Eric

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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 fault.

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.

That deductible, 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 credit card.

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.

© 2008 North Star Writers Group. May not be republished without permission.

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