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Financial Highlights
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Robert L. Shoptaw
Chief Executive Officer |
A front burner issue going into the national elections in the fall of 2008 revolves around health-care delivery and financing in the United States, which logically subdivides into the basic components of quality, cost and access to necessary care. The major candidates in both parties have voiced their commitment to one type of health-care system reform or another. In all cases, the candidates have indicated their primary focus will be to close the “coverage gap” for the roughly 46 million Americans who, on any given day, do not have health insurance coverage.
A more subtle set of issues associated with reforming the nation’s health care system involves basic economics. First, and maybe the most important of these interrelated issues, is what we can afford to spend on health care in the United States and remain competitive in the increasingly global marketplace. Today we are at the “top of the heap,” spending $6,096 per man, woman and child in the United States. This compares to $2,823 in Japan, $3,521 in Germany, $2,900 in the United Kingdom and $3,038 in Canada. Countries such as China, Brazil and Mexico spend less than $500 per capita for health care annually on their citizens. The vast majority of Americans would not be satisfied with the health care systems in emerging third world countries, but Americans must find ways to effectively compete with these economies if our current high standard of living is to be maintained over time. Obviously, the level of health care costs factored into the price of the goods and services produced in any country has a significant bearing on its international competitive standing.
The second component of the economic dilemma we face in the United States relates to the unfunded entitlement program liabilities, which already are in place and must be addressed by those of us currently active in the workplace along with our children and grandchildren in the decades to come. The two-headed economic monster at our door is composed of the existing entitlement programs of Medicare and Social Security. Based on a recent analysis by McKinsey & Company, the current unfunded liability for Medicare stands at $30 trillion, and the future liability shortfall under Social Security is at the $8 trillion level. To put these numbers in perspective, recognizing that we currently have in excess of an $11 trillion domestic national product in the United States (e.g., the value of all goods and services produced in the United States in one year), today we’re facing combined
Medicare and Social Security unfunded liabilities which are equivalent to roughly three and one-half years of the total output of our economy to bring them to a zero balance.
If the magnitude of this combined debt were not enough, the number of workers in the U.S. economy, relative to the number of retirees eligible for Social Security and Medicare services, is in rapid decline. To illustrate this point, in 1960, there were 5.1 workers in the U.S. economy for every retiree. In 2005, this ratio was down to 3.3 workers per retiree. By 2015, this ratio is projected to further decline to 2.9 active workers per retiree in the United States.
Honoring Commitments
Obviously, there are a number of different reform strategies being advocated by those candidates currently sharing the national political spotlight. Some are proposing to “tweak” the current system to close the gap on the uninsured via additional tax credits and the expanded use of individual high deductible health savings accounts (HSAs). On the other end of the spectrum are those candidates who would like to engineer a total overhaul of the existing U.S. health-care system. In all cases, there remains, in varying degrees, an endorsement of some form of joint public/private sector mix of programs or approaches that, at a minimum, would essentially eliminate the uninsured problem, which has hounded the U.S. health-care system for decades.
From the perspective of Arkansas Blue Cross and Blue Shield and its affiliated companies, we feel we’re well positioned to make a meaningful contribution in support of whatever changes are adopted coming out of the current public policy debate. As a major contractor to the federal government under both the Medicare and Federal Employee Health Benefits Program, we have the demonstrated capabilities in place to provide these types of administrative support services on an expanded basis however they may eventually take shape. Likewise, a full range of under age 65 private sector offerings can be re-engineered to meet any new government compliance standards that may be enacted in the post 2008 election era. With our substantial operational and financial capacities, we welcome the opportunities which lie ahead to partner with both public and private sector stakeholders, and to more efficiently and effectively achieve the three basic objectives of high quality, affordable cost and reasonable access to necessary health-care services for all Americans.
The stakes around health-care financing and delivery reform are high for all of us on both a personal and collective basis. My hope is that a practical balance among the competing alternative solutions can be struck. This balance should be heavily oriented toward the goal of promoting a high quality of life for all Americans in terms of both personal health status and continued achievement of an increasing overall standard of living. To achieve less than these twin objectives jeopardizes the role of global leadership for future generations of Americans that previous generations have labored so hard to establish!
Sincerely,
Robert L. Shoptaw
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Chief Executive Officer
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