Enlightened Economics

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Posts Tagged ‘laurence kotlikoff’

• U.S. Health Care: Resolving the Quagmire

Posted by Ron Robins on January 9, 2014

The following excerpts are from chapter one of a book in progress by Ron Robins, tentatively titled, Resolving America’s Economic Quagmire… individuals gaining inner fulfillment is the key*

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“These [Social Security, Medicare, and Medicaid] and other projected expenditures… have produced, not a fiscal cliff, but a fiscal abyss.”

Professor Laurence J. Kotlikoff, Boston University.

Overview (Excerpt)
“Professor Kotlikoff calculates this fiscal abyss of the U.S. Federal Government as an astounding unfunded liability of $205 trillion. It equals a current debt of about $665,000 for every living American adult and child. And most of this sum pertains to health care. The health care costs quagmire poses a financial deathblow to the U.S. economy and its citizens. To avert this calamity, America’s health care system will be revamped.

Notwithstanding Obamacare, one way will be to re-organize the health care system according to well-studied methodologies that show huge potential cost savings. While another way—garnering increasing attention—is by utilizing scientifically validated disease prevention interventions such as the Transcendental Meditation (TM) program. Also, many political leaders, economists and others, believe there will need to be substantial reductions in health care benefits as well.

Interestingly, by deploying the known methodologies and interventions inferred to above and written about below, it might not be necessary to reduce benefits yet still be able to cut health care costs a stunning 50-80 per cent!”

Major health care cost drivers. Reducing their cost through health system reform and introduction of the Transcendental Meditation disease prevention program (Excerpt)
“The major health care cost drivers are:

  • The increasing incidence of chronic disease in an aging population
  • Relatively fewer workers to pay for increasing costs
  • Exceptionally high professional fees relative to other developed countries
  • Huge oversupply of services, equipment
  • Administration costs and fraud 

Now we look at these issues one by one, and where appropriate, determine the role that individual TM practice can play in reducing their costs.”

The increasing incidence of chronic disease in an aging population (Excerpt)
“Over half of Americans have chronic diseases. Yet, despite significant improvements in treatments for chronic diseases, their incidence and related financial costs continue rising dramatically.

Actual costs of  America’s seven most common chronic diseases—cancer, diabetes, hypertension, stroke, heart disease, pulmonary conditions and mental disorders—have been estimated at $1.3 trillion annually by Ross DeVol and colleagues, or about 10 per cent of gross domestic product (GDP). Their unique and original study quantified almost all related costs to employers, governments, and to the U.S economy. They say those costs could reach $4.2 trillion by 2023.

Numerous researchers cite the growing incidence of chronic disease as mostly due to aging. However, many in the medical field also believe that more important than aging are the unhealthy lifestyles, diets, and behaviors of most Americans. And this is another area where the TM practice can be highly beneficial. Aside from its well-documented physical health benefits, TM creates an ‘inner fulfillment and self-sufficiency’ that alleviates the desire for the kind of instant gratification (with bad lifestyles, diets, etc.) that cause much chronic disease.

The first major study demonstrating the effectiveness of the TM practice in reducing chronic disease (and overall illness) was by Dr. David Orme-Johnson in 1987. Using Blue Cross/Blue Shield data, Dr. Johnson found an average 50% reduction in medical utilization in all 16 major disease categories studied among subjects practicing TM as compared to matched controls.

As the elderly are responsible disproportionately for health care costs, some researchers suggest they be particularly encouraged to practice TM. One leading researcher on health care costs, Dr. Robert Herron, wrote about this in the Huffington Post on July 13, 2012. Dr. Herron remarked–on a study he did–that, ‘In the Medicare population… the highest spending 25 percent of seniors accounted for 85 percent of total expenses’ and that there was ‘a 28 percent reduction in doctors’ bills over five years from baseline for persistent high-cost people who practiced the TM technique.’”

Relatively fewer workers to pay for increasing health care costs (Excerpt)
“Between 2012 to 2050 the United Nations predicts the U.S. labor force having far fewer workers (aged 15 to 64 years) for every American over 65 years—down from 5 to 3 workers over that period.”

Exceptionally high professional fees compared to other developed countries (Excerpt)
“The following data is extracted from the International Federation of Health Plans 2012 Comparative Price Report, a 100-member group of companies in 30 countries which includes a huge group of international health providers.”

2012: Medical service provided

USA Average

Canada

Netherlands

France

US$

US$

US$

US$

Scanning & Imaging CT Scan, Abdomen

     630

    124

      267

      183

MRI

  1,121

      –

      319

      363

Hospital Charges Per Day

  4,287

      –

      731

      853

Total Hospital & Physician Charges Coronary Artery Bypass

73,420

      –

 14,061

  22,844

Physician Fees Routine Office Visit

      95

      30

       –

        30

Normal Delivery

  3,096

    536

      292

      583

Huge oversupply of services, equipment (Excerpt)
“After reviewing the book, Tracking Medicine by John E. Wennberg, Arnold Relman on September 30, 2010, wrote, ‘[Wennberg] provides convincing evidence that oversupply of services throughout the U.S. adds greatly to the cost of care.’

Mr. Relman adds, ‘Wennberg [says] that since the medical care in the low-expenditure areas is not discernibly different in quality from that in the high-expenditure areas, a huge amount of money could be saved if all the country were to receive care the way it is provided in the low-expenditure areas. Wennberg estimates the savings would be about 30 to 40 percent.’”

Administration costs and fraud (Excerpt)
“American health care administrative costs (at roughly 7 per cent of all health care costs) are roughly double those of other developed countries, says Mark Pearson, Head, Health Division, of the OECD.  And the Federal Bureau of Investigation calculates that fraud costs the health care system about $80 billion annually—or about 3 per cent of all health care expenditures.”

Conclusion (Excerpt)
“Resolving the health care financial quagmire and avoiding its potential financial deathblow requires unparalleled changes to the health care system and Americans’ attitudes about their health and health care. It requires reforming the health care system by implementing known cost-effective modalities. It means introducing scientifically validated cost-saving disease prevention programs such as the TM technique that create an inner fulfillment and self-sufficiency that engenders improved personal psychology, healthier lifestyles, diets, and so forth.

Implementing these recommendations could cut U.S. health care costs by 50-80 per cent and improve health outcomes—all without reducing benefits!”

References
DeVol, R. at al. (2007). An Unhealthy America: The Economic Burden of Chronic Disease—Charting a New Course to Save Lives and Increase Productivity and Economic Growth, Milken Institute.
Federal Bureau of Investigation. Rooting out health care fraud is central to the well-being of both our citizens and the overall economy.
Herron, R. E. (2011). Changes in physician costs among high-cost transcendental mediation practitioners compared with high-cost non practitioners over 5 years,  American Journal of Health Promotion, 26(1), 56-60.
International Federation of Health Plans. (2012). Comparative Price Report, Variation in Medical and Hospital Prices by Country, United Kingdom.
Kotlikoff, L. J. (2012). The Hysterical Economy, VOX, December 16, 2012.
Kotlikoff, L. J. (2013). America in Worse Fiscal Shape than Detroit–Professor Laurence Kotlikoff, video interview with host Greg Hunter, USA Watchdog, December 4.
Orme-Johnson, D. (1987). Medical care utilization and the Transcendental Meditation program, Psychosomatic Medicine, 49(1), 493–507.
Pearson, M. (2009). Disparities in health expenditure across OECD countries: Why does the United States spend so much more than other countries? Written statement to the U.S. Senate Special Committee on Aging, September 30, P.7.
Relman, A. (2010). Health Care: The Disquieting Truth, The New York Review of Books, September 30.
United Nations. (2012). Department of Economic and Social Affairs, Population Division, Population Ageing and Development.
Wennberg, J. E. (2010). Tracking Medicine: A Researcher’s Quest to Understand Health Care, Oxford University Press, first edition.

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* In his prospective book, Resolving America’s Economic Quagmire… individuals gaining inner fulfillment is the key, Mr. Robins elucidates America’s hidden structural economic and social fault lines, their costs, and the economic benefits when resolved in the viable manner he prescribes. Furthermore, he determines that unresolved, these fault lines are a deathblow to America’s well-being.

Mr. Robins believes this financial deathblow might only be stopped by a fundamental shift in individual and collective consciousness: from that centered on seeking instant gratification and fulfillment outside of ourselves, to one focused on ‘internal fulfillment and mental balance.’ Mr. Robins argues that to create this change, the scientific literature suggests the Transcendental Meditation program could be an optimal solution.

Each chapter of his book examines an area of society—health, environment, family, crime, and so forth—in the light of known cost-effective modalities to improve conditions applicable to that area, as well as the associated merits of the TM program. Where possible, the dollar cost savings are shown in relation to their share of gross domestic product (GDP). Mr. Robins estimates his proposals may produce overall savings to GDP of over 40 per cent.

These cost savings will allow for the deployment of unparalleled new economic resources to greatly enhance Americans’ economic and social well-being.

© Ron Robins 2013

 

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• US Healthcare Delivering a Heart Attack!

Posted by Ron Robins on February 16, 2011

By Ron Robins. First published February 10, 2011, in his weekly economics and finance column at alrroya.com

Medical spending could deliver a debilitating heart attack to the US economy, despite the recently passed healthcare legislation that hopes to significantly control costs. Depending on assumptions made, the unfunded US government medical liabilities range as high as $125 trillion, equivalent to about eight times America’s annual gross domestic product (GDP). These unfunded liabilities—money that might have to be borrowed—have the possibility of totally derailing the US economy.

In 2008, Richard Fisher, president and CEO of the Federal Reserve Bank of Dallas cited the US government’s unfunded Medicare program liabilities at $85.6trn over the infinite horizon. He said that including the unfunded liabilities of US Social Security the total rises to $99.2trn. Mr. Fisher further added that were they to be funded, it would require a lump sum payment of $1.3 million per family of four to the US federal treasury! Or alternately, an increase of 68 per cent in federal taxes for all individuals and corporations, for now and forever.

The unfunded liabilities figure of $125trn arose from a conversation I had recently with Boston University’s renowned Professor of Economics, Laurence Kotlikoff, who believes they could range that much also using an infinite horizon time frame.

Now really ‘low-ball’ medical unfunded liability estimates come from the 2010 Annual Report of the Boards of Trustees of the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund. They are the reports of the Medicare trustees of the US government. The 2010 estimates of US government medical unfunded liabilities have been shaved dramatically from their prior year reports.

And the Medicare trustees make the following remarks in that regard. They say that, “the Affordable Care Act [the recently passed healthcare legislation] improves the financial outlook for Medicare substantially. However, the effects of some of the new law’s provisions on Medicare are not known at this time, with the result that the projections are much more uncertain than normal, especially in the longer-range future… the actual future costs for Medicare are likely to exceed those shown by the current-law projections.” In other words, their low-ball estimates are based on such flimsy assumptions as to make them untenable.

And the record of government predictions and cost containment in regard to Medicare expenditures is anything but encouraging. As Gary Shilling, a US economist recently remarked, that in 1967 a special committee of the US Congress predicted by 1990 that Medicare would cost $12 billion. It actually cost $110bn. Quite likely the estimates of US government medical unfunded liabilities, by Richard Fisher and Professor Kotlikoff are nearer the reality, barring truly significant program cuts, changes and increases in taxes.

The US government’s Medicare program began in 1965. It primarily covers medical expenses for people over 65 years of age and for certain disabilities for people younger than 65. Medicare was envisaged as being able to pay its own way through payroll deductions, and for many years it did even more than that: it built up surpluses. However, in January 2011 the US Congressional Budget Office (CBO) showed that the cash flows of the Medicare trust funds had now grown significantly negative. Also, the CBO sees US government Medicare related costs jumping from an estimated “$870bn in 2011, or 5.8 per cent of GDP… to $1.8trn in 2021… and 7.4 per cent of GDP.”

Also, the US spends disproportionately higher on its healthcare than other developed countries, yet with frequently poorer outcomes. Mark Pearson, Head, Health Division, of the Organisation for Economic Co-operation and Development (OECD), made these written comments to the US Special Committee on Aging on September 30, 2009. He wrote that, “the United States spent 16 per cent of its national income (GDP) on health in 2007. This is by far the highest share in the OECD… Even France, Switzerland and Germany, the countries which, apart from the United States, spend the greatest proportion of national income on health, spent over 5 percentage points of GDP less: respectively 11.0 per cent, 10.8 per cent and 10.4 per cent of their GDP… For all its spending, the US has lower life expectancy than most OECD countries (78.1; average is 79.1).”

Further illustrating the enormity of the US healthcare spending problem, the US government’s Centers for Medicare and Medicaid Services (CMS) said that total US national health expenditure (NHE) “grew 4.0 per cent to $2.5trn in 2009, or $8,086 per person, and accounted for 17.6 per cent of GDP [up from 16.6 per cent 2008].”

Additionally, CMS found that US government Medicare and affiliated Medicaid 2009 program expenditures grew even faster at 7.9 and 9 per cent respectively, accounting for 35 per cent of NHE. The US federal government’s share of health care spending rose by just over 3 per cent in 2009 over 2008, to 27 per cent.

Reining in the growth of US federal government Medicare and related spending will require huge healthcare industry adjustments, spending cuts and continuing modification of government health funded programs. And it will probably require substantially increased taxes to fund its remnants. In recent polls by CNN/Opinion Research Corp Poll and Gallup, the vast majority of Americans said no to cuts in Medicare. A healthcare expense heart attack could be on the horizon for Americans.

Copyright alrroya.com

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