A study of government-controlled health care systems throughout the industrialized world reveals an amazing commonality ---- "Pay As You Go." This means taxes acquired today, are spent tomorrow. Nothing gets invested for the future.
The baby boomer generation is another common phenomenon shared by many of these countries. Every year in the United States, another 4 million baby boomers become eligible for early Social Security. Soon they will be added to our nearly bankrupt Medicare system ---- a system that President Barack Obama wants to expand via the public option.
Addressing health care reform will require that we address "Pay As You Go" and find ways to save for the future.
Statistically speaking, today we have one Medicare recipient for every four taxpayers funding the system. By 2030 this number will drop to 2.3 taxpayers per recipient. You don't have to be a mathematician to see that blindly following President Obama will lead to massive tax increases. More specifically, the 25 percent federal income tax bracket will have to increase to 55 percent and the 35 percent tax bracket will have to increase to 77 percent ---- and these are the minimum projections.
Medicare currently has a $37 trillion unfunded liability. This liability is the gap between tax revenues (your money) and promised benefits, in this case over the next 75 years. Oddly enough, President Obama, who accepts these numbers, uses them as the reason to create yet another health care entitlement program ---- this time for anybody younger than 65.
Coincidentally, the countries reviewed for this article all share another common failed method for controlling health care expenditures ---- the establishment of price controls as the primary method of addressing inflation. Price controls fail to slow inflation because they ignore the "demand" side of the "supply and demand" curve. We must address "demand" if we want to control health care expenditures.
Empowering people to expect more from their health care dollars is the key to controlling health care expenditures. Unfortunately, today's health insurance fails to empower patients. Rather, it encourages unsustainable demand by blinding patients to the cost of delivering quality health care. If we applied the health insurance model to automobile insurance, this would be analogous to expecting automobile insurance to pay for routine car maintenance. If you think car insurance is expensive today, imagine what it would cost under this model.
Health savings accounts coupled with high deductible health care insurance policies could be one invaluable tool for saving our health care system by empowering patients. A health savings account is a method of saving pre-tax dollars to fund medical expenditures.
Coupled with a high deductible health insurance plan, this type of insurance encourages savings for the future, protects from abnormally high medical expenses, and drives down the cost of medical care. By accepting a higher deductible, insurance costs are inherently lower.
Furthermore, since initial expenditures come from a personal health savings account, patients will start demanding more from their health care dollars and they might think twice about demanding expensive services that may not be warranted.
The question then becomes, where do we find extra money for health savings accounts? The answer lies in understanding who pays for our health insurance.
If you believe that employers pay for most of our health insurance, think again. These costs are already calculated in employee compensation packages.
In other words, if your employer offers health insurance, you are paying for it. This is your money, withheld from your paycheck, to provide you a service that bestows a tax benefit for your employer.
Businessman David Goldhill offers this poignant example looking at a 22-year-old single employee with a starting salary of $30,000 who gets married in six years, supports two children for 20 years, retires at 65 and dies at 80.
Let's also assume that insurance premiums, Medicare taxes and premiums, and out-of-pocket costs will grow no faster than earnings ---- say, 3 percent a year.
At retirement, this person's annual salary will be $107,000 and they will have paid $1.77 million for their family's health care. And this assumes health care inflation doesn't outpace the general economy ---- something we could only wish for today.
The reality is that we have plenty of money to afford this type of reform. We just need to demand the most from our health care dollars so there are more to save for the future. This does not require another failed government entitlement.
Afterall, Social Security is essentially bankrupt. Medicare is essential bankrupt. The Post Office is essentially bankrupt. Amtrak is essentially bankrupt ... and this list goes on and on.
Dr. GARY GONSALVES is a North County anesthesiologist and co-founder of Stop Taxing Us. Contact him at www.StopTaxingUs.com.
