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Fiscal cliff: Most disruptive healthcare issue

Posted Jul 18 2012 3:50pm

by Kent Bottles

Let's begin today's column with a pop quiz for all hospital executives and physician leaders.

What is the single most disruptive development that you should be thinking about if you want your healthcare organization to thrive in the coming years?

A. The November presidential election
B. The implications of the Supreme Court decision on the Patient Protection and Affordable Care Act
C. Whether your state's governor goes ahead with the Medicaid expansion
D. Technology: the ramifications of the digitalization of the human health
E. None of the above

If you are in my class, the correct answer is E. None of the above. Let me explain.

The issues listed in answers A through D are vitally important, and I am paying a lot of attention to them. But, there is an issue that is so big and important that it sometimes gets lost in all the healthcare stories in the mainstream media: Taxmaggedon and the federal budget deficit cliff come Dec. 31, 2012.

Taxmaggedon describes the $494 billion impact on the federal budget of the convergence of the expiration of the Bush tax cuts, the 2009 Economic Stimulus provisions, the payroll tax holiday and 67 other tax provisions. Taxmaggedon could be easily avoided if Congress and the White House were capable of thinking about the good of the country and compromising. All evidence points to nothing happening on the political front to avoid the Congressional Budget Office's prediction that the U.S. economy will shrink 1.3 percent in the first half of 2013 because of Taxmaggedon consequences.

One does not need to wait until 2013 to see the effects of Taxmaggedon. Business leaders and policy makers think the uncertainty surrounding the end of the year already are causing companies to hold back on hiring new employees and making investments in equipment.

The solution to the federal deficit problem is clear and painful, but politically impossible in today's highly partisan climate. Fifty seven prominent businessmen and former government leaders of both parties have identified a $4 trillion 10-year debt reduction package that is necessary to stabilize the government's debt as a share of the overall economy.

Such a package would need to include cutting government spending and raising revenues; the Simpson Bowles commission gives us a roadmap on how to make the necessary and painful decisions.

Let's not forget that many believe the high cost of healthcare is the single most important cause of the huge federal budget deficit. Yearly rising healthcare insurance premiums result in U.S. employers having less money to give higher salaries to U.S. workers. U.S. workers borrowed $14 trillion in consumer debt in 2006, and the recession hit the U.S. economy when consumers ran out of money to pay their mortgages and car payments. Seventy percent of the U.S. economy is driven by consumer spending.

I ran across some figures from the AAMC (Association of American Medical Colleges) that highlight just high healthcare spending has become. If consumer prices grew as fast as healthcare since 1945 a dozen eggs would cost $55.00; a dozen oranges would cost $134.00 and a gallon of milk would cost $48.00.

In 2013, a President Obama or a President Romney will face the unenviable task of getting a divided country to accept an unpopular $4 trillion deficit reduction package. The reaction of the stock market to the Supreme Court's decision to uphold most of the PPACA shows that reform legislation is not the economic disaster that some have feared.

Medicaid expansion is vital for hospitals to get out from under the uncompensated care problem, but the dollars at risk are not in the trillions. Technology will be a game changer in healthcare, but if there is no money available to purchase disruptive technologies, then the game will not change. The federal budget deficit is the most pressing problem facing all healthcare leaders. Tell your elected officials to fix it now.

Dr. Kent Bottles is a Senior Fellow at the Thomas Jefferson University School of Population Health.

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