A Pamphlet from Don Stuart, Preserve Our Nation, LLC
Pamphlet #27 - 9/14/2009

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What is HealthCare Inflation?

Inflation. We all know what inflation is. Inflation is the rise in the Consumer Price Index (CPI) as measured by the government's calculation of the general rise in the price of the goods and services.

But what is HealthCare Inflation? Let's take an aspirin from 1980. The price has gone up in the last 30 years and we expect to pay an inflated price for a aspirin today. We would expect the price to be adjusted by the inflation rate from 1980 till today. Per the CPI, $1.00 for a bottle of aspirin in 1980 would cost $2.62 today.

HealthCare Inflation is not the rate of inflation of the cost of medical care but is the cost of new medical care. Would you want to be treated with the medical treatment from 1980 today? I guess not. So with every invention or new medicine the price is established and it rises with the CPI inflation rate from then on.

The problem is that new medicines, new inventions and medical improvements are being created every year. Are you not willing to pay a higher cost for new life saving care? Or would you rather buy the old 1980 care at an inflation adjusted price?

So HealthCare Inflation is not an appropriate way to judge the cost of healthcare. Inflation is not the only criteria causing Healthcare cost to rise.

So let's look at the cost and payments numbers for Medicare. Why Medicare? Because the President stated the new HealthCare plan is to be like Medicare. We have heard the following statements from the current debate on Healthcare.

Lets look at these statements

Numbers from the Debate
  • Medicare pay 94% of actual cost to delivery care.
  • Medicare pays 20% less than Private Insurance Companies for care.
  • Doctors and Hospitals charge Private Insurance Companies 36% more for care.

What can we get from these statements.

On the first statement, "Why does the government cheat the medical service providers by not covering their cost to provide the care?" In other words, why is my doctor and my local hospital not receiving adequate payments to cover their loss? Doesn't this mean they have to pass that loss on to the rest of us? Does my local hospital have to get special tax treatment from my city, my county and my state to stay in business? Is this just another one of those Federal programs that dictate a program and pass the cost to the states and communities and finally on to the citizens. (Actually the citizens are the ones who pay all the final bills via taxes.)

As to my doctor taking a loss on his care for patients it is not a good incentive for him/her to stay in business or to attact new doctors to the area. How does he pass this loss on to others? You know he will because he has to just like all other business. They have to raise the price they charge on to others to make up for the loss.

But who are the others? I don't know anyone who pays cash to their doctor or the hospital. But I know they exist. There are those who also can never pay their bills. How does the medical providers cover these losses?

So what do the medical providers do? They have to raise the cost to those who have private insurance. Private Insurance then raises their premiums to you and me so that they can pay the doctors and hospitals for our care.

So now to the answer for the second statement above. As read above this is why Medicare pays 20% less than private insurance companies. The cost of the service by the doctor and hospital is higher for private insurance companies to cover the losses incurred by Medicare.

Moving to the third statement. This causes doctors and hospitals to charge as much as 36% more for their services. Medical providers have to make up their losses and the only way is to raise prices for everybody else.

As an example of how this works, I suggest you also read my issue statement on Healthcare.

So how does the percentage work?

  • 100% -- is the cost to provide service
  • 94% -- is the Medicare refund rate.
  • 136% -- is the cost plus profit medical providers bill the private insurance companies for services.

Since the number of Medicare and private insured patients are not the same, we have to make sure not to misunderstand the percentages. The above numbers do not represent a one-to-one comparison of Medicare and privately insured patients. For those comparsisons, select the link above to read my issues on Healthcare.

So when will HealthCare Inflation peak? That is, when will we plateau at a point when we feel that we have the best healthcare and believe that better healthcare would not beneficially help us? Or will we plateau when the government decides that we have adequate healthcare and have to live with our established healthcare limits?

Which do you want?

One way to protect our freedom of choice of Healthcare options is to amend the Constitution.

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