Wednesday, May 23, 2007

Thoughts on Health Reform

I don't think incremental reforms have worked as yet. Health care costs have gone up at fast rates in the past few years, and the uninsured problem has not gone away. The systemic problems of the past 40 years have gotten worse, not better. Employers are very unhappy. In other words, we are spending 50% more for health care than other countries with 1/6th of the public uninsured at any given point in time and with moratlity rates that are mediocre in comparison with other countries'. The highest costs in the world with poor results. Health care is where the auto industry was in 1972, and it's going to get worse.

Know one knows the the coming cost impact on health care of the aging baby boomers--no one can predict that. For sure, the inelasticity of demand for health care will magnify small increases in demand.

In addition, there is the problem of the employer retiree health insurance plans that are about to implode, which will be a surprise to many middle class baby boomers who have yet to experience paying 20% of their paychecks (or pension checks) for health insurance.

Oh, I'm sure all those retirees are going to love selling their second homes or not being able to vacation in Hawaii because health insurance costs here will be 75% higher than anywhere else in the world.

The health insurance industry is going to be real popular, sort of like John D. Rockefeller in 1932. The insurance industry needs to start thinking creatively, or the public is going to make it regret it.

The automobile industry learned that you can sell cars that last 60,000 miles and call them great, but sooner or later there are going to be cars that last 300,000 miles at the same price. I think that the insurance industry had better start coming up with some new ideas or they will suffer a parallel response. The real question is whether the response will continue on the present regulatory path, which may end private health insurance altogether, or more market-driven reforms will take the system in a better direction.

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