The news media and Americans are focused on the upcoming presidential election. Given the important role the president plays in the United States this is natural. However, the focus on the election has been on the questionable personal traits of Donald Trump and Hillary Clinton. This myopic focus masks serious issues that face the Country and the next president, irrespective of who is elected.
The significant challenges the Country faces include international relations, as well as economic issues. The Middle East is devolving into chaos that will eliminate the artificial borders and countries created after World War I. Russia is again adversarial and imperialistic. Economic growth in the United States is tepid with the total debt soon to exceed $20 trillion. Irrespective of whether Clinton or Trump become president, these issues will prove intractable.
Within the broader subject of economic challenges is the out of control medical costs. This problem had its roots long before Barack Obama became president. However, the President’s signature program, Obamacare, exasperated the problems and is showing signs of heading into a death spiral.
The President is aware of Obamacare failings writing in The Journal of the American Medical Association: “Too many Americans still strain to pay for their physician visits and prescriptions, cover their deductibles or pay their monthly insurance bills; struggle to navigate a complex, sometimes bewildering system; and remain uninsured.” This is a far cry from the President’s promises to the American people that healthcare costs would decrease. Obamacare not only added expensive mandates to the cost of medical insurance, but covered some 20 million people who previously did not have insurance. For the President to have made this cost cutting promise indicates incompetence or dishonesty, there is no third option.
A more honest representation of the realities of Obamacare was made earlier this month by former President Bill Clinton who said:
“You’ve got this crazy system where all of a sudden, 25 million more people have health care and then the people that are out there busting it – sometimes 60 hours a week – wind up with their premiums doubled and their coverage cut in half.”
Leave it to Bill Clinton to take a complex issue and break it down to its most basic problem; the middle class and healthy younger Americans are being forced to pay for the health costs of others. Insurance is a system whereby risk is spread amongst a population of people with an example being auto insurance. Some drivers will have accidents while others will not. In the case of so-called health insurance, all beneficiaries will require significant benefits. Therefore what we call health insurance is an entitlement and cannot be financed as if it was insurance.
In early October Minnesota Gov. Mark Dayton said: “The reality is the Affordable Care Act is no longer affordable”. This is no partisan attack coming from a Democrat governor of a state that is projected to have increases in the Affordable Care Act medical exchanges in excess of 50%. (Source) Other states are facing similar problems.
In business or economics matters, prior to resolving a problem the issue and goals need to be clearly vetted and defined. This was not done with healthcare reform. Instead, proponents of Obamacare promoted problems to elicit emotional responses. This included Americans without medical insurance and the increasing costs of medical care. Ignored were the basic laws of supply and demand that have impacted these issues and will play a role in any propose resolution. The upcoming implosion of Obamacare is the result of this gross failure.
After the presidential election the winning party will throw celebrations for the power they gained or maintained in Washington. Beginning in January a new president who will be forced to address the problems left behind by Barack Obama. A major issue will be the growing problem of the increasing cost of healthcare. Democrats will promote a single-payer system; i.e., government run healthcare. This should concern Americans given the government’s poor track record managing the health care of veterans through the VA Administration.
Republicans will promote market oriented solutions for health care reform. However, continue calling a solution “insurance” improperly defines the problem and will not lead to productive results that are politically or economically palatable.
When discussing the problems of increasing healthcare costs, rarely will politicians discuss economic realities including supply and demand. Instead, many scapegoat insurance companies, pharmaceutical companies, and/or doctors. While these factors play some role, it is minor compared to demographic changes. For example, the Country is rapidly aging. In 2000 there were 35 million Americans over 65 years of age. In less than two decades this has increased to 47 million. In addition we have become more obese. Both factors increase the demand for healthcare and therefore cost. Not including these issues in the broader discussion of healthcare reform dooms any program to failure.
The Kaiser family Foundation reported that in the last six years, health insurance premiums rose about 19%, three times greater than inflation. At the same time, peoples’ salaries rose only 11%. This increasing cost of healthcare as a percentage of total income is one reason the recovery has been sluggish. Consumer spending on other goods and services has been decreased as a result. Unless healthcare costs are brought under control, this negative impact on the economy will grow. May the force be with the next president!