The American people are now debating on a very big issue: Obama’s Health Care Reform. Everyone is aware that American healthcare costs have increased unbelievably at an average level of 16.5% of the United States’ Gross Domestic Product (GDP).
This means that many Americans have to allocate much more than this 16.5% from their income while many others allocate much less or almost nothing to get “the average”. Even worse, over the next five years, this already significant percentage is projected to reach almost 20% of the GDP.
The main problem with this increase in the costs of healthcare services and the costs of health insurance that is has resulted in an increase in the under-insured and un-insured population to such a level that many people are demanding reforms.
Americans are now debating between either moving toward a mandatory “universal” healthcare or maintaining a free and not mandatory market… and it is a logical and natural debate. However, as always in life, we must distinguish between what we would like to have versus what we are able to have. If we want all people to have health insurance, someone must pay for it.
The healthcare crisis is impacting employers and individuals with real consequences. For example, 38% of all workers in the USA are employed in small businesses, where more than one-third of those firms do not offer health benefits to their employees.
Health insurance expenses are the fastest growing cost component for employers and as a way to manage these costs, employers are shifting the healthcare expense from the company to the employee, reducing benefits, or eliminating coverage. And this has been happening for some time.
The employers, as well as individuals, have devalued their interest in acquiring healthcare coverage while increasing their interest in other goods and services or in preserving profits and disposable incomes. However, individuals should know that sooner or later they may suffer a serious illness and then they would need to have enough savings to afford it.
About 1.5 million families lose their homes to foreclosure every year due to unaffordable medical costs and every 30 seconds in the United States someone files for bankruptcy in the aftermath of a serious health problem.
This reality has made many people search for other healthcare options, including looking beyond the US borders. Now, a new industry, Medical Tourism, is being developed to supply that demand. Thus, many international health providers, many of them Joint Commission International Accredited, are offering services at their facilities for less than 50% of US cost and with proven clinical quality, patient safety and standards very similar to the USA.
Not only that, but many other players like health insurance carriers, based in the US and other countries, are considering to underwrite policies for covering surgical procedures and catastrophic illness to be treated abroad at an affordable cost of less than 100 dollars per member per month.
So, with access to products like this, don’t you think that many Americans would stop worrying about falling into bankruptcy because of the exorbitant healthcare cost in the USA? After all, the main problem lies in these expensive treatments and not in the lack of coverage itself. The medical tourism phenomenon has caused many consulting firms to evaluate the magnitude of this market.
But the reality that so many people who are either un-insured or under-insured has also made the government looks for solutions such as reforming the healthcare system. Recently, the Senate Finance Committee approved the legislation to remake the health care system and to provide subsidize coverage to 29 million un-insured people, still leaving 25 million un-insured by 2019.
According to the Congressional Budget Office, the cost of this new subsidy would be 829 billion dollars over the next 10 years; that is to say, 82.9 billion dollars per year to be added to the already Chronic and Unsustainable US Federal Budget Deficit of almost 1 trillion dollars every fiscal year.
And, how will this program be financed? Surely, by increasing the National Debt even more! Upon birth, US children currently owe about US$ 250,000 to compensate for this deficit. How do American taxpayers and foreign countries feel about financing the US Deficit?
Today, the National Health Expenditure is about 2.37 trillion dollars a year. If we divide this amount by the total health insured population (260 million including Medicare and Medicaid covered) it results in an average cost of US$ 9,115 per member per year.
On the other hand, if we divide the 82.9 billion dollar proposed subsidy for the 29 million un-insured people (those who would be subsided), it results in US$ 2,859. This is not even enough to cover hospitalization expenses without reducing costs. In fact, it represents a similar coverage than it is proposed by the Medical Travel Industry but about twice as expensive.
Even though markets require certain regulations (i.e. regulate about pre-existing health conditions) there is no doubt, ceteris paribus, that there are two ways to fix this problem. You can either increase the socialized solutions, and thus, the National Debt until it CRACKS or you can let the invisible hand of the free global market do its own and deserved job…
Daniel Vasquez Ger is the Director of International Development and Health International at Hospital Universitario Austral in Buenos Aires, Argentina. He may be reached at DVAZQUE@cas.austral.edu.ar