AMERICAN ISSUES PROJECT

"We're out of money."

President Barack Obama said those sobering words to C-Span reporter Steve Scully. He blamed the current economic crisis, but also used the opportunity to promote his health care agenda.  He said America is operating in deep deficits because of "our failure to make some good decisions on health care over the last several decades."

He's right.  There have been some very poor decisions made, starting with the creation of Medicare and Medicaid.

It reminds me of a Thomas Sowell quote, "It is fascinating to watch politicians come up with 'solutions' to problems that are a direct result of their previous solutions.  In many cases, the most efficient thing to do would be to repeal their previous solution and stop being so gung-ho for creating new solutions in the future.  But, politically, that is the last thing they will do."

The current health care crisis is exactly as Sowell says.

In 1965, health insurance was primarily an employee benefit.  People received their health insurance from their employers due to a federal tax rule, exempting taxes on those benefits.  President Johnson's Medicare and Medicaid programs covered the two demographics that didn't have insurance:  the elderly and the poor.

By 1970, Medicare's cost was $42 billion. Thirty-eight years later, it's ballooned to $468 billion, a 1000 percent increase.

Why has this happened?

First, there are simply more people. The number of people enrolled in Medicare is twice what is was with the program began. The cost per person has still increased fivefold.  Again, why?

Well, the cost of health care has increased drastically. From 1940 to 1960, health care prices increased from 4 percent of the GDP to 5.2 percent. From 1960 to today, that percentage has increased to 17. You can blame part of that increase on a mixture of easy government money and greed.

Medicare and Medicaid are both "fee for service" programs. Doctors, seeing the opportunity, stopped providing some services for free, and raised the prices for others.  Had patients been paying for this service, rather than the government, it is unlikely this increase would have happened.

Another reason is fraud.  It is estimated that at least $60 billion of the cost of Medicare is because of fraud.  In 2007, the inspector general for the Department for Health and Human Services reported South Florida submitted 72 percent of all the claims for HIV/AIDS treatment.  However, only 8 percent of HIV/AIDS beneficiaries call South Florida home.

In another case, one woman with a laptop scammed the government out of $105 million.  It took Rita Campos Ramirez four years, but she was able to submit 104,000 Medicare claims for services and equipment she didn't need. 

The medical equipment industry also sees Medicare as a cash cow.  According to The Boston Globe, an oxygen tank setup, including tank deliveries for three years, will cost a private citizen "as little as $3,500, or about $100 a month."

That same setup costs the federal government $8,280.  Medicare spent $1.8 billion in one year, just on oxygen equipment.  Billions are spent on products that could be bought at lower prices from local pharmacies or online stores.  But federal rules won't allow it.

Medicare buys equipment based on fixed prices and fee schedules, rather than the free market.  Medical supply companies spend a lot of money to ensure this system stays in place.  In 2003, the system was threatened by conservatives in Congress, who wanted to pass a law requiring Health and Human Services to replace fee schedules with a bidding system.

In 2008, Democrat Max Baucus, who received $4,000 from homecare lobbyist American Association for Homecare, preserved the fee system.  According to the Heritage Foundation, the bidding plan would have saved taxpayers $1 billion a year.  Baucus recently voced support for taxing health benefits, the reason employers provide health insurance in the first place.

Senators and Congreesmen hear from lobbyists by proxy also.  When they threaten the medical supply companies, the medical supply companies hit them where it really hurts:  their constituents. Here is a video from InHome Medical from December of 2008.  How big of an impact do you think this has on the voting habits of carreer politicians who know the elderly vote?

There is one final reason we are "out of money" and it stems all the way back to FDR.  During his battle with the Great Depression, he found the Supreme Court less than cooperative with his socialistic plans, and while one decision deemed a program unconstitutional, it opened the door to the mess we have today.

In United States v. Butler, the Supreme Court completely rewrote the meaning of "general welfare."  Founding father James Madison wrote, "With respect to the words "general welfare," I have always regarded them as qualified by the detail of powers connected with them. To take them in a literal and unlimited sense would be a metamorphosis of the Constitution into a character which there is a host of proofs was not contemplated by its creators."

The Supreme Court in 1936 wrote, "...the power of Congress to authorize expenditure of public moneys for public purposes is not limited by the direct grants of legislative power found in the Constitution."

With that decision, the door was opened to spend federal taxes on anything the Congress deemed necessary for "the general welfare." 

For decades, the federal government entered into areas it was never intended to be, with disastrous results.  The solution does not lie in repeating the mistakes that lead us here.  It's in returning to a limited government and a free market.

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