The Education of an American Dreamer by Peter G. Peterson

Another one of America’s finance billionaires has written a book and is making the obligatory media rounds; I caught Peter Peterson on Good Morning America this morning during his 5 minute interview with Diane Sawyer. Along with the typical ‘rags to riches’ bio, Mr. Peterson seems to have some concerns for the future indentured servants generations:

Not unlike another successful investor from Nebraska, Peterson, nearing the end of the road, offers a few tidbits on how we might solve the looming fiscal disaster of aging Boomers:

1. Develop a Health Care Budget

Peterson said he believes the United States spends far too much on health care. “We’re the only country that doesn’t have a budget for health care,” Peterson said. “They leave it to the states and Medicare to decide how to allocate [the money].” Without a federal budget, Peterson described the system as “totally open-ended” and called the incentives “perverse.”

I’ve heard this argument before – essentially we spend, on average, a larger amount per/person than other industrialized nations, though we receive far less care. However, as most of this money is recycled back into the US instead of China, the problem is not that we spend too much money, it is that too much money is being funneled away from the middle class and towards the top 10% via the health insurance industry and Big Pharma®.

2. Develop a Best Practices Method in Health Care

The current system encourages endless tests that, Peterson argued, are inefficient and costly. “You [patients] don’t care what kind of procedures and tests they do because it doesn’t cost you anything,” Peterson said. But for the doctors, Peterson said, the increased chance for profits and the decreased chance of litigation make it worthwhile to conduct expensive, sometimes unnecessary procedures. “We need to be more efficient and stop the over-prescribing of tests, surgical procedures,” Peterson said.

This is a no-brainer, and is due to the actual price of each test/procedure being hidden from the patient (at least those that have a decent plan). We’re obviously going to have to start charging those on the government teat for the majority of these extras. If you want it, pay for it out of your own pocket. No more passing on the bill to your kids and grandkids.

3. Reform Open-Ended Tax Subsidies for Health Insurance to build an Incentive for the Consumer to Reduce Costs

Currently, Peterson said, the tax-free system does not allow patients to make decisions on a procedure’s value and worth. “There should be a progressive tax, based on salary that sets limits on how much health care you can deduct without paying taxes on it,” Peterson said. He said there should be limits on how much of the employee’s benefit is tax free, adding employees should have to pay taxes on some of their contribution so there is a built-in incentive to reduce costs.

Another good point, though it is a little confusing. Essentially, the wealthy, union workers, and government workers currently receive very costly benefits packages, at least as compared to those in the private sector. The benefits are not taxed, even though they are essentially income. Overpaid government workers love to whine about how their salaries are lower than comparable salaries in the private sector – thus, the plush benefits they receive are fair and square. Even if the salary part were true (it no longer is true), these workers are forgetting that they do not pay taxes on their health insurance, while the private sector employees do pay income taxes on each dollar of their earnings.

4. Elderly Who Can, Should Pay for Their Own Health Insurance

Peterson said that able elderly people should pay for their own health insurance, arguing that this would allow us to take care of the poor while still having an incentive to reduce costs. He proposed an affluence test. “If you make above a certain income, you start paying taxes on your social security. People with incomes less than X amount can deduct this,” Peterson said.

Hell Yeah! When the majority of the nation’s wealth is already concentrated disproportionately among the elderly, it is beyond belief that the politicians have not yet grown the balls and taken on the AARP over this issue. Is is morally corrupt for wealthy retirees to collect social security and medical benefits, while there are millions of workers (the majority of them young) that are currently paying for those benefits, while these workers themselves have absolutely no medical insurance, often times facing financial ruin after a single medical incident.

Of course, I can already hear the whining:

“But I paid into the system for 40 years, and I’ll be damned if I don’t get back what I put in”.

Sorry guys, but as a collective group, you placed money into your Social Security Trust Fund with one hand, immediately pulled it back out with the other hand, and then went off on a huge spending binge. In fact, you spent a few trillion dollars more than you had saved, and conveniently left the debt for this extra consumption for your kids.

5. Create an Integrated Health Care System

Peterson suggested that a single coordinated system could drive down rising health care costs. “Instead of having eight different doctors, have one doctor who gets a set payment to care for your health — all the records are there, and they don’t do things that they don’t think is necessary,” he said.

In other words, get used to limited health care. There is only so much pie to go around, and that means not everyone will get to see specialists for each and every ache and pain.