Month: July 2009

Medicare Bankrupt in 6-8 Years Without Rationing

Think rationing is impossible in the US? Medicare will soon be bankrupt, and the government will have to spend its healthcare funds in a limited, rationed way.

Medicare’s annual spending exceeded revenue brought in from taxes in 2008, forcing Medicare to begin spending its reserve funds. According to the Medicare Trustees, Medicare’s reserve will be empty by 2017, and Medicare will have to cut benefits or payment rates by 19% to balance its budget [1]. Since the projected date of Medicare’s bankruptcy has been brought forward many times [2], it’s likely that the actual date of bankruptcy may be as early as 2015.

This should come as no surprise to observers of US healthcare policy, since Medicare has limited funds, but nearly unlimited liabilities. Medicare will pay for almost any treatment that a licensed doctor provides, without regard to the effectiveness of that treatment, or its own ability to pay for that treatment.

In the past, politicians have paid for Medicare’s growth through borrowing. That route will be unavailable this time, as US government debt will exceed GDP by next year, and could be over 120% of GDP by 2017. Raising taxes will be difficult as well, since tax revenues will have to be increased just to pay for the existing debt! If Congress and the President fail to curb Medicare cost growth as part of health care reform, the cuts in 2017 will look a lot like California’s budget, where the state was forced to cut $16.1 Billion (18%) from its  in state services across the board.

The current health care reform plans have introduced a variety of cuts in Medicare, which may reduce costs in the short term. But none of the plans under consideration address Medicare’s root problem: Medicare is not allowed to say NO. Rationing health care is not part of the current health care discussion, but it happens covertly today, and it will become the norm. If Medicare is to avoid insolvency, the government will have to decide when some procedures just aren’t worth doing. Seniors should be allowed to pay extra for those procedures, but Medicare will have to limit its responsibility. If you don’t believe me, look at California, where they finally learned that when the money’s gone, it’s gone.

[1] The Medicare Trustees’ Report Summary can be found at: http://www.ssa.gov/OACT/TRSUM/index.html

The fiscal situation referred to in this post refers specifically to the solvency of the Medicare Part A, the Hospital Insurance (HI) fund. Other parts of Medicare are in slightly better shape, but not by much. In 2017 the HI fund will have revenue for 81% of benefits, but in 2035 it will have revenue for only 50% of benefits.

[2] The Medicare Trustees note that the 2008 Report projected a Medicare HI Fund insolvency date of 2019 – it was brought forward 2 years this year. The solvency calculations also assume that Medicare will cut payments to medical providers based on a Deficit Reduction Act formula – but every year from 2003-2009, these cuts have been rolled back. The likely date of insolvency may move forward by a few more years as a result.

Posted on by praveenghanta 16

Is Peak Oil Real? A List of Countries Past Peak

Only 14 of the 54 oil producing nations in the world are still increasing their oil production. The era of cheap oil is definitively over, as shown below.

Is peak oil real? The BP Statistical Review of World Energy provides the data needed to answer this question. Using the 2009 edition, I have compiled a list of all oil producing countries and regions in the world, along with the production status of each, ordered by year of peak production. BP groups minor producers into categories like “Other Africa”, and “Other Middle East”, and that notation is used here. All production numbers are quoted in barrels/day.

Country Peak Prod. 2008 Prod. % Off Peak Peak Year
United States 11297 7337 -35% 1970
Venezuela 3754 2566 -32% 1970
Libya 3357 1846 -45% 1970
Other Middle East 79 33 -58% 1970
Kuwait 3339 2784 -17% 1972
Iran 6060 4325 -29% 1974
Indonesia 1685 1004 -41% 1977
Romania 313 99 -68% 1977
Trinidad & Tobago 230 149 -35% 1978
Iraq 3489 2423 -31% 1979
Brunei 261 175 -33% 1979
Tunisia 118 89 -25% 1980
Peru 196 120 -39% 1982
Cameroon 181 84 -54% 1985
Other Europe & Eurasia 762 427 -44% 1986
Russian Federation 11484 9886 -14% 1987*
Egypt 941 722 -23% 1993
Other Asia Pacific 276 237 -14% 1993
India 774 766 -1% 1995*
Syria 596 398 -33% 1995
Gabon 365 235 -36% 1996
Argentina 890 682 -23% 1998
Colombia 838 618 -26% 1999
United Kingdom 2909 1544 -47% 1999
Rep. of Congo (Brazzaville) 266 249 -6% 1999*
Uzbekistan 191 111 -42% 1999
Australia 809 556 -31% 2000
Norway 3418 2455 -28% 2001
Oman 961 728 -24% 2001
Yemen 457 305 -33% 2002
Other S. & Cent. America 153 138 -10% 2003*
Mexico 3824 3157 -17% 2004
Malaysia 793 754 -5% 2004*
Vietnam 427 317 -26% 2004
Denmark 390 287 -26% 2004
Other Africa 75 54 -28% 2004*
Nigeria 2580 2170 -16% 2005*
Chad 173 127 -27% 2005*
Italy 127 108 -15% 2005*
Ecuador 545 514 -6% 2006*
Saudi Arabia 11114 10846 -2% 2005 / Growing
Canada 3320 3238 -2% 2007 / Growing
Algeria 2016 1993 -1% 2007 / Growing
Equatorial Guinea 368 361 -2% 2007 / Growing
China 3795 3795 – Growing
United Arab Emirates 2980 2980 – Growing
Brazil 1899 1899 – Growing
Angola 1875 1875 – Growing
Kazakhstan 1554 1554 – Growing
Qatar 1378 1378 – Growing
Azerbaijan 914 914 – Growing
Sudan 480 480 – Growing
Thailand 325 325 – Growing
Turkmenistan 205 205 – Growing
Peaked / Flat Countries Total – 49597 – 60.6% of world oil production
Growing Countries Total – 32223 – 39.4% of world oil production

Only 14 out of 54 oil producing countries and regions in the world continue to increase production, while 30 are definitely past their production peak, and the remaining 10 appear to have flat or declining production [1]. Put another way, peak oil is real in 61% of the oil producing world when weighted by production. Since 2008 capped a record run for oil prices, most countries and oil companies were trying all-out to increase production. While a handful of producers (think Iraq) might be limited by above-ground factors, the majority of producers simply couldn’t do any better in 2008 [2].

The evidence of the demise of the cheap oil era has become insurmountable. In the face of the highest oil prices on record, the great majority of the world’s oil producers were incapable of taking advantage and producing more oil. Many nations including the US saw their oil production peak decades ago – there simply is no turning the clock back. This list shows that we are relying on a small number of countries to keep providing cheap oil. We need to move faster to alternatives and greater energy efficiency, before the last fourteen peak as well.

* More information on these countries:

  • Russian Federation – Russia’s oil production collapsed by the early 90’s as the Soviet Union collapsed, but despite a decade of growth, Russia’s own oil execs don’t think the old peak can be surpassed.
  • India’s production appeared to plateau in 1995, and has stayed within a steady range since. The EIA forecasts Indian oil production to remain flat or decline slightly in the near future.
  • Republic of Congo (Brazzaville) hit a production plateau in 1998, though current production is still very close to 1999 peak levels.
  • Other Central & South America – The remaining countries of the Americas hit a production peak in 2003, though it’s still too soon to know if this will be final peak.
  • Malaysia has been on a production plateau since 1995, and the EIA projects flat or falling production.
  • Other Africa – Oil production in much of Africa is potentially impacted by above-ground constraints, so it’s definitely possible that production will rise here. It will rise from a low base of only 50,000 bpd however, and may not have much impact on total world production.
  • Nigeria is impacted by domestic insurgencies in its oil-producing regions, and may be able to lift production if the political situation improves.
  • Chad’s oil production history is too short to definitively identify a peak in production, but the drop-off since 2005 has been dramatic.
  • Italy has been on a production plateau for over 10 years, and it’s unlikely that a mature economy is significantly under-exploiting its resource potential.
  • Ecuador’s production grew rapidly until 2004, but has leveled off and declined somewhat since then.

[1] To be considered past-peak, a producer’s current (2008) production has to be at least 10% less than its best year, and the best year must have occurred prior to 2005. Some countries’ production has been artificially constrained by political and other non-geological considerations. But in some of these cases, it will be difficult to pass an old peak because decades of depletion have occurred since that peak. Iraq peaked in 1979, making it all the more difficult to pass that now.

[2] While OPEC maintains formal production quotas, it is widely believed that only Saudi Arabia had true spare capacity in 2008, while all other OPEC nations were producing at capacity. The truth is unclear, since OPEC nations do not provide detailed reserve statistics for their oil fields.

Total has created its own short list of oil producers past peak, and Wikipedia has a list here.

Posted on by praveenghanta 13

Plugin Hybrid List

http://www.pluginamerica.org/plug-in-vehicle-tracker.html
Plugin America, an organization devoted to promoting electric and plugin hybrid vehicles, has put together an excellent list of plugin vehicles (linked above). Most major auto manufacturers now have a plugin model targeted for 2011 or earlier.

Continuing advances in battery technology mean that by 2011 plugin hybrids will be cost effective at today’s gas prices ($2.50 per gallon), and by 2013 hybrids may be cost effective at $2 a gallon.

Posted on by praveenghanta 0

US Doctors Are Overeducated

US medical students study for 8 years prior to residency, compared to 5-6 years of study in the rest of the world. This discrepancy increases health care costs by $25 Billion annually without contributing to quality.

In the UK, medical students study for five years after high school before beginning residency. They can expect to become practicing doctors by their late 20’s. This is true in Australia as well, where it’s possible to become a practicing doctor after less than 10 years of post-secondary education.

In much of Europe, medical students study for 4-6 years before beginning vocational training, and this process is slowly being standardized throughout the EU. Finally, in Japan, Brazil, China, India, and many other countries, medical education involves a 5-6 year degree followed by optional specialty training.

Since medical students in the US have a career path two years longer than in most other countries, their initial salary requirements must inevitably be higher to compensate for two years of extra tuition and lost salary. Using a career ROI calculation, it’s possible to estimate that US doctors must be paid an additional $30,000 per year as a result of this additional schooling [1]. With roughly 800,000 physicians in the US, that amounts to $25 Billion per year in additional compensation!

Why does the US stand almost alone in requiring aspiring doctors to study for eight years before training for another 3-8 years prior to practicing medicine? Is it possible that American doctors are better at their profession as a result? In fact, a small number of accelerated six-year medical programs exist in the US, and these programs have extremely competitive admissions. In a 6 year program, typical Bachelors-level general college education is curtailed while still accommodating a full four years of medical school. This model should become the norm rather than the exception, enabling medical students to enter careers more quickly and with less, thereby saving the entire health care system money!

[1] Using the spreadsheet used to perform Career ROI calculations, we can first adjust the medical student’s career path to shorten it by two years. This will raise the NPV and rate of return. We can then lower the expected salary to the point that the NPV is equivalent to the original NPV – the difference in salary is the salary amount made necessary by the extra schooling.

Posted on by praveenghanta 2