This is the age of once-in-a-lifetime events.

Just as the last quarter of 2008 witnessed the greatest financial crash in most people’s lives, the Northern-hemisphere Summer of 2009 presented a political happening on a similar order of magnitude to President Nixon’s exit from the White House in 1974.

From Messiah to Anti-Christ?

In metaphoric terms: President Barrack Obama hit the “Lincoln Wall” going ninety miles an hour and on the way to the hospital, a medical emergency worker found the number “666″ on his scalp, under his hair.

The “Lincoln Wall”, of course, was the barrier referred to by Abraham Lincoln, in the saying:

You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time.

President Obama hit this “wall” when he failed to get a Democrat-controlled Congress to pass a thousand-page “health care reform” bill, without reading it, before adjourning for summer recess and facing their constituents at traditional townhall meetings.

The “medical emergency worker” in this metaphor represents the American people who finally began to figure out that Barrack Obama was not the “Chosen One” after all.

The number “666″ represents the little girl along the parade route as Obama drove to a town meeting in New Hampshire, holding up the hand-written sign: “Obama lies, Grandma dies”.

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The trillion-dollar Obama health care plan increases the odds that US economic recover will be delayed, and that unemployment and inflation will increase.

The main thrust of the Obama plan is to increase taxes on individuals earning more than $250,000 a year, while forcing all but the tiniest businesses to purchase health insurance coverage for employees.

The money raised by these taxes will be transferred as subsidies for those who do not have health insurance — primarily due to low earnings and inability or unwillingness to purchase health insurance without government assistance.

Proposed legislation on Obama care, drafted by House Democrats, covers more than 1,000 pages. Some analysts claim that this huge document contains clauses that will eventually force millions of American to acquire government health insurance.

Typical of Obama reforms, the measure is being rushed through Congress without adequate discussion of consequences, without bi-partisan consensus, and with scant disclosure by the Democrat party that has filibuster-proof control of the US Congress. Most Republicans are expected to vote against the measure.

Increased inflation and unemployment

Most new employment in the United States is created by small and medium-size business — precisely the people that President Obama wants to tax in order to raise funds that will be transferred to poorer, less-productive sectors of the economy.

Businesses being hit by these massive new taxes have only a few ways to respond:

  • Reduce the number of employees or delay hiring new employees.
  • Pass the costs of higher taxes on to consumers.
  • Increase outsourcing of labor costs to offshore suppliers.
  • Compensate for rising taxes by reducing wages.

In other words, the immediate impact of Obamacare is likely to be increased unemployment and higher prices — stagflation.

The Obama administration claims that costs of subsidized health insurance will be compensated by undocumented “cost savings” — but these claims are contested by the Congressional Budget Office.

In the next decade, Obamacare is estimated to cost over $1.5 trillion.

Why health costs will continue to rise

Over the last fifty years, costs of health care in the United States have steadily increased faster than other consumer prices.

There are many reasons for the escalating costs of health care, but the two main drivers have been:

  1. Medical advances: Many life-saving medical procedures are available today that were impossible fifty years ago. Organ transplants are a case in point. The existence of these procedures creates demand. However, many of these procedures are extremely expensive, well beyond the financial capacity of most of the population. In good times, many employers have been willing to give workers free health insurance to cover such costly procedures.
  2. Employer paid health insurance: The common practice of large businesses providing free health care insurance to employees as a fringe benefit, often written into employment contracts, has created vast inefficiencies in the pricing of medical services, as beneficiaries of health care were disassociated from the normal need to shop for the best service at the lowest price. At the same time, because of the nature of insurance contracts, doctors were paid per procedure rather than for results. The costs of health insurance for individuals not covered by group plans became too high for many to afford.

To these basic structural reasons for escalating health care costs, the Obama plan adds the extra price driver of increasing the size of the market for health services (by offering subsidized coverage to the poor), without a corresponding increase in the number of doctors and nurses.

A missed opportunity

Barrack Obama was elected on a platform calling for change and there is general consensus that reforms of the US health care system are needed.

However, by forcing through a plan that seems almost certain to increase unemployment while spurring inflation, the so-called misery index (inflation plus unemployment) is likely to rise far above the level that prevailed when President Obama took office. Over the last two generations, a rising misery index has portended that the incumbent President will be removed from office by the voters.

This, perhaps, is why President Obama is anxious to pass this highly controversial legislation before his popularity sinks to the point where such legislation will not longer be possible.

Along with mismanaged “spending is stimulus” package and the “cap and trade” legislation, the Obama healthcare plan may seal the fate of this administration.


Like all proposals that come from the Obama administration, details of the President’s multi-trillion dollar public health care plan are murky and shrouded in controversy.

However, the essentials are simple:

Will doctors survive Obamacare?
  1. The number of people to be covered by health insurance will expand to cover the entire population, including illegal immigrants.
  2. The overall cost of health care will be dramatically reduced. How this will be achieved is not fully disclosed.
  3. It takes about ten years to create a new doctor, starting from the initial career choice on graduating from high school.
  4. Health care is a service industry and the principal costs are the salaries and earnings of doctors and nurses.

The implications of this plan are straight forward.

If the demand for health care services is to be artificially stimulated by government mandate and if it takes a decade to increase the supply of doctors needed to meet this demand, in the immediate future, to achieve the President’s goals without further inflation of health costs, either health care must be rationed by the government, or doctors and nurses must earn less for less service — or both.

Average earnings of doctors will fall

Because it is not politically expedient for the politicians to tell grandma that she can’t have that hip replacement, rationing health care — especially for over-indulgent Baby Boomers entering their golden years — will be a non-starter, in the early years.

This means that doctors who come to depend upon the Obama health care system, will face a sharp decrease in income and increased bureaucratic paperwork to justify even that.

Will it still pay to study anatomy?

Medicine will become a far less attractive profession. The Obama plan does not contemplate reducing the fees of their favored constituency, lawyers that sue doctors for malpractice.

Extremely high entry costs (ten years of education and internships), together with diminished returns, will provide strong disincentives for the creation of new doctors.

Normal attrition and retirement will reduced the supply of medical professionals further.

The result will be fewer medical professionals serving more people. Care must eventually be rationed and doctors must earn less.

It’s just textbook supply and demand, operating under artificial restraints.

Some patients will do quite well, thank you

Some Americans will continue to receive excellent health care under the Obama plan:

The rich and powerful will do just fine
  1. The very wealthy. Even in under-developed countries with dicey health care systems, the rich do OK. Factory owners in Indonesia fly to Singapore for routine checkups. In Brazil, the well-to-do go to private doctors rather than to government-run hospitals.
  2. The very powerful. President Obama, his family and friends, will not have to face the indignities of public health care, just as they are able to avoid the public school system brought down by the unionized teachers that they support.
  3. The unionized proletariat. Government and private sector workers, protected by union contracts and exemptions hidden in the Obama plan, will be given preferences, not on the level of the very rich or powerful, but better than the adoring masses that ushered Obama into office.

The doctors, nurses, and hospitals that cater to the rich and powerful will survive the Obama plan.

The rest of the profession will either fall prey to what I call the “electric wheelchair syndrome”, described below, or will face restricted circumstances.

Some years ago, I visited Brazil and found doctors driving taxicabs in Rio de Janeiro, victims of the government health system. Many moved to the United States.

The electric wheelchair syndrome

Any economic system that is regulated not by the free market, but by government rules, will contain loop holes to be exploited by clever entrepreneurs.

Medicare is a case in point.

In Florida (and perhaps in other places), local television is swamped with advertisements for electric wheelchairs. The pitch is quite simple:

If the wheelchair seller is not able to get Medicare to pay for that electric wheelchair you think you would like to have, after having said that you qualify for the benefit, you’ll get you wheelchair for free!.
Electric wheelchair and beneficiary

Every year, the ads show the building of the wheelchair seller getting bigger and bigger.

A trip to Disneyworld reveals squadrons of obese wheelchair drivers, scooting around the theme park, competing for parking spaces at the most popular attractions.

Obviously, someone has figured out how to get Medicare to approve requests for electric wheelchairs. Maybe a doctor owns the wheelchair company. Maybe a Medicare official gets a commission. Something is going on. Even President Roosevelt didn’t have an electric wheelchair.

If it’s not electric wheelchairs, it will be something else. Regulations create loop holes to be exploited and if people can figure out how to make money on a loop hole, it will be done.

Some clever doctors will learn to extract cash from Obama care and will do quite well. It will all be quite legal. It just won’t be medicine.

Obamacare is not necessarily inflationary

The projected trillion dollar costs of Obamacare may not eventually be realized, not because of cost savings resulting from efficiency, but rather because of rationing of services.

If there are not enough doctors and nurses to attend the expanded demand for services, inevitably rationing must be imposed. The supply of services, rather than demand, will be the limiting factor.

With rationing, money is simply not spent as fast as it might be otherwise. If money is not spent, and if costs are kept artificially low by cutting doctors fees, inflation will be contained.

This is great news for the rich and powerful people who will continue to enjoy the best health care service on earth. It is also great news for investors (except for investors in hospitals and medical facilities).

Doctors will move away from medicine to more lucrative pursuits — like selling electric wheelchairs.

Meanwhile, grandma, who voted for Obama, will just have to wait for that hip transplant.


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