Date: 01/25/2010 Posted By: Jon Barron
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The Healthcare Disaster
Okay, I'm about to make everyone reading this newsletter angry -- Democrats, Republicans, and Tea Party members. And for those of you living in Europe, China, South Korea, and Japan, you might as well get upset too...
All healthcare plans, private or national, existing or proposed, are giant Ponzi schemes. They depend on ever larger numbers of new, young healthy people pumping money into the system with no need to pull money out in the near term so that the older sicker population can use that money to take care of themselves. Again, it doesn't matter whether the money is being given to private insurance companies or governments, the principle is the same -- an ever larger number of young, healthy citizens supports a smaller number of older sicker citizens. And like all Ponzi schemes, it works as long as no one upsets the apple cart. But the moment there are no longer enough "new," young, healthy people to keep priming the pump, or those "new" contributors need to pull their money out before their time, the system collapses.
And that's the situation we now face.
Outside the countries of Japan and South Korea, Europe is aging faster than any other part of the globe. In 2006, 21 percent of Europeans were older than 60 years of age. By 2050, nearly 34 percent will be above 60. Quite simply, you're talking about a dramatic reduction in the number of young, healthy people priming the pump and a dramatic increase in the number of senior citizens drawing from the well. The only solution is an equally dramatic increase in the amount of taxes that the young, healthy workforce will have to pay in order to sustain the system.
And that's if the younger, healthier population doesn't have to pull its money from the Ponzi scheme before its time. But in fact, they will. That's the self-inflicted disease demographic I mentioned, and that we'll explore in more detail in a minute. For now, just understand that an aging population means more people drawing on the system and fewer people paying into it. The only way to keep the books balanced is for those paying in to pay more…or to reduce the amount of care that senior citizens are getting.
That covers Europe. But as I said above, Japan and South Korea are actually aging even faster. As for China, it too is aging rapidly, largely as a result of government policy that mandated smaller families. In fact, in China, the current ratio of 16 elderly people per 100 workers is set to double by 2025, then double again to 61 by 2050, according to the Washington-based Center for Strategic and International Studies. But it's not just established countries that are aging. Countries such as Mexico are projected to reach developed-world levels of old-age dependency by the middle of the century.
As for the United States, it too is aging, but more slowly than many countries in the developed world. But that "more slowly" is based on a couple of questionable premises. First, a significant factor in keeping the U.S. population "young" is teenage pregnancy. Despite the promotion of "morality" in the U.S., the U.S. actually leads much of the world in teenage pregnancy. Unfortunately, children born to teenage mothers are much more likely to become welfare babies and "draw" money from the system as children and young adults, rather than contribute to it. In other words, they exacerbate the problem, not make it better.
Immigration
If a country's population isn't replacing itself fast enough, there's one other way to keep the population young -- immigration. This has been one of the prime factors that has pumped new, young, healthy workers into the system thereby continually pumping up the pool of young taxpayers to support it. In this regard, the U.S. has in the past been far friendlier to immigrants than Europe, Japan, China, and South Korea, for example -- and thus delayed the aging of the country. However, that is changing. Thanks to 9/11 and changing attitudes in general, the current citizenry of the U.S. views immigrants less favorably than in the past. In addition, the economic disruption of the last year has made the U.S. a less attractive destination for many immigrants. The upshot is that immigration is down in the U.S., and the immigrants who are coming in are the older family members of immigrants who are already here -- rather than the young, healthy, opportunity seeking, "new" immigrants needed to support the Ponzi scheme. The bottom line is that in the coming years immigration will less and less be a factor in slowing down the aging of America.
Self-inflicted disease
And now we come to the big one, the elephant in the room no one wants to talk about -- self-inflicted catastrophic illness. Over the years, I've written many times about this issue -- always ending with the same conclusion:
No amount of tinkering and funding can stop the inevitable train wreck barreling towards us -- unless there's a major paradigm shift. No matter where you live or what healthcare system you function under, the demographics are undeniable. The American model is headed for disaster. But so is the French model. How can any healthcare system survive up to half its population living for 20-30 years with severe diabetes (as predicted by the CDC), let alone the other half suffering from cancer, heart disease, osteoporosis, Alzheimer's disease, and MS? There isn't enough money in the world to cover it.
And every time I return to the issue, the numbers have only gotten worse. Let's take a quick look at some of those numbers.
Diabetes
Literally just days ago, The Medical News published the latest analysis which showed that the cost of diabetes and pre-diabetes reached $218 billion in 2007, with the exploding number of cases of type 2 diabetes responsible for the majority of the costs. And those numbers are three years old! Update them for today -- and over the next ten years -- and you're looking at an average of a quarter of a trillion dollars a year over the next ten years in the United States alone. Do the math and that's $2.5 trillion dollars unnecessarily spent on a just one self-inflicted disease over the next ten years whether a healthcare bill passes or not. If people in the United States didn't give themselves diabetes through diet and lifestyle choices, the savings alone would 100% cover:
- All costs associated with any healthcare bill including covering all those currently uncovered.
- 100% of the cost of the bank bailout.
- 100% of the cost of the stimulus plan.
And that's with no new taxes, and that's just one disease.
As for heart disease, it's estimated that anywhere from 50-80% of heart disease is the result of dietary and lifestyle choices. (Personally, I put the number at 90%.) How much does that cost us? The cost of heart disease and stroke in the United States, including healthcare expenditures and lost productivity from deaths and disability, is projected to be more than $475 billion in 2009. As the U.S. population ages, the economic impact of cardiovascular diseases on our nation's healthcare system will become even greater. So again, using the conservative estimate of around 50% of that cost being self-inflicted, you're looking at another quarter of a trillion dollars a year in unnecessary costs per year.
And then there's cancer. Overall, environmental factors, defined broadly to include tobacco use, diet, infectious diseases, chemicals, and radiation, are believed to cause between 75 and 80 percent of all cancer cases in the United States. And that's not even considering the percentage of breast cancers caused by hormone replacement therapy (still commonly used) and yearly mammograms. And what are the costs associated with preventable cancer? The estimates are all over the map depending on how you look at the numbers. But at the low end, you're looking at close to a quarter of a trillion dollars a year (again) back in 2000 -- and at the high end, just under a trillion dollars a year in 2000.
So, let's add the numbers up.
At the low end, you're looking at $750 billion a year paid in the U.S. for the three major self-inflicted catastrophic diseases. Over the next 20 years, that's $15 trillion. Now you're talking about not just paying for healthcare, but literally paying off the entire national debt -- with no new taxes!!! On the other hand, if we continue to head down the road we're on, we're looking at ever higher taxes, ever greater debt, and a disintegrating healthcare system.
And every other country in the world can look forward to the same scenario.
Conclusion
Like a broken record, I keep repeating:
Pretending that any tinkering of the world's current healthcare systems can produce a viable solution to this problem of compounding demographics is the equivalent to rearranging deck chairs on the Titanic. At some point, our children will be left drowning in debt. The bottom line is that the only way that healthcare can survive -- the only way you can survive -- is if you take back control of your health and start doing those things that allow your body to stay healthy without the need for healthcare. Or to put it another way, the only way to save healthcare is to stop relying on it, use it only for the exceptional, and take care of yourself.
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