A Back of the Envelope Case for Socialized Medicine

  • “We always tout how much we love small-business and that small-business is the backbone of the country, but the reality is, it is very difficult to leave your job if you don’t have health insurance.”

  • “Something as simple as home building is a primary driver of economic growth.”

I love statistics. When I was thrashing about trying to figure out what I wanted to do when I grew up, one of the professions that strongly interested me was being an Actuary. Using statistics to make models that made the world run. Unfortunately for me, high-level math is all theorems and proofs and like one of my favorite all-time characters on TV, Gus Haynes, I’m too simple-minded for that. I’m more interested in behavioral economics. I want the numbers to translate to mankind and improve our existence on this planet.
Which brings us to the current state of Health Care in America. Back in 2013, Steven Brill wrote a great piece for Time Magazine titled, “Bitter Pill”, in which instead of arguing about whether Health Care is a right, or who should pay for it, examined why Health Care is so expensive. The Title of the piece, was very apropos. One thing that really stuck with me from the article was Time’s breakdown and itemization of medical bills from various people’s hospital and ER visits. Incredible markups on simple, reusable items. It reminded me of an incident growing up when my brother took an ambulance ride to the hospital and the ambulance company tried doing the same thing, but my Father called them on it. The invoice for the ride included charges for sandbags, a back board and an assortment of items that were reusable. My father assertively argued with them that if they were going to charge him for those items, then he wanted those items. Unpersuaded by their hollow argument “…but that’s not the way it works Mr. Valenzuela…”, the ambulance company finally relented and removed the extraneous charges and the bill was promptly paid.

Portland and Oregon are both on fire economically right now. Wages rising, housing boom, job-less rate at an all-time low, heck, even Salt and Straw just accepted a substantial investment from a NY restaurant group and yet, Oregon’s budget is in shambles. The costly expansion of Medicaid (largely due to reduced federal support) is a primary driver of the budget shortfall. It’s my first blog post, so we can argue about spending and the PERS issue later, but my point is, we spend more per capita on Health Care than any country in the World and yet on nearly any metric, we rank middle of the pack in outcomes. Starting with the premise that I am simple-minded, it doesn’t take a genius to see the discrepancy between dollars spent and outcome, but it is my contention that we are missing the real point: Not having national health insurance is actually an economic retardant.

With our current system, many people are tethered to their jobs for Health Insurance. We always tout how much we love small-business and that small-business is the backbone of the country, but the reality is, it is very difficult to leave your job if you don’t have health insurance. Starting a business is an incredible adventure, fraught with many perils, many of them unaccounted for when you put together your business plan. The risk of calamitous medical bills due to being uninsured is a risk that keeps many would-be entrepreneurs on the sideline. It is my contention that the lack of insurance safety net discourages business formation and it is the new and young companies that are the primary source of job creation.

The second profound impact caused by lack of Health Insurance is that many middle-income families are squeezed out, or discouraged from having children, or more of them. Take my Sister for example. My sister is one of the finest human-beings I have ever had the pleasure of knowing. She and her husband would make tremendous parents and raise children who would blossom into valuable contributors to society and yet, they have no children. Not because they don’t want them, but they have been forced to delay having children due to their lack of health insurance/insanely high-deductibles.

My sister is not alone as most of her peers are delaying many milestones, such as marriage, children, purchasing homes, etc. due in no small part to the costs of health insurance and childcare.

Demographics are primary drivers of economics. More children equals more consumers and more demand which equals increased economic activity. Something as simple as homebuilding is a primary driver of economic growth.
Thus, not only is lack of Health Insurance holding entrepreneurship back, but it also is discouraging economic growth by forcing many people to forego, or delay having children. This is not to argue that Health Care is a basic human right, or that our current system is immoral or that hospitals should be stripped of their non-profit status. I’m not into soap boxes. I am into results and pragmaticism. It just so happens that usually, what is best for society, is what is most just. In this case, not only is a National Health Insurance the right thing to do morally, the creation of a National Health Insurance (NHI) would be a driver of economic growth, rather than our current model where we as taxpayers end up subsidizing a model that is radically cost ineffective.

I am not advocating the abolition of private insurers. I believe if you can afford it, or your employer chooses to pay for it, you should have whatever health insurance you like. However, there should exist a parallel system that would ensure coverage for all Americans that could easily be paid for by reallocating the dollars we currently spend on private insurance (Medicare, Oregon Health Plan, etc) into a public system. This public system could also decrease costs radically by having enormous scale and purchasing power, decreased overhead costs in terms of a reduction in redundant management and marketing layers, as well as elimination of insurance costs associated with malpractice insurance. Sorry, but you cannot sue the NHI. Lastly, we could make it cost effective by instituting something akin to an ROTC program where Doctors and Nurses who were part of NHI would have their schooling paid for and graduate debt-free, but in return, would owe several years of service to the NHI. There, I just solved our Health Care problem. Now I am going to go have lunch.

We can argue about sustainability (what is more eco-friendly: purchasing a used 2000 BMW 528i or a new Prius?) and population in future posts. Full disclosure, I am an optimist, a believer in creative destruction and the power of mankind’s ability to innovate and adapt, so I look forward to discourse, but please, let’s keep it constructive and disprove Godwin’s Law.

Make it Happen – Baruch

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