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Even as Obama speaks, healthcare costs go up.

Posted on Feb 25, 2009 by Sergio Ulloa ()

Tuesday night Eastern Standard Time, President Obama addressed a joint session of congress in an effort to outline his plan on managing the current economic crisis and to praise legislators for their quick actions in getting the US$ 787 Billion stimulus package passed. Obama told congress that he would eliminate all wasteful spending from the budget (line by line no less), create a new and decisive policy for Iraq and Afghanistan, pass initiatives to create or save approximately 5.5 million American jobs, and that he would take immediate action on dealing with the massive costs of modern healthcare.

While one can be slightly optimistic about the rapid response from the new administration with regards to the myriad of current economic, political, and social woes plaguing the USA and the world at large, there is a feeling that there may be fluffy pink clouds of naivety wafting through the offices of the executive branch.

You see, according to a Department of Health and Human Services report, released yesterday, healthcare costs during 2009 will average approximately US$ 8,000 per American. Remember, this report comes before legislators have met to discuss the issue, and with the credit crisis dominating most of the political agenda it may be a while before any concrete action is taken on health care.

Through no fault of his own, Obama has inherited a healthcare service which is woeful at best. In fact, the Medicare and Medicaid services are so overstretched that analysts forecast their insolvency by 2016 and, that by 2018 $1 out of every $5 in the budget will be spent on healthcare. Couple this alarming prediction with the fact that the number of uninsured Americans has reached a record high of approximately 48 million, and the whole healthcare outlook for the USA starts to look rather grim.

What does this mean?

For a start, the current economic crisis has provided a clear indication that universal healthcare is not the answer; the system is struggling to cope with the 45 million people that it currently covers. Considering that the USA has a total population of roughly 300 million it becomes fairly evident that the American healthcare system, as it exists today, simply will not be able to cope with the sheer volume of patients that it can reasonably expect to receive as the situation worsens.

It comes as no surprise that the cost of receiving treatment in the USA is higher than anywhere else in the world. This may be attributed to the "idea" of healthcare in the States, namely that it must include high-tech, and often extremely costly, tests and procedures. A culture has formed whereby patients demand the very latest in treatment, no matter the cost or the efficiency of the action, and healthcare workers are often extremely happy to comply. This is where the heart of the issue lays, not in the coverage provided by various insurers (whether they be private or publicly funded), but with the exorbitant fees charged by hospitals and other healthcare facilities.

Whilst on the campaign trail, President Obama frequently mentioned the need for radical healthcare reform. What was Obama's major campaign proposal to reduce healthcare spending? Move to a paperless healthcare system where patient records are stored electronically. The US$ 77 billion in estimated savings was laughed off by industry analysts at the time, and seems even more ludicrous now, in the midst of the worst economic downturn of the last 20 years.  Further to this, he has publicly stated on a number of occasions that he supports expanding the scope of Medicare and Medicaid to include increased numbers of low income earners.

Looking at the current state of the American financial system, and considering the afore mentioned DHHS report, it becomes fairly evident that taking the small step of eliminating paper from the healthcare system will still leave a host of other expenditure issues to contend with. Remember that 2016 is the estimated cutoff date for funding of public healthcare in the USA; removing paper from the system may make it solvent until 2018, but there is no guarantee. As for expanding existing programs; the reason that public healthcare is in such a precarious position is due to the fact that the number of individuals in America aged 65 (baby boomers) or above is expected to grow 20% by 2011. And that is just the start. Essentially, what this means is, that by 2016 the federal government will be paying for half the medical costs of the entire nation. This is simply not a sustainable policy as healthcare costs have already reached record highs (US$ 2.4 trillion in 2008) and are expected to climb further in the short term.

Many American citizens will decry the insurance industry as to blame for the current healthcare fiasco, but this may be more out of experience with insurance companies, rather than any actual understanding of the issues. Health Insurance in the USA is expensive and complicated, but there is a very good reason for this: the insurance has to be expensive because the cost of treatment is expensive. The insurers have to set a price/premium which is a fair assessment of the risk involved in the policy. If you were to buy the same policy in Thailand, the cost would be drastically reduced, because the costs associated with healthcare are much lower. The solution to lowering healthcare expenditure in the USA, both publicly and privately, would then seem to be a simple question of regulating healthcare costs, or the amount that hospitals and clinics can legally charge for their services.

This is the crux of the problem. And yes, it would follow that you do get what you pay for, and in the USA you are paying for the best and are receiving it, or so you would think. Why then, does the USA have one of the highest infant mortality rates in the world; one would have thought that a US$ 30,000 delivery fee at Cedar Sinai hospital would ensure a healthy birth. Why do American citizens pay more for their prescribed medications than anyone else in the world? It is these questions that need to be addressed, and it is the responsibility of the pharmaceutical companies and healthcare providers to answer them.

Whatever the response from Obama's government, it is clear that action will need to be taken quickly. The money is running out.

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