In the webcast interview above Warren Buffett and Bill Gates discuss business, health care, economics, wall street, the Fed and more. Both agree the health care system is far too expensive and needs to be fixed. And both agree the current reforms are far too small and seem to do little to address the core problems with incentives and entrenched interests maintaining system in need of reform.
Both also agree the future is bright for the USA and the world economically. The innovation possible will may well come from more locations in the next century but those innovations will also come from the USA.
Warren Buffett also defends the independent Federal Reserve board system.
Related: Warren Buffet Webcast to MBAs – Advice from Warren Buffett UT at Austin business school – Bill Gates: Capitalism in the 21st Century
Diabetics in U.S. May Double in 25 Years, Tripling Health Costs
Without new programs to assure that people get health care to manage their condition, 44.1 million people in the U.S. will have diabetes by 2034, from 23.7 million today, the report said. The number of diabetics on Medicare, the government plan for the elderly, will reach 14.1 million from 6.5 million today.
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The analysis by O’Grady and his colleagues included the impact of aging and obesity rates
The broken health care system needs to be fixed. We continue to spend huge amounts of money and yet fail to take sensible steps to improve outcomes (see our recent post for another example of failing to focus on outcome measures).
Related: USA Heath Care System Needs Reform – Deficit Threat from Health Care Costs – articles on improving the medical care system – USA Spent $2.2 Trillion, 16.2% of GDP, on Health Care in 2007 – Study Finds Obesity as Teen as Deadly as Smoking
Hans Rosling uses his fascinating data-bubble software to burst myths about the developing world. Look for new analysis on China and the post-bailout world, mixed with classic data shows.
“The worldview students have corresponds to reality the year their teachers were born”
The software he uses, the very cool Gapminder world, developed by his son and bought by Google is available online.
He also correctly congratulates the USA for providing free data it has collected worldwide, for decades, on world health. And correctly criticizes the World Bank for selling the data they compile using taxpayer funds.
Related: Data Visualization Health Care Example – Economic Measurement Issues Arising from Globalization – Millennium Development Goals – Government Debt Compared to GDP 1990-2007
There are several factors that need to be addressed relating to the broken health care system in the USA.
1) It is bankrupting the government
2) It is severely handicapping business that must pay for the expensive and poorly performing system
3) It is bankrupting individuals (Employees Face Soaring Health Insurance Costs)
4) It is hampering economic freedom due to the model that ties health care to employment. If I want to go start my own small business, I not only have to worry about all the risks of running a business I have to risk my heath coverage (coverage is expensive and if you get sick you can be dropped, or rates increased so dramatically that they are not affordable – hardly insurance when you are dropped when you need it).
5) social inequity – no other rich country denies basic health care to everyone
6) the results are poor to mediocre (at by far the highest cost of any country)
The idea that a system that is far more expensive than any in the world and performs, at best, in the middle of the pack of rich countries while creating huge economic and human hardships should not be reformed is crazy. Unless you believe the USA is just incapable of performing even at a mediocre level in health care, for some reason, you have to believe they current performance needs to be dramatically improved.
Now there may well be disagreement about which failures are most important. Some may not care about the huge competitive disadvantage companies are put in by the current broken system. Others may not care that millions don’t have basic coverage. Others may not care that sick people go bankrupt. Others may not care that the heath results are mediocre at best – that tens of millions have much less healthy lives than they would. Others may like that they make a great deal of money from the current system. Others may like that they personally get good health care. So in what ways the broken system in place now needs to be fixed is open for debate.
The long term result is very simple to see. The current system is very broken and will not work. Different people suffer differently depending on what solution is adopted. My desire would be to reduce spending on hugely expensive miracle cures (especially for terminal ill patients) and increase spending dramatically on preventative and healthy living (versus spending on managing sickness) but I can see that such a solution is not at all popular. So we are not going to adopt that part of what I would like to see.
But I have no doubt the system will be dramatically reformed. Because if not the economic costs will destroy the economic future of the country. I don’t believe tens of millions without health care will drive action – we have seen that we are perfectly willing to allow that to continue. If the economic costs (say reducing the economic benefit to every person in the USA by $5,000 a year) just stayed at that level, it seems those that are benefiting from the current system are able to hold off improvement. But that figure is increasing each and every year. Eventually the costs grow too large and too many people will demand the broken system be improved.
Health Care: Lessons for America
It switched to a system that separates insurance from employment. Each individual or family is required to buy coverage, and insurers must offer a basic package of benefits to all applicants. They can’t profit from selling basic coverage, but they can from supplemental plans. Premiums are deducted from paychecks; the unemployed and poor are subsidized.
Despite opposition from insurers, drugmakers, and business, the plan passed by a bare majority and went into effect in 1996. Switzerland now spends 11% of its gross domestic product on health care, just as it did before. But everyone is covered, insurers are more profitable than ever, and its high-quality health care has been maintained.
The lesson, as laid out in The Healing of America: A Global Quest for Better, Cheaper, and Fairer Health Care, by T.R. Reid, is that “health-care systems can be changed, even in the face of powerful…interests.”
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Many Americans boast about having the best health care in the world, even though the U.N. ranks the U.S. system 37th, based on a broad range of measurements
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At the same time, he learned that almost all countries use one of four health-care models: Germany’s Bismarck system, in which hospitals and insurers are private entities and financing comes from payroll deductions; Britain’s Beveridge Model, with the government providing health care financed by taxes; the Canadian plan, where private doctors and hospitals are paid by the government through taxes; and the out-of-pocket care found in most poor nations, where those who can afford care get it, while the rest suffer or die. Unlike any other country, the U.S. combines all four models
Related: posts on the economics of health care – Broken Health Care System: Self-Employed Insurance – Many Experts Say USA Health-Care System Inefficient, Wasteful – USA Spent $2.2 Trillion, 16.2% of GDP, on Health Care in 2007 – International Health Care System Performance
The decisions over the past 30 years to pass huge huge tax bills to those in the future is unsustainable. Saying you cut taxes when all you actually do is postpone them is dishonest. However, many people go along with such false statements so politicians have learned to buy votes today by raising taxes on the future. Since the public keeps voting for such people when the facts are clear the only explanation is they support raising taxes, not today, but in the future (or, I suppose, they are not able to understand the clear implications of what they vote for). The Long-Term Budget Outlook
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For decades, spending on Medicare and Medicaid has been growing faster than the economy. CBO projects that if current laws do not change, federal spending on Medicare and Medicaid combined will grow from roughly 5 percent of GDP today to almost 10 percent by 2035. By 2080, the government would be spending almost as much, as a share of the economy, on just its two major health care programs as it has spent on all of its programs and services in recent years.
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CBO projects that Social Security spending will increase from less than 5 percent of GDP today to about 6 percent in 2035 and then roughly stabilize at that level.
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Federal interest payments already amount to more than 1 percent of GDP; unless current law changes, that share would rise to 2.5 percent by 2020.
The cost of paying for a dysfunctional medical system has been a huge drain on the USA economy for decades. But that is nothing compared to what the future holds if we don’t adopted sensible strategies that reduce the huge extra costs we pay and the worse performance we receive for that cost.
Social security is not the huge problem many think it is. Still I would support reducing the payout to wealthy individuals and bringing the age limits more in line with the changes in life expectancy. 12.4% of pay for low and middle wage workers (high income earners stop paying social security taxes so in effect marginal tax rates decrease by 12% for any income above $106,800). Medicare taxes add 2.9% bringing the total social security and Medicare taxes to 15.1% (including both the amount paid directly by the employee and the amount paid for the employee by the employer).
Related: True Level of USA Federal Deficit – USA Federal Debt Now $516,348 Per Household – quotations about economics – articles on improving the health care system – USA Spent $2.2 Trillion, 16.2% of GDP, on Health Care in 2007
Economist blog post on Health care:
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In hindsight there seems something rather perverse about only providing the best care to retired workers. In theory, the government should make private insurance cheaper for everyone else because then the young won’t have to subsidise (at least through their health-care premiums) the old. The main problem, which European countries have learned, is that sustainable, government-provided care and timely access to the most innovative treatments tends to be mutually exclusive.
Related: Many Experts Say Health-Care System Inefficient, Wasteful – Improving the Health Care System – USA Spent $2.2 Trillion, 16.2% of GDP, on Health Care in 2007
The health care system in the USA is broken, and has been for decades. The economic consequences of failing to implement effectively solutions has been immense. Finally, the momentum demanding change is growing. I still think the entrenched interests are going to delay needed reform, but hopefully I am wrong. An interesting proposal for ending medical status pricing is in the news – Health Insurers Propose End to Medical-Status Pricing
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Health insurers oppose a Democratic push to create a government-run health plan to compete with private insurers for customers. Supporters of a public plan, including President Barack Obama, say it would guarantee affordable coverage, especially among those denied insurance or charged higher rates because of pre-existing medical conditions.
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Insurers still would adjust variations in the price of premiums to an applicant’s age, family size and place of residence, according to Zirkelbach’s group. The organization speaks for 1,300 companies that provide public or privately funded benefits, led by UnitedHealth Group Inc. of Minnetonka, Minnesota, and Indianapolis-based WellPoint Inc.
This federal employees health benefit plan provides any federal employee the option to buy the insurance with no cost difference depending on health status. Some option, building off that is one that seems to have some possibility of success. I think some such system would be an improvement. However, it is far from the solution. Many problems are not solved by that at all. The huge amount of waste generated by insures and all the forms, needless bureaucracy… they generate is hard to justify. What value to they provide for the enormous costs?
Related: Broken Health Care System: Self-Employed Insurance – Traveling for Health Care – Employees Face Soaring Health Insurance Costs – Personal Finance Basics: Health Insurance – USA Spent $2.2 Trillion, 16.2% of GDP, on Health Care in 2007
Health spending in the United States grew 6.1 percent in 2007, to $2.2 trillion or $7,421 per person.
For comparison the total GDP per person in China is $6,100. This continues the trend of health care spending taking an every increasing portion of the economic output (the economy grew by 4.8 percent in 2007). This brings health care spending to 16.2% of GDP (which is yet another, in a string of record high percentages of GDP spent on health care). In 2003 the total health care spending was 15.3 of GDP.
With the exception of prescription drugs (which grew at 1.4% in 2007, compared to the 3.5% in 2006), spending for most other health care services grew at about the same rate or faster than in 2006. Hospital spending, which accounts for about 30 percent of total health care spending, grew 7.3 percent in 2007, compared to 6.9 percent in 2006.
Spending growth for both nursing home and home health services accelerated in 2007 (4.8% v. 4.0%). Spending growth for freestanding home health care services increased to 11.3 percent. Total health care spending by public programs, such as Medicare and Medicaid, grew 6.4% in 2007 v. 8.2% in 2006. In comparison, health care spending by private sources grew 5.8% compared to 5.4%.
Private health insurance premiums grew 6.0 percent in 2007, the same rate as in 2006. Out-of-pocket spending grew 5.3 percent in 2007, an acceleration from 3.3 percent growth in 2006. Out-of-pocket spending accounted for 12.0 percent of national health spending in 2007. This share has been steadily declining both recently and over the long-run; in 1998, it accounted for 14.7 percent of health spending and, in 1968, out-of-pocket spending accounted for 34.8 percent of all health spending.
The costs for health services and supplies for 2007 were distributed among businesses (25%), households (31%), other private sponsors (4%), and governments (40%).
Decades ago Dr. Deming included excessive health care costs as one of the seven deadly diseases of western management. We have only seen the problem get worse. Finally it seems that a significant number of people are in agreement that the system is broken. Still, admitting the system is broken is not the same as agreeing on how to fix it. The way forward to workable solutions still seems very difficult.
Full press release from the United States Department of Health and Human Services.
Related: International Health Care System Performance – Personal Finance Basics: Health Insurance – Many Experts Say Health-Care System Inefficient, Wasteful – How to Improve the Health Care System
Drug giant GlaxoSmithKline pledges cheap medicine for world’s poor
In a major change of strategy, the new head of GlaxoSmithKline, Andrew Witty, has told the Guardian he will slash prices on all medicines in the poorest countries, give back profits to be spent on hospitals and clinics and – most ground-breaking of all – share knowledge about potential drugs that are currently protected by patents.
Witty says he believes drug companies have an obligation to help the poor get treatment. He challenges other pharmaceutical giants to follow his lead.
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He said that GSK will:
• Cut its prices for all drugs in the 50 least developed countries to no more than 25% of the levels in the UK and US – and less if possible – and make drugs more affordable in middle-income countries such as Brazil and India.
• Put any chemicals or processes over which it has intellectual property rights that are relevant to finding drugs for neglected diseases into a “patent pool”, so they can be explored by other researchers.
• Reinvest 20% of any profits it makes in the least developed countries in hospitals, clinics and staff.
• Invite scientists from other companies, NGOs or governments to join the hunt for tropical disease treatments at its dedicated institute at Tres Cantos, Spain.
The extent of the changes Witty is setting in train is likely to stun drug company critics and other pharmaceutical companies, who risk being left exposed.
This is a good move by GSK.
Related: Shop Around for Drugs – Traveling To Avoid USA Health Care Costs – International Development Fair: The Human Factor