Obama is starting to realize that healthcare entitlements are a massive burden on the budget.

So what exactly is the president proposing to help him realize hundreds of billions of dollars a year in savings?

Obama aides talk about “game-changers.” These include improving health information technology, expanding wellness programs, expanding preventive medicine, changing reimbursement policies so hospitals are penalized for poor outcomes and instituting comparative effectiveness measures.

Nearly everybody believes these are good ideas. The first problem is that most experts, with a notable exception of David Cutler of Harvard, don’t believe they will produce much in the way of cost savings over the next 10 years. They are expensive to set up and even if they work, it would take a long time for cumulative efficiencies to have much effect. That means that from today until the time President Obama is, say, 60, the U.S. will get no fiscal relief.

Correct me if I’m wrong, but it looks like Obama’s plan to save money is to spend more money.

Currently, the health care industry has no incentive to reduce costs. Why? Because the people that would drive cheaper medical innovations are covered by Medicare/Medicaid. If Medicare/Medicaid stopped paying for these people, the health industry would stop making money from these people until it developed cheaper treatments.

In our system right now, there is no incentive to develop more affordable treatment, because the current more expensive treatments are payed for by the tax payer. This has ruined the demand curve, which is an integral part of a functioning market.

So I have an idea: cut off Medicare/Medicaid tomorrow. Pharmaceutical companies, hospitals, pharmacies, etc. would start cutting costs immediately, while beginning development on cheaper treatments to serve the 45 million strong uninsured market. Until we allow the incentive of the almighty dollar to work, we will not see affordable medical care.

I know some people might see this plan as callous. And yes, some people will be left out in the cold. But do you want low cost health care, or do you want high cost, over-budget government insurance? Because you can’t have it both ways Barack.

This entry was posted on Friday, May 15th, 2009 at 1:28 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.