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100 Million Dead In US

by Karl Denninger, Market Ticker:

Go ahead folks, read this one.

Accordingly, I must communicate to you at this time the full extent of our dire fiscal straits and the potential disruptions that we face in addressing even our most critical core responsibilities going forward into the new fiscal year. My Office has very serious concerns that, in the coming weeks, the State of Illinois will no longer be able to guarantee timely and predictable payments in a number of areas that we have to date managed (albeit with extreme difficulty) despite an unpaid bill backlog in excess of $15 billion and growing rapidly.

We are effectively hemorrhaging money as the state’s spending obligations have exceeded receipts by an average of over $600 million per month over the past year. (ed: That’s $7.2 billion/year)

My cause for alarm is rooted in the increasing deficit spending combined with new and ongoing cash management demands stemming from decisions from state and federal courts, the latest being the class action lawsuit filed by advocates representing the Medicaid service population served by the state’s Managed Care Organizations (MCOs). As of June 15, the MCOs, and their provider networks, are owed a total of more than $2.8 billion in overdue bills at the Comptroller’s Office. There is no question that these obligations should be paid in a more timely manner and that the payment delays caused by the state’s financial condition negatively impact the state’s healthcare infrastructure. We are currently in court directed discussions to reach a workable and responsive payment schedule going forward, but any acceleration of the timing of those payments under the current circumstances will almost certainly affect the scheduling of other payments, regardless of other competing court orders and Illinois statutory mandates.

Now folks, you can call this a “one off” if you wish.

It’s not.

It is also not a surprise where the problem is centered. It’s in health care.

I’ve only been yelling about this since the 1990s, when I saw the impact on my firm’s balance sheet and cash flow statement on a year-over-year basis for a few years running. You don’t need to see it for more than a couple of years to grasp the gravity of the problem if you have a brain and are not politically poisoned to wave it off.

Anyone with a $3 WalMart calculator can figure it out, given 5 minutes and an IQ greater than their shoe size. You merely need to run the exponential series out 5, 10, 20 years and what happens becomes obvious.

At ~9% expansion the rule of 72 gives you a close-enough approximation: Costs double every 8 years; in 24 years you spend eight times as much money as you did originally.

There isn’t 8x as much money and you can’t raise it.

You can’t increase taxes by 800%. You can’t expand the economy by 800% over 24 years; at a 3% GDP expansion rate (which we haven’t had in the last two decades for any sort of time period, I remind you) the economic output expands by 200%. This means that you’d have to quadruple taxes compared against economic output, and if you try to do that GDP will collapse because you will consume all of the expansion in economic output and then some.

There is only one answer to this problem and that is to take the entire medical system, which is where the entire problem resides, and dismantle it. Prosecute every single hospital administrator, owner of an imaging center, drug company executive and physician that has ever, even once, stuck his head in a hospital room and then billed someone $1,000 for a “drive by” consultation — or anything like it, such as charging $90,000 for a drug here that’s $2,000 in another nation, or billing one person $100,000 for a procedure where another is billed $5,000 or $10,000.

Read More @ Market-Ticker.org

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