Chapter 1 – Run For The Hills, As We Are All Doomed!

This is Chapter 1 of my book-in-progress, “Open Wide And Say Moo! – The Good Citizen’s Guide to Right Thoughts And Right Actions Under Obamacare.” Comments are fervently sought; you can leave them here.

You can read my rationale for undertaking this project, and thus opening myself up to the possibility of public failure, humiliation, derision, disapprobation, and unwanted scrutiny, here.

And here is the up-to-date archive for all the chapters that have been posted so far.
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Update – September 1, 2012

Open Wide and Say Moo! is now revised and published!

 

You can find it on Kindle here.

 

Now available in the audiobook version!

 

 

 
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Part 1 – Progressive Healthcare, and Why We Have Chosen It

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Chapter 1 – Run For The Hills, As We Are All Doomed!

I originally meant to call this chapter, “Healthcare Economics,” but I decided that name would frighten people off.

Everyone (that is, everyone with an ounce of common sense) is frightened by economics. Economics is the index case of what happens when you attempt to apply mathematics and the language of science to what is essentially a study of human behavior. (Microeconomics, as I understand it, attempts to study the behavior of one or two guys at at time; macroeconomics purports to study the behavior of everyone, all at once.)

Human behavior will stymie anyone who tries to understand it, let alone predict it, or especially control it. (Even God, according to Genesis, became so frustrated with human behavior that on at least one occasion he was moved to wipe just about everybody out and start over. And all to no avail, one must note.)

And so economists, having dedicated their lives to studying something that intrinsically surpasses all understanding – such that even astrophysicists seem closer to their goal of understanding what happened before the Big Bang than economists are to theirs – are reduced to devising massive, complex and unlikely constructs of mathematical clockwork only they can understand, with which to pummel one another in professional meetings, in peer-reviewed publications, and on CNBC.

Oh, and they also advise our political leaders.

So I have called this chapter by a name that is far less alarming than “Healthcare Economics,” and that I hope will not send readers scurrying away. Besides, the name I have chosen is at least partially true. For it seems reasonably likely that we are indeed all doomed, though heading for the hills probably will not help very much.

Assuming that we can avoid the Really Bad doomsday scenarios that are always out there (collisions with asteroids, nuclear war, electromagnetic pulses, sudden ice ages, &c.), then the thing that is most likely to produce among us the renting of clothes, gnashing of teeth, heaping of ashes upon heads, and other behaviors commonly associated with the End Times, is the fiscal black hole we’ve made of our healthcare spending.

Our healthcare spending is sufficiently out-of-control that it produces a real threat to our survival as a society, and within many of our lifetimes. It was largely the effort to control this runaway spending that led us to adopt Obamacare in the first place, even though Obamacare (as I hope to demonstrate) promises to be almost as destructive itself.

The first five chapters of this book that comprise Part I aim to show how our healthcare system’s dire fiscal problems have led us to choose a Progressive healthcare “solution.” Here in Chapter 1, I will describe the astounding magnitude of our healthcare system’s financial mess, and how we have created it. In Chapter 2 and 3, I will survey some of the incredibly harmful changes we have made to our healthcare system in an attempt to cope with the fiscal mess. These changes have caused so much damage that, when it was time to try to choose among the four possible methods for bringing the costs of healthcare under control (which are described in Chapter 4), we finally acceded to the Progressive solution many of our elected representatives had been pining for for at least 20 years. Accordingly, in Chapter 5 I will discuss the Progressive program in general, and show why control over our healthcare is the lynchpin to the Progressives’ overarching plans for all of us.

The Fiscal Golden Age of Healthcare

Once Upon A Time, when people received a service from a physician, they paid for it themselves. Physicians who wanted to maintain a viable practice would keep their prices within the reach of their patients. And if somebody could not pay they would typically accept a reduced fee, or even a couple of chickens in exchange. During this time, healthcare was not considered a crisis, or a right, or even very important in the lives of most people.

I call this the Lancing Boils And Getting Paid In Chickens era of healthcare. It was the dark age of medicine – there was generally very little a doctor could do for you, other than lance those boils, set some but not all broken bones, and hasten your demise with leeches and bleeding. (At this point we must say a prayer of thanks that Progressives care very little about history, and so are relatively unlikely to re-discover the benefits of leeches and bleeding.) But while it was the dark age of medicine, it was the Golden Age of healthcare finance. Healthcare in those times accounted for none of our (or anyone’s) national, collective debt.

Even when inhaled anesthesia first came into common usage – making various surgical procedures such as appendectomy and Caesarian sections routinely available for the first time – the cost of healthcare was not considered a major societal problem. Somehow, arrangements were made to reimburse doctors for their services, whether through cash payments, barter, or some sort of Victorian E-Z payment plan, thus allowing the patient to avoid destitution, and the doctor to avoid the sundry nefarious activities that have always been available to cash-strapped medics.

Indeed, right up until World War II, when penicillin was discovered, physicians and their skills could offer relatively little benefit for most serious illnesses beyond the surgical variety. As a result, relatively little money was spent on healthcare. And by the traditional means of barter or negotiated settlements, or the more modern means of charity hospitals, hospitals run for their employees by the big railroad and lumber companies, or in the later years, fledgling Blue Cross plans, all the medical services that were considered useful were somehow paid for on an as-you-go basis. There was no fiscal burden placed upon society. And all was well.

Unless you got sick.

The Medical Golden Age

Conservative Americans can rant and rave about it all they want, but the fact is undeniable that the remarkable advances we’ve seen in American healthcare over the past 50 – 60 years were ushered in by a new fiscal era – an era in which we began to pay our healthcare costs collectively.

This new era was begun during World War II, when companies began offering health insurance to their employees in order to attract workers during the wage controls then in effect. Health insurance proved so popular that Congress changed the tax laws to make the insurance premiums paid by employers tax-deductible so as to encourage the practice, and before very long virtually every company provided health insurance to their employees as a matter of course.

The tax-deductibility of employer-provided health insurance was the game-changer. Healthcare costs suddenly were no longer borne entirely by individuals, or by individual businesses who paid the insurance premiums. Instead, they were distributed among the American taxpayers, whose taxes had to make up for the insurance deductions taken by businesses. So-called “private” health insurance became publicly subsidized.

The public funding of healthcare advanced by a giant step with the institution of Medicare and Medicaid in 1965, which amounted to direct public funding of healthcare for a large proportion of the population. So, by 1970, most of American healthcare was paid for by the taxpayer either directly, or indirectly through subsidized private insurance. We had largely collectivized the financing of our healthcare.

While most of my Conservative friends would like to think otherwise, when you look at the big picture it becomes apparent that this collectivization of healthcare financing has not been the unmitigated disaster they like to claim. There have been substantial benefits, and chief among these is the incredible progress we’ve made in medical learning and medical technology over the past half century.

In fact, this taxpayer subsidization of healthcare catalyzed an incredible golden age of medicine.

It turns out that, the moment everything that is deemed “healthcare” is “covered” by taxpayer-supplied or taxpayer-subsidized health insurance, and therefore payment is guaranteed for virtually any medical product by the full faith and credit of the United States government, a huge amount of investment money suddenly appears to fund research and development in every aspect of medicine you can imagine. And the next thing you know, you’ve got medical progress.

Medical entrepreneurs figured out in about a minute and a half that to be successful, all they had to do was to come up with a product that offered a measurable benefit to some group of people with some illness – no matter how marginal that benefit might be, or how expensive their product – and they were certain to have a ready market for their product and a customer who would pay the going rate without complaint. The more products you could develop, the greater your profits. And so R&D budgets went through the roof.

An utter explosion in medical progress, virtually all of it arising in the United States, began in the 1950s and 1960s, and really accelerated in the 1970s when Medicare was up and running full-bore. With a bit of sputtering, it continues until this day. Except for the Manhattan Project and the moon shot (whose fruits medical researchers strongly relied upon in doing their work), the kind of concentrated scientific effort that was applied to advance the science of medicine during this interval is unsurpassed in human history.

And like the Manhattan Project and the moon shot, it was ultimately funded by the taxpayer.

The medical technology that has been developed since the 1950s has done immeasurable good. Uncountable heart attacks and strokes have been prevented or aborted; cancers have been cured or beaten back; people who formerly would have been crippled can conduct normal daily activities without assistance; and some scourges of mankind (such as smallpox and polio) have been nearly vanquished altogether.

But there is a problem. Coincident with this explosion in medical progress has been an explosion in medical spending, spending to such a degree that, unless we bring it under control, we are headed for societal chaos.

The Magnitude of the Problem

A fundamental principle in economics is that when we are buying consumable products that we are consuming ourselves – like Caribbean cruises, sports cars, ice cream, or healthcare – we should spend no more on those products than we individuals are able to pay ourselves.

I realize that by adding healthcare to this list I have probably angered a lot of readers. But I assure you that I am not making a political statement here; I am simply stating an economic principle, which (as is the unfortunate case with principles) is inherently true even if inconvenient.

It is certainly true that some societies, including ours, have decided to purchase some of these consumable products (healthcare, for instance) collectively, so that individuals don’t pay for them at all. And the collective purchase of consumables constitutes a somewhat different situation that I will address in a moment.

But for consumable products that everyone agrees ought to be paid for by the individual (let’s just take Caribbean cruises as a relatively non-controversial example), the individual must arrange to cover the cost. The reason for this principle is obvious. If individuals could arbitrarily decide to go on a cruise whenever they’d like, but leave the cost to others who have no say in whether the cruise takes place, the economic system would soon collapse.*

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*Like most laws, principles, and ethical mandates, this one can be systematically violated by certain, small, well-defined groups of people without crashing the whole system, as long as the rest of the population (for whatever reason) decides to overlook, tacitly approve of, and pay for the irresponsible behavior of this elite group. I am referring, of course, to our political leaders.
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But what about those societies which have decided to collectively purchase certain products and services (like healthcare) that are consumed by individuals? It turns out that these societies must operate under a very similar economic principle: A society should spend no more on products which are consumed by individual citizens than it can pay without incurring long-term, multi-generational debt.

In the United States as we have seen, we have decided to pay for healthcare collectively. Whether your healthcare is provided directly through government payments or through tax-deductible insurance premiums, to a great extent society is collectively footing the bill.

This would not be a problem, economically, if we were doing it on a pay-as-you-go basis. But we’re not. We’re running a huge national debt today, and largely because of healthcare obligations that debt will reach stupendous proportions in the foreseeable future.

Reasonable people can argue over whether having a large national debt is good or bad, but the answer lies at least partially in what it is that the debt has been incurred to pay for.

The ability to borrow money, and carry debt, is important to a vibrant economy. Individuals can borrow even large amounts of money as long as they promise to pay it back and their credit rating is sufficiently high. But if a person fails to pay back what they owe according to a predetermined schedule, society takes steps to stop further borrowing and to force them to repay. If they get in too deep, society ushers them into bankruptcy, and allows them to slowly make themselves whole again. But society does not allow them to simply keep borrowing indefinitely.

This is because individuals die. If we were to allow individuals to simply accumulate as much debt as they want until they die, leaving it to somebody else to pay it back, the economic system would soon disintegrate. So before people can borrow money, they need to demonstrate their ability to repay it, or to have their estates repay it upon their death. In this way there is a natural limit to how much individuals can spend on consumable products in their lifetime.

Societies, like individuals, must borrow no more than they can eventually pay back. The difference is that, unlike individuals, society lives “forever.” That is, the accumulation of debt that cannot be paid off in a single generation is not necessarily alarming, because society will “always” be there to pay it off.

As it turns out, the ability to accumulate even huge amounts of debt is vital for complex societies like ours, as it permits us to maintain a buffer for economic stability, to smooth out boom-bust cycles, and to maintain reasonable predictability, stability, and steady growth. The ability to carry multi-generational debt enables the government to borrow the money it needs to make multi-generational investments, things like building up the nation’s infrastructure, providing for national defense, advancing medical research, and engaging in other forms of non-commodity spending that will allow society to progress, to grow stronger, and to steadily improve the lives of successive generations of its citizens.

The “right” kind of long-term national debt, then, is a chief enabler of economic growth and prosperity, an investment in the nation’s future. It is appropriate to ask future generations of Americans to share the financial burden of that debt, since they will reap the benefits of the investment.

Things go very wrong, however, when we burden society with the “wrong” kind of debt, the kind that represents an open-ended promise to purchase products and services that are consumed by individuals, such as healthcare. There are two problems with this kind of debt.

First, this kind of debt is not an investment in the future, whose fruits will be realized by our children and grandchildren, and whose returns will more than compensate for the overall debt obligation. Instead, it benefits only the individuals currently alive who are the direct recipients of the consumable services, leaving no direct benefits but only an ever-increasing debt burden to those who will be left paying the bills decades later.

Second, while there is a natural limit on how much an individual can spend for products and services they consume during their lifetime, once the responsibility of paying for those consumables shifts to society there is no longer such a natural limit (since societies live forever). The debt can now be borne by multiple generations. Because there is no longer an inherent limit to what an individual can consume, and because it is to the advantage of present and would-be officeholders to eliminate any remaining arbitrary limits, individuals are eventually encouraged to consume as much as they want. And without these limits (whether natural or imposed by rules) the provision of such services to individuals rapidly becomes an entitlement, whereupon the natural checks and balances that (in past times, at least) apply to other parts of the federal budget are no longer available.

When society faces an accelerating debt burden that is completely open-ended and is not subject to normal checks and balances, that society is dealing with a “disproportionate economic variable” (DEV) – that is, an economic obligation that grows without limit and completely out of proportion to the growth of the overall economy. Healthcare spending, which unrelentingly consumes an ever-increasing proportion of our GDP, is such a DEV.

DEV’s are inherently destructive to a society, and for that reason they are typically rare. Indeed, in viable societies the only commonly encountered DEV is wartime spending, where a disproportionate amount of a society’s wealth must be spent in the violent struggle for survival (or, alternatively, in the violent struggle to take away valuable resources of the opponent in order to power future growth, in which case war is analogous to a high-risk start-up). Indeed, the disproportionate spending in wartime is tolerable only because war itself is temporary. It should be noted, however, that one reason war is temporary is that in a prolonged war, a runaway DEV can cause a country to spend itself into oblivion. (See: the multi-decade Cold War and the demise of the Soviet Union.)

Until the time we began to collectivize our healthcare expenditures, healthcare spending in the United States acted like any well behaved economic sector. That is, until the 1950s healthcare spending remained at a steady 4% of the GDP. But by 1960, healthcare spending had become a DEV. Healthcare spending was at 5.3% of the GDP in 1960, 7.3% in 1970, 10.2% in 1980, 13% in 1993, 14.9% in 2002, and 17.6% of the GDP in 2009.

We already cannot afford to pay-as-we-go for all the healthcare we’re consuming. Instead, we’re violating that economic principle I mentioned earlier, and accumulating massive amounts of federal debt to cover the cost ($16 trillion at last count, enough that we’re already flirting with fiscal brinkmanship), which we are leaving to future generations to figure out how to pay off. And it’s about to get much worse.

Assuming we survive credit downgrades, the European debt crisis, oil disruptions in the Middle East, and other more routine difficulties, the most immediate fiscal threat to our economic survival becomes apparent when you think about all the expensive medical technology we’ve managed to accumulate over the last 50 years, and imagine applying it to our rapidly aging population, that is, to the baby boomer generation – which (I can personally assure you) is planning to make exuberant use of all this stuff. The magnitude of this problem is actually pretty easy to estimate.

Consider: All the people who will constitute our population of Old Farts for the next 30 years (a group which already claims your humble author as a proud member) are alive today. We can count them. We can also enumerate the quantity of many of the various illnesses and ailments they will suffer – the strokes, heart attacks, heart failures, Alzheimer’s disease, hip replacements, cancer, drooping body parts and ED – with fair accuracy. And we can estimate reasonably closely (if our leaders succeed in stifling medical progress, and therefore medical technology is held at its current level) what kinds of drugs, devices, nursing care and other expensive medical appurtenances they will require. And with this information we can add up all the sums and multiply all the multipliers to estimate what it’s all going to cost us.

Indeed, the GAO has done this. It’s looking like it will cost $30 – 40 trillion over the next several decades, just to cover the medical entitlements which we have promised current and not-too-distant-future older Americans, Americans who have themselves been paying taxes for many years, and who have arranged their affairs according to the expectations created by those promises.

That’s way more money than it will take to cause societal collapse.

Can’t We Just Eliminate Waste and Inefficiency?

In Chapter 4, I will talk about the four ways that are available to reduce this dangerous level of healthcare expenditures. You may be surprised to learn that none of these four methods is to eliminate all the waste and inefficiency in our healthcare system.

I am in favor of eliminating waste and inefficiency, of course, and I applaud most efforts to do so. But eliminating waste and inefficiency did not make the list of four for a simple reason. It will not work. That is, even if we somehow got rid of all the wasted healthcare expenditures taking place today (and there truly is a tremendous amount of it), that won’t be enough to rescue us from economic oblivion.

This is not a pleasant thing to hear, nor is it a common thing to hear. Indeed, it is a central assumption of all of the healthcare reform plans ever proposed that we can get our spending under control simply by eliminating – or at least substantially reducing – the vast amount of waste and inefficiency in the healthcare system. Conservatives propose to do this by incorporating the efficiencies of the marketplace, thus eliminating the waste and inefficiency imposed by government bureaucrats. Progressives propose to do it by adopting and enforcing strict, top-down regulations (ideally, through a single-payer system which employs the officially-perfect wisdom of various expert panels) that will control the wasteful and inefficient behaviors of greedy and/or ignorant healthcare providers. But one way or another, schemes for reforming healthcare all propose to bring spending under control by eliminating waste and inefficiency.

Another way of describing what all the reformers across the political spectrum are telling us is: There is so much waste in the system that we can avoid healthcare rationing by getting rid of it. Most Americans believe this. Most policy experts believe this. They have to believe it, because nobody wants to even think about healthcare rationing.

But this is unfortunately false. No matter how much waste and inefficiency you think might be gumming up our healthcare system today, there’s not enough to explain the uncontrolled rise in healthcare spending we have been seeing for decades, and therefore, not enough to allow us to avoid rationing altogether in any economically feasible, publicly funded healthcare system.

To understand why this is the case, we must first recognize the fundamental problem with our healthcare spending. The real problem is not simply that we’re spending a lot of money on healthcare, or even that we’re spending a larger proportion of our GDP on healthcare than any other country. If that’s all the problem was, we could with modest difficulty adjust the rest of our spending to accommodate it, and get our national budget under control that way.

Rather, the real problem is that our healthcare expenditures for decades have been growing at double digit rates, several multiples faster than the overall inflation rate, and each year consumes an ever-greater proportion of our national spending. Unless this disproportionate rate of growth is stopped, eventually healthcare spending will cannibalize our entire economy. (What will really happen, of course, is that the debt we are accumulating to pay for our healthcare will grow to the point of producing societal upheaval, sending us back to a more typical era for mankind, where healthcare is a little-thought-of luxury, and not a necessity or a right. This will happen well before healthcare consumes 100% of the economy.)

To reiterate, it’s not the amount of spending on healthcare that is creating a fiscal crisis, it’s the rate of growth of that spending.

Once we understand the problem – that it’s the rate of growth of healthcare spending that threatens our society – then demonstrating that waste and inefficiency cannot possibly account for that rate of growth is a matter of simple mathematics.

There are only two things that can possibly account for the excessive growth rate of our healthcare expenditures. Either it is caused by unrelenting growth in wasteful spending (as we are assured by our political leaders), or it is caused by unrelenting growth in useful healthcare spending. If it is the latter, then in order to get spending under control in a collectivized payment system we must cut back on or ration useful healthcare. This is why we all fervently pray, and most of us choose to fervently believe, the excess rate of growth must be caused by wasted spending.

This desired conclusion, unfortunately, leads to mathematical absurdities, and therefore (for anyone who eschews magical thinking) turns out to be utterly false.

I am going to show you some data from a spreadsheet. My spreadsheet illustrates what would have to happen in order for wasteful spending to account for our current level of healthcare inflation. The spreadsheet is based on the following four assumptions:

Assumption 1) The annual growth rate of spending on useful healthcare (discussed further below) is economically well-behaved. That is, it matches the rate of overall inflation. The spreadsheet therefore assumes a 3% annual inflation rate for useful healthcare spending.

Please note that this is the very assumption which politicians invoke whenever they say that all we need to do to control healthcare costs is to eliminate waste and inefficiency. In fact, the whole point of this spreadsheet is to test the logic of this assumption. For, if useful healthcare spending is not economically well-behaved, then eliminating all the wasteful spending would still leave us with disproportionate healthcare inflation.

Assumption 2) 25% of healthcare expenditures at Year 1 of this spreadsheet are wasteful. I have picked 25% arbitrarily, a value that happens to fall within the range of popular estimates. As it turns out, the initial value we choose for the level of wasteful spending at Year 1 in this spreadsheet has very little influence over the outcome. So if you don’t like this number, feel free to pick your own.

Assumption 3) The annual rate of growth of overall healthcare spending (i.e., healthcare inflation) is 10%. This is a rough average of what we have actually seen for the last few decades.

Assumption 4) Total healthcare inflation is the sum of healthcare inflation due to the growth of “well-behaved,” useful healthcare spending, and the healthcare inflation accounted for by spending on waste and inefficiency. Given that the inflation rate for useful healthcare spending is 3% (Assumption 1), this spreadsheet simply calculates the cumulative annual inflation rate for wasteful spending that would be necessary to account for an overall rate of healthcare inflation of 10% (Assumption 3).

Before I show you the spreadsheet, we should discuss the difference between “wasteful” and “useful” healthcare. In actual practice, this is not a distinction which is straightforward. It depends, for one thing, on who gets to define “wasteful.” If I’m a 92-year-old man who gets a $12,000 stent procedure to eliminate my angina, I and my doctor might consider it money well-spent, while you might consider it wasteful.

But for the purposes of this present analysis, I am defining “wasteful” healthcare in the way our politicians define it – or at least in the way they want us to think they are defining it. That is, wasteful healthcare is completely wasteful – it is a totally useless expenditure, and is no more beneficial than flushing money down the toilet. In contrast, useful healthcare is that which is likely to provide at least some of its intended benefit to patients.

Any other definition of useful vs. wasteful healthcare would require us to place a value judgment on just how much benefit a healthcare service must provide before we consider it to be useful, and thus worthy of paying for. Another name for such a process is “rationing,” and we all know that we’re not going to do any rationing. No, sir.

So, the definition we must use for “useful” vs. “wasteful” healthcare, by process of elimination, can only be the definition I have just laid out.

Here is the spreadsheet:

Year

Index of overall Dollars Spent per year

% wasteful spending

% of annual increase due to useful spending

% of annual increase due to wasteful spending

1

100

25%

-

-

5

146

42%

18%

82%

10

236

59%

13%

87%

20

612

78%

7%

93%

We can immediately see several things. First, as expected, the amount of money we’re spending on healthcare, assuming a rate of healthcare inflation of 10%, is doubling roughly every 8-9 years. It’s this growth rate that threatens our survival as a society.

Second, in order to account for this unsupportable growth in healthcare spending by invoking waste and inefficiency, the proportion of healthcare spending that is caused by waste must increase to ridiculous proportions very rapidly, such that (for instance) by the 10th year we will have more than doubled (59%) the proportion of all healthcare expenditures that are wasteful; and by the 20th year, nearly 80% must be wasteful.

Similarly, the proportion of the annual increases in healthcare spending that would have to be due to waste and inefficiency rapidly climbs to equally ridiculous proportions. By year 5, wasteful spending will have to account for 82% of the annual increase in healthcare expenditures, and that proportion continues to climb, eventually approaching 100%.

To me, these numbers seem absurd on their face. But if you still need to be convinced, consider that in real life, runaway healthcare inflation has already been taking place in the United States for decades – so our position on such a spreadsheet would not be at Year 1; we are much closer to Year 50. And no matter what value for wasteful spending we might have plugged in at Year 1, by Year 50 wasteful spending would have to be well above 80%, and more likely approaching 100%. In order for waste and inefficiency to account for the situation in which the American healthcare system finds itself today, therefore, one would have to believe that virtually all healthcare spending is wasteful. (And if you believe that, then solving the crisis would be a simple matter of discontinuing all healthcare.)

Now let us illustrate the same point in a slightly different way. This time, let’s pretend that as recently as 2009, when President Obama was inaugurated, our healthcare system was 100% efficient. That is, only three years ago there was no waste whatsoever. Then let’s allow that the remaining three assumptions given above are still operative. The following table results:

Year

Index of overall Dollars Spent per year

% wasteful spending

% of annual increase due to useful spending

% of annual increase due to wasteful spending

2009

100

0%

100%

0%

2010

110

7%

30%

70%

2011

121

15%

28%

72%

2012

133

17%

26%

74%

We can see from these results that, even if only three years ago we had a completely efficient healthcare system, in order for waste to account for the excess growth in healthcare spending we’ve experienced since that time, then after just three years as much as 74% of today’s annual increase in spending has to be due to waste and inefficiency.

Any way you cut it, the spreadsheet leads to nothing but absurdities. Assumption 1 – that useful healthcare spending is economically well-behaved – therefore cannot be true.

Wasted spending may and likely does account for a significant proportion of our healthcare expenditures, but it simply cannot account for the sustained, disproportional growth in healthcare expenditures that threatens to collapse the system.

So yes, by all means, let’s try to eliminate waste and inefficiency from our healthcare system. But if we hope to survive as a culture, we will, at the same time and as an entirely separate endeavor, have to figure out how to get the growth in useful healthcare spending under control.

Summary

It is critical to understand that a fundamental, nearly intractable, doomsday-magnitude fiscal problem with our healthcare spending preceded Obamacare, and continues today. That fiscal problem will remain whether we proceed with Obamacare or not. Simply striking it down in the courts or repealing it will not help fix the underlying problem.