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Jerry Jasinowski Headshot

Aye, There's The Rub

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Everywhere we look across the nation's landscape we see looming consequences of fiscal irresponsibility, both public and private. The federal government is running up vast amounts of debt every year while Congress is in a partisan deadlock, unable to craft sensible policies that would lead us out of this fiscal morass. The latest news is that states, counties and municipalities are at long last acknowledging that they also have made commitments to retirees that they cannot possibly honor. It's like a tsunami of red ink roaring across the land, threatening to consume all of us in its wake.

The reality is that we have it within our power to deal with all of these problems. All that is lacking is a mature political will -- politicians who will tell the truth and a public that is willing to hear the truth. We have to restrain spending on entitlement programs, especially Social Security, and raise taxes somewhat, on everyone. This encounter with fiscal reality does not appear imminent, but when the crisis truly starts to hit home, we will come together to do what must be done.

But there is one critical issue driving much of this fiscal imbalance that poses a unique challenge -- health care. Health care already consumes 25 percent of the federal budget and at the present rate of increase will hit 40 percent by 2037. As Shakespeare wrote long ago, "Aye, there's the rub."

Politicians, insurance companies and health care providers are scrambling to find ways to reduce the growing health care tab, but most of their efforts amount to a game of musical chairs as they try to pass the buck -- or I should say the missing buck -- to someone else. For the most part, we are just spinning our wheels.

To get health care costs under control we have to make fundamental changes in the system which President Obama missed a golden opportunity to do with Obamacare. The President basically left the existing system in place while extending health insurance to more people. That is a laudable objective, but it will drive spending up, not down.

The one critical shift we need to make is to move away from the fee-for-service system we have that encourages ever more tests, treatments and drugs, to one that compensates the medical establishment fairly for providing total medical care based on the patients' needs. Paul Ryan is taking a lot of heat for his plan to shift Medicare to a voucher system, but that might actually work. It certainly offers a more reasonable prospect of cost control than Obamacare. One way or another, we have to impose market incentives on health care. But any way you slice it, fundamental change does not come easily to a vast institution like our health care sector. We need a national plan that comprehensively redefines how medical care is delivered.

First things first. We all know our population is aging even as new therapies and medicines are being developed. The health care cost arrow is pointing up as far as the eye can see. We simply cannot keep doing what we are doing. To get our fiscal house in order, we first have to embrace a more efficient, cost effective system for delivering health care.


Jerry Jasinowski, an economist and author, served as President of the National Association of Manufacturers for 14 years and later The Manufacturing Institute. You may quote from this with attribution. Let me know if you would like to speak with Jerry. August 2012