Medical Costs Outrun President Obama’s Projections
Posted Oct 07 2012 3:12pm
Stanley Feld M.D.,FACP,MACE
No one should be surprised that the cost of
healthcare and medical prices are overrunning projections by the Obama
administration. It was self-evident with the passage of Obamacare. Now it is
President Obama has done all the wrong things to
lower costs and all the right things to raise costs.
Why is President Obama not bending the cost
curve as he promised? I would say he either doesn’t know what he is doing or he
knows precisely what he is doing.
My guess is he is trying to force consumers into
a "Public Option" that will be created by the health insurance exchanges. He is
also trying to stick the cost of this “Public Option” onto state governments.
The state governments are required to balance their budget.
Even before states institute the health
insurance exchanges most states are suffering from large budget deficits when
they are supposed to have a balanced budget.
The health insurance exchanges will make it
worse. The federal government will have
to bail states out as the payer of last resort. This will increase the federal
deficit even further. The federal government will have to print more money.
Printing more money will devalue savings,
salaries and purchasing power. The result will be further inflation. Somewhere someone like a China will not continue to buy the United State's depth and it will default on payment.
America is currently suffering from inflation.
It is being disguised because the government has eliminated fuel costs and food
costs from inflation calculation.
I believe Americans understand this. Governor
Romney must emphasize this in no uncertain terms.
“Affordable Care Act, which
promises to expand coverage to 30 million Americans starting in 2014 and trim
“If you don’t bend the cost curve, ultimately
insurance gets more expensive,” said Douglas Holtz-Eakin, the president of the
American Action Forum, a Washington-based advocacy group that opposes the health
law. “It’s a big problem for the Affordable Care Act.”
Obamacare tries to limit insurers’
administrative expenses and profits. The Healthcare insurance industry is
supposed to pay at least 80% of premiums for direct patient care. ( Medical Loss
Ratio of 80 %).
However, President Obama
has permitted the healthcare insurance industry to continue to count expenses
for administrative services into the direct medical services column. The result
is a decrease in the amount of money available for direct patient care.
The Health Care Cost
Institute published the direct cost per person under employer- sponsored plans
increased from $4,349.00 in 2010 to $4,547.00 per person in 2011. United, Cigna
and Humana cover 40 million people.
The obvious question is why
should an employer pay $15,000 to $20,000 dollars a person a year when the cost
Why should I be paying a
premium of over $15,000 a year in after tax dollars for my Medicare premium and
supplements for my wife and me when it costs $6,600 per person? The $6,600 per
year average includes the sickest seniors.
Each year the government
increases the Medicare premiums on a means tested basis because it spends money
above my premium cost.
Keep in mind I have been
paying into the Medicare Trust since 1965. Now I am paying an additional
$15,000 a year for direct services that cost $6,600 per year per person.
Any salary earned by a
senior results in them paying into the Medicare trust.
Someone is ripping off the
system. The likely candidates are the healthcare insurance industry and the ever-increasing
This statistic is a
distraction from the real issue. The real issue is to explain the difference in
direct cost compared to premium costs.
President Obama believes
that hospitals owning and managing physicians practices will result in best
practices using evidence- based medicine.
I believe a system can be
built to teach independent physicians best practices combined with their use of
Holtz-Eakin, former CBO
head, believes that Obamacare encourages consolidation among hospitals and
doctors. The consolidation of hospitals and physicians is leading to greater
pricing power by the hospital system.
The problem with the
consolidation of hospital systems and physician practices, is that physicians
are not receiving an increase in reimbursement for their intellectual property
or technical skills.
The hospital system owns physicians’
intellectual property and technical skills. Its staff does the collecting and
financials. The hospital system enjoys the increase in revenues. The salaries
for its administrators have skyrocketed into an average of 1 million to 5
million dollars a year.
It is clear that the price
of adding 30 million people to the healthcare insurance rolls will increase
costs. The increasing price spiral will not be to the advantage of patients and
The costs will become
unsustainable and the government controlled healthcare system will collapse.
The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone