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    Monday, July 19, 2010

    Expensive Health Care

    Over the last year, as we in America have been swept up in political wrangling over health care, and the inherent power struggle between democrats and republicans that is ultimately at the bottom of it all, I have had the opportunity to have a front row view. I sat on the board of trustees for the Texas Medical Association and sat through numerous conference calls and strategy sessions with doctors in Texas, the American Medical Association, and politicians in Washington DC.

    For sure the problem with healthcare is multifactorial, and our solution undoubtably must be as well. However, a favorite argument thrown out by both sides is the "cost of health care." One need not look far or read many webpages to hear someone opine about needing to reign in those outrageous costs (and his or her solution). This past July, Veronica Gunn, MD, chief medical officer for the Tennessee Dept of Health spoke to us about this and other topics.

    The scare tactic she used was common: put up a graph that shows $12.7B spent on healthcare in 1950 and $2400B (yes, $2.4 trillion) spent in the USA in 2008.

    "Holy cow!" you say?

    Yep. That's right. An almost 188-fold jump in spending. That's like going to McDonalds and wanting a $1 hamburger only to be told it now costs $188. You'd choke then & there - way before you got the hamburger! Anyone and everyone should rightly be concerned about such a jump.

    "Why would the hamburger cost so much," you ask?

    Well, McDonalds gives you the standard answer: yesterday we made hamburgers, but our board decided overnight to do a couple things. We now have all new state-of-the-art machines for making patties the same size every time, and a super fryer that makes our delicious fries even more so - and healthier! We've also decided that you have to buy your own buns separately - but only the ones we decide for you to buy (and write you a prescription to get) and the bun makers say they have special no-fat buns that taste good but cost a fortune to invent. Oh, and don't forget the new program to give free hamburgers and fries to everyone who comes in without the money to pay.

    You see, we've decided it's immoral to refuse hamburgers to someone who doesn't have the cash on them, so we give it out free and charge you more. But don't worry. If $188 is too much, we'll allow you to pay $40 a month (whether you'd have eaten 40 burgers a monh before or not) to another company who pays us, and then you can get each dollar hamburger for $1.

    Now, before we hear the cries of "Health care is a right! Eating hamburgers is not!" I want you to put aside your righteous indignation at an admittedly flawed (but I still think decently effective) parable, and follow me to the numbers.

    Ms. Gunn said $12.7B spent on healthcare in 1950 and $2400B spent in 2008. If adjusting for inflation according to the consumer price index, $12.7B was really $112.4B in 2008 dollars.
    Now, that's still a large gap, but the 188-fold difference that made your eyes pop out of your head has dropped to 21-fold. Crazy large? Yes. Space-time continuum splitting? No.

    Now let's adjust for population. 1950 - 152,271,000 people. 2008 - 301,621,157. That increase in spending just dropped to 10-fold.

    10-fold is a lot different from 188-fold.

    Essentially McDonalds is saying, "Our hamburger now costs $10 a burger, from $1 in 1950. So, pay us $40 a month regardless of the amount of hamburgers you eat, and you can have your hamburgers for $1, plus, we can give free hamburgers out to people who can't pay for them."

    Even if you believe ideologically that you should give free hamburgers to the poor, spending $40/month is a lot harder to stomach when the price of the hamburger is only $10 and not $188. The Democrats and certain special interest groups (including many physician organizations) understand this, so they play up the $188 burger. Health care becomes an easy way to redistribute wealth.

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