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Healthcare Armageddon in 5 Years

Reserves will become depleted in 2028 and the Medicare Insurance (HI) Trust Fund will be able to pay only 90 percent of total scheduled benefits.


Put in perspective, Medicare is 15% of the federal budget compared to defense spending which is 10%.



Taxpayers and Patients Pay More - Providers Squeezed


Healthcare costs have been increasing significantly more than inflation due to the inefficiency and ineffectiveness of the health care industry. This trend will be worsened by an aging population, and expensive miracle pharmaceuticals and technologies. There is little we can do about the aging population, and miracle technologies are highly desirable, yet much can be done to make the healthcare industry more efficient and effective.

The government is already squeezing healthcare costs by reducing reimbursement to doctors. This is a reactive policy of ramming down prices by reducing reimbursement rates. The government pays 56% of healthcare cost forcing private insurance (less than 20% of healthcare cost) to take on a bigger burden.


The consumer will pay much more through increasing taxes and out of pocket costs. With fewer people in the work force as the population ages, the increase in taxes and out pocket costs could be dramatic.


The Trustees project that total Medicare costs will grow from approximately 3.7 percent of GDP in 2018 to 5.9 percent of GDP by 2038, and then increase gradually thereafter to about 6.5 percent of GDP by 2093.


The Answer Is A Bitter Pill


Healthcare costs can be reduced about 33% if we controlled healthcare costs like other developed nations. If we allowed consumers the ability to choose providers and services with competitive markets and rewarded the consumers financially for making healthy choices, free market incentives would drive down costs and improve quality and outcomes.


This requires leadership at the government and business enterprise level to put in place guide rails to move the current healthcare structures of regional monopolies of providers (something that is happening rapidly), and to change the nature of health insurance companies from micromanaging claims, to managing risks of catastrophic harm by pooling customers with actuarially determined premiums (think automobile insurance). The result will be a healthier and more profitable private sector, and a healthier consumer with much reduced costs.


This change will be resisted by the incumbent institutions. It will take energized consumers and private enterprise companies to create the political will to start on this path. This is my New Year’s resolution.


References: Office of the Actuary, National Health Statics Group, Social Security Administration



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