece from Wednesday’s WSJ is best read in conjunction with #msg-18495262 and the charts in #msg-16968419.]

http://online.wsj.com/article/SB118714325206398102.html

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By MERRILL MATTHEWS
August 15, 2007

Reducing health-care spending isn't hard: Just give the government control over the national health-care budget and you'll see spending decline. Access to physicians and hospitals, the newest technology, important therapies and the best medications will also decline over time. But that's the trade-off society makes when the government controls health-care spending.

It's remarkable how gullible people are who claim, "Canada (or England, or France, etc.) manages to provide universal coverage for much less than the U.S. spends on health care." They seem to think these other countries have reached some sort of economic nirvana. These countries spend less -- usually between 8% to 10% of GDP versus nearly 16% in the U.S. -- simply because health-care spending isn't a function of consumer demand; it's a function of political demand.

Politicians in single-payer countries -- where the public pays higher taxes and the government pays most bills -- decide how much the country will spend on health care, and the prices that will be paid. Since they have to consider education, welfare, defense, etc., as well as the need to keep taxes low enough to encourage economic growth, there is never enough money to go around. There is not one government-run health-care system that is considered adequately funded by those who have to deal with it. In some countries, the rationing, lack of access and waiting lines are worse than others. But they all face these problems.

And virtually any U.S. reform proposal promising "universal coverage" will do the same thing. Why? Because Congress has a long and sordid history of support for health-care price controls.

Medicare reimbursements to hospitals have been price-controlled since 1983, and to physicians since 1992. If Medicare represented 1% or 2% of the health care market -- as the VA does with respect to prescription drugs -- price controls would create distortions, but they would likely be manageable. However, Medicare is the dominant insurer in the country. Its price controls become the benchmark.

Whenever the government controls prices, it arbitrarily determines who it will pay, how much, and for what. Vendors -- that is, providers of goods and services -- generally begin to work the system in order to maximize their gain -- or, more accurately when referring to doctors in Medicare, minimize their losses. When Medicare distorts a price -- and virtually all government-set prices are distorted -- the reverberations are felt throughout the health-care system.

Consider physician reimbursements. Every year, doctors face a cut in Medicare reimbursements, even though their costs for providing care continue to rise. The American Medical Association's lobbying effort has managed to keep current reimbursements about the same as they were in 2001, in part by backing the Medicare Modernization Act in 2003. That's six years without an increase. And unless Congress acts, doctors face a 10% cut in reimbursements in 2008, and a 40% cut by 2016.

At this point, we don't know where doctors' Medicare reimbursements will land; that issue has become a political football in the battle over reauthorization of the State Children's Health Insurance Program (Schip). Democrats are dangling a slight increase in reimbursements, instead of that 10% cut, in exchange for the AMA's support for their massive expansion of Schip.

However, Democrats also want to cut reimbursements to health plans operating in the quickly growing Medicare Advantage program. And they are trying once again to give the federal government the ability to dictate prices -- which they inaccurately describe as a "negotiation" -- for prescription drugs.

All of this is being done in the name of "controlling costs." But does anyone really believe those price controls won't hurt access to quality care?

Increasingly, doctors are refusing to see new Medicare patients. A recent AMA survey found that 60% of responding doctors said they would stop accepting new Medicare patients if the 10% cut is imposed. Even if that figure is inflated by currently angry doctors, it could represent a significant decrease in seniors' access to care.

The situation is worse under Medicaid. It reimburses even less than Medicare, which will lead to more and more access problems for the elderly and the poor. It can also lead to doctors trying to see ever more patients in a given time period in order to keep the income from falling. Less time for each patient reduces the quality of care.

Because politicians want to keep health-care spending as low as possible, they have very little incentive to raise those reimbursement rates. Much easier to rail against "greedy physicians" or use them as pawns when they want to pass other pieces of legislation. You can expect even more political maneuvering if health-care "reform" gives the government increased control over prices and spending.

Either the market will set prices based on supply and demand, or the government will set prices based on budget priorities and bureaucrats' best guess at what specific goods and services should cost. That process may undermine the access to and quality of care, but at least government-run health care advocates can claim it keeps costs down.
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