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February 15, 2008
Someone Tell Karl
Rove: Health Care, Debt Bringing on Recession
Asked on Fox News whether the economy is headed toward a
recession, former George W. Bush adviser Karl Rove gave an answer stock
in trade for the administration he once served – it’s someone else’s
In this case, it’s the
media’s fault for coloring people’s perceptions, he said.
Anyone wondering how Rove
wound up with a prime writing gig covering the election with Newsweek?
The evidence that the
national economy is headed for a recession, potentially for the long
term, is mounting. Practically no one with an honest eye on things
believes it will get better any time soon or that it won’t get worse.
The reasons for this are
many, and the failure of the housing industry is really only just a very
prominent, easy-to-grasp reason. But the same things that failed there
are failing in other places, mostly that the American economy is today
built on a foundation of paper – increasingly bad paper of debt and
credit. You can’t build something on the premise that you’ll pay someone
back later and not expect the bill to eventually come due.
The day-to-day struggles
of families to keep their heads above choppy financial waters are taking
place in the forefront. In the background, if you look closely enough,
is a coming crisis in health care.
Oh, it’s not a new
problem certainly, but the connection between family debt and
disappearing benefits and declining national health care is something
that hasn’t gotten much ink.
Part of the cause for
that is contained in the president’s proposed budget for next fiscal
year. In what is part of yet another trend, the president’s budget goes
heavy on foreign wars and light on domestic spending. Part of that is
yet another cut in reimbursements for Medicaid and Medicare, and it is
this that will have a negative impact on the nation’s health care.
Reimbursement levels for
Medicaid and Medicare for the last couple of years – after some
last-minute deal making – have remained stagnant. The problem is that
while reimbursements have held steady, costs have continued to rise.
Anyone who’s ever gone a year without a pay raise at a job understands
what this means – less spending power from the same pool of money.
This is coupled with
something else – Medicaid and Medicare patients are a financial loss for
health care providers. That is, the money a hospital gets to treat a
patient on Medicaid doesn’t cover the costs of treating that patient.
Eventually the ledger has
to balance out, so those costs are passed along to other patients and
insurance plans, which has helped businesses look for ways to save on
benefits. In the last couple of years, deductibles have skyrocketed.
Where once it might have been typical for a company to offer a $250
deductible for services, these days it’s not uncommon for deductibles to
go over $1,000.
naturally, has to be covered by the patient, and the result is medical
debt piled on top of mortgages, car payments and – of course – the
And here is the bad news.
As Baby Boomers age, it will create a giant lump of people moving
through the health care system on Medicaid and Medicare, which itself
will be paid for by a smaller pool of people – their children.
Woes in health care will
become a public problem, especially as health care spending expands to
what some think will be as much as 25 percent of the GDP. We could
recover from one recession only to slip into a new one. The fact that we
can see it coming only makes the entire thing sadder.
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