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Deane Waldman

Deane Waldman

Posted: July 28, 2009 05:37 PM

Government Cuts Expenditures -- Only We Can Cut Costs


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You cannot listen to a politician talk about health care without hearing the phrase "cost cutting." Problem is: government cannot cut costs, only we can.

When you and I use the word "cost," we mean the sum of all resources -- materials, money and men (or women but that sacrifices alliteration) -- used to make a product or deliver a service. When Intel, WalMart, or Boeing cuts costs, they consume fewer resources.

For health care, you and I determine costs by how much service we demand. Sometimes we can control this through healthy behaviors and timely preventative care. Sometimes we cannot, viz., breast cancer. Nonetheless, it is we -- the patients -- who directly drive costs. Doctors indirectly drive costs by their recommendations to us: You should have an MRI; Take these [$10 each] pills three times a day; I need to operate on you.

The primary thing that the government controls is money -- what they do with the dollars we give them in taxes. Government increases but never decreases true costs because it is constantly expands the bureaucracy and consequent administrative costs. (If you have even one example when government reduced the size of bureaucracy and simplified administration, please share with me. I know of none.)

A government official whose lips say cost cutting means reducing expenditures. He or she is going to pay less, not reduce resource consumption.

Recent example
In a recent newsletter defending ObamaCare (America's Affordable Health Choices Act), Congressman Vic Snyder of the 2nd Congressional District of Arkansas wrote the following. "In 2008, health care providers in this district provided $228 million worth of uncompensated care, care that was provided to individuals who lacked insurance coverage...Under the [proposed] legislation, these costs [my emphasis] of uncompensated care would be virtually eliminated." See how the word "costs" is misused?

The care was given. The resources were consumed. The costs were incurred. In future years, people will again need these services and again costs will be incurred. The only difference is where the money might come from: the government or from revenue shifting as occurs now (from the soon-to-be-extinct profitable patient). Thus, the costs will not "eliminated."

True cost cutting
True cost cutting translates to using fewer health care resources. Absent a totally new system, this means (here comes the buzz word) rationing care. The only question is who will ration your care: a private insurance company; a public insurance company run by the government; or you?

There are other reasons, besides our demands, why healthcare is going bankrupt that can be summarized as the black box: money goes in (to the health care black box) but does not come out as payments for services or products. The black box includes defensive medicine; regulatory compliance; micro-economic disconnection; and fraud -- to name four of the eight multi-hundred billion wastes of health care dollars. These true costs can only be cut by creating a new system.

Without a totally new health care system, cutting health care costs means reducing usage -- rationing. You have to decide just one thing: who will be the rationer?

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