Newswise — I agreed with President Bill Clinton that we needed health care reform. We needed it 16 years ago and we still do. But times have changed very dramatically. Now we face a number of different and very important issues surrounding both health care and the cost of providing health care to everyone — issues we were not facing 16 years ago. These issues must be closely considered before moving ahead with health care reform.
1. The population of older people has and is growing rapidly. The Baby Boomers (that huge cohort born 1946 through 1964) are aging and approaching retirement. People are living longer. This combination of many millions of people growing older and expected to live longer is highly problematic from a cost viewpoint because older folks generally need more health care and more expensive health care than their younger counterparts.
2. Health care has improved dramatically. New (and generally expensive) medications and treatments along with hundreds of thousands of joint replacements each year have driven the cost of health care upward. Furthermore, these same dramatic medical improvements will likely result in increased longevity, thereby increasing the cost of health care.
3. The malpractice industry has grown dramatically. According to the Wall Street Journal article on June 16, 2009, "Obama's Malpractice Gesture," some economists argue that the cost of legal fear exceeds $100 billion a year. The fear has resulted in many doctors leaving high-risk fields such as obstetrics, anesthesiology, neurosurgery and emergency medicine. In addition, it has resulted in doctors ordering unnecessary tests to cover themselves in lawsuits.
4. We are now in a very deep recession — the worst since the Great Depression. The budget deficit for this fiscal year already exceeds $1 trillion and is likely to exceed $1.3 trillion. In addition, high unemployment (8% or above) is likely to last several years. One reason for this is that the natural flow of young people into the workforce and older people out of the workforce has been disrupted. Would-be retirees have taken tremendous losses on their 401(k) plans as well as their homes; they simply cannot afford to retire.
5. A very ominous crisis in Social Security looms ahead. For many years the revenues generated from Social Security taxes have exceeded payments and administrative costs by many billions a year. The government spent the excess revenues to cover other costs (defense, interest on debt, etc.). The Social Security Trust Fund consists of trillions of dollars of government IOUs. To redeem those IOUs, the government will have to either increase taxes or borrow more money. Millions of Americans depend on Social Security. The appropriate funding of Social Security must be dealt with before engaging health care reform.
Not long ago, when President Obama wanted to pass the $787-billion stimulus package, he urged Congress to move quickly and told the public that rapid passage of the stimulus package would result in limiting unemployment to 8%. The stimulus package was hastily prepared and contained thousands of earmarks; it is likely that no member of Congress actually read the entire legislative package before it became law.
Unfortunately, the stimulus package was not well thought out. Now, only a few months later, unemployment nationally exceeds 9.5% and is expected to exceed 10%. Recently, Warren Buffett noted that "Our first stimulus bill"¦was sort of like taking half a tablet of Viagra."
How much will health care reform cost? Will it be $1 trillion or maybe $2 trillion? In either event, where will the money come from? On July 16, the head of the Congressional Budget Office stated that the proposed plan to overhaul health care would cost considerably more than the White House estimated. The truth is that no one really knows how much it will cost.
But, I am sure of one thing about money: you can only spend it once. When we are talking about spending trillions, it is absolutely essential to be sure of the costs and benefits of the proposed changes. We cannot afford error since we will only get one chance to make major changes to the health care system.
We cannot afford to throw trillions at a problem and wind up a few years down the road with half of a Viagra. We have lived for 16 years without reform and can live for a few more without taking drastic action.
Before moving ahead with health care reform we need to fix the economy; next, we need to fix Social Security. Without a strong economy, we cannot afford meaningful health care reform; without a fully funded Social Security System we will default on the promise of security President Roosevelt made to our citizens during the Great Depression. Haste makes waste! For now, put health care reform on the back burner.
Finally, while we are dealing with the deep recession and the crisis in Social Security, let's deal with medical malpractice tort reform. Fixing that problem will save billions of dollars a year and not hurt anyone except some trial lawyers.
NOTE: Pritchard is the senior member of the Rohrer College of Business faculty. He completed both his undergraduate degree in physics and an MBA at Drexel University, his MA in applied economics at the Wharton School of Business at the University of Pennsylvania and his doctorate in education administration at the University of Pennsylvania. Pritchard has authored/co-authored nine books in the fields of finance, small business management and marketing and has written more than 250 trade journal articles. He has consulted and provided financial training for many businesses and trade associations throughout the United States. Pritchard's research interests include real estate, personal financial management, retirement planning and Social Security. He specializes in applied financial research and pedagogical research principally pertaining to the teaching/learning processes in business and finance.