The Missing Ingredient in the Health Care Debate

August 24, 2009

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.

Health Care Reform an Unintended Consequence of Trade Deficit

June 8, 2009

You’ve heard me speak of the linkage between the trade deficit and the federal budget deficit – the latter driven by the need for spending to offset the consequences of the former.  Unemployment insurance is the best example.  But it will soon be dwarfed by another:  the price tag for health care reform. 

First of all, I should point out that there is no health care crisis in America.  Health care is top quality and abundant.  There are clinics, hospitals and drugstores at practically every corner.  They advertise incessantly, begging you to choose this hospital, that insurance plan and to stock your medicine cabinet with every drug imaginable. 

What we do have is an income crisis – income meaning both wages and benefits.  The median income, adjusted for inflation, has been declining for decades as millions of manufacturing jobs have fallen by the wayside, thanks to intense foreign competition while our manufacturers get no access to equivalent markets.  As a result, anything whose price has risen faster than inflation has become more unaffordable – health care being at the top of the list. 

Now the wealthy few who have benefitted the most from our idiotic trade policy will face an unintended consequence – footing the bill for Uncle Sam’s tab for health care.  Taxes will have to rise dramatically for the upper income brackets, since there’s not much left to be squeezed from the middle and lower class. 

Economic collapse, high unemployment, deficit spending and government-run health care – all thanks to our economists’ love affair with their 18th century theories, their closed minds toward the economic consequences of overpopulation (especially the imported consequences of free trade with badly overpopulated countries) and their inability to question their own conventional thinking.  The future of the U.S. isn’t looking good.