Saturday, January 21, 2012

The Pharma-Hospital-Insurance Complex

The exploding cost of healthcare -- as a percentage of GDP in the United States -- is a cancer that is out of control. As of 2010, it was 17.3% of GDP. It's projected to be 19.3% of GDP by 2019.

The bigger the healthcare sector, the more clout it has in government with respect to lobbying (i.e. bribery). The ObamaCare legislation was crafted behind closed doors -- all to benefit the industrial monopolies.

Since the Wall Street meltdown of 2008, the United States has been in a biflationary economy. The inflationary sector (i.e. healthcare) has the most money to bribe Congress & the White House. The deflationary sector (i.e. "Main Street") doesn't have this kind of clout. Hence, the federal government will favor the inflationary sector with the subsidies, mandates and monopoly protections. With more money being pumped into the overheated healthcare sector, this actually fuels the inflation of that sector; whereas money is being sucked out of the deflationary sector. This exacerbates the dichotomy between the two economies.

Government subsidies have the effect of fueling inflationary bubbles. It had happened with housing; it's now happening with healthcare. So when the healthcare bubble bursts, it shall be the aging Baby Boomers who will bear the main brunt. But who cares? The government? The old people will have their care rationed -- just "let them die."

Both ObamaCare and RomneyCare are immoral. They force citizens to sacrifice their hard-earned income unto middlemen -- insurance companies and government bureaucrats -- who will then control people's healthcare. This is what I term as demand-side, insurance-mandated healthcare. It favors the industry, not the consumers. Likewise, it discriminates against old people with insurance rates three times higher than those of younger people. (In Canada, the healthcare tax is based solely on income.)

The healthcare oligarchs are greedy. They not only get subsidies and the insurance mandate, they also get the government to provide them monopoly protection via certificate of need (CON) regulations. This guarantees huge profits because these regs eliminate competition. But with the aging of the Baby Boomers, this will spell disaster with runaway inflation -- or with prices capped, then severe rationing.

What's desperately needed is a new model -- supply-side, consumer-driven healthcare. This is how our foodcare industry is modeled after. There is a proliferation of supermarkets, people buy their own food with their own money -- no insurance required. A person who is poor, does not go into the store (demanding from the grocer) free food. Everybody is expected to pay -- including illegal aliens. Yet we do not live in a country of mass starvation.

So with healthcare, we need to allow for grassroots capitalism to flourish within the hospital /medical industry. With the aging of the Baby Boomers, there should be no problem, whatsoever, for a proliferation of medical clinics in our neighborhoods -- just like grocery stores. But this cannot happen with the certificate of need regulations limiting the number of hospitals/clinics within neighborhoods.

Likewise, the Ryan Plan talks of increasing competition for private healthcare insurance; but not for increasing competition of healthcare clinics and hospitals. This will still result in runaway inflation and rationing. The conservatives in Congress are just as retro in mindset as the progressives -- they're trapped in the mindset of comprehensive insurance (as the required medium) for access to routine healthcare. (The only difference is that the conservatives believe in private insurance, whereas the progressives believe in government insurance.)

Another problem with the Ryan Plan is that it isn't based on "free markets." The insurance will be subsidized. Hence (like that of the subsidies for low-interest loans via Freddie Mac), it will fuel an inflation bubble. Plus the government is then put into the position of picking winners and losers. (Politicians will decide which insurance plans qualify for the the subsidies .. and which will not.) This is a recipe for corruption.

The reason the insurance model worked okay during the previous decades was that the Baby Boomers were young, whereas the sickly old were few. The Ponzi nature of insurance (including Medicare) was in it's early, benign stage. Now that the Baby Boomers are getting old (with a scarcity of the young to support them), the Ponzi bubble is about to burst.

References: (CBS News Website)


  1. Healthcare is not an asset to bubble, like real estate. There is a finite price people will pay for it, or not get healthcare. Even if they must die because of it. Right now many people are losing insurance because of the premiums. In whole, I agree with your article, but people will just not get healthcare, health is something difficult to value, unlike other tangibles.

  2. Healthcare, in its current form, is monopolistic. Therefore, the cost is too high for many folks. But in a truly competitive market, prices would be affordable.

    While one's own *health* is difficult to value, the healthcare *service* is more tangible. But because of the MANY DECADES of relying on comprehensive insurance for routine care, the average layperson has gotten conditioned to never think of the price.

  3. Health care, in its fundamental form, is simply the time and resources that we invest in our health.

    The idea that health care can be packaged and sold as a discrete product is patently absurd and is the cause of our woe.