This will take a few minutes to read through, but I ask that you do and promise the threat here is real. First, I would ask that you just take a moment and look at this graph from the world bank. It shows the percent of America's GDP that is going into medical care.
Now I want to point out that where the graph starts (around 13% on medical care) is already higher than almost every other developed country in the world (can see them all at http://data.worldbank.org/indicator/SH. ... start=2000 ) and was high for the United States in 2000. Most those other developed countries today have socialist type systems for health care which should have naturally higher costs (arguments can be had between the two systems, but free markets are virtually always at least somewhat cheaper if there is competition). The trend is also not changing (the graph is a few years old). Last year we went past 17.8% of GDP on just healthcare which is insane by any historic or international standard (https://www.cms.gov/research-statistics ... rical.html).
Now let me ask two questions. 1. Do you think your income is increasing at the same rate as medical expenses? 2. Do you think this is a trend that can continue without major consequences?
What is Causing it?
Our basic problem is that the medical industry is treated completely differently than every other industry by the federal government. While other industries are all subject to anti-trust laws which force competition (and thus lower prices), the medical industry has not been subject to those same laws for a long time. It is not that those laws have been repealed, they simply have not been enforced on it in decades.
Let’s compare experiences. If you have a major purchase decision, like say a car, you look at multiple dealers or online. You look at what you are getting for your money and make the best decision. Since car dealers know you are looking between them, they try to keep the price of their cars down and make business decisions that allow them to charge less. Even if you don’t do that great of research, you probably end up spending less simply because the dealer must keep the price down as he or she knows many others are comparing and a reputation for high prices hurts.
Now let’s compare that to a hospital experience. Let’s say you are healthy right now and don’t need anything? Is there any easy way for you to go look up the difference prices for hospitals? Maybe Hospital A charges a little less for everything or Hospital B overcharges on many expenses. Of course, it is even more complicated than that because the hospitals have agreements with different insurance companies to charge different prices. What the hospital charges with one might be several times more than what charges it for someone on a different insurance or what is charges someone with none at all.
Now let’s say you get sick. You go to the hospital, they tell you everything you need, and you only get a final bill after everything is done. Now maybe Hospital A and Hospital B weren’t that different in cost, but maybe they were. Even if they weren’t, if they had to publish exactly what everything cost beforehand, they would have had far bigger incentives to keep prices down that they do now.
To put this in perspective, a women in Arizona was charged $83,046 for anti-venom at a hospital while it costs just $100 a dose in Mexico (http://www.nydailynews.com/news/nationa ... -1.1152754) . While this is an extreme example, it’s indicative of our whole medical system.
I don’t want to get more into this here as I know this post is already getting long, but you see similar issues throughout the medical industry.
What Can You Do?
What we want to do is spread the word on things that would help our system. Karl Denninger has posted the following proposal https://market-ticker.org/akcs-www?post=231949. What we are hoping for is that we can get this trending and force a new discussion away from the Obamacare/Republican Replacement plans, both of which are useless for addressing our issues.
The Federal Debt Bomb
I would like to end with a series of graphs showing how this problem is effecting government spending. The only thing that these graphs show is what the Centers for Medicare and Medicaid Services spends each year and come straight from the Treasury (you can see the most recent full year on page 10 at https://www.fiscal.treasury.gov/fsrepor ... ts0916.pdf if you want to). Look at its growth over 16 years vs. the entire rest of the federal budget (which has also grown a lot). [Note: After making these charts I realized they somewhat underestimate federal spending, as federal government considers somethings off of its budget sheet. They still tell the tale pretty well though].
From these charts, I think we can very clearly tell one thing. The federal government cannot continue to afford ever increasing medical expenses. If we add in the interest paid on the debt every year to the expenses from the Centers for Medicare and Medicaid we are now up to over 4 out of every 10 dollars of the federal budget accounted for. That is leaving an increasingly smaller percentage for absolutely everything else the federal government pays for. The net result of that is that the federal government continues to borrow large sums of money to continue all the programs it wishes to.
That the federal government cannot afford these increases in prices any more than individuals or companies can presents us with one final worry, and it is the biggest of all.
Remember, that the federal government is also spending ever increasing amount of money on just interest on the debt. Right now, that interest is very light, but given the huge debt, is still hundreds of billions of dollars a year. Even a small increase in worry that the federal government will not pay back all its obligations will result in interest rates getting much higher much quicker (which means the federal government would have to borrow even more to keep up). In other countries where we have seen that happen and unless there is outside intervention (and there wouldn’t be anyone big enough outside to help the United States), interest rates on government debt go from relatively low to unaffordablely high in a very short period. At that time, it becomes virtually impossible for a government to borrow money. A change that massive would leave the United States instantly in the worst depression we have ever experienced.
That is the future we are hoping to avoid. Please help us get Karl Denninger’s proposal trending. https://market-ticker.org/akcs-www?post=231949