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Health Care Costs And The Rule Of 72

November 9, 2010

There I was, listening to that socialist-propaganda  NPR  station again when I heard that employer-based health insurance costs in Colorado were expected to jump another 14% in 2011. I think the man said they’d been going up  an average fo 10% per year for the last ten years.  Employers are expected to pass the 14% increase in premiums on to their employees.

Do you know the “Rule of 72”? It’s a way of estimating how many years a certain sum of money will take to double, given compound interest at a certain rate. For example, if your utility bill  goes  up 12% a year,  how long until you are paying double what you’re paying now?  Divide 12 into 72 and the answer is six (6) years.  The answer is not 8.3 (12 into a base of 100) because the increase is compounded every year. If you have investments paying 5% a year, it will take 14 years for them to double in values (5 into 72 equals 14.4).   You can also find how much the growth rate must be for your money to double in say, 10 years: 10 into 72 is 7.2% compounded annually.  So if your health insurance premiums , say, go up 14% a year  every year, they will double in five (5) years.  If they go up “only” 10% a year, it will be about 7.2 years before they have doubled.  (The Rule of 72 assumes a consistent growth percentage, year after year. That’s why it’s only an approximation).

What are we going to do if we cannot seriously control soaring health care costs and health insurance costs? We are already paying 17% of  our total economy  (GDP)  on health care.   No other nation on the face of the earth is spending more than 8%,  so we are spending more than double what any other country is, as a percentage of our GDP. Yet we rank between 35th and 45th by the indicators usually used to measure health care outcomes. 

The US ranks thirty-seventh (37th) in infant mortality rate, behind Cuba but just a tad above Croatia.

We  also rank 37th in life expectancy,  behind Bosnia-Herzegovina and Bermuda. (

On most other health indicators we rank somewhere between 35th and 45th,  behind some Third World countries.

I know, I know: some of you are going to say, “We have the  37th best health care system int he world, so why mess with success?”

This is success? By no measure! Only by blind, dogmatic faith is it “success”. It’s a  failure, a tragedy, and a  disgrace.

Anthem Blue Cross just raised its California premiums by 18% (they originally planned it to be  38%) and Blue Shield by 14% for next year. Other health insurers are seeking increase of 29-38% for the next  year alone. Let’s see….at 18% that’s a doubling every 4 years; at 14% a little over 5 years, at 29%  less than 3 years, and 38% less than two years….

Buck Consultants 22nd  National Health Care Survey (see predicts overall average increases between 10.6% and 11.6% depending on the type of policy: HMOs, 10.6%, and High Deductible Health Plans (HDHP), 11.3%, PPOs, 11.6% and POS 11.3%. So this more modest projection means you can expect  the cost of your coverage to take six or seven years to double, if there are no raises larger than next year’s, a dubious assumption.  Your (“your”?!) insurance company just might decide at any time that next year is a good one for a 18% to 38% jump n their premiums, and you can toss that “Rule of 72” out the window. All best are off. What you gonna do then? It can happen at any time,  you know.

How ironic that precisely because  we are American citizens we have few or no alternatives or options –just the “freedom” to take it or leave it.  No recourse, no appeal, no rights. No alternative to the price-fixing of the handful of giant  Health Profit Corporations that call the shots.

Many Americans now pay five to ten times as much for health insurance as they pay in federal income taxes. That is crazy. And it’s not clear how much, if anything, the new  health care reform on the books will do to actually control costs in practice.  It’s too much an expansion of the current for-profit system, not a real reform or restructuring. But we must do something. Continuing the status quo is not a viable option.

If you don’t like “Obamacare”, that’s fine. I’m critical of it, too. But we need something–and not some silly  token “vouchers” or discount “coupons”,  or minor  “tweaking”. We need to put health care on a very different footing. We need a major restructuring, a shift in the whole basis. values,  and assumptions on which the present system rests.

Can’t we do better? Don’t we have to? If we don’t change the system health care costs may soon be eating up 25 or 33% of entire economy. We can’t afford to continue on the path we are on now. That is not an option.









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