The Missing Ingredient in the Health Care Debate

There is no health care crisis in America.  The country is virtually awash in top-quality health care.  It’s available on practically every street corner.  Clinics, medical office buildings and hospitals have become as ubiquitous as gas stations. 

What we have is an affordability crisis.  To be sure, there are many facets to the affordability issue.  Our society promotes over-use of health care – especially with the incessant pharmaceutical advertising in the media.  And our society does too little to promote healthy life-styles, especially with – once again – incessant advertising of calorie and fat-laden junk foods.  Could health care be made more affordable by cutting out the middle-man profits – the private health insurance industry?  Perhaps a little – maybe ten percent, but also perhaps at the expense of efficiency. 

What’s being completely missed in the debate about the affordability of health care is that it has two components – the cost of health care, which has gotten all of the attention, and the availability of income to pay for it, which has been completely left out of the debate.  The failure of incomes to keep pace with inflation over the past few decades, much less the cost of living, is more to blame for the health care affordability crisis than the cost of health care itself.  For most working people, health insurance has long been a component of the compensation package provided by their employers.  As the demand for labor has failed to keep pace with the supply, employers have been able to cut their compensation packages without fear of losing their best employees and, naturally, the component that’s cut first and the most is the one that’s been growing in cost the fastest – health insurance (followed closely by the cost of pensions).  Employers either cut the cost by dramatically raising premiums, or they simply eliminate it altogether.

To a great extent, the crisis in the affordability of health care isn’t the real problem.  It’s a symptom of a deeper, underlying problem and, as such, attempts to treat the health care crisis are akin to treating the flu by wiping our runny noses.  There is no solution without addressing the underlying problem in our economy that is exacerbating the imbalance in the supply and demand for labor. 

The problem I speak of is trade policy that sees trade not as a vehicle for marketing our excess capacity for producing products, but for trading away the jobs involved in meeting even our domestic demand.  In exchange, we get cheaper products, but at the cost of a downward spiral in wages.  When  products like health care, which can only be provided domestically, don’t follow that downward spiral, then a crisis is inevitable. 

If we want a real solution to the health care affordability crisis, we need to consider both sides of the problem – not just the cost of health care, but also the factors involved in driving down the incomes we use to pay for it.  Without addressing the underlying causes of this problem, we’ll find that there aren’t enough bandages in the box to stanch the bleeding.

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8 Responses to The Missing Ingredient in the Health Care Debate

  1. mtnmike says:

    Pete,

    Excellent article today. Your point is oh so clear. A falling wage and a rising cost soon meet the point of diminishing return. Nicely done.

    “It takes a very unusual mind to undertake the analysis of the obvious.” — Alfred North Whitehead

    The only point that would debate is the cost of insurance companies in the middle. My friend Jack E. Lohman who writes on this subject and who was involved in healthcare his entire life estimates that as much as 40% of heathcare costs go to insurance companies and other waste that support non-essential satellite industries.

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  3. ClydeB says:

    As I see it, our view of what medical care should cost has been frozen at 1970 levels, while our epectations soar to outer space heights. Expectant mothers have sonograms, one after the other, to show off to their envious friends. We brag about the MRI, the EKG and the CAT scan we just had. We have artificial joints, plastic lenses in our eyeballs, cancer killing cocktails, sixtuplet bypasses, replacement faces, sex changes and a myriad other devices, treatments, procedures and medicines that were unheard of a few short years back. While all the time pretending that the cost should remain at levels of long ago.

    When we do wake up and realize what has happened, we cry out that ‘we can’t afford that and someone else must pay’ so that I can have them.

    It can not happen for long. Either we bring the jobs home so there are wages being earned to pay with, continue printing money while the Titanic band plays ‘Happy Days are Here Again’, or give up on the idea of health care for other than those who can afford it. IT IS IMPOSSIBLE TO DO IT WITHOUT JOBS.

    • Pete Murphy says:

      Clyde, your analysis is right on the money. (No pun intended.) The concept of insurance works when the high cost of very rare events is spread across a large population. When everyone begins to incur those high costs, the whole system begins to break down. That’s a big factor in the “cost” side of the equation. But I’ll leave that one to the experts. I just want to raise awareness that the “income” side of the equation has been lost in the debate.

  4. Randy says:

    The jobs for the middle class provided by manufacturing are worthless. Japan and Germany are building cars in the USA right now. The Japanese provide pictorials for the illiterate in the south on how to operate the machines. Thats your idea of wealth creation?

    The problem for the USA is the lack of savings to support a vibrant biotech industry. They gave all their money to the Wall Street Machine. Now the US consumer is dead for the industry that matters going forward: Biotechnology.

    Japans demographics isn’t a weakness, its a powerful advantage that will attract foreign investment.

    • Pete Murphy says:

      Randy, you deride manufacturing jobs as worthless and then bemoan the lack of savings in the U.S., holding up Japan, an economy built on manufacturing, as a shining example of savings. How can you expect anyone to take you seriously?

  5. mtnmike says:

    Clyde,

    Your comments were excellent and remind me of old Doc on Gunsmoke whose total medical treatment was taking out a bullet and then pretty much keeping the patients company while waiting to see if they were going to die.

    There are problems that have no palatable solutions and today’s healthcare is one of them.

  6. ClydeB says:

    Randy,
    Three excellent sources of pertinent information are Pete’s book, Five Short Blasts, Mike’s book, The Biggest Lie Ever Told and the archives of this blog. Together they just might be able to help clear some of this up for you.

    No doubt, there is a serious lack of savings in this country, but what would be the benefit of having a large savings pool if it were invested in biotechnology?

    There is one single positive factor in Japan’s future that we and most other countries don’t have. They have started to recognize the inherent problems of over population. So far it has only resulted in sending some foreign workers home but if they actively persue population reduction, it could be a breakout plan. If only we would do the same.

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