Wednesday, April 14, 2010

The Real Costs of Medicare and ObamaCare

Medicare is often held up to show that socialized medicine is a good idea and works. Medicare also has the advantage that they can tell doctors how much they will be paid for their services and can bargain with drug companies for discounts (something private healthcare can not do). There is no doubt that Medicare has been good to senior citizens, but it is put together in a way that is not sustainable. Medicare costs double every 4 years and the baby boomers are now starting to reach 65 years. At its current funding, Medicare will go broke 7 years.

One of the most deceiving arguments is the comparison between the overhead costs of private healthcare at 20% compared to Medicare at 3%. But, when you look deeper, you find that it is one of those cases were statistics tell a skewed tale. You see, the 20% and 3% figures first comes from comparing the administrative costs per patient, to the cost of medical care. Medicare deals with senior citizens that require more medical costs per patient than the younger patients treated through private healthcare. Turns out private healthcare doctors have to see eight patients to equal the cost of one Medicare patient and it takes more money (i.e. administrative costs) to see eight patients than one, hence a difference in overhead. The second cause is even more damning. It turns out the government doesn't even administer Medicare. The government contracts this job to Atena and Cigna; the 3% figure is simply the cost or preparing a report for Congress every year. The real Medicare administration costs costs are hidden, and paid as fees by Medicare. This also explains the 12% of additional costs for Medicare Advantage; the 12% of so called waste, Congress just cut to pay for ObamaCare. There is also the fact that low administration costs are often blamed for the huge amount of fraud in Medicare, $50 billion a year, or $500 billion over 10 years.  It's called smoke and mirrors and now it's the law.

Medicare has two main avenues for reducing costs. The first is mandating hospital and doctor compensations and the second is working with Part D (prescription) insurance companies to negotiate drug costs with drug producers (Big- Pharm).Poor compensation rates has already led to widespread fraud, so it is doubtful the Feds will lower these rates any more. In order for a standard Medicare doctor to make $200,000 in gross income, they would need to see approximately 35-40 patients a day. This compared to a Medicare Advantage doctor, that see on average about 16-20 patients a day, to make the same $200,000 income. This, according to the Democrats is the waste and fraud that needs to be removed from Medicare. On the subject of Big-Pharm, the option to negotiate lower drug prices will not exists, as Pres Obama made a deal with Big Pharm that removes any negotiations for Medicare drug prices, as long as they did not oppose ObamaCare and pay the Senate Finance Committee $80 billion over ten years. This is estimated to double the cost of prescription drugs for Medicare from $250 billion over 10 years to $500 billion (minus $80 billion of course). President Obama has promised that the Health Care bill will be “deficit neutral”, meaning it will be 100% paid for by cuts in Medicare and new taxes. But this does not included theses added costs to Medicare, $500 billion that was counted twice, the so called doctor fix at $210 billion and $50 billion of discretionary spending to implement ObamaCare.

Now that ObamaCare has passed the real numbers are starting to come out. With a sudden surge or truth, the CBO is telling us that ObamaCare will add $2 trillion to the national debt over the next 10 years; this means that by 2020 the debt could be $20 trillion or 90% of the GDP; $1 trillion @ year just to pay the interest on the debt. With these numbers there are 3 choices, 1) wait until we go broke, 2) cut 50% of government spending, or 3) a Value Added Tax (VAT). We now know why the President has been spending with abandonment, without a looming fiscal disaster, there was no way he could break yet another promise and tax the middle class and poor with a VAT. What did Rahm Emanuel say? Oh yes, "Rule one: Never allow a crisis to go to waste".

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