[FoRK] Fwd: Hey, big spender...

Jeff Bone jbone at place.org
Wed Aug 27 10:28:35 PDT 2008


On Aug 27, 2008, at 11:57 AM, Stephen Williams wrote:

> Those are a lot of assumptions.  I'll just point out that if the  
> dollar devalues that much, then $1.5T will seem like $1T does  
> today.  By stating $1.5T now, you are implying $1.5T in todays  
> dollars, which, for that grossing up at least, doesn't seem like a  
> valid way to spit out numbers for comparison.

Costs going up due to devaluation at the same time revenues and GDP  
(in absolute terms) are declining.  How do *you* think governments  
handle that situation?  By cutting back spending?  Not hardly.

>>> $65 billion-a-year health plan
>>
>> Vastly, VASTLY underestimated price.
>
> If you state a budget item by price, how is it vastly  
> underestimated?  I don't believe the plan even can be: "Solve this  
> at any price, which I think is $65."


Now that you've gone into rabid machine-gunner-on-meth mode, I'm  
having a hard time even parsing some of these.

Here's the calculation.  There are roughly 46M uninsured individuals  
in America.  Assuming that we *only* cover them, what do you think the  
average cost-to-insure is?  Consider that among those 46M are a  
disproportionate number of the sickest people in America, and that  
sicker people cost significantly more (10x or greater annually, on  
average) than the average cost overall --- which in 2006 was over  
$11k / family of four;  let's say $2.5k per.  Now given the  
concentration of folks that need more care in the target group and the  
higher cost OF that care, it's probably safe to assume a 5x increase  
in the average cost per person, or $12.5k.  So the basic cost to  
insure the uninsured cannot reasonably be much less than  
575,000,000,000 --- more than HALF A TRILLION ANNUALLY!  And that  
doesn't include the costs of administering the program, which are  
easily 20-33% on top.

Don't like that number?  Scale it back --- assume NO greater cost to  
insure than the average cost of employer-provided insurance.  Assume  
NO overhead.  Assume ridiculous things like economies of scale because  
it's the government (never mind all the evidence to the contrary,  
right in front of our faces.)  Even if the cost of the government  
program is 1-1 with existing employer programs, then the cost is  
"only" $115B.  Still nearly 2x the estimate above, and a total pipe  
dream AT THAT.

We can sanity check this.  The percentage of the population that's  
uninsured is about 15%;  thus we're talking about expanding coverage  
by about 18%.  Total expenditures on health care all-in (which  
doubtless includes certain eleemosynary costs and social program  
spending) in 2007 was about $2.3T - $2.5T.  Let's assume the former.   
So we're talking about an increase of about 20% in spending on health  
care to insure the generally sickest 18% of the population.  That  
$575B number is therefore *probably too low!*

I have similarly detailed (or not detailed, depending on how you find  
the above ;-) back-of-envelope analyses for every one of the factors  
I've considered.  I sum them up, take a "you're being too pessimistic"  
filter to them by halfing the number again, and I still come up with a  
staggering sum for what Obama's stated intentions are going to cost us.

> Certainly things might be increased, but budgets really do run out  
> when you've spent all of the money allocated.

Hardly.  When this sort of thing happens, our government seeks to  
extract more blood (money) from the stone (the people) by two  
different means:  by borrowing it from the future (GOP) and by taxes  
(Dems) and by raiding locked boxes (Dems, particularly LBJ's $5T raid  
on Social Security.)  Rarely has spending ever really declined, and  
never just because of some little obstacle like "not enough to pay for  
it."

> The worst case I can assume won't happen.

Haven't you ever heard the adage "expect the best but prepare for the  
worst?"

That's the thing about Black Swan events.  They may not be very likely  
--- indeed, you'll note that the high water mark for my prediction of  
a GD given Obama influence is "only" 1/3 --- but the impact is severe  
enough that you have to weight accordingly.

Or not.  Your call.  Do you drive without a seat belt, too?  Why risk  
it by handing the whole enchilada to a single party, EITHER party?


jb



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