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The Real Deficit Problem (Gwen Moritz Editor’s Note)

4 min read

I wasn’t able to hear all of Jim Glassman’s presentation in Little Rock last week, but I heard enough from JPMorgan Chase & Co.’s senior economist to wish a lot more people had been there.

Glassman pooh-poohed fears of hyperinflation, the stuff Art Laffer and The Wall Street Journal “panicked” about. Instead he seemed to be hoping for a bit more inflation simply as a sign of the “fundamental strength of an economy” and evidence that businesses have regained some pricing power.

He’d like to see a lot more vehicles running on natural gas — not, as far as I could tell, because he’s particularly concerned about cleaner energy, but because that kind of demand would drive up the price of a commodity that the United States has in abundance.

The topic that interested me most, and about which I talked with him afterward, was his connection of the federal budget deficit and health care costs — problems that to Glassman are one and the same.

“The fear-the-debt crowd,” he said, “is missing the real problem.”

The federal budget deficit, he said, “is not a problem you solve by raising taxes and cutting spending.”

The solution, in Glassman’s mind, is to get health care inflation under control, which is going to be impossible as long as no one knows what anything costs — as long as even the doctors ordering tests and prescribing medications don’t know what kind of bills they are running up.

(His point should be obvious to everyone who has ever received a medical bill but set it aside in the secure knowledge that the bottom line is a fiction to be ignored until after the insurance company tells us what we really owe, which will be a total surprise.)

Medicare can’t survive in its current form, Glassman said, and he gives Rep. Paul Ryan, the Wisconsin Republican who was Mitt Romney’s running mate in 2012, credit for “breaking the ice” on the hard discussion of entitlements.

But just bringing in more Medicare taxes will never be enough. “I really think the problem is lack of competition in the health care industry,” he told me, acknowledging that “health care is a hard thing to apply economics to.”

Glassman used the hard-to-hear word “rationing” to describe what he thinks needs to happen with basic health insurance in our country, although the wealthy would certainly be able to buy care and treatment that lower-income people could not afford. He advocates tort reform primarily to relieve doctors of the pressure to spend ridiculous amounts of Medicare money on futile attempts to prolong the lives of the elderly.

(You may recall that paying doctors for the time it takes to counsel Medicare patients about end-of-life decisions was removed from the Affordable Care Act because certain political interests insisted that it was tantamount to “death panels.” It’s not too late for Congress to put it back in, provided any politician is brave enough to cast a vote to improve Obamacare knowing that it will be used against him in a future campaign ad.)

As for the employer-sponsored system that has been a peculiar mainstay of the American health insurance system, Glassman said, “I’d get business out of the business of doing it.” This, of course, has been my biggest disappointment in the ACA — that it cemented in place the completely artificial connection between where one works and what kind of health insurance one gets.

The tax code has long encouraged companies to pay for employee insurance, and the ACA attempted to make it mandatory, although enforcement has been repeatedly delayed. That’s another area that could be improved if any politician could withstand the fallout from actually improving Obamacare.

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My husband took a new job in August, and we decided to move our family to the high-deductible policy offered by his new employer. It’s truly amazing how much more thought one puts into health care spending when the first $2,000 comes straight out of pocket.

On a Saturday afternoon two weeks into our new coverage, I dropped a kitchen knife on my foot. As my husband was trying to clean up what looked like a case for CSI on our kitchen floor, I was pulling out the new insurance card and insisting that he call the helpline to get advice.

Instead of driving to the emergency room, our first impulse, we ended up at an urgent-care clinic. The bill for five stitches and two follow-up visits was less than $400. That’s less than a quarter of the average ER cost for treating “open wounds of extremities,” according to a National Institutes of Health study of ER charges between 2006-08. I’m sure the saving was even greater six years later.

Email Gwen Moritz, editor of Arkansas Business, at GMoritz@ABPG.com.

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