Health Services: A Catastrophe Coming
By: A. B. Jacobs
In connection with the delivery of medical services in America, several things deserve to be said. Over the past decade an unmistakable trend has developed, and none of us will escape the inevitable. The basic problem is remarkably simple. While medical technology becomes increasingly complex and costly, a substantial and growing portion of the population, with little or no financial resources, is guaranteed limitless access to the services. The solution to the problem is far more complex, involving the political quandary of requiring massive transfers of wealth among various groups of the society. As difficult as this might seem, there are three factors making it all the more unresolvable. The first is the number of retirees eligible for Medicare, now passed 40 million and growing steadily. The second is that an increasing number of companies, many for pure survival, are ridding themselves of employees and transferring their assets outside our borders, beyond the reach of the regulators and tax collectors. The third, and perhaps most crucial, is that the effective tax rate on a middle class working American is approaching 50 percent. Not only is there little slack, but the rate is reaching what historically constitutes revolt conditions.
This country is presently responding the only way possible. It is searching for ways to reduce services and the attendant costs. The main vehicle for this change is the health maintenance organization (HMO)?, ideally set up to ration health care, and the federal government’s aggressive promotion of this concept for Medicare and Medicaid recipients is understandable. This is not occurring without severe upheaval, however, as the HMOs are squeezed between the medical recipients demanding ever more benefits, and the payors seeking to reduce expenses. What is developing as a logical response is the capitation arrangement, by which medical providers agree to accept a set monthly fee per patient. The effect on the entire medical establishment is becoming cataclysmic as physicians, pharmacies, therapists and the like, see their fees reduced to unacceptable levels.
In the meanwhile the majority of HMOs are themselves in precarious financial condition, with mergers and bankruptcies increasingly common, and the attempt by many to shed themselves of unprofitable Medicare patients will probably be opposed by the government in various ways. One thing is becoming ever more obvious: The nation will eventually decline to extract money from $9.50 per hour service station attendant Billy Rae Campo so that penniless widow Myrtle Fellers, age ninety-four, can have bunions removed from both feet at a cost of $9,700 to the Medicare system. In the meantime, however, it is business as usual. With such expenditures, of course, there must be corresponding economies such as Billy Rae's wife, Sue Ann, not having her cervical cancer diagnosed in time to save her life. There is no point in relating the many tales of medical malpractice; we hear the horror stories told and retold. As members of a prestigious California HMO for fifteen years, my wife and I discovered how the system, as designed, broke down. Fortunately for us things turned out satisfactorilyin 1981 we escaped with our lives.
The prime purpose of this treatise is to suggest ways to address the problem. Please accept my apologies in this case; there may be no long-term solution to recommend. If you are reasonably young and healthy, you will want a low cost program, and an HMO provides satisfactory medical care as long as nothing is wrong with you. It is when you actually incur an ailment that the troubles begin. Any person whose health is less than ideal is better off with a good private physician and a comprehensive health insurance policy. Unless and until private medicine ceases to exist, this should be your goal, and the likelihood is that as time passes your choices will narrow while the costs increase. With that in store, you must be prepared to shoulder the expense when the time comes. Having the financial ability to provide first class medical care for yourself and your family, while most of the nation finds themselves relegated to third-rate status, is part of what personal prosperity is all about. This will surely be a situation where success is its own reward.
Al Jacobs has been a professional investor for nearly four decades. His business experience ranges from real estate, mortgage, and securities investment to appraisal, civil engineering, and the operation of a private trust company. In addition to managing his investments on a day-to-day basis, he is a featured financial columnist for both online and print publications. He is the author of Nobody's Fool: A Skeptic's Guide to Prosperity. You may subscribe to his financial Newsletter, "On the Money Trail," at no cost or obligation, by visiting http://www.onthemoneytrail.com/.