Sunday, March 28, 2010

Notes and Remarks of a Health Reform Provocateur

I see by my blog counter that 99 people visited this medinnovation blog in the last few days – 84 from the U.S, 4 from India, 3 from Europe, and the rest from elsewhere. I am encouraged people are reading my blog, but I am discouraged by the few comments. I suppose this is because everyone agrees with what I have to say.

To provoke more comments, I shall make a few incendiary remarks. These remarks go against my nature because I believe both sides of the health reform issue harbor deep and serious convictions.

But here goes anyway.

• President Obama’s historic achievement proves the end – government-directed care to guarantee near universal coverage – justifies the means – back room deals, ignoring the will of the people as expressed in countless polls, shutting out the political opposition until the deal was done, budget gimmicks, and federal debt as far as the eye can see.

• President Obama and the Democrat Congress failed to tackle head-on the staggering cost of care, $2.5 trillion, 17% of the national economy. Instead, Obama and followers chose to avoid the $250 billion doctor-fix (after all, doctors only provide the care needed to fulfill the political promises), doubled down their Medicare bet ( cut $500 billion while promising more benefits), skillfully executed a financial sleight-of-hand(counting 10 years of revenue with only 6 years of outflow), radically expanded Medicaid( adding 16 million to state-rolls), and pretended defensive medicine engendered by malpractice fears had nothing to do with costs (while doctors surveyed said defensive medicine accounted for 26% of costs).

• These political maneuvers all rested on the ludicrous promise that these costly measures will save the government and the public money through unproven cost-saving strategies that will not take effect for years ( paying on basis of comparative effectiveness, bundling hospital-doctor fees, electronic medical record efficiencies, rewarding high performance, and wellness and prevention programs).

. The adverse consequences of Obamacare are already starting to roll in. less than a week after its passage. As a result of the bill, AT&T announced it will write down $1 billion in profits. The write-down wave includes Deere & Co $150 million, Caterpillar $100 million, AK Steel $31 million, 3M $90 million, Valero Energy $20 million. All of these corporations have informed their employees they will be forced to reduce or drop health benefits.

• I agree with Charles Krauthammer (“The VAT Cometh,” Washington Post, March 26) that a U.S. VAT (Value-Added Tax), a consumption tax on most goods, will inevitably be necessary to pay for this comprehensive bundle of health-care goodies and to reduce the national debt.

If you doubt the last remark, I invite you to look at the history of Medicare. In 1966, after Medicare’s passage, government financial experts assured us medical expenditures would not exceed $12 billion by 1990, when on that date in actuality costs reached $107 billion, a mis-estimate 9 times off the mark.

Maybe the current CBO estimate of slightly less than $1 trillion or so by 2020 is on the mark, and maybe it will not be off by a factor of nine times by 2045. but I am not optimistic. Already critics like Paul Ryan (R-Wisconsin) says the actual cost will be $2.5 trillion or more in the next decade.

But let us not quibble over a $ trillion here and a $ trillion there. As a nation we are already $8 trillion in debt. And the CBO projects another $12 trillion by 2020.

Why a VAT? Because history, not only here but in Europe and other Western countries, shows that government entitlement programs are always instantly addictive, wildly popular, and politically irreversible.

A U.S. VAT is a logical way to reduce the federal debt. The VAT is a federal cash cow. Every 1% of VAT produces yields $1 trillion per decade.

So why not VAT? It is for a noble cause. It is a moral imperative for the social good. A U.S. VAT may not be as high as in Europe – 19% in Germany, 20% in France and Italy, and 25% in Scandinavia because of our vibrant but fading capitalistic economy.

Whatever the VAT level, it will be needed to feed the entitlement beast. This is not all bad, of course, if we want to emulate European social welfare programs, and if we are to assure egalitarian equity and social justice among all classes. If the VAT starves the private sector and stifles private innovation, so be it.

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