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You Want to Fix the Economy? Then First Fix Healthcare

We don’t just deserve an affordable, sustainable healthcare system–we’re doomed to bankruptcy without one.

 

What is blindingly obvious to employers but apparently invisible to the average zero-business-experience mainstream pundit is this: if you want to fix the economy, you must first fix healthcare. If you want to pinpoint a primary reason why U.S. enterprises shift jobs overseas, you have to start with skyrocketing healthcare costs.
According to a report by the St. Louis Federal Reserve, real (adjusted for official inflation) wages have risen a mere 3% since 1970. (No wonder wage earners don’t feel wealthier; if we use a more realistic measure of inflation, we haven’t gained 3%–we’ve lost ground.)
But if we look at total compensation costs paid by the employer (health insurance, workers’ compensation, employer’s share of Social Security, etc.) we find that these costs have soared 60%. In other words, if these labor overhead costs had remained stable (i.e. gone up only as much as inflation), employers could have distributed the difference as raises to employees.

Business Sector: Real Compensation Per Hour, Average Hourly Earnings of Production and Nonsupercisory Employees

(see more posts on U.S. Average Earnings, )
Business Sector: Real Compensation Per Hour, Average Hourly Earnings of Production and Nonsupercisory Employees

Business Sector: Real Compensation Per Hour, Average Hourly Earnings of Production and Nonsupercisory Employees - Click to enlarge

These labor overhead costs are the reason why wages have been stagnant for 46 years, and the dominant overhead expense is healthcare insurance. Why has healthcare soared from 6% of GDP to 18% in four decades?
One reason is we have the worst of all possible worlds: we have a healthcare (what I call sickcare, because sickness is profitable but health is not) system in which for-profit corporations–cartels with immense political power–set the prices, and the government pays them.
If you set out to design a system that optimizes price-fixing, fraud, over-testing, questionable procedures, pharmaceutical advertising to a credulous public and opaque billing, a system with no real limits on prices, you’d end up with the American sickcare system.
If you think this system is affordable, sustainable, and a wonderful deal for employers, you need your head examined. Better yet, go out and get platinum coverage in ObamaCare and pay the entire monthly insurance cost yourself.
I have written dozens of substantial analyses of sickcare/healthcare over the years. Please start with these four:
Then move on to these:
While you’re gasping for breath, check out these charts. Let’s start with medical costs, which have outpaced inflation by leaps and bounds.

Milliman Medical Index

Milliman Medical Index

Milliman Medical Index - click to enlarge. - Click to enlarge

The costs of the federal healthcare programs, Medicare and Medicaid, are exploding: where are the trillions of dollars to fund these programs going to come from? Please don’t say higher taxes (tax levels above 20% of GDP trigger recessions) or borrowing more money (federal debt is already pushing $20 trillion):

Projected Changes in Medicare Costs and Enrollment

Projected Changes in Medicare Costs and Enrollment

Projected Changes in Medicare Costs and Enrollment - click to enlarge. - Click to enlarge

After a head-fake down, health insurance costs are soaring again.

Health insurance continues to soar

Health insurance continues to soar, CPI: Health Insurance, Medical care services

Health insurance continues to soar - Click to enlarge

Our developed-world competitors manage to pay for their “socialized medicine” at roughly half the cost per capita (per person) as the U.S.

U.S. Healthcare Costs 1960 - 2008

U.S. Healthcare Costs

U.S. Healthcare Costs - click to enlarge. - Click to enlarge

So you want a solution, right? The current system is not a solution, it’s a poisoned blade in the heart of the economy. Everybody knows this, just as everybody knows it’s unaffordable and unsustainable.
The solution? Let a 100 flowers bloom. Give consumers as wide a choice as possible, including government-run insurance programs. Don’t force anyone to join anything. Give employers and employees as broad a range of choices as possible–yes, including a government-run insurance program in which the government owns the entire operation–clinics, hospitals, drug manufacturers, etc., lock, stock and barrel.
The point here is we need real competition, but our current system guarantees there cannot be real competition. The for-profit cartels have captured the federal regulatory and funding agencies, and the last thing the cartels want is transparency and wide-open global competition.
Around 40% of the cost of the current mess is paperwork going back and forth between all the players; a one-stop shop would eliminate about 90% of those needless expenses right from the start.
Look, if the federal government offered a civilian equivalent of the Veterans Administration with its own pharmaceutical manufacturing divisions, do you really think it would cost more and be any more inefficient than the insane mess we have now?
If it did cost more, then nobody would use it and it would go away.
In a truly competitive healthcare system, cash would be king. Please read this before passing judgment:

We don’t just deserve an affordable, sustainable healthcare system–we’re doomed to bankruptcy without one.Join me in offering solutions by becoming a $1/month patron of my work via patreon.com.

My new book is The Adventures of the Consulting Philosopher: The Disappearance of Drake. For more, please visit the book's website.
The Adventures of the Consulting Philosopher: The Disappearance of Drake
Full story here
Charles Hugh Smith
At readers' request, I've prepared a biography. I am not confident this is the right length or has the desired information; the whole project veers uncomfortably close to PR. On the other hand, who wants to read a boring bio? I am reminded of the "Peanuts" comic character Lucy, who once issued this terse biographical summary: "A man was born, he lived, he died." All undoubtedly true, but somewhat lacking in narrative.
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