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Government Health Care: The Cost of Reality
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!