The economic challenge of entitlement reform is clear: entitlements are growing more rapidly than our economic growth is capable of paying for. Consider the federal government’s 2012 budget: the government takes in approximately $2.4 trillion in tax collections and spends approximately $3.8 trillion. Difference is known as the budget deficit, which is approximately $1.4 trillion. The accumulation of years of budget deficits is what creates our national debt now at approximately $16 trillion. And that’s only the beginning. So-called “unfunded liabilituies”, Social Security and Medicare primarily, add another $80 Trillion in obligations that our politicians have made for taxpayers.
Politically speaking entitlement reform is a third rail, that is, dangerous to tlak about in Washington. Limit Social Security overtly and incur the wrath of AARP or other special interests. Forcing healthcare providers to deliver health care more efficiently sounds so much more appealing to voters. But what does forcing healthcare providers to deliver healthcare more efficiently really mean in the real world?
It means paying them less….and all the consequences, intended or not, from this approach. Even nonprofit healthcare providers need to make money to continue delivering services. When they cannot pay their providers, chiefly labor, labor goes elsewhere and the provider isout of business. What are a healthcare provider’s choices?
Fortunately the European models allow us a glimpse into the future. Healthcare is rationed. At the street level this means lengthier delays to see physicians and other providers, as well as unequal access to the best providers. Those with means will purchase additional health insurance plans to allow speedier access to healthcare as well as access to the best providers. Everyone else will have to wait in line.
Another disruption to supplies when entitlements become too expensive for governments to pay occurs with drug supplies. Consider Propofol, a safe and widely used sedatives used in diagnostic and surgical procedures. The Medicare Modernization Act prevents ‘cost shifting’ by pharmaceuticals, so when U.S. manufacturers couldn’t make money with Propofol, they stopped making it here. Now no U.S. manufacturer makes propofol; we import it from European drug makers at five times the cost, and the supply chain is erratic. Health care providers are hoarding supplies. Wait for your drugs, too.
New regulations on food and behavior must follow as well to help control the cost of healthcare. Consider the regulations in New York City limiting the amount of soda that can be sold in a single serving. This regulation was more about the high cost of healthcare for obesity, diabetes and other high sugar induced maladies among the poor (who have no incentive to control their health care costs). Thus, as entitlements grow and politicians continue to kick the cans down the road, choice even of the beverages we purchase mus tbe regulated. The situation worsens.
For other entitlement reform, currency debasement provides a stealth solution with disastrous effects on receivers of fixed incomes. When the printing presses go into overdrive the true currencies of natural resources food and precious metals increase in value. Consider that from 2008 to 2012 gas prices at the pump nearly doubled, gold prices doubled, and a trip to the grocery store increased significantly for many foods. Politicians can vilify oil companies and currency traders but at the end of the day, people on fixed incomes suffer. Because the promises are no lnger possible to deliver.
Obamacare added 30,000,000 people to a vast new entitlement program: expansion of Medicaid services and more regulation of medical delivery systems. Those getting free services will continue to vote for more free stuff, while people paying for the services will continue to pay more.
The challenge is alerting voters to what every politician knows: the trajectory is unsustainable. THey ekeep makign promises they all know we can’t keep.
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