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Important Advice on How to Svert Economic and Healthcare Crisis.

The following thoughts are written by:

David Walker
The Peter G. Peterson Foundation

Past U.S. Comptroller General

As of September 30, 2007, the United States had financial obligations over $53 trillion, $34 trillion, or almost 65% of that cost, is to address the unfunded obligations for America’s Medicare program. The Medicare program and our overall health care system must be reformed.

Presently, we are facing a scenario that could require 100% of our nation’s historical level of tax revenue to pay for Medicare, Medicaid, Social Security and interest on the Nation’s debt by 2030. That’s staggering and must be a ‘wake-up’ call to the citizens of the United States. 78 million Baby Boomers will soon be retiring, and when they do, it will bring a tsunami of spending that could swamp our ship of state. We are set to increasingly mortgage our children's and grandchildren's future to pay for existing entitlement programs.

Runaway healthcare costs are our single largest fiscal challenge for the future of our country. Our health care system is out of control. We have the largest percentage of uninsured population of any major country in the world, yet we spend double the amount of money per capita than any other country. We have below average outcomes and we are number one in the world in obesity and that is not a good thing to be number one at. Medicare spends four times as much on unhealthy people as it does on healthy ones. America’s health care system is obviously broken and we are going to have to reengineer it. Wellness and preventative care has to be a key element to a fundamental review and re-engineering of our health care system.

There are four key pillars of comprehensive health care reform. First, we have to achieve universal coverage of basic and essential health care based on broad-based societal needs and not unlimited individual wants. It must be affordable and sustainable and at a minimum include more preventative care and wellness, as well as catastrophic protection, while avoiding taxpayer financed “heroic measures.” Second, we need to have a budget for what the Federal Government will spend on health care, because health care costs could bankrupt the country if we are not careful. Third, we need national evidenced-based practice standards to improve consistency, enhance quality, reduce cost, and dramatically reduce litigation risk. Lastly, we have to end up improving personal responsibility and accountability for health and wellness.

We need to have to have a national discussion and dialogue involving all key stakeholders, including the American people, to help them understand that our current system is unacceptable, unaffordable and unsustainable. We also need to gain a national consensus on what we are trying to accomplish as part of comprehensive health care reform. I suggested four pillars, they may or may not be the right ones, but until we have a national discussion, we are going to continue to take incremental steps to build on an almost dysfunctional system that is a major part of our Nation’s overall economic challenge.

As we contemplate our fiscal future, we need to recognize that we need to create a capable, credible and bi-partisan commission to focus on the need for budget controls, comprehensive Social Security reform, round one of comprehensive health care reform and round one of comprehensive tax reform. The commission should be set up so that it travels outside of Washington and in no more than a year, they can come back with a comprehensive set of proposals that will receive an up or down vote by Congress, possibly with limited amendment provisions.

This process is going to involve a lot of public engagement, a lot of public education and interacting with a range of key stakeholders. In the case of Social Security, we can do it in one reform package. In the case of health care, it’s too complex, it’s too big, it’s too emotional to do it that way, but we need to get started with comprehensive reform now. In addition, any health reform package must be designed so that it does not dig our huge financial hold deeper.

We need to make sure we have a national pool and broad based financing mechanism for the universal, basic and essential healthcare program. We then need to provide choices for people who want to obtain more health insurance coverage or protection than the basic and the essential. But if they do, they are going to have to make a trade-off of how much of their resources they want to allocate to being able to reduce the related risk.

As it relates to Federal Government programs, we have to realize that it is one thing to be eligible for a Federal Government program and have guaranteed insurability at group rates; it’s another thing to receive the same taxpayer subsidy irrespective of your personal financial condition. In the case of Medicare Part B and Medicare Part D, which is physician payments and prescription drugs, respectively, they are voluntary programs. In other words, you don’t have to participate in them. The problem is that on average people only pay 25% of the cost of these programs, irrespective of their personal financial need and status. If you are near poor then that makes sense, but if you are wealthy or have above average income, it doesn’t make sense for taxpayers to be subsidizing a voluntary health care program to the extent they currently do. A similar type of middle and upper class subsidy system exists under the tax code in connection with employer provided and paid health care costs. This does not make sense and it’s especially inappropriate today in a time of huge and growing deficits and debt levels since it’s our children, grandchildren, and future generations who will ultimately be asked to pay the bill. That is not only financially irresponsible, it’s morally wrong.

Better health and well-being isn’t just a matter of money. It’s also a matter of economic growth, a matter of productivity and a matter of personal happiness. There are lots of reasons why we need to fundamentally change our focus on health care. We can end up creating a happier, healthier society that’s going to improve our economy, that’s going to help our productivity and that’s going to enhance our competitiveness. Quite frankly, in today’s knowledge based service economy and with slow work force growth and current demographic trends, we need to encourage people to work longer, and in many cases because of recent market trends, they are going to have to.

I think intelligent and forward looking employers can see that if you invest in your workforce, over time you can end up generating returns. The difficulty is that loyalty is a problem today. Employers have not historically been able to invest a lot of money in the better health and wellness of their employees because they have so much workforce turnover. They don’t necessarily think they are going to get the return on that investment.

That’s why I believe it’s important that as part of whatever universal coverage program we have in this country, health and wellness and preventative care has to be a part of that universal program. The bigger the pool you have, the bigger the opportunity you will have to benefit from the long term rate of return we need to achieve.

It’s simple; if you want to live a long healthy productive and happy life you need to assume more personal responsibility for your own health and wellness. How you eat, whether or not you exercise, how much sleep you get, whether and how much you drink or smoke, how much stress you are subject to, all are factors. We all have a responsibility to be able to control whatever we can with regard to our own personal behavior, irrespective of our genetic makeup.

The thing that one must recognize is the reality that the Government has over promised with regard to a lot of social insurance programs, especially in the healthcare area. Those promises will have to get renegotiated. Yes, Medicare, Medicaid, and Social Security are going to continue in the future, but they need to be reformed and more well off individuals are going to have to assume more personal responsibility for their financial future. In addition, most Americans are probably going to have to consider working longer, either full time or part time, because of financial need and because of our national need. This is just the reality of our present and prospective situation.

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