Mr. Obama wants to "reform" health care spending in the USA. It looks like that means spending more money. Apparently the USA already spends over $8,000 per person on all things medical (nearly 1/5th of GDP). We believe that long-term, USA GDP will fall much closer to the world mean, about $10,000 per year. Obviously the USA cannot spend 4/5ths of its income on medicine.
This is not good news for the U.S. medical complex. Given that the USA spends about twice as much per capita on medicine as other developed countries, there is plenty of fat to be cut. Some countries go further such as Singapore or Cuba, for example, which have adequate health care systems (certain measures of public health are higher than for the USA), at a small or tiny fraction of the cost per capita (1/5th and 1/25th respectively).
It is apparent that a vast reduction in medical spending need not necessarily yield a vast reduction in medical care. Though, considering the disarray in the U.S. system, a decline of quality is likely. What is certain is that incomes for those who make their living in the industry are bound to fall dramatically or just go away.
Among the many super-sized industries in the USA, medicine is among the most bloated. We expect the Depression will cut it down to a sustainable level dramatically smaller than its current size.
Showing posts with label health care. Show all posts
Showing posts with label health care. Show all posts
Thursday, February 26, 2009
Saturday, January 10, 2009
Is Medical Care a Necessity or a Luxury?
We do not propose to answer this question on an ethical basis, but on an experimental one. We believe that the 2007 Depression will cut into incomes so severely that social observers may get an answer to the question based on patterns of spending cutbacks.
It is irrelevant whether medical costs are paid out-of-pocket, through insurance schemes, or by a government. In the coming years there are going to be severe budgetary constraints at all levels in society from the household to the United Nations. Whether the decisions are made individually or politically, the issue of whether to spend on medical care is going to loom ever larger.
This also raises the question: if medical spending is to continue, what spending will be sacrificed? Obviously, goods and services which are noncontroversially considered luxuries such as travel, dining out, and entertainment may be first in line to the scaffold. After that, electronic and durable good purchases may be deferred or forgone. Then we are getting into the 'meat and potatoes' - necessities.
The USA has, notoriously, the most expensive and least broadly available health care system in the world. If the same or more money is spent, will the USA become a nation of people metaphorically taking each others' blood pressure? In 2008, Medical spending was 17% of GDP. If GDP falls 50%, will medical spending become 34% of GDP? Or will priorities change?
If the axe falls on medical spending the implications are quite dramatic. Workers and investors in the industry have been used to steady (often lucrative) work, and reliable returns. What will the consequence on consumers be? Will even more Americans find themselves uninsured and without access to anything but the most primitive services?
Many questions...with many answers forthcoming in the years ahead.
It is irrelevant whether medical costs are paid out-of-pocket, through insurance schemes, or by a government. In the coming years there are going to be severe budgetary constraints at all levels in society from the household to the United Nations. Whether the decisions are made individually or politically, the issue of whether to spend on medical care is going to loom ever larger.
This also raises the question: if medical spending is to continue, what spending will be sacrificed? Obviously, goods and services which are noncontroversially considered luxuries such as travel, dining out, and entertainment may be first in line to the scaffold. After that, electronic and durable good purchases may be deferred or forgone. Then we are getting into the 'meat and potatoes' - necessities.
The USA has, notoriously, the most expensive and least broadly available health care system in the world. If the same or more money is spent, will the USA become a nation of people metaphorically taking each others' blood pressure? In 2008, Medical spending was 17% of GDP. If GDP falls 50%, will medical spending become 34% of GDP? Or will priorities change?
If the axe falls on medical spending the implications are quite dramatic. Workers and investors in the industry have been used to steady (often lucrative) work, and reliable returns. What will the consequence on consumers be? Will even more Americans find themselves uninsured and without access to anything but the most primitive services?
Many questions...with many answers forthcoming in the years ahead.
Tuesday, December 9, 2008
Enabling Destructive Economic Behaviour
Although we ourselves are not of the socialist persuasion, we agree with socialists that there are cases where government can actually provide useful services, and at a reasonable cost. So reasonable in fact, that the case for privatisation is not particularly compelling.
Unfortunately, at the national level, the USA seems incapable of delivering that sort of socialism (with the possible exception of the Post Office). Instead it engages in malignant lemon-socialism, where destructive enterprises are rewarded with life-prolonging capital infusions, or outright government ownership.
Take, for example, a number of large banks, Fannie, Freddie, and Wall Street firms. These outfits swindled the world's investors. All issues of criminal fraud aside, their activities were and continue to be enormously destructive economically.
Investors lost confidence in them. Any sane governing authority would simply shut them down. In any sort of free market economy, they would be done already. There are thousands of better run competitors out there to take up the slack. But yet, the Federal Government saw fit to step in and keep them going. Not because no one else was providing some useful service they are. In fact, they aren't producing any useful service at all. Quite the contrary.
Another example is the bailout of the 'Big Three' automobile manufacturers. As stated in a previous post, there are many good, sound business reasons for these companies to go out of business. It's not like there aren't lots of other companies which can make cars. If the USA has a glut of car making capacity, then a fair chunk of it needs to go away.
The core economic problem of the failed Soviet Union was that its central planners took valuable natural resources and turned them into useless waste. Ignoring issues of quality and desirability, they measured output strictly in tonnage. This was socialism at its worst.
Unfortunately, the USA is following in the footsteps of the Soviet Union. Its central planners are diverting ever larger portions of the nation's income into operations that produce little or no benefit. The litany is extensive, but includes bloated 'Defense' and 'Homeland Security', subsidies for airlines, automakers, banks, construction, insurance, mortgage companies, prisons, and real estate brokers.
Spending by Governments at all levels in the USA is about 40% of total national income. Also, about 50% of the population is dependent primarily on government for its income. This is a country fairly deep into some kind of socialism. Is it getting a good value for its commitment? Does the USA have enviable public education? a low rate of incarceration? free health care for all? a first-rate passenger rail system? The answer to these questions is a resounding "No!"
On top of that, Government in the USA is quite involved with the private sector. Does the USA have a healthy industrial base? a healthy balance of payments with the rest of the world? energy security? well-paid, content workers? No, again.
We are profiling a country at the verge of leaving the club of wealthy, advanced nations, if not heading for outright collapse. The response of the political leadership to the 2007 Depression is very telling: bailouts, handouts, and more pork. This will do nothing to make the nation more productive and increase its citizens' income. On the contrary, it will make the nation less productive and exacerbate the decline in income.
Unfortunately, at the national level, the USA seems incapable of delivering that sort of socialism (with the possible exception of the Post Office). Instead it engages in malignant lemon-socialism, where destructive enterprises are rewarded with life-prolonging capital infusions, or outright government ownership.
Take, for example, a number of large banks, Fannie, Freddie, and Wall Street firms. These outfits swindled the world's investors. All issues of criminal fraud aside, their activities were and continue to be enormously destructive economically.
Investors lost confidence in them. Any sane governing authority would simply shut them down. In any sort of free market economy, they would be done already. There are thousands of better run competitors out there to take up the slack. But yet, the Federal Government saw fit to step in and keep them going. Not because no one else was providing some useful service they are. In fact, they aren't producing any useful service at all. Quite the contrary.
Another example is the bailout of the 'Big Three' automobile manufacturers. As stated in a previous post, there are many good, sound business reasons for these companies to go out of business. It's not like there aren't lots of other companies which can make cars. If the USA has a glut of car making capacity, then a fair chunk of it needs to go away.
The core economic problem of the failed Soviet Union was that its central planners took valuable natural resources and turned them into useless waste. Ignoring issues of quality and desirability, they measured output strictly in tonnage. This was socialism at its worst.
Unfortunately, the USA is following in the footsteps of the Soviet Union. Its central planners are diverting ever larger portions of the nation's income into operations that produce little or no benefit. The litany is extensive, but includes bloated 'Defense' and 'Homeland Security', subsidies for airlines, automakers, banks, construction, insurance, mortgage companies, prisons, and real estate brokers.
Spending by Governments at all levels in the USA is about 40% of total national income. Also, about 50% of the population is dependent primarily on government for its income. This is a country fairly deep into some kind of socialism. Is it getting a good value for its commitment? Does the USA have enviable public education? a low rate of incarceration? free health care for all? a first-rate passenger rail system? The answer to these questions is a resounding "No!"
On top of that, Government in the USA is quite involved with the private sector. Does the USA have a healthy industrial base? a healthy balance of payments with the rest of the world? energy security? well-paid, content workers? No, again.
We are profiling a country at the verge of leaving the club of wealthy, advanced nations, if not heading for outright collapse. The response of the political leadership to the 2007 Depression is very telling: bailouts, handouts, and more pork. This will do nothing to make the nation more productive and increase its citizens' income. On the contrary, it will make the nation less productive and exacerbate the decline in income.
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