Oracle - June
2003
As I write this Oracle, it appears that the United States Congress
is going to add some kind of prescription drug benefit to Medicare, the Federal government program
which provides taxpayer supported medical care to the elderly. Differences
have yet to be worked out between the U.S. Senate version of legislation
and the U.S. House version, but it is crystal clear that something will come
about by autumn. President Bush no doubt, has something to say about negociations
of any plan, but a messy kind of plan will probably be enacted within three
to four months.
My prediction:
The new taxpayer drug entitlement to the elderly has widely been
reported in the media as costing about $400 billion over the next ten years.
This dollar amount will easily be overrun.
The overwhelming majority of government programs
end up having cost overruns over estimates and Medicare is a particularly
glaring example of this. For example, in 1966 sceptics asked members of
then President Lyndon Johnson's administration how much the program would
end up costing taxpayers in 1990. In 1966, about $3.7 billion was allocated
to the program. Johnson's minions said that in 1990, Medicare expendatures
would run about $9 billion. The actual cost of supporting Medicare was $100
billion or a 1100% cost overrun! In 1972, Congress added a kidney
dialysis benefit to Medicare which ran similar levels of cost overruns.
Defenders of government run health care schemes say cost overruns
occur because of the demand for the new service. Well, then people had better
start doing a better job of estimating the demand for such freebes. And they
are freebes. Also bear in mind that in 10 years, the oldest of the baby
boomers (Happy birthday, George W. Bush!, now aged 57) will be just reaching
retirement age....
Moreover, efforts on the part of governments to control health
care costs rarely work. The main reason American health care is expensive
are that most Americans don't pay nearly the full cost of their treatments.
Americans end up cross - subsidizing their fellow American's health care.
Also, there is the small matter that people receive their health insurance
from their employers, who get tax breaks for offering health insurance.
Ergo, Americans have steadily been electing to take more of their compensation
in the form of health care rather than income.
Since this is an no brainer prediction, I will
grade it only a difficulty factor of 1.
Back to
Oracles
Go to Home Page