The fastest growing component of the federal budget and already a major fraction of the overall spending involve the health-care entitlements of medicare, medicaid, affordable care act, and others.  These programs provide direct payment to delivery of health services to participants.   Although separate programs with different mechanisms for revenue and cost controls, the overall growth in spending is due to the underlying growth in health care costs in general: the growth in the appetite for health services by subscribers (either because they are sicker, or because they are more encouraged to seek out care) and the growth in the number of services available that fall under the concept of health care.   There may be simple inflation involved but I haven’t seen this discussed and I wonder how this can be measured when it is required to use the latest approved practices: it is not possible to use older practices that may be cheaper though less effective.  

In any case, the growth of health care expenses by the population is a such a major driver in the growth of spending that it deserves the highest priority to get overall spending in control.

From a budgeting perspective, I think that the health care / insurance aspect of government should be strictly self-funded.  The costs for delivering services should not exceed the revenues directly funding those services: premiums, payroll taxes, various tariffs targeted directly to health care.  It is not a legitimate expense to contribute to the national debt.  The reason is that the costs keep compounding: those needing health care today will continue to need health care tomorrow plus be joined by new arrivals.   The budget for health services should be balanced on an annual basis.  To me, it does not make sense to borrow from the future to pay for today’s health care needs.

The primary reason for my concern for balanced budget in health is for the youth and the healthy.  I strongly support the greatest opportunities for the young people who are just starting their careers by providing them the least burden of added expenses and future obligations paying off past delivery of healthcare of others.

Individuals should have the opportunity to invest in better health care, either through paying from existing wealth or from taking on debt.   As observed and promoted as a major reason to support a nationalized solution, taking on such expenses can lead to bankruptcy.  This is a risk that we should allow people to take.  It is also a risk that makes sense because successful outcomes directly lead to that individual’s wealth (in terms of a longer life or improved quality of life).

However, at the collective level such as health insurance plans or government plans, I see no justification for adding costs of health care delivery to long term debt.  The collective pooling of resources through premiums (directly tied to one’s own healthcare benefits), payroll taxes (tied to healthcare benefits of others), and healthcare-designated taxes should be the limit of what can be spent on health care.   Given that health care costs can change quickly while the revenues remain steady, there is a need for some short terms borrowing followed by near term payback.  But on a moderate term the budget should be balanced.  That moderate term may be quarterly, semi-annually, annually, or even bi-annually, but not longer than that.  I do not accept paying off collective health care that was delivered more than two years ago even though I may accept paying off personal health care debts incurred many years before.

Collective pooling of health expenses is inherently a transfer of wealth from healthy people to unhealthy people.  We accept this transfer to some extent because we hope the unhealthy will get healthy again and that the healthy will benefit in the future when they become unhealthy.  Government involvement introduces an element of coerced participation to the same concept.  The government coercion is justified if it is a fair system.

The fairness of a system depends on a concept of separating health care from other forms of wealth.  Rich or poor, we all are subject to needing health care for the same conditions that generally involve the same costs.   We are asserting the health is distinct and not interchangeable with wealth.  I see the argument that anyone should be denied care that is available to those who are wealthy.  But there is the counter argument that the poor should not have to pay for the health care for the wealthy: the poor are poorer by having to subsidize the costs for wealthy health care.  

In a society where the poor vastly outnumber the wealthy, there is a small added burden on premium for delivering care to those who otherwise could afford larger premiums, deductible, and copays.  In our society, the effects are not trivial.  The two arguments cancel each other out: the poor should not subsidize the health care of the wealthy vs the poor could be denied health care available to the rich.   When one is healthy, he wants the greatest opportunity to pursue his career with the benefit of increasing wealth to society.  When one is unhealthy, he wants to get better so he can recover that opportunity.  There is a limit to what we can expect to limit opportunity during healthy times of the less wealthy in order to fund the unhealthy times of the more wealthy.

In particular, I am concerned by a particular transaction that our current system is imposing.  That transaction is to transfer wealth from younger people who are starting their careers to the older people who are at the peak or retirement age of their careers.  In general, those who are older have accumulated more wealth than those who are younger: either through accumulation of wealth or through accumulation of skills, reputation, or prestige.  Outside of inheritance or gifts from parents, the young people do not have this accumulation.

To me a fair system is to divide the health insurance pools by age group so that each pool has to be self-funded: the collected premiums pay for that groups expenses.  Insurances should be allowed to offer different levels of coverage based on the differences in risks and outcomes.  The goal should be to provide the least expensive health care premiums to the younger groups.  The goal is also to have the expenses comparable to the experiences of that age group: the expenses are something that one can reasonably imagine happening to them in the next couple years.

The fact is that treating older people is more expensive than treating younger people.  The older people are more likely to get ill, and given the same illness, the older people are likely to require more expensive or longer treatment to recover.   The older people as a population also has more wealth.  They should be able to share their risk through insurance for their age group, but they should accept that that is going to be a lot more expensive than it was when they were younger.

Health care is the wildcard that can drain ones lifetime of accumulated wealth. Health care one of the expenses that that wealth should be expected to fund.  Collectively, the age group should be able to pay for their collective health care needs without having to take money from younger age groups.  Also, their access to health care should be constrained by the wealth they are collectively willing to contribute.