There has been a great deal of talk about schemes for health care payments. We look briefly at some herein.
Medicare
Medicare is generally, but not always, for those over 65. It functions as shown below.
Namely a person spends their entire working life, say 40 years, contributing 3% of their gross pay, with NO cap as is the case for Social Security, and then at 65 they have the option of enrolling in Medicare. They pay about $50 per month per person. But what of the amount they contributed for those 40 years? Well, let us calculate what that may have been. We make some simple assumptions. We assume that they made $80,000 a year for 40 years and that the money gained a simple 6% per annum interest. Thus when they retire at 65 they have accumulated $370,000 which they now deduct a fixed amount for say their remaining 20 years of life. This equals to a payout of $32,400 from what they contributed and added to their current payment it is $33,000 per year! It costs about $8,000 per year to care for them. So what is the problem, First of course is that most people did not make $80,000, but we will account for that shortly. Second, the real problem is the Government already spent the money! Medicare really has no problem, Government does, it spends beyond what it has collected. If Medicare were say an independent fund non attachable by the Government then it would be self supporting.
Now let us look at the sensitivity to this number. We show this in the following Figure.
Note that the number scales simply. That is we can calculate what the amount would be at say $30,000 per year, which would be $12,200 for a 20 year life span plus the $600 per month. This is still well above the cost! You would have to go even lower to get below cost but the average salary per working person is well above that number. Why has no one ever calculate this number? Because it demonstrates that the Government is the problem NOT the way the system works!
Medicaid
The next system is Medicaid. This is a problem because unlike Medicare there is no contribution. We show this in the following Figure.
This does cost money and this is something which gets supported by those of us who already contributed to Medicare! So don't punish us workers.
Corporate
The next is the Corporate Plans. Remember that this is an artifact from when the Government regulated salaries. It was a way to give workers something when the Government denied pay raises. It is akin to the Wage Czar we have today. We show this below.
The problem with the Corporate model is that for the 40-50% of those insured covered under this the Corporations have leverage and they drive down costs below what it costs to deliver. Thus the insurers will make it up on the individual insured persons and put pressure on the providers as well.
Individuals
This group really gets the burden. The insurers delimit it to low risk persons and then charge exorbitant rates.
Co Op
The above individual model could be improved via the co-op plan which Republican have presented. This avoids a single payer Government plan as well as allowing for buying cooperatives which have some leverage with insurers. The problem is it adds another layer and the costs will reflect that.
Single Payer Government
The Democrats want a single payer plan with the Government being that payer. In many ways it is reminiscent to Medicaid with all of its problems. It does allow for a single buying pool which is a benefit but it also allows and would encourage delimiting service to reduce costs. It also begs the question of price setting and who pays whom in the process. The Government then takes away any market power that either the patient or the provider may have had, little if any now, and with this plan it would be zero.
Cost Comparisons
We now do some cost comparisons on these plans. First we show below a comparison table for all plans with assumptions which reflect the general numbers as are currently observed. Not what is contributed, what the costs are and that providers are almost uniformly getting a loss.
We show below the costs by class.
Below we show the costs across all classes. These numbers show we believe that Medicare really is the most healthy based on those who contributed and that Medicaid is the worst. Perhaps a co-op system is better than a single payer for the obvious stated reasons. The Medicare is different in that people already paid and are still paying. One must remember that even Medicare places s substantial personal burden on the individual.
Medicare
Medicare is generally, but not always, for those over 65. It functions as shown below.
Namely a person spends their entire working life, say 40 years, contributing 3% of their gross pay, with NO cap as is the case for Social Security, and then at 65 they have the option of enrolling in Medicare. They pay about $50 per month per person. But what of the amount they contributed for those 40 years? Well, let us calculate what that may have been. We make some simple assumptions. We assume that they made $80,000 a year for 40 years and that the money gained a simple 6% per annum interest. Thus when they retire at 65 they have accumulated $370,000 which they now deduct a fixed amount for say their remaining 20 years of life. This equals to a payout of $32,400 from what they contributed and added to their current payment it is $33,000 per year! It costs about $8,000 per year to care for them. So what is the problem, First of course is that most people did not make $80,000, but we will account for that shortly. Second, the real problem is the Government already spent the money! Medicare really has no problem, Government does, it spends beyond what it has collected. If Medicare were say an independent fund non attachable by the Government then it would be self supporting.
Now let us look at the sensitivity to this number. We show this in the following Figure.
Note that the number scales simply. That is we can calculate what the amount would be at say $30,000 per year, which would be $12,200 for a 20 year life span plus the $600 per month. This is still well above the cost! You would have to go even lower to get below cost but the average salary per working person is well above that number. Why has no one ever calculate this number? Because it demonstrates that the Government is the problem NOT the way the system works!
Medicaid
The next system is Medicaid. This is a problem because unlike Medicare there is no contribution. We show this in the following Figure.
This does cost money and this is something which gets supported by those of us who already contributed to Medicare! So don't punish us workers.
Corporate
The next is the Corporate Plans. Remember that this is an artifact from when the Government regulated salaries. It was a way to give workers something when the Government denied pay raises. It is akin to the Wage Czar we have today. We show this below.
The problem with the Corporate model is that for the 40-50% of those insured covered under this the Corporations have leverage and they drive down costs below what it costs to deliver. Thus the insurers will make it up on the individual insured persons and put pressure on the providers as well.
Individuals
This group really gets the burden. The insurers delimit it to low risk persons and then charge exorbitant rates.
Co Op
The above individual model could be improved via the co-op plan which Republican have presented. This avoids a single payer Government plan as well as allowing for buying cooperatives which have some leverage with insurers. The problem is it adds another layer and the costs will reflect that.
Single Payer Government
The Democrats want a single payer plan with the Government being that payer. In many ways it is reminiscent to Medicaid with all of its problems. It does allow for a single buying pool which is a benefit but it also allows and would encourage delimiting service to reduce costs. It also begs the question of price setting and who pays whom in the process. The Government then takes away any market power that either the patient or the provider may have had, little if any now, and with this plan it would be zero.
Cost Comparisons
We now do some cost comparisons on these plans. First we show below a comparison table for all plans with assumptions which reflect the general numbers as are currently observed. Not what is contributed, what the costs are and that providers are almost uniformly getting a loss.
We show below the costs by class.
Below we show the costs across all classes. These numbers show we believe that Medicare really is the most healthy based on those who contributed and that Medicaid is the worst. Perhaps a co-op system is better than a single payer for the obvious stated reasons. The Medicare is different in that people already paid and are still paying. One must remember that even Medicare places s substantial personal burden on the individual.
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