Government Health Care: The Cost of Reality

Updated on October 25, 2009

Do you really know how much a government run health care system would cost? The fact is that nobody knows. At best it can only be estimated but it is possible to come reasonably close.

Do you know what it takes to estimate the cost? Where would those figures come from? Given how General Ledgers vary across the industry how would financial categories be interpreted to accurately align to reflect true cost?

Though it can be done it would take an army of accountants and 100% cooperation from health care industry.

For starters, the financials of every hospital, pharmaceutical, insurance, clinic, doctor, hospice, equipment, and every other business involved in health care would have to be examined. No doubt a daunting task.

However, we can do some simple math using reasonable general figures to give us a good idea of weather government health care is financially possible.

The general consensus seems to be that out of pocket and insurance costs about \$8,000 per year per person. Just for the sake of argument let's say this is a bit high so we'll use \$5,000. With over 300 million people in the US these figures give us 300,000,000 * \$5,000 = \$1,500,000,000,000 annually. That's 1.5 trillion per year.

The last figures that came out of government is 1 trillion annually. Our cost right off the top is \$1.5 trillion. Hmmm! It does seem to increase every time government speaks!

Generally the larger private health care insurance companies employ a few thousand people each to administer their business. Keep in mind that this is just for one state as government forbids health care providers to operate across state lines. Oh the power of law!

Government will have to cover 52 states, a few possessions, and thousands of providers. Government will probably have to hire well over a 100,000 people to deal with a problem of this scope. This is far less than those employed by all the private companies and given how government has no experience in health care it is not unreasonable that this estimation is low. Another factor not considered here is that these government employees will most likely be union adding additional cost and benefits.

Let's say the average salary is \$40,000 per year and let's add a meager \$15,000 for benefits for a total package of 55,000 per year. \$55,000 * 100,000 = a payroll of \$5,500,000,000. Our total is now \$1,505,500,000,000.

Employees will need to process data and look up records. The average cost of a computer is about \$2,500 per person. This does not include printers, wires, expensive servers, software, and the 20 watts of power each computer will use daily. Using a base cost of \$2,000 * 100,000 = \$200,000,000. Our total is now \$1,505,700,000,000.

The printers, wires, software, communications equipment, a couple of mainframe computers to store data, and everything else need to support those will cost too. We also have to include vendors like GE who will probably write the database to keep your records and perform other goodies. A reasonable cost estimate could be \$10 million. This brings our total to \$1,505,710,000,000.

These people need a place to work. The industry average is about 200 square feet per person. Since I am from Philadelphia, I know it costs just over \$30 per square foot which is low compared to other locations throughout the country. 200 * 100,000 = 20,000,000 square feet * \$30 = a cool 600 million giving us a new total of \$1,506,310,000,000.

Keep in mind that government will have to set up shop in all 50 states which will be even more expensive. The cost estimated here is probably a few million low. With every government building stuffed with employees, government may decide to build a few new buildings escalating the cost significantly. Hey, politics are politics - right!

So far our cost is whopping \$1,506,310,000,000. As you can see the costs keep escalating.

Can you imagine what heating, electric, water bills, and cleaning services, are to support 20,000,000 square feet of office space and 100,000 people? A few million is not unreasonable. Government runs by politics, not cost. Government always pays more than it has to.

What about payment and collection services? Cleaning and maintenance services? All the costs a general business incurs will be incurred by the government. In addition you can throw in a few billion on typical government waste and experimentation. Government knows nothing about health care.

Then there is fraud. The government pays millions of dollars in false Medicare and Medicaid claims every year. This will most likely continue into the new system,

The politics will cost too. \$20 - \$30 billion could be given away to secure votes just to pass the bill. It was when congress voted and passed cap and trade. In congress the market value of health care is high right now as Obama, Pelosi, Reid and others are determined to get something passed.

Don't forget government will not turn a profit like a business to offset their cost. The only way government can curtail cost is by rationing cost or raising taxes.

This is an extremely simple look at the possible cost of government run health care. You don't need to be an accountant to think it out rationally. I drastically underestimated everything here.

If you don't like my figures, use your own, pop out a spreadsheet or calculator and see what you come up with. See if you can make sense of it?

Regardless of how you “feel” you need to ask some hard questions. Can we afford it? Does it make sense? Can government deliver what they promise? Where is the money going to come from? Who is lying to me?

And here is another point to ponder. America actually spends an estimated 2.5 trillion dollars per year on health care. In our conservative estimate we came up with a bit over 1.5 trillion. If there are millions without health care now, how is government going to cover everyone for less?

It simply defies logic and common sense. Someone is going to go without health care!

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• Chef Jeff

9 years ago from Universe, Milky Way, Outer Arm, Sol, Earth, Western Hemisphere, North America, Illinois, Chicago.

From my point of view the insurance companies are doing exactly everything that the people who are against this health care reform seem to fear from a government-run system, not that I believe the system would be government run. Who runs the so-called "death panels" now? Corporate executives. They decide the policy of each insurance company and how much it will risk on you, me, and everyone else. They decide the risk based onprofit, do they not? They do not feel overly generous, from my point of view.

I can tell of more than two dozen close friends who have died for lack of any health care, who lost jobs, families and homes to pay for care that was substandard and inadequate.

What we have now is barbaric. Insurance companies simply want profit, and to hell with the rest of us. It seems to me that real health care reform would include provisions that control costs and keep open plans for those with "pre-existing conditions", a term which could and often does mean anything that ever ailed you. But right now insurance companies seem to have carte blanche to do whatever they please, charge whatever they want, and deny service to whomsoever they want.

Just the same, if Democrats are pie-in-the-sky with their proposal, why have not Republicans done more to make a real health care proposal instead of just stalling and yelling about straw-man socialism? It seems to me that at least some people are trying to do something, but others are simply trying to make sure nothing at all gets done. And meanwhile, how many thousands of people die every hour due to lack of health care? Is it 122 each hour, 24/7/52???? If that is true, then shame on us.

Chef Jeff

• Uncle Goat

9 years ago from Chicago, IL

All in all, I would rather have my tax dollars going out to help people I don't know instead of killing people I don't know. Consider the money blown in Iraq and Afghanistan. How many women could have had prenatal care with that money? How many infants could get the care they need?

The problem isn't so much government run health care, as health care run by bean counters who would rather deny care than spend money on it. A single payer system, everyone in, nobody out, could be set in place by shifting a fraction of our tax dollars out of the Pentagon and into universal health care. Over 50% of the government's budget is set for war. Maybe if we spent 45% of the budget on war, we would have money left over for schools and hospitals. No taxes would have to be raised either. Yeah, it's that simple. So of course, it won't be done.

As it is now, pray you don't get sick. Ever have the flu? That's why your heart is weak, can't cover a pre-existing condition. Ever drink beer? That's why your kidneys are failing. Sorry. Ever use a cell phone or be in a room with cigarette smoke? That's why you have cancer. Don't assume with insurance they will actually cover any claim, instead assume that they will not.

The number one cause of bankruptcy in the country right now is getting sick. Insurance may cover some of the bills, if they feel like it, but a couple tests here and there like they show on TV will bleed most of us dry in a few days.

• AUTHOR

joer4x4

9 years ago from Philadelphia, PA

To be sure it is flawed. I would say it started (off the top of my head) when insurance got into the doctors offices opening the doors for the lawyers. It was all downhill from there.

Yet I rather have what I have today (I had better) rather than let government run my care. Not they are to some extent already.

• Uncle Goat

9 years ago from Chicago, IL

But don't be confused: we're paying for the uninsured already. The "system" we designed for the uninsured is to go to the emergency room. For the flu, for colds, for minor aches and pains. It's a nightmare. If the people there actually have no money, that cost is passed onto you anyway.

That we have decided to run hospitals like a business is insane. When I lived in Florida, a huge corporation took over some hospitals in the panhandle and closed them down since there was no profit there. People had to be airlifted to the hospitals that were still open. The cost of a helicopter ride ain't cheap. And again, if the person being taken to hospital cannot pay, that cost is passed on to us anyway.

Preventive medicine -- to stop people from getting diabetes, to get people to move away from cancer risk activities, to have Pap smears -- are generally not covered by insurance companies. Viagra, and some hair loss drugs are. Clearly, this a seriously flawed system.

• AUTHOR

joer4x4

9 years ago from Philadelphia, PA

Through taxes (fines). It looks like the Budget Office is going to raise over \$150 billion in fines over the next ten years. At least that's looks like the plan.

In a nut shell we will pay. Business will be taxed but that will be passed on to the consumer. Not sure how the rates will work yet.

This is where the national database comes in (GE) linking health care, IRS, and SS.

From what I have read so far in the actual bill, this is going to get ugly down the road.

• jiberish

9 years ago from florida

Joer, you seem like a reasonable man, explain this to me...How will the people who cannot afford insurance now be able to afford it when it's mandatory?

• AUTHOR

joer4x4

9 years ago from Philadelphia, PA

Thanks...

I'm looking at the bill passed over the weekend. All I can tell you now is it won't cover everyone, if your health care is not up to snuff you will be taxed, and you will have to pay for those who can't afford it.

This bill is a monster of a read! The only reason it so complicated is that they are trying hide something.

• Uncle Goat

9 years ago from Chicago, IL

We are currently spending 5 billion a day on health care in order to have shorter lifespans, more infant mortality and needless procures. While the current plan isn't addressing the real problems, (insurance companies which do no health care at all) allowing the status quo is monstrous.

Europe seems able to care for people and they live longer. If this means that companies will actually have to pay taxes, so be it.

Saying that someone is going to have to go without health care is saying that people will have to put to death because they are poor. If this is your concept of a just society, then we live on different planets.

• James A Watkins

9 years ago from Chicago

Thank you for pointing out the obvious: this is terrible legislation. One of the real purposes of it to to hire those 200,000 workers it will take to run, all of whom will be unionized, thereby guaranteeing that many more votes for Democrats. The other reason is to make the citizenry dependent upon the government. Then we'll have to toe the line or go without.

• AUTHOR

joer4x4

9 years ago from Philadelphia, PA

It is sad. Government can do so much good but instead it chooses to be self serving.

They think it won't affect them but in the long run it will in an ugly way.

• breakfastpop

9 years ago

Great hub, so logical. Sadly, the powers that be behind closed doors in Washington don't give a fig about cost containment or what the public really wants. Let's face it, costs will go up and quality down. Look at what a "magnificent" job this government has done with Medicare and Medicaid, both on the verge of bankruptcy. What happened to a government for the people and by the people?

• eovery

9 years ago from MIddle of the Boondocks of Iowa

So did they solve world hunger behind those closed doors.

Healthcare reform is too big for these idiots to do. We can allow them to do this. They need to concentrate on the smaller picture, and fix the small things they can. The rest of the deal is too big, and cannot be done in the time frame they want to. The cost will be 2 to 3 times of what you have mentioned here. All the insurance and records and all the other stuff that has to be set up. It is gigantic undertaking to do, and would not be ready in the 5 years they would want to implement it. Just rake in the taxes, and ruin the large insurance corporations.

Keep on hubbing!

• AUTHOR

joer4x4

9 years ago from Philadelphia, PA

What savings? Please explain. Our annual debt is \$1 trillion. So where are the savings?

Please name one program government has improved. Medicare and Medicaid are broke. Politicians have taken money from Social Security and have never paid it back. That's why the recent cuts were made. And who suffers - the people not the politicians. Open your eyes - they're stealing money from you! Don't you care?

Scare tactics? How about facing reality. Reality can be scary.

I say, if your scared - get a dog! But only by facing reality can the system be fixed.

How much does it cost you or your retirement fund or employer for your health care? Take that number and multiply it by 300 million people. There is no escaping the financial reality.

Companies are ripping us off because they have government breathing down their back. They're handing money left and right to politicians in hopes of favorable legislation. Government won't let them operate their business the way they need to. They have to pass the cost on to me and you.

You can't clean up business until you clean up government. Unemployment is now 18%. Do you think business goes out of business for the sake of going out of business?

• stevenschenck

9 years ago from Sacramento California

A Strange analysis - The government runs many health care systems, so we know very much what this will cost and why - your analysis fails to take into account the savings from improving the system which is a cornerstone of the entire plan, because right now nothing but profit taking and skimming and ripping off by private companies is all we have.

Of course, when all you want to do is live in fear and scare others it is best to avoid facts and go with wild lies. How sad for you, I guess you think the rest of Americans are as paranoid as you are, we are not.