Special Interests Infect Health Care Reform

No.: 
64

National expenditures on health care as a percentage of GDP and as an outright expense will rise with the reforms President Obama signs into law. Choices will decline and coercion will climb as bureaucrats struggle to contain soaring costs. As pending health care reforms swell our medical expenditures bubble, the nation’s slide will accelerate. While it is true that something must be done about health care costs and injustices, special interest pressures within both parties will not allow a best practices outcome.

As the United States evolves into a socialized medicine regime our health care experiment will prove inferior to the European experience. The U.S.A. emphasizes freedom of choice, medical technology, pharmaceutical consumerism, convenience-based diets, market based profits, and compensation privileges for elites. Even our social circumstances contrast with Europe’s norms, although this is notably changing. Europe’s demographic legacy combined with its more economically communitarian culture facilitates a politically viable semi-egalitarian model for medical care. By contrast, our political and demographic situations allow fewer efficiencies.

No argument here is intended as a defense of either political party. The two parties are equally sold to special interests, with the Republican Party being gripped by the pharmaceutical and insurance lobbies. Our current insurance driven approach to health care is a disaster financially and a disgrace morally. The problems are so extensive that we are vulnerable to politically driven change even when the reforms have little curative power. Spurred by frustration and confusion similar to what the nation experienced after the World Trade Center attack, our nation is launching a health care campaign as misdirected as our war in Iraq. Just as we failed to find the alleged weapons of mass destruction in Iraq, we will fail to obtain a victory against health care costs. Our wrongheaded approach will lead to embarrassment and unintended consequences.

We face a massive health care bubble that we cannot live with or without. We cannot afford to pop the health care bubble because our economy is so dependent upon it — jobs, capital investment, the health of the stock market, and government tax revenues. Neither can we afford to live with a cost bubble in medical services that is forcing us to borrow from foreigners, keep interest rates artificially low to facilitate that borrowing, and run an inflationary money supply to mitigate the debt. By spending so much on medical care we imbalance our economy, make government the servant of the most powerful lobbies, and impose opportunity costs on ourselves relative to infrastructure maintenance. There’s nothing in James Madison’s system of ‘factions checking factions’ sufficient to check mega-factions like Wall Street or health care.

By analogy, one is drawn to contemplate our military spending bubble. Our nation’s share of world military spending has reached 45%, our expenditures now six times greater than those of Russia and China combined. Our outlays are double the military expenditures of the European Union. Now that China and Russia are our partially democratized trading partners — with economies and commercial interests interwoven with ours — it makes little sense to spend like Cold War antagonists. Since rogue state and terrorist spending is minuscule, we could spend far less on defense if we would simply adjust our Wall Street capitalism to make our financial system less predatory in the eyes of the Islamic world. The same type of irrationality exists with our health care bubble: We throw dollars at our problems rather than disciplining our excesses and addressing our core dysfunctions.

What do we get for our ill-advised health care policies? We errantly incentivize people to seek pharmaceutical intervention and the control of illness symptoms rather than lifestyle reform as the means of dealing with personal health challenges. This is not only cost inefficient but ineffective in improving the nation’s health. Nevertheless, politicians keep skirting the real issues because too many state economies are dependent upon our health care bubble. Politicians are counting on future economic growth to pay for costs built into states’ entitlement programs, especially state workers’ retirement plans. Few politicians are willing to resize health care expenditures for the same reasons they remain unwilling to end the Ponzi architecture of the stock market.

Now that we’ve sent so many quality manufacturing jobs overseas, politicians are loathe to eliminate one-third of the health care sector so as to bring expenditures back to 10% of GDP. Yet it is apparent that American corporations cannot increase their exports significantly or stop the bleeding of manufacturing jobs to foreign countries until the heavy burden of health care costs is lightened. Perversely, we will increase the health care burden, accelerating the loss of infrastructure jobs.

Sadly, our nation is left with a bloated fast food industry and grossly bubbled sectors in health care, financial services, defense and government. Corporate profits nowadays are heavily skewed toward health care and financial services. This leaves stock and bond markets as well as tax revenues leveraged to these bubbles’ continuation. In other words, greed and ignorance have caused the U.S. to paint itself into a corner.

A great many Americans have been upset with Wall Street, their anger galvanized by what they saw happen to their retirement account balances in 2008 and early 2009. Now, much of the anger is gone as financial articles appear with titles like, “Get ready to party like its 1991.” The financial services industry party results from the federal government bombing Wall Street with money. These observations have not been lost on members of Congress or the Barack administration that are coming to view health care stimulus as emergency economic care. But as the emerging heath care plan triggers costs far above formal government estimates — like nearly every other health care reform in the last thirty years — the long term consequences will become painful.

The health care bubble is unsustainable because it is predicated upon massive foreign borrowing and easy money policies. The health care bubble grew rapidly for three decades as large employers increasingly subsidized health insurance premiums, the effect being to create an artificial and unsustainable growth in demand for health care services — health care consumers and providers gone wild! Now, the seemingly benign bubble is a malignant tumor. It is a looming threat that calls to mind sub-prime mortgages and credit derivative obligations (CDOs) as weapons of mass economic destruction — both predicated on insurance and faulty government regulation to errantly price critical risks. Now, no end game remains in health care that is both politically feasible and economically sustainable.

Even though the U.S. is not likely to find a way out of its health care quagmire, it is important for honorable Americans to fight the good fight on behalf of the best policy reforms identifiable. Love of country and a decent regard for one’s fellow citizens require efforts to develop the conceptual groundwork for better policy, regardless of what type of reforms the administration signs into law. In the final analysis, there is no substitute for personal responsibility. We must find ways to help citizens be at their responsible best.