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A History of Cost Overruns Should Squash Government-Run Health Care

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Why on earth would anyone believe that the federal government running health care will cure the high cost problem in the industry? I mean what has government ever run that even works well? Our monetary system is a mess. The economy is in the toilet. Our schools are sub-par. Welfare programs have not alleviated poverty. Our prisons are bulging at the seams, filled with too many non-violent drug offenders.

But, here we are debating whether Congress and the Administration should totally control one-sixth of our economy in an effort to lower costs and provide universal health care coverage for America. The proposition to me is ridiculous – folks have only to look at the federal government’s track record when it comes to programs and cost overruns to see that.

There have been thousands of examples through the years and the following is by no means the most egregious. In the realm of transportation, cost overruns are  automatic with federally funded projects. Take the “mixing bowl” highway interchange project in Springfield, Virginia for instance. It was estimated by state officials to cost $241 million. At its completion, the project ended up costing $676 million. Of course, the most notorious transportation cost overrun was Boston’s “Big Dig”. Initially estimated to cost a mere $2.6 billion, the project’s final cost was $14.6 billion.

Uncle Sam’s fiduciary experiences, when it comes to energy projects, are not much better. Take the Clinch River Breeder Reactor project of the 1970s for instance. The project experimented with nuclear fission and was forecast by the Atomic Energy Commission to cost $400 million. Throughout the decade its cost estimates steadily increased to $4 billion. Eventually the program was scrapped, but not before taxpayers dished out $1.7 billion.

Without question, cost overruns in Social Security are legendary. The old age pension system has required many reforms in its 74-year history because of insolvency. When it was established in 1935, its financing only required  a contribution one percent of wages from the employee, with a matching one percent from the employer. Over the years, reform has eventually raised those contribution levels to 6.2 percent each. The most significant amendments to the system came in 1983, when an earnings penalty for wages above a certain level, a delay in the cost of living allowance for six months, reduced benefits for those who retire early, and a higher retirement age were enacted. All were measures to shore up the insolvent trust fund used to pay benefits. Today, the outlook is even bleaker for Social Security. Faced with millions of baby boomers retiring and a much smaller workforce to finance the system, it will be almost impossible for Uncle Sam to come up with an estimated $45 trillion in future unfunded liabilities.

Finally, and most germane to why the federal government should stay out of health care is because it already has a history of massive cost overruns in the industry. When Medicare Part A was passed in 1965, government experts projected costs to rise to $9 billion by 1990. Total costs actually reached $67 billion. In 1987, Medicaid added a special hospital subsidy to its coverage which was projected to cost $100 million. By 1992, costs stood at $11 billion per year. Now, I understand that things happen beyond the government’s control, but these overruns are not small, indeed they are huge.

Given this dismal historical record of cost overruns, why anyone would trust politicians when they announce cost estimates for government proposals is mindboggling. As long as our “leaders” can continue to scam the public and rely on the Federal Reserve to print money to cover their excesses, their behavior will not change.  Now they are proposing to take control of an industry which represents one-sixth of our economy  — one that is literally vital to the health of you and your family. Of course, given the size of the industry, if the politicians succeed in taking over health care, the cost overruns will not be in the millions or even billions of dollars, they will be in the trillions.

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About Kenn Jacobine

  • Clavos

    You’re absolutely right about the financial mess at Medicare. In large part it is due to an almost total lack of oversight, resulting not only in Medicare paying more than they should for nearly everything, but also in massive fraud, which amounts to billions of dollars a year.

    There is no evidence to indicate that UHC will be run any better. That probability alone is enough reason to oppose it.

  • http://www.joannehuspek.wordpress.com Joanne Huspek

    I can give several examples of how state run programs, once given to the private sector, do much better than when run by the state. I can only assume it’s the same for the Feds.

    The alarming thing to me is that I feel the insurance companies are in the bag on this one. One hand is paying the other. Consider it, because big insurance isn’t squawking one bit. Why wouldn’t they scream unless they were part of the so-called UHC?

  • Bliffle

    Here’s why I think that the Feds have a shot at doing a better job than the insurance companies:

    Right now we spend about $2.5trillion/year for medical insurance. Of that, about 40% is overhead (28% at the insurance company and about 12% reflected back on the providers, doctors and hospitals). That means about $1trillion is wasted on non-healthcare expenses, largely paperwork to assure that they only insure well-persons. Medicare has an overhead cost of about 3%, which means we could save almost a trillion dollars every year by taking out the middleman, i.e., the insurance companies.

    The insurance companies have a de facto monopoly because of the 1945 McCarran-Ferguson act which forbad the feds from regulating insurance companies. The only other business with a legal private monopoly is Major League Baseball.

    The insurance companies are doing what any monopoly would do: charging high prices, blocking competition and squeezing suppliers.

    The head of the Kaiser system says that if everyone in the USA had Kaiser that everyone would be covered and we’d save about a half trillion per year.

    The insurance monopoly has to go. Or else it must be managed and controlled by the government, which is what medicare does.

    Also, your assertion that Social Seurity is broke is just plain wrong. SS yields a surplus of about $160billion every year, and has a net surplus (trust fund) of $2.5trillion.

  • Mark

    Joanne – I can give several examples of how state run programs, once given to the private sector, do much better than when run by the state.

    Yes, please.

  • http://mizbviewsfromthetower.blogspot.com Jeanne Browne

    I disagree. The USA is the only country in the world where health care is a business, not a service, and we need a change. Government does and can run things efficiently, especially when watched and pressed. I wish Obama would be more forceful, tell the Repubs where to get off, tell the Dems where to get on, and declare new-and-improved Medicare For All (for all their problems, Medicare and VA health care are less expensive and offer more bang for the buck than the profit-making health care industrial complex). Insurance companies make health care decisions, not docs & patients. Our health should not be in the hands of businessmen!

  • Kenn Jacobine

    Jeanne,

    Just today there was an article about the VA and how disabled vets are waiting on their disability checks while nepotism, corruption, and $24 million bonuses are running rampant at the agency

  • http://mizbviewsfromthetower.blogspot.com Jeanne Browne

    Kenn — Yes, the VA is a mess and their handling of disability cases has been unconscionable. VA hospitals are also often a horror show. But with public and media attention being focused on these issues, they’re being improved, and at least vets have a “public option” to turn to. Also, personally, as a Medicare recipient, I can tell you that the system has its problems and its idiocies, but I’m very grateful for it.

  • Cannonshop

    7: Jeanne,

    Sure, as soon as the Cameras and the Broadcasters are crawling over the facility, things get fixed…but as soon as the media Leaves entropy returns to form, and where the Media aren’t RIGHT THERE, nothing changes for the better.

    Notably the Media has the attention span of an ADHD kid on Crank…

  • douglas

    “I mean what has government ever run that even works well?”

    Fire departments, Police departments, Postal Service.

  • Clavos

    Fire departments and police departments are run by municipal or county governments, the vast majority of which are infinitely more efficient than the the federal government.

    The postal service is a money-losing, inefficient agency featuring ever-decreasing service coupled with ever-increasing prices.

  • http://drdreadful.blogspot.com Dr Dreadful

    The military, then?

  • Clavos

    The military is pretty good, but not great when you consider what we spend on it. That said, the military enjoy far greater independence from the bureaucrats than almost any other government entity.

    [to be continued — nurses just came in to change a dressing]

  • Clavos

    [continued]

    Two other well-run federal agencies are NOAA and NASA. The well-run ones are the minority, though.