Medical Care for the Masses

Al Jacobs

The title of the article I just finished reading is as startling as if it said: “How to live forever.” But even more improbable, it says: “How to fix the health system.” The author is David Lazarus, a most prolific columnist these past two decades, currently with the Los Angeles Times and before then the San Francisco Chronicle.

With a history degree from UC Berkeley, experience as a nightly talk show host for San Francisco’s KGO Radio, and several years a resident of Japan, where he authored two books, I’ve come to expect nothing but rationality on every subject he touches … however, with several of his suggestions on how healthcare can be provided for millions, he appears to have met his match.

Admittedly, with a remarkable depth of understanding, many of the points he makes are irrefutable, as when he states: “The harsh reality is that if you’re serious about providing affordable coverage to people with preexisting conditions, there aren’t many ways to do it. Moreover, each approach requires an element of shared sacrifice that Americans in general and conservatives in particular find unpalatable.”

This, of course, was a fundamental element of Obamacare, where everyone would be required to maintain coverage. Obviously when all younger and healthier people were required to contribute to the community health insurance pool, more money would be available to cover the older and less-healthy individuals. The question as yet unanswered is whether laws can be enacted and enforced to restore the individual mandate to force healthy persons into the risk pool. If not, nothing but pure government subsidy will cover those with preexisting conditions.

For those of us who keep abreast of recent developments, be aware on Dec. 14, U.S. District Judge Reed O’Connor in Texas ruled the Affordable Care Act’s (ACA) individual mandate unconstitutional, and inasmuch as the mandate cannot be separated from the ACA, the rest of the law is also invalid.

The ruling came on the eve of the Saturday deadline for Americans to sign up for coverage in the federal insurance exchange. If the ruling stands, it will create widespread disruption across the U.S. health-care system. It’s not immediately clear what the legal path will be from here. Technically, O’Connor granted summary judgment to the lawsuit’s plaintiff – the Texas attorney general – but because he didn’t grant an injunction as the plaintiffs asked for, it’s unclear what its impact will be.

If one thing is obvious, it’s the reality healthcare is among the most contentious disputes now taking place in this nation. And there’s a reason for this; whenever the government is involved in confiscating and redistributing massive sums of the public’s funds, there’s no limit to the angst it creates.

One astute observation by the author is the realization any effective method to guarantee coverage for preexisting conditions requires a large risk pool, so claims from the sick represent a manageable expense. As he points out: “Other developed countries achieve this through different types of single-payer systems that guarantee coverage for all.” However, both his next line – “In the United States that could be done through a Medicare-for-all approach.” – As well as his arguments which seem to favor some sort of universal government healthcare, thoroughly invalidate the title of his article – “How to fix the health system.”

Ah … Medicare-for-all. How nice if we could all live our lives by slogans. It’s true, of course, a small select group of Americans do get by nicely in this fashion. The Medicare-for-all phrase, enthusiastically promoted by Vermont Senator Bernie Sanders, helps keep him comfortably ensconced in the senate at 77 years of age. His website proudly proclaims: “Health care must be recognized as a right, not a privilege for every man, woman and child in our country regardless of their income. The only long-term solution to America's health care crisis is a single-payer national health care program.”

Without a doubt, this sentiment certainly has a nice ring to it. As long as a majority of his constituents don’t question the practical effects or the fiscal ramifications of such a policy, his seat will probably be safe for several more terms.

We shall presently analyze Medicare-for-all, but before doing so, let’s take a close look at Medicare as it services its current 57 million recipients. With a present U.S. population of about 329 million, those eligible for Medicare constitute 17.3 percent of the total population. And with the medical needs of a relatively small portion of the citizenry being financed by the entire nation, how is the system faring?

Based upon the latest projections in the 2018 Medicare Trustees report, the program’s spending was 15 percent of total federal spending in 2017, and in that year its benefit payments totaled $702 billion, up from $425 billion ten years earlier. In addition, based on the latest projections, the Medicare Hospital Insurance (Part A) trust fund is projected to be fully depleted in 2026, three years earlier than the 2017 projection. And finally, Medicare per capita spending is anticipated to grow at an average annual rate of 4.6 percent over the next 10 years, due to increased use of services, intensity of care and rising health care prices.

Now, having viewed Medicare’s financial condition in which only 17.3 percent of the nation’s population is serviced, how will the system function when 100 percent – or roughly 5½ times more recipients – must be accommodated with the same taxable receipts basis? If, for simplicity’s sake, you choose to multiply the $702 billion spent in 2017 by 5½, you’ll operate a Medicare program spending $3.86 trillion annually … yes, Trillion.

What we’ve just calculated is the likely cost of Medicare-for-all. Is this figure even conceivable? Quite clearly it is not. It’s unlikely a substantial portion of the nation’s entire net worth will be confiscated so that everyone becomes a Medicare-for-all recipient. What will be far more likely is the system will morph into Medicaid-for-all. Though this may sound like we’re merely correcting a typographical error, the distinction is formidable, for the latter is truly synonymous with Universal Healthcare.

A few comments are warranted on Universal Healthcare as practiced elsewhere around the world. There will be limitations as to the treatments covered. In order to keep rates down, reimbursements must be lowered, which will prevent many worthwhile treatments from being employed. With a limitless number of potential patients, long waiting times for everything becomes acceptable. With the system run by the government, bureaucracy and red tape is soon the norm.

Within a short time, rationing of services is considered standard practice, as is seen in countries like New Zealand, Australia, France, Canada, the U.K. and Taiwan. And perhaps the most disconcerting occurrence of all is as the quality and availability of medical services provided continue to deteriorate, the costs to the government – and to the millions of patients impressed into the system – will continue to rise. Governments aren’t great in running large systems, and as they take control of health care, expect a never-ending succession of irreconcilable problems.

The conclusion of David Lazarus’ article sums up his view of what he believes must be accomplished. He states: “The bottom line is that health care isn’t as complicated as some would like to think. It just requires hard work. Republicans and Democrats apparently agree that people with preexisting conditions can’t be left to the cruel vagaries of an unregulated market. They need the government’s help … One way to make it work is what Obamacare tried to do from the get-go: Spread the risk of the sick as widely as possible by requiring everyone to have coverage.”

Despite my general admiration for Mr. Lazarus, he and I don’t see eye to eye on this matter. I acknowledge medical care in this country is less than equal for the many disadvantaged among us, with Medicaid as their last resort. However destroying the entire system by governmentalizing it, thereby creating equality by mandating inferior services to everyone, regardless of the ability of the more advantaged to obtain the preferential service they may be willing and able to pay for, strikes me as a replica of what the Soviets created as their land of equality a full century ago. Except for members of the political ruling class, who always prosper, they ensured misery for all.


Al Jacobs, a professional investor for nearly a half-century, issues weekly financial articles in which he shares his financial knowledge and experience. You may view them on


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