Sunday, March 6, 2011

If you look at the US fiscal situation, it's easy to see that Medicare is a looming black hole ready to swallow the entire economy. Reforming the entitlement seems necessary to prevent fiscal ruin.

But actually that's too narrow a way of looking at things. After all, the costs borne by Medicare are no more sustainable if they're shifted to private individuals. It's just the path is different.

The REAL problem is how expensive our healthcare system is compared to its benefits, at least relative to other countries.

This chart is from SocGen's Albert Edwards. As you can see, the US has the same life-expectancy of Chile at 7 times the cost.

Now, the root causes of this can be debated ad nauseum. We need to reform what we pay for. We need to lose weight. We need to end the doctor cartel, on and on you can go. But if you're looking for a problem THIS is it.

Solve it, and the Medicare crisis goes away.


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