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How Long Can the Country Take High Health Costs?

By July 2, 2015Commentary

When something has been identified as a problem for a long time, such as high and growing health spending, the public may become inured to the impact and may start to think, yeah, it’s a problem, but nothing really awful is going to happen.  But there often is a point at which some drastic action has to be taken to avoid or prevent real disasters (just ask the Greeks).  A brief from the American Health Policy Institute suggests we may get to that point sooner than we think in regard to health spending.  (AHPI Brief)   Most Americans’ health care is paid for either by a government program, generally Medicare and Medicaid, or an employment-related health plan.  The government programs are probably in the most jeopardy, since they require taxpayer support and there is a limit to how much tax revenue can be generated.  The report suggests the day of reckoning is in the 2025 to 2030 range.  According to the Institute’s estimates, by 2025 Medicaid costs will be over a trillion dollars a year and by 2030 the Medicare hospital “trust” fund will be depleted.  Our ratio of workers to retirees will be below 3 to 1 and 18% of the population will be over 65.  The “promises” that have been made by the Medicare and Medicaid programs are basically unfunded; in other words, money isn’t being set aside on a current basis to be available for the costs that will be incurred in the future.  The demographic conclusions are pretty inescapable, but our politicians just continually defer the problem.  Similarly, with employer health costs continuing to rise faster than economic growth, at some point it becomes difficult for companies to bear that burden without losing competitiveness in a global economy.  In all seriousness, drastic action needs to be taken now to fix these problems before it is such a crisis that there isn’t a reasonable solution (see Greece, for example, or Puerto Rico).  But the political will for pain is non-existent.  What we are doing to the younger generations is inexcusable.  Just some pleasant thoughts for your holiday weekend.

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