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• U.S. Health Care: Resolving the Quagmire

Posted by Ron Robins on January 9, 2014

The following excerpts are from chapter one of a book in progress by Ron Robins, tentatively titled, Resolving America’s Economic Quagmire… individuals gaining inner fulfillment is the key*

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“These [Social Security, Medicare, and Medicaid] and other projected expenditures… have produced, not a fiscal cliff, but a fiscal abyss.”

Professor Laurence J. Kotlikoff, Boston University.

Overview (Excerpt)
“Professor Kotlikoff calculates this fiscal abyss of the U.S. Federal Government as an astounding unfunded liability of $205 trillion. It equals a current debt of about $665,000 for every living American adult and child. And most of this sum pertains to health care. The health care costs quagmire poses a financial deathblow to the U.S. economy and its citizens. To avert this calamity, America’s health care system will be revamped.

Notwithstanding Obamacare, one way will be to re-organize the health care system according to well-studied methodologies that show huge potential cost savings. While another way—garnering increasing attention—is by utilizing scientifically validated disease prevention interventions such as the Transcendental Meditation (TM) program. Also, many political leaders, economists and others, believe there will need to be substantial reductions in health care benefits as well.

Interestingly, by deploying the known methodologies and interventions inferred to above and written about below, it might not be necessary to reduce benefits yet still be able to cut health care costs a stunning 50-80 per cent!”

Major health care cost drivers. Reducing their cost through health system reform and introduction of the Transcendental Meditation disease prevention program (Excerpt)
“The major health care cost drivers are:

  • The increasing incidence of chronic disease in an aging population
  • Relatively fewer workers to pay for increasing costs
  • Exceptionally high professional fees relative to other developed countries
  • Huge oversupply of services, equipment
  • Administration costs and fraud 

Now we look at these issues one by one, and where appropriate, determine the role that individual TM practice can play in reducing their costs.”

The increasing incidence of chronic disease in an aging population (Excerpt)
“Over half of Americans have chronic diseases. Yet, despite significant improvements in treatments for chronic diseases, their incidence and related financial costs continue rising dramatically.

Actual costs of  America’s seven most common chronic diseases—cancer, diabetes, hypertension, stroke, heart disease, pulmonary conditions and mental disorders—have been estimated at $1.3 trillion annually by Ross DeVol and colleagues, or about 10 per cent of gross domestic product (GDP). Their unique and original study quantified almost all related costs to employers, governments, and to the U.S economy. They say those costs could reach $4.2 trillion by 2023.

Numerous researchers cite the growing incidence of chronic disease as mostly due to aging. However, many in the medical field also believe that more important than aging are the unhealthy lifestyles, diets, and behaviors of most Americans. And this is another area where the TM practice can be highly beneficial. Aside from its well-documented physical health benefits, TM creates an ‘inner fulfillment and self-sufficiency’ that alleviates the desire for the kind of instant gratification (with bad lifestyles, diets, etc.) that cause much chronic disease.

The first major study demonstrating the effectiveness of the TM practice in reducing chronic disease (and overall illness) was by Dr. David Orme-Johnson in 1987. Using Blue Cross/Blue Shield data, Dr. Johnson found an average 50% reduction in medical utilization in all 16 major disease categories studied among subjects practicing TM as compared to matched controls.

As the elderly are responsible disproportionately for health care costs, some researchers suggest they be particularly encouraged to practice TM. One leading researcher on health care costs, Dr. Robert Herron, wrote about this in the Huffington Post on July 13, 2012. Dr. Herron remarked–on a study he did–that, ‘In the Medicare population… the highest spending 25 percent of seniors accounted for 85 percent of total expenses’ and that there was ‘a 28 percent reduction in doctors’ bills over five years from baseline for persistent high-cost people who practiced the TM technique.’”

Relatively fewer workers to pay for increasing health care costs (Excerpt)
“Between 2012 to 2050 the United Nations predicts the U.S. labor force having far fewer workers (aged 15 to 64 years) for every American over 65 years—down from 5 to 3 workers over that period.”

Exceptionally high professional fees compared to other developed countries (Excerpt)
“The following data is extracted from the International Federation of Health Plans 2012 Comparative Price Report, a 100-member group of companies in 30 countries which includes a huge group of international health providers.”

2012: Medical service provided

USA Average

Canada

Netherlands

France

US$

US$

US$

US$

Scanning & Imaging CT Scan, Abdomen

     630

    124

      267

      183

MRI

  1,121

      –

      319

      363

Hospital Charges Per Day

  4,287

      –

      731

      853

Total Hospital & Physician Charges Coronary Artery Bypass

73,420

      –

 14,061

  22,844

Physician Fees Routine Office Visit

      95

      30

       –

        30

Normal Delivery

  3,096

    536

      292

      583

Huge oversupply of services, equipment (Excerpt)
“After reviewing the book, Tracking Medicine by John E. Wennberg, Arnold Relman on September 30, 2010, wrote, ‘[Wennberg] provides convincing evidence that oversupply of services throughout the U.S. adds greatly to the cost of care.’

Mr. Relman adds, ‘Wennberg [says] that since the medical care in the low-expenditure areas is not discernibly different in quality from that in the high-expenditure areas, a huge amount of money could be saved if all the country were to receive care the way it is provided in the low-expenditure areas. Wennberg estimates the savings would be about 30 to 40 percent.’”

Administration costs and fraud (Excerpt)
“American health care administrative costs (at roughly 7 per cent of all health care costs) are roughly double those of other developed countries, says Mark Pearson, Head, Health Division, of the OECD.  And the Federal Bureau of Investigation calculates that fraud costs the health care system about $80 billion annually—or about 3 per cent of all health care expenditures.”

Conclusion (Excerpt)
“Resolving the health care financial quagmire and avoiding its potential financial deathblow requires unparalleled changes to the health care system and Americans’ attitudes about their health and health care. It requires reforming the health care system by implementing known cost-effective modalities. It means introducing scientifically validated cost-saving disease prevention programs such as the TM technique that create an inner fulfillment and self-sufficiency that engenders improved personal psychology, healthier lifestyles, diets, and so forth.

Implementing these recommendations could cut U.S. health care costs by 50-80 per cent and improve health outcomes—all without reducing benefits!”

References
DeVol, R. at al. (2007). An Unhealthy America: The Economic Burden of Chronic Disease—Charting a New Course to Save Lives and Increase Productivity and Economic Growth, Milken Institute.
Federal Bureau of Investigation. Rooting out health care fraud is central to the well-being of both our citizens and the overall economy.
Herron, R. E. (2011). Changes in physician costs among high-cost transcendental mediation practitioners compared with high-cost non practitioners over 5 years,  American Journal of Health Promotion, 26(1), 56-60.
International Federation of Health Plans. (2012). Comparative Price Report, Variation in Medical and Hospital Prices by Country, United Kingdom.
Kotlikoff, L. J. (2012). The Hysterical Economy, VOX, December 16, 2012.
Kotlikoff, L. J. (2013). America in Worse Fiscal Shape than Detroit–Professor Laurence Kotlikoff, video interview with host Greg Hunter, USA Watchdog, December 4.
Orme-Johnson, D. (1987). Medical care utilization and the Transcendental Meditation program, Psychosomatic Medicine, 49(1), 493–507.
Pearson, M. (2009). Disparities in health expenditure across OECD countries: Why does the United States spend so much more than other countries? Written statement to the U.S. Senate Special Committee on Aging, September 30, P.7.
Relman, A. (2010). Health Care: The Disquieting Truth, The New York Review of Books, September 30.
United Nations. (2012). Department of Economic and Social Affairs, Population Division, Population Ageing and Development.
Wennberg, J. E. (2010). Tracking Medicine: A Researcher’s Quest to Understand Health Care, Oxford University Press, first edition.

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* In his prospective book, Resolving America’s Economic Quagmire… individuals gaining inner fulfillment is the key, Mr. Robins elucidates America’s hidden structural economic and social fault lines, their costs, and the economic benefits when resolved in the viable manner he prescribes. Furthermore, he determines that unresolved, these fault lines are a deathblow to America’s well-being.

Mr. Robins believes this financial deathblow might only be stopped by a fundamental shift in individual and collective consciousness: from that centered on seeking instant gratification and fulfillment outside of ourselves, to one focused on ‘internal fulfillment and mental balance.’ Mr. Robins argues that to create this change, the scientific literature suggests the Transcendental Meditation program could be an optimal solution.

Each chapter of his book examines an area of society—health, environment, family, crime, and so forth—in the light of known cost-effective modalities to improve conditions applicable to that area, as well as the associated merits of the TM program. Where possible, the dollar cost savings are shown in relation to their share of gross domestic product (GDP). Mr. Robins estimates his proposals may produce overall savings to GDP of over 40 per cent.

These cost savings will allow for the deployment of unparalleled new economic resources to greatly enhance Americans’ economic and social well-being.

© Ron Robins 2013

 

Posted in Consciousness/Psychology, Economics | Tagged: , , , , , , , , , , | 2 Comments »

• Americans Say it’s Still a Recession—or Worse!

Posted by Ron Robins on June 21, 2011

By Ron Robins. First published June 1, 2011, in his weekly economics and finance column at alrroya.com

Why don’t Americans believe Mr. Ben Bernanke, the chairman of the US Federal Reserve, that the economy is growing and getting better? Americans are right not to believe him and the Obama administration that the economy is on the verge of significant and sustained growth. Past predictions by these parties have either been flat out wrong or overly optimistic. Hence, Americans are not fooled and their own experience tells them that the US economy is still in recession—or worse.

They see the reality every day of joblessness and increasing poverty, and hear about out of control government deficits and debt. They know that massive deficits and debt can only mean belt tightening and increasing taxation ahead—resulting in even higher joblessness.

In a Gallup poll published April 28, Gallup found that, “more than half of Americans (55%) describe the U.S. economy as being in a recession or depression… Nor does it seem likely that — given surging gas and food prices — most would agree with the Committee [the Federal Reserve’s Open Market Committee] that ‘longer-term inflation expectations have remained stable and measures of underlying inflation are subdued.’”

And Americans are not convinced that cutting the federal government’s deficit will create jobs. A New York Times/CBS News poll on April 21 reported that, “for all the talk from Congressional Republicans and Mr. Obama of cutting the deficit as a way to improve the economy, only 29 percent of respondents said it would create more jobs. Twenty-seven percent said it would have no effect on the employment outlook, and 29 percent said it would cost jobs…”

Most Americans are also beginning to understand that despite the huge growth of corporate profits and executive pay in recent decades, their pay has been left far, far behind. And this adds to their belief that the economy for most Americans is one of continuing and growing recession.

On March 16 Yahoo Finance noted that, “since 1973, the median take home pay of full-time workers is virtually unchanged on an inflation-adjusted basis. [That] the top 11,000 households in America have more income than the bottom 25 million. [And] since 1976, 58% of real income growth has gone to the top 1% of Americans… ” Jeffrey Sachs, professor of economics at Columbia University, says in the article that, “we’ve reached the greatest income [and] wealth inequality in history… the people at the top buy the politicians… All of them – all parties. Everyone is in the hands of the super wealthy.’”

However, the above inflation adjusted median take home pay situation of full-time workers is probably even far worse than depicted. Unfortunately, the take home pay data above is discounted by US government inflation statistics which have had numerous ‘modifications’ over the years that cumulatively, effectively, and dramatically, have lowered the inflation rate from what it would otherwise have been. With a higher inflation rate, the real take home pay in the above analysis becomes almost miniscule.

For many years now, the current US consumer price index (CPI) no longer measures the prices of a fixed basket of goods and services. To understand what the CPI really is, see my post, Unethical Statistics Lead us Astray. Shadowstats.com has created their SGS Alternate CPI which they say is a true “measure of the cost of living needed to maintain a constant standard of living,” and it is now running about 10 per cent higher than a year ago. That compares with nominal wages increasing only around 2 per cent over the same period, according to the US Bureau of Labor. No wonder that Americans feel they are still in a recession—or a depression.

Adding to Americans’ sense of economic distress is that the US job market is becoming one of lower paying jobs. In 1980, the US had a plethora of middle income jobs—about 75 per cent more than low income jobs. However, by 2010, the number of middle and low income jobs were almost even at just over 40 per cent each of America’s job market, as reported by Sherle R. Schwenninger and Samuel Sherraden in, “The American Middle Class Under Stress,” released by the New America Foundation on April 27.

Schwenninger and Sherraden also report that, “wages and salaries have fallen from 60% of personal income in 1980 to 51% in 2010. Government transfers have risen from 11.7% of personal income in 1980 to 18.4% in 2010, a post-War high… [and] America’s social wage has been eroded by the rising cost of health care and education. Health care spending increased from 9.5% of personal consumption in 1980 to 16.3% in 2010… The average cost of one year of college… after adjusting for inflation… has risen 72% since 1990… ”

They continue that, “household net worth declined from $65.7 trillion in the second quarter of 2007 to $56.8 trillion in the fourth quarter of 2010… At the end of 2010, 23.1% of all residential properties with a mortgage were underwater [home value being less than the principal left on the mortgage]… Over the past three decades, household debt as a share of disposable income increased from 68% to 116%.”

The data is irrefutable that Americans are suffering financially in ways they never before imagined. While the rich get richer, they get relatively poorer and ever more dependent on debt and government handouts. No press conferences like the one on April 27 by Mr. Bernanke, or government propaganda, will convince suffering Americans that the ‘system’ has not been rigged against them, or that there is the possibility for any substantive improvement ahead. It is no wonder that most Americans believe that the US is still in recession—or worse!

Copyright alrroya.com

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• The Economic Statistic US Elites Keep ‘Hush-Hush’

Posted by Ron Robins on June 14, 2011

By Ron Robins. First published June 6, 2011, in his weekly economics and finance column at alrroya.com

It is a simple statistic that continues to warn of huge economic problems ahead for the US. Some economists call it the ‘marginal productivity of debt (MPD).’ It relates the change in the level of all debt (consumer, corporate, government etc.) in a country to the change in its gross domestic product (GDP). However, due to the message it is delivering, most US economists employed in financial institutions, governments and private industry, as well as financiers and politicians, want to ignore it.

And for the US economy and government finances, the MPD (and related variants of it) is continuing to indicate extremely difficult economic times ahead.

I have vague recollections of the MPD concept from my economics classes long ago. But I was re-introduced to it around 2001 by a renowned economist who, during the following few years prior to his passing, became alarmed as to the MPD path of the US. His name was Dr. Kurt Richebächer, formerly chief economist and managing director of Germany’s Dresdner Bank. Dr. Richebächer, was so respected that former US Federal Reserve Chairman, Paul Volcker once said of him that, “sometimes I think that the job of central bankers is to prove Kurt Richebächer wrong,” reported the online financial journal, The Daily Reckoning on May 15, 2004.

Investigating Dr. Richebächer’s concern further, I wrote an article on my Enlightened Economics blog on January 23, 2008, titled, Is the Amazing US Debt Productivity Decline Coming to a Bad End? I found that, “for decades, each dollar of new debt has created increasingly less and less national income and economic activity. With this ‘debt productivity decline,’ new evidence suggests we could be near the end-game… ”

Another way of viewing the debt productivity problem is to look at it in terms of how many dollars of debt it took to help create total national income, which is the wages, salaries, profits, rents and interest income of everyone. Again, from my above mentioned article, which quotes Michael Hodges in his Total America Debt Report, that, “in 1957 there was $1.86 in debt for each dollar of net national income, but [by] 2006 there was $4.60 of debt for each dollar of national income – up 147 per cent. It also means this extra $2.74 of debt per dollar of national income produced zilch extra national income. In 2006 alone it took $6.32 of new debt to produce one dollar of national income.”

Such data helps explain why US exponential debt growth—after reaching certain limits—collapsed in 2008 and contributed massively to the global financial crash.

However, whereas the US private sector debt has marginally ‘de-leveraged’ (retrenched) since that crash (which might now be reversing), the US government, as everyone knows, has run up mammoth deficits to purportedly keep the country’s economy from imploding. Thus, the US’s MPD is marching to another, perhaps even more frightening tune, suggesting government financial insolvency and/or debt default.

One fascinating way of looking at the declining MPD of US government debt has just been presented by Rob Arnott on May 9, 2011, in his post, Does Unreal GDP Drive Our Policy Choices? What Mr. Arnott does is to subtract out the change in debt growth from GDP, and refers to this statistic as ‘Structural GDP.’ He finds that, “the real per capita Structural GDP, after subtracting the growth in public debt, remains 10 per cent below the 2007 peak, and is down 5 per cent in the past decade. Net of deficit spending, our prosperity is nearly unchanged from 1998, 13 years ago.”

In its effort to counter the significant economic difficulties since 2008, the US government has added, or will have added, around $4 trillion in deficits (financed by new debt) in its three fiscal years 2009, 2010 and 2011. Yet, all this massive government deficit spending has failed to really ignite economic growth. Most likely this is because of the enormous dead weight of unproductive and onerous private sector debt, particularly that of consumer debt. Hence, real US GDP will have increased probably less than $1.5trn during these years. Including some further economic benefit in the years thereafter, a total GDP benefit of only about $2trn is probable.

So, $4trn borrowed for $2trn in GDP gains. Thus, in very rough round numbers, each new one dollar of US government debt might only produce $0.50 in new economic activity and probably only about $0.08 in new federal tax revenue. (Federal tax revenue as a percentage of GDP is around 15 per cent.) Therefore, the economic marginal return for each new dollar of US government debt is possibly around -50 per cent! If you loaned someone $10 million and they gave you back $5m, you would not be happy!

Hence, it might not be long before those holding or buying US government bonds perceive the reality that the US government, and US economy, are losing massively on government borrowings. This will result in much, much higher US government bond yields and interest costs. Most importantly, it may make the rollover of US debt and new debt issuance incredibly difficult unless either US taxes rise stratospherically to cover the deficits, and/or the US Federal Reserve money printing goes into hyper-drive to purchase the debt the markets will not buy. (Of course US banks, pension funds etc., could also be forced to buy them.)

Thus, the idea that US government debt continues to be ‘risk-free’ is absurd.

For this, and for many other reasons cited above, is why the US financial and political elites want to keep hush-hush about what the MPD and its variants reveal!

Copyright alrroya.com

Posted in Economic Measurement, Economics, Monetary Policy, Statistics | Tagged: , , , , , , , , , , , , , , , , , , , , | 5 Comments »

 
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