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Health Care Bubble: The Sequel

I am considered a Pfizer retiree. I worked there for about three days after their takeover of Warner-Lambert in 2000. I am covered for health insurance by the Pfizer retiree plan. When I received the retiree newsletter last week I was rather shocked to see that insurance costs will rise dramatically starting in 2009. Apparently Pfizer and many other corporations have capped their contributions which reached a peak in 2008. So all retirees are going to carry the up charges from now on.

Pfizer says our costs will be $5216 in 2009, $8357 in 2010 and $11,808 in 2011. Sounds like a bubble to me. The company says these rates are still less than if we went out on our own to buy health insurance. I do not like paying these rates but I can afford it. What about the majority of their retirees who cannot afford such rising costs? I imagine there are millions of retirees who face this same dilemma from thousand of corporations.

The New York Times ran a front page story on October 22 titled “In sour economy some scale back on medications.” The story profiled people who have stopped taking their prescriptions or cut back on doses. The big pharma companies will give drugs to the poor for low prices or for free but not give it to the middle class. Are we nearing the tipping point from free market medicine to government control?

We cannot continue on our current cost path. That much is clear. The issue is what system will control 60% annual rises in premiums. What system will help control hospital and drug costs effectively? My father-in-law, who I loved, died of cancer recently. He was terminal and wanted to die in peace at home. Unfortunately he spent much of his last month in a hospital getting every test possible on every organ even though every specialist knew he had weeks to live. I am guessing his hospital bills were several hundred thousand dollars trying to treat the untreatable. We cannot go on like this. Rationing care must be part of the cost solution.

No solution to the bubble is easy. Neither McCain's nor Obama's plan that will solve the problem. Just insuring everyone does nothing to reduce cost of care. In fact it makes care more expensive in total. Since drug costs are only about 10% of total health costs, attacking drug companies is not the answer. Of course the drug industry can and should do more to reduce cost. Their individual and group efforts are good but not sufficient.

I hope the next Congress and President will deal openly and honestly with our cost problem. The housing and credit bubble was obvious only in hindsight. The health bubble is obvious now before it bursts. I used to be a free market advocate for solving healthcare costs. I am changing my views because healthcare is just too complex to expect the free market to succeed. Some government control is needed. Can a blended free market and government system work? I am afraid it will not.

The bubble will burst sooner than later if we do not revise our entire system. I am afraid our elected officials will only take action once forced to do so. It may take the bubble to actually burst to get them take on politically charged issues. That may take more guts than Congress has but let us all hope they take up this unsustainable cost problem.