Brookfield Basics

A column about history, culture, policy, and things in between.

The Tipping Point

This post is a continuation of my last article on consumer driven health care.

The U.S. Department of Labor issued some interesting statistics last week, one of which was a graph showing the intersection of two lines.  This intersection illustrated that the number of Americans represented by public sector unions now exceeds the number of organized private sector employees.  This reveals the reality that while private sector employment is shrinking, government is a growth business, and it is a precursor to the potential of total public sector employment rivaling or exceeding that of the private sector. 

So what?  Well - the inevitable outcome of all this is that the cost of employment for an ever increasing number of people will be funded by an ever decreasing number of people.  It is an actuarial equation that simply cannot be sustained.  It is the same equation that led me to predict in 1997 that GM would be bankrupt within fifteen years; a statement that earned me gales of derision and laughter at that time.  No one is laughing anymore, as the prediction came true even faster; the deep recession in the auto industry hastening (not causing) GM's demise.   

It matters not what your politics are, who you voted for, or who you plan to vote for.  It is well beyond that, for things have reached a tipping point.  What matters is that the laws of economics are immutable  and will not be mocked.  They are routinely ignored but they cannot be suspended.  They operate independent of whether or not we like them, agree with them, or recognize them.

As the ranks of those employed by government swell, so too does the aggregate cost of the health care plans in place to cover them.  The total cost of health plans provided by public sector employers is significantly higher than the cost of comparable plans in the private sector (after its massive bail out, I no longer consider GM a private sector company).  There are multiple causes of this, but the primary one is that public plans are insulated from market forces, and rely on models of use and delivery nearly forty years old.      

This matter of public health insurance plans is the iceberg below government's financial water line.  The good news is that the tenets of consumer driven health care offer can offer some assisatance.     

Keep an eye on this graph - it has enormous implications.  

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