My wife asked what I thought about the President’s speech on Health Care reform last nite, and my response was mixed. President Obama may be the most gifted orator we have seen in our lifetime. He is clearly brilliant in his intellect; there is never a question of whether he “gets it”, whatever it may be. But I was also disappointed that he resorted to the same demagoguery he accused opponents of. I was reminded of a speech given by President Andrew Shepherd (the role played by Michael Douglas) in the movie “An American President”. In this particular section, he was referring to Senator Bob Rumson, his opponent in the upcoming election. He said, “He is interested in two things and two things only: making you afraid of it and telling you who’s to blame for it. That, ladies and gentlemen, is how you win elections.” Or in this case, pass legislation. References to “special interests” are always good for sound bytes, but let’s remember: we are all special interests. My wife is a teacher; she is a special interest. We have relatives who are seniors; they are special interests. I belong to  church and volunteer with a charity; those are special interests. Special interests are not inherently bad.

Health Care and Health Care financing is big. It represents nearly 20% of our GDP and it is growing. There are segments of our system that are badly in need of repair, and some of those repairs are fairly simple. Guarantee Issue is something that was legislated by many states for small businesses (AB 1672 for CA) and later by the feds as part of HIPAA. It does not however protect individuals nor mid sized businesses. Months ago, the insurance industry offered this up as a part of the solution. This is not something one company can do unilaterally, or it will lose in the marketplace by others who game the system. All must play by the same rules of the game. GI can work, but only when all people are in the system. Why would someone buy insurance when healthy, if it is possible to get after you are sick. Several states (like MA) tried this and the cost skyrocketed. MA premiums are generally double what comparable plans in CA cost. This is a workable solution, but it does not stop the spiralling cost escalation.

Health Insurance is going up because the cost of providing health care is going up. It is pretty simple mathematics. Understand this: we enacted Social Security in the 1930’s and arrived at 65 as the normal retirement age (NRA) because only 11% of the population lived to age 65 and lived on average 2 years beyond that. Today, life expectancy is nearly 80 and will continue to rise with advancements in the delivery of care. To put it in perspective, the average life expectancy at the turn of the 20th century was 45. What has occurred in the last hundred years is nothing short of dramatic. And while we have virtually eliminated many of the diseases and conditions that for thousand of years killed our populations, we have also figured out new ways to be sickened. For instance, we have yet to see what many are calling the “Epidemic of Diabetes” will do to our system. The average senior lives with 3 co-morbid factors (conditions that require on-going treatment). And with the emergence of the baby boomers into retirement age, the strain of the system will explode. Premature births are commonplace. C-Sections, once uncommon, now represent over 50% of the births at many of our top hospitals. We are able to treat and sometimes cure conditions that previously killed us. But this comes at a price. So, when public officials talk about reducing the costs of health care, we should keep in mind the real facts and the real numbers. Is there waste in the system? Yes, and it should and can be corrected. But the 2 main factors that create the meteoric rise in health care costs are:

1) New and more treatments for more of our citizens. Our is without question the best place in the world to be treated when you get sick.

2) The fact that in our health care system, it is the only segment of our economy where we are playing with OPM (other people’s money). Basic Economics 101 tells us that when cost is low or non-existent, over-consumption always, always occurs. 

As a nation, we are unlikely to accept a system that rations care. If the financing of health care is looked at as a zero sum game, one with a set budget, then rationing is inevitable. You have to decide how to distribute limited resources. This becomes very difficult when it is our own selves, or a loved one dealing with a medical condition. At that point, too much is never too much.

Reiterating past comments on the Public Option: competition is a good thing. It makes all competing entities better and provides for a healthy marketplace. The playing field has to be level however. It is not a matter of fairness; it is a matter of pragmatics. If the Public Plan reimburses providers at Medicare and/or Medicaid rates (which is largely under the net cost of care), the providers are forced to charge more to private paying patients. Ultimately, the only option left is the Public Plan, and Americans have generally indicated that is not their preference).

Again, the message to our public officials should be: reform the system,…but do it right. We have already seen what the Law of Unintended Consequences did to our housing and mortgage markets when we sought to create the well-intentioned reform of “affordable housing”. This is a big issue and deserves debate. It affects all of us in a very personal way.