As the debate over healthcare continues, I can’t help but wonder if the Republican leadership has the intestinal fortitude to do what is right. Yes, the House has already passed a repeal of Obamacare, and that is a good start. But, we’ve already heard discussions that they know they can’t truly get the repeal all the way through the legislative process and get Obama to sign it. They have said they promised the voters that they would vote on it and they did. But, that is not enough. They must permanently derail it soon, or they will have lost the window of opportunity.
If Obamacare is allowed to be implemented, it is game over for our very way of life. Look at every other government entitlement program created. They never get smaller. They never even stay the size they were projected to be. Instead, they all grow. Up until now, the only large government program that is not bigger than promised is the Medicare Part D prescription drug program. Why is it not bigger? Is it because it was a Republican President and a Republican congress that put it into place? I think some of my friends who are party loyalists first, and principled conservatives second, might think that. After all, we just elected a senator to his sixth term who bragged about being a part of writing Medicare Part D.
The only reason it is not bigger than planned is it is still too new. In fact, Obamacare ensures Medicare Part D will be far more expensive than planned. An important, but much derided, part of Medicare Part D is the “donut hole” where a covered senior has to pay roughly the second $2500 of his or her prescription drug costs out of pocket. For those who don’t think deeply about the implications of government action, it sounds good. I mean who doesn’t love a freebie? But, just think for a minute about what some of the consequences are of closing the donut hole. No longer will seniors need to spend any time at all trying to get the best deal on their prescriptions. Heck, their grandchildren will pay the bill. To be fair, I suspect most seniors are not thinking that, but that is the reality.
And, the even bigger implication is what does closing the donut hole do to the cost of healthcare? It certainly will do nothing to bring the cost down. But, it will likely cause large increases in the cost. I’ve never been on a cruise, but I’ve been told the food is very good and you can eat whatever you want; the costs are all inclusive. I love steak and seafood, but don’t eat it very often because it is expensive. Instead, I eat a lot of chicken, turkey and even free range organic venison. But, if I were going to go on a cruise, what do you think I’d eat? A lot of steak and seafood! On the other hand, if the cruise was not all inclusive, but I paid for each item I took, what do you think I’d eat? You can be sure I’d be looking for the dollar menu! Of course, my point is, when there is no direct cost associated with a meal at the time I eat the meal, I am going to go all out and get the best. But, if there is a direct cost, and the best costs more than is acceptable, I am likely to get the alternative 95% of the time.
Our healthcare expenditures are no different. Suppose you are a senior who is on several prescriptions. You are just below the donut hole, and your doctor tells you that you need a new prescription that will cost $2000 per year. With the donut hole, you are going to have to pay that $2000. With the donut hole closed (some like to call it fixed), you don’t pay the $2000. What is the likely outcome? With no donut hole, you pick up your $2000 prescription and go happily on your way, perhaps not even realizing what you are doing to your grandkids. But, with the donut hole, you have a personal stake in the cost of the medicine. Perhaps you ask your doctor if there are alternatives. Maybe you even find a generic drug that will work just as well and that you can get for $40 per year. Because you have no incentive to save the money, the cost for your medical care increases by $1960 per year. Of course, this is for one single prescription. Multiply that by all the procedures and prescriptions for all seniors, and you’ll understand why Medicare is crushing this country.
This example was very similar to my own situation with cholesterol medicine. The original prescription was going to cost $900 per year. I carry a large deductible, and knew that ultimately, this $900 was going to be out of pocket for me. I, of course, asked the doctor to prescribe an alternative. There was no generic of the drug he originally prescribed, so I asked him to consider a different drug that might have a generic alternative. My cholesterol is under control, and has been for seven years now. How much have I spent? $40 per year or $280! How much would the insurance company have spent had I been fully insured and not asked for an alternative? $900 per year or $6300. I’d like to think I would have asked the question even if I did not have a large deductible. But, the reality is most of us would not ask.
Obamacare has a multitude of problems. But, the most glaring problem is that it will most certainly drive up costs, because it further separates the user of the services from the payer of the services.
Back to my original point that every entitlement program ends up costing a lot more than planned. Did you notice the prescription drug program is Medicare Part D? Do you know why it is called Medicare Part D? Because it is an addition to the original Medicare bill. We were promised in 1965 when Medicare was first passed that it would cost in the neighborhood of $12 billion dollars in its 25th year, 1990. Do you know what it ended up costing? Had they not made any changes to the original Medicare program, it would have cost approximately $64 billion in 1990 or more than five times higher than the original projection. But, the total cost of Medicare and all its add-ons actually cost over $107 billion in 1990, roughly 9 times more than it was projected to cost. Last year, Medicare expenditures were over $528 billion. This compares to a cost of just $3 billion in 1966. That means Medicare costs 176 times more in 2010 than it did just 45 years ago. Is there any reason to trust that the new healthcare entitlement for all will not follow the same pattern?
Just this week, it was reported that neither the Republican leadership in Congress nor the President want to be the first to tackle entitlement reform because they are afraid of how the other side will demagogue them. As American citizens, we need to make them far more afraid of not solving these problems.
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