As I’ve said in these pages often, Health Care costs in the US are so inflated that it’s much less expensive for non emergency care & routine surgery to go outside of the country. Recent proposed insurance premium increases are startling, especially after the last few years of steady increases. While for some, subsidized care is a boon, however for the majority of users, costs have far outpaced inflation even doubling in many cases. Thanks to Karl Denninger of the Market Ticker for the following heads up on upcoming increases & ideas on how we might change things:
According to a recent Wall Street Journal article, insurance companies are asking for increase of 25% to a shocking 51.6% in health insurance premiums in large markets across the country in order to cover the high costs associated with the Affordable Care Act.
Karl Denninger of the Market Ticker writes often on the overpriced medical system & I agree with his conclusion that if we just enforced consumer protection laws such as anti-trust, racketeering, & anti-monopoly, we could soon reduce healthcare costs to what they should be in a free market. Moreover, it’s not really an option as we will reduce costs as the current deficits cannot continue indefinitely.
It’s really not complicated folks: Medicare and Medicaid are the problem, all of it.
Let’s take the numbers right out of the MTS for last fiscal year. Medicare tax receipts, last fiscal year and all-in, were $224 billion. That’s it. Medicaid received zero since there’s no tax associated with it. But between Medicare and Medicaid last year $1,187 BILLION was spent, resulting in a deficit between spending and tax receipts of nearly a trillion dollars. In fact last fiscal year the US Federal Debt increased by $1,085 billion which means that essentially all of the actual deficit was due to this disparity.
You got that folks? The entire reason that we have a budget deficit — all of it — is that we are spending $963 billion more than we take in through taxes on Medicare and Medicaid. THE ENTIRE PROBLEM LIES THERE, ALL OF IT.
Now to be fair, the Social Security system ran a $150 billion deficit last fiscal year too. But $150 billion is chump change compared against $960 billion, and the latter is growing in payments far faster than receipts. If you think you can effectively double the tax rate paid for Social Security, Medicare and Medicaid (that, I remind you, would mean that your actual tax rate for these programs would be 30% from dollar #1 for all wage dollars up to the FICA limit and then 15% for every dollar thereafter!) you’re nuts.
That sort of tax increase literally drive anyone in the middle income brackets and below into the poorhouse; it would be a doubling of the actual effective tax rate on those not making enough to pay federal income tax net of deductions and credits, for example, and would be a monstrous (30% or more) effective tax rate increase even on those with a $100,000 gross income!
That’s simply not plausible to implement — period.
Nor can you CUT Medicare and Medicaid expenditures by 80% (which you’d have to) except by getting rid of the need for both programs for everyone except those in abject poverty.
This means there’s only one way to solve the problem:
You must eliminate the need for Medicare and Medicaid for everyone that is not abjectly poor.
Enforce AntiTrust Laws & Drastically Cut Health Care Costs
So how would you go about doing that?
What if you knew that scorpion antivenom that costs $30,000 a vial in Phoenix was $100 a vial in Mexico where it is made, just a few hundred miles south? It is.
What if you knew that Sovaldi, the cure for Hepatitis C that costs nearly $90,000 for a course of treatment in the United States has a cost of approximately $1,000 in India and Bangladesh? It does.
What if you knew that if you went to either Mexico or Bangladesh and bought 100 courses of treatment of either drug and brought it back into the United States to sell at a 100% mark-up, an act that (if replicated) would not only make you a nice profit but also instantly force down the price in the United States down to something reasonable, you would have your lawfully-purchased courses of treatment confiscated and you would almost-certainly be charged with a crime and imprisoned? That’s exactly what would happen.
What if you knew that an MRI that is often billed out at $3,000 in the United States can be purchased for cash for about $200, including the reading of the results by a qualified MD, in Japan? This means that it is actually cost-effective for you to get on a plane, fly to Japan, have the test done and then fly back home as opposed to having it done at the MRI place around the corner! That too is true.
What if you knew that surgeries performed in an open competitive market were often available, even here in the United States, for 20% — that is one-fifth — of the price charged in other places just a few miles away? Oklahoma Surgery Center anyone?
What if you knew that people are routinely billed hundreds or even thousands of dollars for a “consultation” that consists of a doctor who you never met and had not consented to treating you sticking his head in your hospital room and saying “Hello!”? This happens literally every single day in hospitals across this country.
What if you knew that people often cannot get a quote on a procedure before it is performed and even if they do hospitals and other medical centers will frequently bill for other things without consent, even when it could have been provided, and then demand payment? Such a practice in virtually any other business, such as auto repair, air conditioning and heating work and similar is a criminal act under state consumer protection laws, incidentally. That happens literally every single day in medical centers and hospitals as well.
What if you knew that people were being billed for procedures that never took place in hospitals, such as being billed for a “trauma team activation” when no life-critical trauma occurred and in fact no such activation or care was provided? Such an act in other businesses, such as billing you to replace an alternator in your car that wasn’t actually replaced is and is prosecuted as a crime. This has been documented to happen as well.
What if you knew that common off-patent medicines are often “reformulated” in their inactive ingredients (that is, the ones that don’t treat the condition) and then the former product discontinued, sometimes under government pressure, resulting in cost increases of 200, 300, or even 500% and the disappearance of inexpensive OTC alternatives? This happens all the time with Albuterol being one such particularly-outrageous example; Primatine Mist, the OTC alternative, was forced off the market and the price of the prescription alternative roughly tripled.
What if, in short, you knew that medical care and so-called “health insurance” in this country is effectively a cartel operation that, in virtually any other industry, would be considered racketeering and prosecuted with thousands of people going straight to prison, firms being broken up or closed and those gouged having their funds returned?
Well, there’s a damn good argument that this industry is chock-full of exactly that sort of behavior by virtually everyone in it!
Now let’s look at what has happened not in gross dollar terms but in terms of GDP. Health care has gone from a low single-digit percentage of the economy (about 3-4%) to roughly 19% today.
We have a $17 trillion economy and of that $3.23 trillion, roughly, is health care, $1.2 trillion of that spending is by the government and virtually all of it spent in deficit by devaluation of everyone’s purchasing power amounting to roughly 6% per year, compounded!
If we broke up those cartels and both Health Care and Health Insurance were returned to being a competitive market the share of the economy would shrink from $3.23 trillion to about $640 billion a year.
Now let’s think this one through — there are 330 million people, roughly, in the nation today. At $640 billion total per-person expense on medical care would drop to approximately $2,000 per-person from the $10,000 per-person spent today.
Nearly all people can afford $2,000 per year; if the threshold for “affordability” is 10% of your income all-in, anyone who makes $20,000 a year or more could afford it where right now you need to make $100,000 to reach that threshold.
Further, with even the cost of catastrophic events dropping by 80% you would be able to buy catastrophic insurance for the few instances where you can’t afford the out-of-pocket for a small amount of money — and that comes out of this $2,000 per-person cost! In other words it would be about as expensive as a basic automobile liability policy to have catastrophic health insurance — about $75/month.
The screamfest about things like “birth control” are an intentional fraud by those advancing such arguments; you can buy, for cash, birth control pills for under 50 cents a day. In many cases for drugs like this, along with common antibiotics, the co-pay is higher than the cash price for generics!
Resolving this situation would effectively allow the removal of Medicare and Medicaid from the federal budget even though it would not actually go away. It would instead be limited in accessibility to those who are under the poverty line and between that restriction and cost reductions it would fall in expense by about 90% in the Federal Budget.
Simply restoring The Rule of Law to the medical and insurance industry instantly and permanently ends the federal deficit and in doing so would result in a roughly 6% improvement in every citizens’ purchasing power every single year thereafter, compounded, because the purchasing power destruction that inevitably and immediately is caused by deficit spending disappears.
That benefit goes to everyone, rich and poor alike and as a consequence will massively benefit the economy as a whole over time.
Who loses? The medical and insurance company cartel members. Yes, their income would decrease – – a lot. And? These people are a small minority of the population and more to the point the “service” funds they consumed could then be spent in the production and purchase of goods, which improves the net wealth of the nation instead of simply shifting money from one person to another, and furthermore the cessation of purchasing power destruction would be of benefit to everyone — including them.
Medical Tourism to Continue Increasing
So, as I say in the title, here’s why will the current system lead to increased medical tourism:
Let’s start with the current state of things: Insurance companies are now institutionalized into American society with the ACA. While we don’t even know the full effect of the program yet (so far it looks expensive,) it has now become accepted, along with Medicare/Medicaid as “entitlements.” This of course suits the medical industry giants & pharmaceutical companies just fine. The money keeps rolling in, and there’s zero talk about really reining in the abuses. Most of us live in terror of an emergency, which could mean years of destitution, or even bankruptcy.
Much as with the banks & mortgage companies, practices that would lead to long jail terms for you and I are flat out ignored when it comes to overcharging, price fixing, collusion, and fraud.
Meanwhile, the vise tightens around those of us who must pay more in premiums while suffering through the low quality healthcare available. Self employed? Ouch, watch those bills grow.
For those in the private work sector, I believe that within two years as the full effects of the ACA become apparent, we’ll see a rising demand for a lower cost solution. Politically it’s dead for now, as the health care and pharmaceutical lobbyists appear to have a firm grip on Congress.
As insurance companies continue to raise rates for participants in order to cover the rising costs associated with the Affordable Care Act, more ordinary families will be forced to forgo or at least delay needed minor surgeries, or even dental care as income is increasingly dedicated to healthcare associated costs. Rising deductibles, higher copays, and huge double digit premium increases make a medical trip the only viable option for many.
There really is no practical reason (other than the fact that we’re being extremely gouged) for an open air MRI to cost about $200 in Peru, while in the States one can pay as much as $5,000-6,000. With most deductibles creeping ever upwards towards $10,000, anything that costs more than a few thousand dollars can easily be done for less, including a trip. While traveling for health care certainly may not be a vacation, it does allow the opportunity to visit other places.
As a country, we simply cannot afford to allow these predatory practices to continue. It’s easily masked in the federal budget far away from any individual choice one might make, but the fact is that every dollar borrowed immediately pulls demand forward with an added interest expense. We are literally stealing from unborn generations to fund healthcare today.
Until we hit the wall financially here in the US however, don’t expect any relief. Keep your bag packed, and a list of possible doctors around the world. Don’t wait, you may need it.
©2015 Ben Gangloff
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