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BUSINESS OF
care and other post-retirement benefit obligations, as well as the
cost of renovating our 50- to 100-plus-year-old infrastructure
(roads, bridges, levees, dams, water, sewer, rail, schools, aviation,
transit, etc.), it all adds up to $156.2 trillion. Or, to put it in terms in the news, they’ve kept up production to drive oil prices down,
even I can understand, that’s almost twice the entire wealth of every-
one in the United States, and works out to $1.3 million per house-
hold. Yes, if we were to confiscate all of the wealth of the entire
country — from Bill Gates, Warren Buffet, George Soros, the Rock-
efeller Foundation, the Bill and Melinda Gates Foundation, all the
hospital and university endowment funds, your wealth, mine…
everyone’s wealth in the entire country — we could meet just a little
more than half of these obligations. The entire wealth of the United
States is $81.5 trillion. Our obligations are $156.2 trillion.
Thirty percent of the population is moving out of the worker col-
umn and into the retiree column by 2030. This silver tsunami will
swamp our current healthcare provider capacity — especially since
many of the providers are in the same baby-boom generation and
also will be retiring along with the rest of us. No matter how steeply
we cut healthcare payment rates, the total cost will continue to es-
calate with the aging population.
AN EYE-OPENER
For years, the trustees of the Medicare and Social Security Trust
Funds have called for a 25 percent cut in benefits. You have experi-
enced the 2 percent Medicare sequestration of your payments. Can
you imagine if that went up to a 25 percent sequestration? You
would lose a quarter of your Medicare collections. Your patients
might self-pay the difference, but only those who were able to afford
it. You’ll either have to find significantly lower-cost ways to deliver
health services, or major new sources of income, or both. I know
this is not all news — but maybe the dollar amounts are a bit of an
eye-opener.
At the start of the Medicare program, we had eight workers per
retiree to support the entitlement programs. Today we are down to
about five workers per retiree. By 2030, we will be down to just 2.3
workers per retiree. That is, our kids will have less than half the col-
lective earning power we have right now, when we cannot meet
these obligations. And they will have only a quarter of the relative,
collective earning power that existed at the time these programs
were started. I tell my students, every two of you will be supporting
each one of us in our nursing homes. And they frankly won’t have
the money to pay for it. Not unless we come up with incredible
new sources of wealth.
MEDICINE
I had high hopes the shale oil might be a source of wealth that
could make a serious difference. But our competitors have not just
sat idly by as we raised our oil production. As I’m sure you’ve read
to nip our fledgling oil boom in the bud. So while the shale oil de-
velopment has been the main driver of economic recovery for us,
I’m not sure oil is going to be the panacea I had hoped. As I ask
folks when I speak at conferences, can you think of any other source
of wealth that could come anywhere near $150 trillion? Not even
oil produces that much. The high-tech sector? Maybe, but the rest
of the world is getting amazingly sophisticated in high-tech inno-
vations, too.
LOOK AT SOUTH KOREA
By the way, South Korea has an amazing electronic healthcare
payment system. As the physician treats a patient, they log onto a
web portal and enter all the salient information. It goes straight to
one main computer system where every claim is reviewed by an ar-
tificial intelligence (AI) system. After the AI review, 800,000 live
claims reviewers give a 100 percent claims review, and payments are
sent out in just 15 days. That’s right — they do 100 percent claims
review on 2 billion claims a year, and pay in just 15 days. How’s
that for high-tech efficiency? In contrast, we waste $200 billion a
year in the United States just on inefficiencies in the administration
of our healthcare system. I had the privilege of visiting the South
Korean command headquarters for their healthcare payment sys-
tem. It looks like something right off the bridge of the Enterprise
on Star Trek (only baby-boomers will appreciate that). They fend
off 3,000 hacker attacks a day. And their system is so sophisticated
they can immediately trace each attack directly back to its originat-
ing computer IP address. Most come from North Korea. Their sys-
tem is so good, they actually package it and sell it to other countries.
We could learn a few high-tech lessons from the South Koreans.
So will our energy or technology sectors save us? I don’t know.
What I do know is, it’s my generation, and I see a costly reflection
in that silver tsunami.
Dana A. Forgione, PhD, CPA, CMA, CFE, is the
Janey S. Briscoe Endowed Chair in the Business of Health
at the University of Texas at San Antonio. He is also an
adjunct professor in the School of Medicine, Department
of Cardiothoracic Surgery, the Department of Pediatrics,
and in the School of Public Health, all at the University of Texas.
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