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Commentary on The Capital Markets
2017-03-30 08:57 by Karl Denninger
in Health Reform , 618 references
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Let's lay out the parameters for a bill, a fairly-modest update to my two previous missives on this point here and here (note the dates) and which can be easily turned into formal legislative language:

  • All providers must post, in their offices and on a public web site without any requirement to sign in or otherwise identify oneself to access it, a full and complete price list which shall apply to every person.  This instantly allows customers to compare pricing between providers for services and products in the medical realm.

  • All customers must be billed for actual charges at the same price on a direct basis at the time the service or product is rendered to them.  This immediately and permanently decouples "insurance" from the provision of care.  The current system of an "explanation of benefits" that often features a "negotiated discount" of some 90% is nothing other than an extortion racket and is arguably felonious -- threatening to bankrupt someone if they don't buy your "insurance" through a threat to charge them ten times as much certainly appears to be a criminal enterprise and, given that more than one entity is involved, looks like it meets the definition of Racketeering.  Insurance coverage may well cover some, part or none of a given bill, and nothing prevents an insurer from telling you in advance of your visit how much they will pay (if anything) for a given procedure or drug.  Indeed you should demand that information from them and use it as part of choosing where to obtain treatment but the bill still has to be rendered to you, you have to be the one to file the claim and everyone must pay the same price to the same provider for the same kind and quantity of product or service.
  • For a bill to be valid and collectible it must be affirmatively consented to in writing, with a disclosure of the actual price to be charged from the above schedule for each item to be provided whether good or service, prior to the service being performed or the good furnished, subject only to the emergency exception below.  A bill that is increased, has items added to it after consent is obtained, which contains any open-ended promise to pay without an actual price listed for each service or good prior to customer consent or is issued with no consent at all is deemed fraudulent and void. This instantly stops "drive-by" doctor charges in hospitals as just one example.  It also prevents charging $20 for an aspirin; nobody would tolerate being billed by the square for toilet paper in a hotel!  Hospitals will of course squawk that they cannot operate like this as they "can't" figure out what is required until after-the-fact but that's false; nothing prevents them from advertising "Appendectomy: $2,000" and that being the soup-to-nuts price.  In fact that's exactly what the Surgery Center of Oklahoma does today so quite-clearly it both can and does work.  In addition this change will permanently and immediately put a stop to the ridiculous practice of defensive medicine (read below for the explanation.)  You would never accept a gas station that only displays the cost of your gasoline after you pumped it and varied that price based on who your car insurance was bought from or a grocery store that had no prices posted at all and only gave you a total after your groceries were taken out of the store and the transaction could not be refused.

  • No event caused by or a consequence of treatment can be billed to the customer.  This instantly aligns the interest of the customer in not having such an adverse complication (e.g. MRSA, etc) with the medical provider.  As it stands right now hospitals actually have an incentive for you to have a complication since they make more money if you do.  If you call me to fix your roof and I drop my ladder causing it to crash through your picture window I get to pay for the glass I broke through my ineptness.  The same must apply to medical providers.  For those who claim hospitals and similar can't adopt such a model I point to the OKC surgery center, which does exactly this -- and has a lower complication rate (gee, I wonder why when they have to eat it if they cause it....)

  • All true emergency patients, defined as those who are unable by medical circumstance to choose where their treatment is to take place and require immediate medical intervention to either stabilize their condition, prevent severe permanent impairment or death (e.g. transported by an ambulance, unconscious with no person with medical power of attorney at-hand, having a heart attack in the ER, etc) must receive the same price for the same service as a person who consents to said service.  For a bill to be valid for a true emergency documentation must be maintained and presented showing that the customer was unable, due to exigent circumstances at the time they presented to the provider, to provide consent prior to services being rendered.  Any medical provider who attempts to bill any service or product above that price to a person in exigent circumstances forfeits 100% of their invoice and is guilty of consumer fraud.  Note that this does not prohibit a hospital from having a published price list that charges more for services rendered through their Emergency department so long as those who walk in, are conscious and able to consent gets the exact same price as someone who is unconscious and flat on a gurney.  If you demand that an A/C repairman or plumber come out now at 3:00 AM he most-certainly can charge you more than if you call and ask him to show up during normal business hours!

  • All medical records are the property of, and shall be delivered to, the customer at the time of service in human readable form (a PDF provided on common consumer computer media such as a "flash stick" shall comply with this requirement.)  Any coding or other symbols on said chart must include a key to same in English delivered at the same time.  No separate charge may be made for the provision of a contemporary record of a medical visit or treatment other than a reasonable charge for physical media if the customer does not have same with him or her.  The obvious way to do this is for the customer to bring a flash drive to which the human-readable chart is written.  If the customer doesn't have one the office can certainly maintain a small supply of $10 flash drives and charge the $10 to their bill.

  • Auxiliary services (e.g. medical or dental Xrays, lab testing, etc) may not be required to be purchased at the point of use.  If you wish to buy your tests from the lab down the street (which also must post a price) that's up to you.  If you wish to have your bitewings taken at the imaging center across town, that's up to you.  The dentist or doctor cannot require that you buy those services from them; they must compete for them like everyone else.

  • All anti-trust and consumer protection laws shall be enforced against all medically-related firms and any claimed exemptions for health-related firms in relationship to same are hereby deemed void; for private actions all such violations proved up in court are entitled to treble damages plus a $50,000 statutory civil penalty per impacted person.  If the government won't bring these charges (and we know they won't since despite not one but two US Supreme Court cases here and here making clear anti-trust laws apply to medical providers of all stripes not one charge has been leveled against any of the medical firms) let's make it damn attractive for individual private suits by making the price of losing such a suit for a medical provider ruinously expensive (and lucrative for the attorneys bringing them!)

  • Any test or diagnostic that carries no exposure to drugs or radiation, nor is invasive beyond a blood draw, may be purchased without doctor order or prescription.  If you want an A1c or CBC you thus need nobody's permission to have one.  Same for an MRI.  For those tests and procedures in which exposure to drugs or radiation are involved, or are invasive (e.g. internal biopsies, etc) requiring some sort of chain of evidence of need due to that risk is reasonable.  But for most diagnostics this is demonstrably not true.  There is a clean argument to be made that for young, outwardly healthy adults a metabolic panel and CBC might actually be more useful in catching incipient serious disease than an annual physical which typically is nothing more than 5 minutes of observation and no checking of metabolic parameters beyond blood pressure and pulse rate!  The former can be had for $10 while the latter is often a $100+ charge.  Let the people and evidence show which is superior on a cost:benefit basis; after all it's my ass on the line from my decision not yours.

  • Wholesale drug pricing in the United States must be on a "most-favored nation" basis.  The impact of this would be to force a level price across all nations for drugs produced by any pharmaceutical company marketing both in the US and anywhere else in the world.  Violations, including attempts to "offshore" via subsidiaries to evade this requirement are deemed criminal and civil acts.  The civil penalty shall be 300% of the difference paid to the customer who got screwed, and another 300% for each instance of a prescription filled at an inflated price paid as a fine to the government.  This would drive drug prices down by at least half in the United States and for many drugs by 90% or more.  It would instantly and permanently end, for example, the practice of charging someone $100,000 for scorpion antivenom in Arizona when the same drug from the same company is $200 for the same quantity 40 miles to the south and across the Mexican border.  Since all prices must be posted at the retail consumer level for both goods and services controlling the drug pricing problem at a wholesale level is both simpler and sufficient since competition will already exist at the retail pharmacy level.

  • No government funded program or government billed invoice will be paid for medical treatment where a lifestyle change will provide a substantially equivalent or superior benefit that the customer refuses to implement.  The poster child for this is Type II diabetes, where cessation of eating carbohydrates and PUFA oils, with the exception of moderate amounts of whole green vegetables (such as broccoli) will immediately, in nearly all sufferers, return their blood sugar to near normal or normal levels.  The government currently spends about 25% of Medicare and Medicaid dollars on this one condition alone and virtually all of it is spent on people who can make this lifestyle change with that outcome but refuse.  If you're one of the few exceptions and it doesn't work in your case you have the burden of proof.  Nobody has the right to light their own house on fire on purpose and then claim FEMA benefits for same.  This one change alone will cut somewhere between $350 and $400 billion a year out of Federal Spending and, if implemented by private health plans as well, likely at least as much in the private sector.  That's more than three quarters of a trillion dollars a year that is literally flushed down the toilet due to people being pigheaded and refusing to do things that would not only save the money but also save their limbs, eyesight and ultimately their life.

  • Health insurance companies must sell true insurance to sell any health-related policy at all.  A true insurance policy is defined as one that (1) does not cover any condition you have received treatment for over the last 24 months (in other words, p != 1.0), (2) if an adverse event does occur your obligation to pay any further premium ends with regard to coverage for that event and all consequences thereof while the company is required to pay reasonable costs of treatment until and unless the condition has been resolved without limitation on the necessary amount or duration of said payments and (3) does cover, with a selection of deductibles available to the buyer, all accidental injuries and truly life-threatening emergency medical events.  Medical underwriting is permitted for such catastrophic policies but once undertaken is transferable to a new company without a new round of underwriting provided no interruption in coverage of more than 60 days occurs.  Such a policy may exclude intentional acts (e.g. acute drug overdose by other than non-consensual consumption), perhaps with an exclusionary period (such as that for suicide on life insurance.)  A common policy of this sort with the above reforms would cover things such as heart attack, cancer, liver failure by other than alcoholism, rare diseases and similar and would be very inexpensive.  For a young person of normal weight the cost of such a policy might be $100 a year.  For a 50 year old, maybe $300 a year.  If you're overweight or obese (or worse, have a high A1c) then it's going to be considerably more-expensive because your risk of heart attack, for example, would be much higher.  Ditto if you're a smoker.  To protect against fraudulent misconduct by insurance companies with regard to rescission of policies after an event, which used to be quite common, the only grounds for rescission is evidence that you actually underwent medical treatment for the condition that is medically proved as the underlying cause of the claim or fraud in the application (e.g. claiming to be a non-smoker when in fact you are.)  The two-year "no treatment" period balances sufficient protection against anything that (1) is degenerative and emergent and (2) would otherwise lead to a claimable event against the abuse of rescission against the possibility of a customer attempting to rip off the insurance company (and thus all the other policy holders) by buying a catastrophic policy after a serious event has become evident to them.

  • All health insurance providers selling true insurance, in whole or part, must provide within their "true insurance" the ability to "replace like with like."  This is the premise of insurance, subject to policy limits.  If you wreck your car you're not entitled to a new car, but rather either (1) repair of the one you wrecked to "as before the wreck" condition or (2) its current value in money.  To the extent reasonably possible health insurance for "true insurance" events (as above) must therefore cover the provision of services and goods to return "like for like" within the area where you are at the time the event occurs, or to where you are involuntarily transported in the event you are incapacitated.

  • Medicare becomes just another insurance provider.  There is no "special" Medicare-accepting doctor list; it is simply an insurance plan and one that does not pay for routine physician visits and similar but rather covers unexpected insurable expenses.  In other words Medicare Part "A" will continue as-is along with Part "D", but Medicare Part "B" will be deleted.  Since Medicare was sold to the public as an "80/20" plan (the customer bears 20% of the cost of care) this change represents no violation of that promise.  In addition Seniors can still buy "Medicare Advantage" plans should they wish that covers all medical costs (with possible deductibles and co-pays) as is currently the case.

  • Medicaid is repealed entirely. No, we're not leaving the poor out in the cold.  See the next point; the poor will in fact obtain better care than they have now as they will have full access to the entire body of physicians, hospitals and facilities.
  • For those who have no means to pay and find themselves with a need for medical attention the following provisions shall apply:
    1. EMTALA is hereby repealed.
    2. The provisions of this section, bearing on those who cannot pay for medical services, shall apply only to US Citizens and lawful permanent residents. This instantly puts a stop to the "uncompensated care" problem for illegals and the "come here pregnant and poop out a kid" expense issue as well.  No medical provider shall have any liability, whether civil or criminal, for their refusal to provide care for which they are unable to secure payment when furnished to other than lawful permanent residents or Citizens.  Other nations that wish to negotiate a billback provision for their citizens in order to insure that payment is secured may, of course, do so but under no circumstance shall a person who is not a citizen or permanent resident obligate any provider to provide services without payment, nor may they avail themselves of the backup payment provisions of this section, nor does any cause of action in favor of any person arise in equity or law for a provider's refusal to provide care to a person who is not a citizen or permanent resident without sufficient guarantee of payment for medical goods and services.
    3. For those with true emergencies (as defined above) and who are lawful permanent residents or citizens and thus can identify themselves as such who are unable to pay the treating hospital/ER shall bill the US Treasury for the lawful charges incurred under the above framework and shall be paid within 30 days.  All provisions of the above shall apply for what constitutes a lawful and payable bill and shall be provided to the customer at the time of service along with the fact that same has been forwarded to the US Treasury for payment.
    4. For those with non-emergency conditions who are (1) US Citizens or (2) lawful permanent residents and who assert they are unable to pay the medical provider shall bill the US Treasury for the lawful charges incurred under the above framework and shall be paid within 30 days with the provision that government billing shall not be available for any condition, drug, device or treatment for which a lifestyle modification that the consumer refuses to make will alleviate any or all of said expense and need for medical goods or services.  Again, all provisions of the above shall apply for what constitutes a lawful and payable bill and shall be provided to the customer at the time of the service being provided.  Treasury shall provide a means of rapid verification of citizenship or permanent resident status for the use of medical providers, with access to same restricted for this exclusive purpose so as to allow validation of such claims at the time of service (if we can have a background check call-in number for gun sales we can certainly verify citizenship status for those who claim to be indigent and in need of medical care!)
    5. Said charges under (3) and (4) will, when submitted to Treasury, result in an invoice being sent to the taxpayer in question and may be settled within 90 days of submission at no penalty.  This allows a person who temporarily cannot pay or who is misidentified as not having a means of payment (whether insurance-based or otherwise) to make payment directly to the US Treasury without risk of an adverse tax action.  If said bill(s) are not paid in full within 90 days then they become a tax lien subject to collection exclusively from any or all of (a) refundable tax credits, which may be garnished at up to 100%, (b) tax refunds, which may be garnished at up to 100%, (c) other entitlement checks excluding Social Security retirement which may be garnished at a rate of no more than 25% (e.g. social security disability, general assistance, etc) and (d) windfall amounts in cash or property that cumulatively exceed $10,000 in a rolling 12 month period from any source (e.g. inheritances, lottery winnings, gifts, etc.) that may be garnished for payment up to their full amount.  Statutory interest at 110% of the current 1-year Treasury bill rate, with the rate adjusted on the last business day of each calendar quarter, shall be applied on any remaining balance until paid in full. This will be vastly cheaper than Medicaid -- about 10% of what is spent today, in fact, and a good part of it will be recoverable over time.
    6. At death if a tax lien exists for unpaid medical bills it shall be treated as any other tax lien for the purpose of claim against the decedent's estate except that in the case of a married couple with a surviving spouse who's marriage pre-dates the medical expenses in question any such claim shall not be recoverable during the surviving spouse's remaining life but rather shall become a claim against said surviving spouse's estate at the time of their death.  Remarriage, creation of a trust or other estate-planning vehicle after the event(s) giving rise to the medical tax lien shall not modify or defray this liability and may not be used to shield the assets of the surviving spouse from an existing claim.
    7. Any provider of service that falsifies billing under this section, bills at inflated prices or otherwise violates the provisions of this law in regard to any bill submitted to the US Treasury for payment shall be deemed guilty of a criminal felony for which the punishment shall be the forfeiture of three times the billed amount and each individual who has caused such an invoice to be issued, transmitted or otherwise participated in same shall be subject to a fine of not less than $1,000 nor more than $10,000 and imprisonment of not less than 2 and not more than 5 years.  Each fraudulent invoice shall constitute a separate and distinct offense, all penalties shall be consecutive and additive, and liability for same shall be joint and several.
    8. Misrepresentation of citizenship or permanent resident status for the purpose of obtaining health care to be billed to the Treasury shall be deemed a criminal felony punishable by not less than one and no more than ten years imprisonment and a civil penalty of three times the amount of the charges incurred.  Upon conviction said individual shall also be immediately deported and suffer permanent exclusion from the United States; said penalties may not be decreased or waived irrespective of other circumstances.

  • ALL provisions of the PPACA and other public health related laws contrary to the above, whether in law, CFR, Internal Revenue Code or otherwise are declared contrary to public policy, void and unenforceable, and all State Laws and Regulations contrary to same are preempted, void and unenforceable since medical care inherently involves commodities that travel in interstate commerce and thus the sale of such goods and services fall under the Commerce Clause to the US Constitution.  Rather than go through and strike them all (which of course Congress could do) that one sentence will take care of it until the necessary clean-up can be performed on a chapter-by-chapter basis.  Yes, this means the taxes, mandates and similar -- all gone.

Now let's look at what you could expect under such a system.

Let me first note that such changes would drop Medicare expenses in the budget by at least 75%.  Again, 25% comes off from changing how we handle Type II diabetes alone; these are not "pie in the sky" numbers.  This results in a near-complete deletion of the federal budget deficit on an instant and permanent forward basis and as a result everyone in the country becomes richer every year because their purchasing power of money stops going down and starts going up.  

The CBO is out with their latest estimate on the detonation of our federal budget, and it's not pretty. They point out what I've said repeatedly on the budget and "entitlements": Social Security is not the problem and in fact will start declining in share of the budget in 2028; politicians speaking of "entitlements" lumping Social Security in with Medicare and Medicaid are lying.  The entire problem is in medical spending and if current trends are not reversed -- not just "adjusted" over time -- will destroy the federal budget and economy.  We will not get to 2037 before it happens either; in fact, if we do not act we'll be lucky to get through the next four years as the markets will figure out that neither political party will take this issue on and resolve it.  Simply put we must solve this problem and we must do it now.

This bill will materially increase access to doctors, clinics and similar by Medicare customers since there is no longer any discrimination between who does and doesn't take the program -- Medicare is simply an insurance payer just as any private program is, and will list its payable amounts for care just as will any private party insurance does.  This also leaves the Medicare Advantage programs, for those who decide they like that program better, fully intact.  For those Seniors who have medical expenses that exceed what Medicare will pay they will wind up with a tax lien just as will any other citizen.

The bill will also destroy PBMs and the outrageous extraction of funds they commit by forcing price transparency and decoupling price from "insurance."  You will be able to call or go online to look up drug prices from any pharmacy and they will in turn have to honor the same price for all retail buyers.  Competition will return at the retail level and the practice of "gagging" pharmacists, which is arguably illegal as it is done for anti-competitive purposes, will end immediately.

If you're unable to pay or accrue medical expenses in your Senior years (or otherwise) that wind up being paid by Treasury then when you die they go "poof" (Treasury eats them) to the extent that your estate is unable to pay them off as ordinary debt prior to distribution through probate (will) or trust.  If you're married then your spouse cannot be punished for said debt during their life should they survive you despite some (or all) of your assets being titled in common, but your joint assets cannot be shielded when the surviving spouse dies against your medical claims nor can you marry after incurring such expenses as a means to prevent recovery from your assets.  This prevents "serial marriage" or late trust-creation gaming of the system yet also protects a surviving spouse, which will be particularly important for poor couples and will prevent some of the nastiest situations that occasionally arise today (where long-married couples are essentially compelled to divorce for economic reasons due to medical expenses and collection efforts.)

Medicaid goes away entirely on a formal basis however poor people actually acquire superior access to health care. The amount spent by Treasury would drop by at least 80% instantly.  A fair amount of the remainder would be, in future years, recoverable as some people leave the ranks of the poor and if and when they do their accumulated medical debt would be recovered over time.

This bill stops the detonation of all of the state public pension fund budgets -- a catastrophe that has been driving property tax increases and threatens to destroy all of the state budgetary systems.  That all ends in one day.

It deletes all state Medicaid spending immediately (the states may choose to use said funds,or some part of them, to pay for low-income clinics and similar for residents in their states, much as County Health Departments do today in the States.)

It makes bilking the government by submitting false or inflated bills to the Treasury severe criminal offense.  The poor and disabled are the least able to press their own claims and fraud is rife in both Medicare and Medicaid today.  This puts real teeth in the anti-fraud provisions for those individuals who, most of the time, cannot reasonably bring their own suits.  It also protects the poor and disabled from improper tax liens while at the same time recovers from them the cost of their care should their financial situation improve in the future.

An often-repeated claim is that medicine is "highly variable"; the person who presents to the hospital or ER has an unknown expectation for complications and follow-up requirements.  But this is true for car repair as well and yet car dealers deal with this successfully through their "flat rate" book.  The "flat rate" for repairing your front brakes is $400.  This includes a set of pads and rotors and the labor to install them along with a margin for expected and possible complications; the dealer has no idea what sort of condition the vehicle is in other than that it needs brakes when he takes it into the shop.  The flat rate book gives him the expected time to perform the procedure including a margin for possible complications.  In some cases the dealer will take less time to fix the car and in some cases more. That doesn't matter; what does matter is that on average that's what it will take with a reasonable profit for the dealer, and in addition the dealer typically adds a "shop charge" that is a flat 10% of his repair price for small and hard-to-itemize things like shop towels, grease and similar.  If he gets it done faster and cheaper, he wins.  If he runs into complications, he loses.  The book gets released with each new model and can be updated as actual service history is fed back to the manufacturer.

The "must post a price" model, incidentally, does not mean that providers cannot differentiate between customers who have objectively-measurable differences in presentation.  For example a provider could charge 25% more for someone who is morbidly obese but must do so for everyone who is, and must post that up front on their price list.  There may well be a higher complication rate for such a person in that practice's history.  If a provider is willing to come in at 3:00 AM to take care of something urgent but wants to charge double to do so rather than waiting until the morning they can, provided they disclose it up front in their price list.  Likewise, perhaps some practice has a lot of available appointments in the afternoon and wishes to offer a 10% discount for appointments between 1-4 PM.  No problem.  Competition once again comes into play; if some provider figures out how to get rid of the additional complication rate caused by said obesity they can then undercut the other guys on price and gain that business.  If one provider is more skilled than another and thus has a lower complication rate they can undercut their competitors which is good for everyone except the lesser-skilled provider.  Who do you want practicing their medicine on you -- the better guy or the lesser one?  This is how progress is made folks.  It's also why the shop charge to change an alternator in one make and model of car is different than the same job done on a different make and model; one may have easy access from the top, the other does not.

Likewise insurance companies employ a whole bunch of actuaries for the purpose of figuring out the odds of a given thing happening and what it will cost if it does.  To do this they analyze previous events.  After this change in law hospitals will be no different; the hospital has access to fine-grained data on all of its previous procedures done, for example, to perform a coronary artery bypass.  It knows on average how many sutures must be laid, how many scalpels are used, how many units of blood get consumed, what drugs and in what amounts are consumed, how many hours in the operating theater and so on.  It knows that X% of the operations go without a hitch, Y% have some minor complication and Z% are a disaster requiring other major interventions because of unforeseen complications -- some of which are avoidable (e.g. infections acquired in the hospital) and some of which are not.  From all of this data the hospital can compute an average and that's the price they set.   Just like the car dealer does not know if your car has frozen bolts that will have to be chiseled off in order to change your brakes or a caliper that will have to be swapped out because when it is reset it starts leaking fluid the hospital does not know all of the possible complications that may arise from a procedure when you are admitted.  By mandating a quoted pricing model competition comes into the game and the hospital now has an incentive to find ways to reduce the complication rate and waste.  The complication rate is very important to you as a customer since avoidable complications (e.g. MRSA infections) are severe consequences that you suffer and a good part of the time it happens because they screwed up.  It is utterly essential if we are to improve the quality of care that the incentives align for the provider and customer in this regard and if the hospital across town (or across the state!) can reduce the infection rate, for example, that also reduces its average cost for a given procedure and thus said provider can offer a cheaper price.  That's called innovation or, if you prefer, productivity enhancement and it is the driver for progress in your quality of life both personally and economically.

One of the often-repeated claims is that much testing today is undertaken for the purpose of "defensive medicine" in the form of preventing malpractice lawsuits (or at least making them harder to win.)  Forcing the doctor ordering said tests to present a price to the customer and obtaining their consent before the test is done ends this instantly.  If the customer refuses to consent to spending the money on some diagnostic then the result of doing so is on him or her.

"Poof" goes the defensive medicine problem in a puff of smoke because the customer made the choice rather than the doctor!  Physicians often claim we need "tort reform" and that they order tests by the bucket-full as a means to defray lawsuit risk. Various advocates, for their part, want to outlaw bringing such suits.  The problem with so-called "tort reform" is that sometimes lawsuits are appropriate -- the classic example is when the doctor amputates the healthy foot or hand leaving the diseased one attached!  The best, easiest and most-equitable reform when it comes to the "tort lottery" game played today is to replace the current "order 10 tests" paradigm with informed consent and shift consent along with the cost and potential benefit analysis to the customer.  If the doc says "I want you to take a CT scan because I suspect X and it costs $200" and I say "No" because I don't want to spend the $200 then if it turns out that the bad thing would have been discovered by the CT I cannot sue because I was offered but refused the test!  Customers need to become the decision point, not doctors; they must be presented both the cost of such procedures along with the expected benefits -- including the odds of either proving up or refuting a possible diagnosis.  My ass, my choice, my expenditure, my risk.  That permanently resolves the entire tort lottery problem yet leaves the legal system intact for the outrageous cases where consumers should have redress in the courts.

Now on to some personal examples of expected financial outcomes.

First, let's compare against an Obamacare policy that contains a high deductible for a reasonably-healthy, 40 year old person.  That person is today charged approximately $400 a month and the policy has a $5,000 deductible.

This means they pay $4,800 a year for exactly nothing and if they use any health services at all there is no coverage until $5,000 in additional funds are expended, at which point the insurance covers 80% up to the "cap" (typically $7,000 or $8,000.)

Under this system that customer would (voluntarily) pay $300 for a catastrophic policy.  Since they are nominally healthy they might decide to have an annual physical (at a cost of $150)  If they remained healthy they would spend nothing more through the year on medical care.

Their cost of health care would go from $4,800 a year today to $450 for a reduction in cost of 93.7%.

Now let's take the person who is nominally ill.  Their current expense, assuming they consume $5,000 of medical care under the current insurance system is $9,800 a year -- $4,800 for the "insurance" and $5,000 for the deductible.

What do they pay under this system?  $300 for their catastrophic policy which does not cover their existing conditions but does cover an accident or new catastrophe not caused by their existing circumstance and all of their current treatment at a discount of 80-90% of today's pricing.

How much medical care can you buy for $9,500?  Well, you can buy one of many operations at the Surgery Center of Oklahoma, should you require one (and not many people need more than one in a year!)  You can buy a hell of a lot of pharmaceuticals when they're sold at outside-US prices, which they would be immediately -- in other words divide current drug prices by anywhere from 5 to 20 or more.  Monthly "specialty" visits to the doctor to monitor your condition would run you $700 over the entire year.

Do you really think you'd spend more than $9,500?  Probably not, and you might spend a hell of a lot less.

In fact, in many cases you might spend 80% less depending on exactly what's wrong with you.  Further, if you go from "ill" to "well" during that year your expense immediately stops since the $400 a month otherwise extracted from you is gone.

A poor person would enjoy dramatically improved access to care over what we have today since there would be no "Medicaid provider lists."  They could access any physician or other treatment option that was medically indicated and there would be no discriminatory pricing for or against, nor any discrimination in access.  Both access and outcomes would improve dramatically for poor people while cost to the government would be dramatically slashed.

How about the person "covered" through their employment, which is most of the population?  Your employer would see thousands of dollars a year in cost reduction, and even more in his liability insurance premiums would disappear.  For the average family of four the premiums covered by your employer are likely close to $10,000 a year.  That is salary that you will receive.  

To put this in perspective the average family makes some $50,000 a year. That "average" family would see an immediate 20% increase in spendable income; roughly $10,000 each and every year forevermore into the future.  That's huge; there is no other way to have such a large impact on consumer income and wealth in this country on an aggregate basis than this.

Let's assume that "average family" has a kid during the year -- a routine, uncomplicated pregnancy.  Today that's about $10,000 worth of expense, but if you have "good insurance" you don't see any of it directly.  The cost of having that child as a matter of routine vaginal childbirth would drop to about $1,000.  You'd get $10,000 more in salary and spend $1,000 of it; the other $9,000 would be yours.  If something goes wrong then your $200 catastrophic policy would cover it, perhaps with a $3,000 deductible.  You'd spend $1,000 for the routine part of the birth, $3,000 on deductible, the cat policy would cover the rest of the emergency and you'd be $6,000 net positive -- with a complex childbirth in the mix.

Now let's assume under this system you're nominally well and have a heart attack.  What do you pay?  The $300 you paid for the catastrophic policy, and perhaps a $2,000 deductible.  The bypass you need to resolve the problem is $10,700 instead of over $100,000 because the local hospital has to compete with places like the Surgery Center, and that's what they charge.  If they don't then they sell exactly zero bypass surgeries to anyone who isn't having a heart attack right now, and they're not going to give up the income. They'll compete because the alternative is that they have almost no business at all, never mind that you will probably choose to have the $10,000 procedure before you have the heart attack (saving you from the risk of dying during the heart attack outright!)

Ok, who gets hurt?

1. The lobbyists.  They lose big.  In fact virtually all of them wind up out of business entirely.

2. The administrators who aren't needed and are very expensive.  Many, maybe most, get fired.  The hospital becomes a place full of doctors and nurses but damn few administrators since now their cost can't be shoved off on others -- it's overhead, and is subject to competition from the hospital across town or in the next town over.  Not only does this reduce employee cost at said hospital dramatically it also reduces the space the hospital uses for overhead which makes their per-person cost for actual procedures go down further since a larger percentage of their space goes to actually treating customers.  Yes, those former administrators will lose their jobs.  The good news is that the economy will expand due to greatly improved cost structures, so there will be new jobs in other fields available to them.

3. The drug reps.  Gee, what happens when you can't be a pusher any more and have to price on a level basis?  The rest of the world's prices go up some (there's many billions of "them") while ours fall like a stone (because there are only 330 million of "us")!  That's math; take the amount of revenue necessary to make the drug and a profit and divide by the number of users; there's the price.  Guess what -- forcing the US consumer to pay for the development cost of drugs used worldwide ends in a day.  This costs us hundreds of billions of dollars a year today.

4. The PBMs.  All gone.  These organizations are all quite-arguably committing unlawful acts on a daily basis in any event under 15 USC Chapter 1; using market power to restrain trade and fix prices is per-se illegal.  These firms appear to be nothing more than a racket -- and one that was tested in 1979 at the US Supreme Court with the drug firms losing their appeal.

5. Anyone who refuses to change their lifestyle and instead demands everyone else cover their willful acts.  That's a tough nut to swallow, but it must be swallowed.  If you can control a condition for zero cost you have no right to demand someone else pay tens of thousands of dollars a year to you every single year because you refuse.  There are millions of Americans who do exactly that costing upwards of $350 billion every year just between Medicare and Medicaid and every penny of that expense must end right now.

That's a good start.

The problem isn't that health care is "expensive."  The problem is that it's a rip-off and is laced through with fraud, theft and arguably even racketeering from top to bottom.  You can find myriad examples of what competitive prices look like for health services and products if you bother to look around, even in the United States, and since we know what those prices look like what I laid out up above isn't a fantasy-land dream -- it's a reality we can have right now and forevermore into the future.

To do it we must demand that the politicians put a stop to the scam and back that demand up with whatever political and economic action is necessary until and unless they do so.

Perhaps we should all start showing up at town hall and campaign events with a simple plastic spork and wave 'em in the air from start to finish.  They're obviously not weapons but the message ought to be pretty clear when it comes to what the people might, at the point the economic and political system collapses due to all the fraud and theft the political class is enabling through medical scams, choose to eat first.

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Come and get it!

Greg's blurb:

The latest is called “Obamacare is the Reason for Anemic Growth-Karl Denninger.”  Analyst and entrepreneur Karl Denninger predicted years ago that Obamacare would “kill the economy” and “eventually implode.”  Today, the first quarter GDP came in at just .9%, and Denninger contends Obamacare is part of the reason the economy is so anemic.  Denninger says, “Since the crash in 2008, we’ve had 2% GDP expansion roughly on an average basis, and you are trying to expand the growth of one program in the government by 8.5%, and that’s not going to work.  This is the problem you have.  What Obamacare has done has caused the 2% expansion. . . .  So, what has happened here is we have taken this program and crammed these costs into the economy on a mandated basis, and the result is the productivity expansion has gone into the toilet.”

Another big problem with Obamacare is the pre-existing conditions.  Denninger says, “When you say an insurance company has to cover pre-existing conditions, what you are saying is if this condition costs $10,000, we are going to make it cost $12,000 because the insurance company has to make money.  The cheapest way to pay for a condition that costs $10,000 is to write a check for $10,000.  That’s just basic math, and yet nobody wants to deal with this.  So, the high risk pools were in the process of collapsing, and as a result, you had Obamacare come into essentially force everybody into the risk pools.  That was the whole point.  Everybody has to buy health insurance and, therefore, force you to take things you cannot get.  For example, as a man I, can never need maternity. . . . If you have these things that I have to pay for in my coverage, but the probability is zero of using it, then what you have done is stolen the money from me and given it to somebody else. . . . I don’t think this can be fixed at the present time.”

Denninger, a professional trader, says the financial markets look eerily like they did just before the “dot-com bust” (2000) and the financial meltdown of 2008.  Denninger explains, “This is the same sort of situation we are in today.  Nobody knows how long it will go on, but you are in a place right now with record margin debt in the United States.  That’s very, very dangerous because at the point the margin calls start, the cascade is almost impossible to stop.  You’ve got imbalances throughout the system.  You’ve got the Federal Reserve where it has to start taking risk off the balance sheet. . . . We all know how this party is going to end.  The building is going to catch on fire, and the door is one person wide, and there are 15,000 people in the room.  The problem is figuring out how far it goes.  At the point the market wakes up to the fact that none of this is going to get resolved at all—ever, that’s when it comes apart. . . . Risk/reward is in a bad place right now.  P/E numbers are very high, and the growth numbers are very low”

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2017-03-26 10:45 by Karl Denninger
in Editorial , 2954 references
[Comments enabled]  

Friday afternoon the Republicans "pulled" the AHCA without a vote.

This is the common way that the party in power makes sure you never get a recorded answer these days as to who opposes and who supports some piece of legislation: If there is no majority to pass it, they never vote at all.

If you think about it for a bit you'll realize that's the exact antithesis of representative government.  Representative government not only "works" when it passes something it works when it fails to pass something too, and the list of elected officials who did and did not support something that fails to pass is just as important and maybe more-so than those who supported (or not) passed legislation.

But, now you simply have claims -- not votes.  And remember folks, claims are not votes; if they had been (according to the polls) we'd have President Hillary right now.

Now let's talk about health care and "health insurance." 

Let us remember that insurance is simply a math problem.  That is, insurance is always and everywhere simply the expression of the formula [sum(p * c) + cost(operation of insurance company]

p = probability of having to pay a claim on a specific event
c = cost of the event

And of course "sum" is the sum of all the "p * c" components that exist for all the things you bought the insurance against.

Given this fact I will now demolish a number of lies that you've been told.

Health insurance should cover routine and expected events.  Nonsense.  If p = 1.0 then it is always cheaper to simply pay cash because [cost(operation of the insurance company)] is never zero.  For something where p = 1.0 for all, or nearly all of the population you should never buy insurance for same since p * c = c!  Again, just in case you missed it: Putting such an expense through an insurance company will never cost less money; it is always cheaper to pay cash.  The only reason to force such expected and certain events through any third party is to hide the cost from you and remove competitive pressure so that someone can jack up the price or collude with others to do so on a grand scale (which is illegal under 100+ year old law in 15 USC, by the way) and steal your money.  Period.

Obamacare is so expensive because men -- and women who have gone through menopause -- have to buy insurance that includes maternity care.  There are dozens of variations of this claim run by politicians and "policy wonks" on the TeeVee; they simply change the condition and population to suit their audience.  It's maternity when they're talking to men and senior women, it's prostate cancer when in a room full of 20 year old women, it's IVF or abortion when talking to a bunch of evangelicals. This is a lie because "p" for such an event for such a person being spoken to at the time is (obviously) zero.

Zero times anything is zero.

So what is the purpose of requiring such "mandatory benefits"?  Simple: It reduces "p" over the entire population of people with policies.  But since the total of those "p * c" computations is the sum of all of them for each individual the purpose of such mandates is to force you to pay for someone else's treatment for a condition you cannot possibly suffer.

To put it more simply: It's theft from those who can't have that condition occur and it's intentional obfuscation of the cost of said insurance for those who can.  In short it's a lie told to the entire population; the exact substance of the lie depends on whether you're in the "can happen" or "can't happen" group but in each and every case whenever someone is forced to buy a policy that covers an event that cannot occur both the can and cannot groups are being lied to and one of them is being robbed.

This lie is intended to and acts to shut down any discussion of the real problem: Why is "c" so damned high?

Obamacare is so expensive because the "high risk" people are in the same pool as everyone else; the AHCA would "fix this" by putting back in place High Risk Pools and insurance costs would drop substantially for health people.  True, as far as it goes.  But there's a problem: The ACA, or Obamacare if you prefer, was written and passed because those High Risk Pools were collapsing!  They were collapsing because by definition everyone in them had "p = 1.0" for something; they had cancer, diabetes, HIV or some other serious and usually-chronic condition that had already happened.

When you get down to it for someone with a p=1.0 problem the cheapest way for them to be treated for that condition is to pay cash for it.  The more hands the money goes through the more you spend in total.  This is obvious to anyone who thinks about it for more than 20 or 30 seconds because nobody works for free.  If you put the money through an insurance company with thousands of employees and big buildings all over the place then the total cost of such care goes up because the insurance company has to pay all of its employees and make a profit (no matter how tiny) or it is no longer in business!  It would be far cheaper to simply stroke a check from Treasury instead of going through all sorts of convoluted arm-waving and cost-shifting such as Obamacare "subsidies" and insurance company mandates.

Here's the problem with simply stroking the check: As soon as you get rid of all the layers of obfuscation the cost is immediately exposed to everyone.  I've already mentioned the lie told to both the people with the (possible) condition and not above when it comes to cost, so I'll focus here on a second lie: Let me remind you that right now the Treasury of the United States (that's everyone in the country, since we're all allegedly responsible for the debt and deficits accrued) spends $350-400 billion a year between Medicare and Medicaid on health services for people with just one condition: Diabetes.  We can reduce that to nearly zero (that is, cut Medicare + Medicaid expense by roughly 25% instantly) by refusing to pay anything from public funds for those people who refuse to undertake a lifestyle change in the form of what they eat that has a proved track record of reducing the need for drugs to treat the far more-common form of that condition (Type II) to near-zero and at the same time dramatically reduces all of the complications (blindness, amputations, kidney disease and dialysis, etc) as well for both forms of the disease.  In fact for most Type II diabetics making this change eliminates the condition entirely.  Note that I did not say "cure" because if you go back to what you were doing you'll almost-certainly see the condition (poor blood sugar control) immediately come back -- but eliminating the condition eliminates all of the cost to the health system.

Remember, as I pointed out up above, that a big part of why Obamacare was written and passed was that the "High Risk Pools" were expanding in cost at an explosive rate.  The states did not have the money to continue funding them and many people with some of these conditions were dying before they could get into the pools and thus access treatment due to delays in enrollment driven by lack of funds.  So the lie here was twofold: Political debate on the cost of such treatments was refused as it was for everyone else up above and at the same time the fact that many of these conditions are not only due to voluntary action (e.g. IV drug abuse, unprotected anal sex or eating things once overweight that are known to exacerbate these conditions) in some cases, specifically those related to diabetes, the condition and its medical costs will disappear if the person in question changes what they eat -- in other words, they make a lifestyle change.  In other words not only are we all having our money taken to pay for the voluntary decisions of others who "made a big mistake" (which is perhaps defensible on the grounds of compassion) we are also having our money stolen to pay for the ongoing voluntarily decisions of others who refuse to change and, if they did change, would see the condition and thus its cost disappear entirely.  That is not compassion, it's pig-headed theft.

In short in order to prevent discussion of both the cost of said treatments and the role that voluntary actions of the sufferers, both causative and continuing have on the expenditure of funds politicians drove the spending through "health insurance" firms and thus made it even more expensive simply due to the middle man being present.

If there was little or nothing we could do about cost then we might all be able to stop here and, at least, take the insurance company costs out of the picture for those with p = 1.0 for some medical problem.  But that's simply not true, which is why the larger lie, and the one that I listed first, is run on everyone instead of simply focusing on those with already-existing medical problems.

Why would you need health insurance if this pricing was commonplace for the following routine medical things -- and remember to extend these representative samples to everything else in the medical field:

  • MRI: $275
  • CT scan: $167
  • X-Ray: $37
  • Mammogram: $142
  • Ultrasound (pregnancy-related primarily, I suspect): $94
  • A1c test (common for diabetics): $4
  • CBC (complete blood count; common for a lot of diagnostics): $3.13
  • Metabolic panel (common diagnostic as well): $3.50
  • PSA screening (common for men over 50): $7
  • 3-Panel cholesterol (the cheap and common one): $3.94
  • Tetanus booster: $20
  • 90 Prozacs: $1.98
  • 30 Prilosecs: $1.44
  • 30 Plavix (blood thinner; newer generation of Warfarin): $2.76
  • 90 Zocors (which I'd argue you probably ought not take at all!): $2.16

These are not fantasy prices -- they're real.  They're what you could have today, or darn close to them if we had a conversation about competitive markets in medicine.  I didn't pull these numbers out of my ass; they're on a "concierge" site for a "direct care" practice in Michigan and none of them are being provided at a loss.

Think about what you spend on "health insurance" today; whether you pay for it directly or you "get it" through employment.  If you get it through your job then every penny of what your employer spends is money you could instead have in salary.  Multiply the monthly amount your employer spends on health insurance for you by 12 and that's money you should receive in cash but don't because it's stolen and given to an industry that then charges you five to ten times the above through the so-called "insurance."  In fact for most medications your co-pay is larger, often by ten times, the above prices!

Would you rather pay a $10 or $20 co-pay for that Plavix prescription or would you rather pay $2.76 cash?

If the answer is "cash" then can you please explain why you would then pay for said "coverage" at all?

So why are these medical procedures, drugs and similar so expensive now for most people?  Why are you basically extorted into buying "insurance" either through your employer or directly?  Why is now the law to run these charges through a company that has to make a profit and thus is guaranteed to drive up cost?

Simple: It prevents us from all having the two political discussions up above -- why are we being ripped off to the tune of 1,000%, that is 10x what we we ought to be paying for virtually everything health-care related and why should we pay anything for someone else's decision to continue a lifestyle choice that results in the expenditure of hundreds of thousands of dollars after they get the condition when they can change that lifestyle choice and eliminate not only the condition but nearly all of its expense?

We know that the pricing above, or similar to it, can exist for everyone in the United States right now.  We know this because it does exist in the United States, right now.

We also know that health insurance companies and providers of health-related products and services are not immune from Anti-Trust law (15 USC Chapter 1.)  We know this because that case went to the US Supreme Court in 1979 and the insurers and those conspiring with them lost.  Specifically, it was ruled that "volume pricing" arrangements and similar were not "the business of insurance" and thus not entitled to protection from anti-trust enforcement under McCarran-Ferguson. We therefore know factually that the failure to bring said cases at the State and Federal levels from 1979 to today has been a political decision, not a matter of "not having" laws that could be applied.  In other words both State and Federal law enforcement and the executive branches of government in both places have intentionally refused to enforce the law and by doing so have become willing partners in you being robbed out of $9 of $10, approximately, spent on health care.

We know that if the cost of health care came down by 90% almost everyone could and would simply pay cash for all routine expenses.  Having a baby.  Vaccinations. Annual checkups. An MRI for a sports injury. A CT scan for something serious that's suspected in your chest or head.

We know that if the cost of health care came down by 90% true insurance for serious catastrophes like cancer, a serious injury or a heart attack would cost pennies compared to what it costs today.  If the cost of cancer treatment was $10,000 instead of $100,000+, and it would be if we locked up the monopolists that refused to stop playing their game of obfuscation and cost-shifting the cost of such insurance would be a fraction of what you spend today to insure your $10,000 automobile!  After all, it's more-likely in a given year that you'll wreck your car than get cancer!

We also know that there would be circumstances under which costs would remain very high; "orphan" conditions are the prime example, simply because the number of sufferers is low and thus spreading the development cost of treatments becomes problematic.  A condition that has 10,000 sufferers in the United States at any given time, for example, has a risk (probability) of 0.003% across the population.  If the cost of treating that condition is $500,000 (because it costs billions to develop the drug and there are only 10,000 customers for it) then for $15 (plus a profit for the insurance company) you could buy insurance against that condition for life.  Would you buy such "rare disease" insurance if, say, the "blended" cost was about $50/year to cover all such conditions?  Some people would not, but if we had the political discussion on this point and decided that the choices were "buy the insurance personally, pay cash if it happens to you without it or suffer the consequences including your death for which there will be zero funds spent other than through private, consensual charity" would that not be a better system than we have today?  It sure as hell would be a cheaper one and nearly everyone would fork up the $50!  Hell, make that $50 something that is akin to the "Presidential Election Fund" checkbox on your 1040 except that it's an opt-out rather than an opt-in if you'd like; $50 for single or HOH, $100 for married and an additional $50 for each dependent.  I'm ok with the mildly-coercive nature of that, considering the potential consequence of choosing "no."

We can surmise that the reason for the above political refusal to have this discussion is due to both lobbying and the fact that should the law be enforced Health Care would drop from its present ~19% of GDP to 3% (it's historical figure prior to the monopolists pulling this crap starting in the 1970s and 80s) almost immediately.  That would be a rough reduction of 15% in GDP which, I remind you, exceeds the 10% drop that economists call "a Depression."  It would not last long because all of the money currently spent through this scam that no longer was would be freed up to produce other goods and services in the economy and the impact on reduction of cost for businesses would be immediate and immense.  Further, the salary increases that would result from the embedded "health insurance" expense in an employee being removed (allowing it to be paid directly to you) would lead to a huge increase in consumer consumption in other areas.  But make no mistake -- there would be losers: Lobbyists, overpriced or overstaffed administrators in health care and similar, and during the adjustment period GDP would indeed fall before rebounding.  Find the politician that is willing to accept this without being forced -- good luck.

Finally, let me remind you that these are not particularly-new ideas.  I've been talking about them since the 1990s when I was the CEO of MCSNet.  I've been writing on them since The Market Ticker began publication.  There are two simple legislative agenda items here and here (note the dates of publication), never mind the entire section in Leverage, that would immediately address virtually all of the above.

I have had a standing offer out to several current House Leadership members since 2011 and to several Senate staffers since not long after to come to DC at my expense to testify before an open committee hearing on the math in this regard and resolution of these issues.

There have been no takers in the last six years.

Among political commentators on "the right" the following have also refused to take this on:

  • Hannity
  • Rush
  • Mark Levin
  • Glenn Beck
  • Michael Savage
  • Bill OReilly
  • Hewitt
  • Michelle Malkin
  • Laura Ingraham
  • Neal Boortz
  • Ann Coulter
  • Tucker Carlson
  • Judge Napolitano (despite the obvious nexus to law in 15 USC)
  • Judge Jeanine (despite the obvious nexus to law in 15 USC)

Oh, and this is not a complete list; it's just a list of people who, off the top of my head, have said zero despite, in many cases, my direct prodding.  I will note that among the left there have no takers either; I simply don't have anywhere near as complete a list of them (there are far more left-leaning political commentators than right-leaning!)

So folks, when you get down to it, it's up to you.

You can look at the AHCA being pulled as "just another thing" and decide to ignore it.

You can try to ignore this too if you want, but it's truly stupid to do so:

That's from the US Treasury's own published MTS taken from September of each year (close of the US Government fiscal year) back to 1998.  It is instructive to note that the blue line is an exponential series, and is expanding at about 8-9% a year, far beyond any rational projection for economic growth.  It is also instructive to note that it is a mathematical fact that any two exponential expansion curves, where one is growing faster than the other, will eventually cause the destruction of the slower-growing one if the faster relies on the slower to pay for it.  That's arithmetic and was the reason that I projected in the 1990s that this trend would bankrupt the United States.

Finally, it is worth noting that Obamacare, for all of its disruption and 2,000+ pages of obfuscation and horsecrap, managed to produce exactly one year of lower Medicare and Medicaid expenditures after which the former trend resumed almost-entirely unchanged.  For those who claim it's all about people getting "older" that is the final lie I would like to demolish; the trend from FY 1998 to 2016 excluding the one-year decrease was 8.35% (all-in) and 8.64% (Medicaid), respectively.  That is, Medicaid (poor people) spending expanded at a slightly-faster rate than Medicare (old people).

We either act on all of this as a nation now or it destroys the economy, it destroys the markets and it destroys both state and federal budgets.

My offer to both government and political commentators whether in the list above or not and irrespective of their political bent remains open: I will be happy to appear by voice, by video or in person to debate and discuss the facts in this regard.

If there's anyone willing to take it on, that is.

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2017-03-22 05:00 by Karl Denninger
in Health Reform , 11160 references
[Comments enabled]  

I had an "interesting" debate on Twitter last night with someone who is involved in the health insurance game in some way and apparently has cancer patients as clients.  He is a strong shill for (supporter of) the "Obamacare Repeal/Replace" process by his own admission.

The debate was plenty fun and decent right up until I pointed out that on the math the Federal Government spent $1,417 billion last fiscal year on Medicare and Medicaid, up from $380 billion in 1998, which incidentally was 37% of all federal spending last year -- and it's accelerating at ~8-9% a year as it has been for the last several decades (with some notable outlying years.)

At this rate it will cross $2,000 billion, or more than half (by a good margin) of the current federal budget within 5 years.  That will blow a $600 billion additional annual deficit hole in the budget into a rising rate environment which the government will not be able to finance.

That's math, not politics.

For this I was told I was a conspiracy nut and belonged on Infowars.  Never mind that every one of my figures came from the Treasury itself in the form of its official published balance sheet.  If that's tinfoil.....


Following my assertion that the AHCA does zero to address cost, which he admitted is correct, and that if we do not address cost and thus drop that $1,417 billion precipitously the government's budget will be destroyed and thus collapse on the clear evidence and trends published by our government's own Treasury Department he declared that he was storming off and blocking me -- and did exactly that.

So what do we have here?  When I bring up arithmetic and facts that are published by our own government along with the published growth rates and what that will inevitably lead to, pointing out that there is exactly one way to stop what is otherwise inevitable predicated on the laws of mathematics I get called a conspiracy nut?

30 year trends in data published by our own government is a conspiracy?  A statement that we cannot finance another $600 billion a year rising to somewhere around $2.5 trillion a year within five more in a rising rate environment is open to question?


Or is the truth that the light came on in his head -- he is shilling for a bill that is an outrageous and open fraud upon the public since it will not address cost (which he admits) but will further advance the collapse of our federal government's ability to fund itself, and thus operate!

It's a hell of a lot easier to just slam the door than take on the math and either find an error in it (in which case you win) or admit you're wrong and change your position, especially after you've been lobbying lawmakers, eh?

If you're wondering why despite my repeated public statements (including right here, again) that I'm willing to show up in DC (or anywhere else for that matter) and have this debate in public, under oath if the body sponsoring same would like it that way and hash it all out there have been no takers among the political class you now know why.  Most of those in the political class do know what the math shows -- they're simply intentionally sticking their fingers in their ears and repeating "na-na-na-na-na-na" because the minute they stop the entire charade they've been running on health care comes crashing down around them.

It's damn hard to continue supporting stupid once you admit it's stupid and won't work - so the entire game is to refuse to have the debate at all in an effort to prevent being tagged with the label "financial rapist" by everyone around you.

Here's a bit of history -- all fact, not conjecture.  The insurance and medical industry was in the beginning stages of collapse in 2008.  Annuities are funny things; you promise to pay X, you take in Y, you invest it with a return of Z in a bond ladder and the books balance.  You hope.

You get in a lot of trouble when the promise to pay X ends up as X+ and the return Z doesn't materialize.  You can get in lethal trouble that way, in fact, and quite easily.  This is how the pension systems in our states, cities and private instances have blown up, and most of it has come from health care.

Then there are all the pigs at the trough in health care itself.  See, while health care counts toward GDP, and is nearly 20% of it today (up from about 3% 30ish years ago) most of it doesn't produce anything.  Not one car, one house, one television set.  Oh sure, it might allow someone to keep making those things -- maybe -- but at what cost?  Yes, there are exceptions, but most of those exceptions (e.g. childbirth) are actually quite cheap in percentage terms.

The ugly part is that much medical care is actually negative to GDP.  Why?  Consider the drug addict who mainlines opiates and destroys his heart valves. "Fixing" it costs upward of $500,000, all said and done. Will that person ever produce more value than that with their remaining life?  Definitely not if they keep using drugs; they'll die.  The sad reality is that most of them do exactly that.

How about the Type II diabetic that winds up running through a quarter-million bucks in drugs, amputations, dialysis, blindness and death because they won't change their food intake and stop eating carbohydrates?  How far does he or she go before the ability to produce is destroyed, at which point they're on disability and go from producing something to a net consumer of everyone else's production?  By the way that specific instance when you add it all up nets out to somewhere around $400 billion a year for Medicare and Medicaid now!  That's crazy on any objective basis; you could literally give everyone in the country -- man, woman and child $1,000 a year instead with money left over -- or adequately feed everyone who is hungry in sub-Saharan Africa (all ~230 million of them!) with a lot of money left over.

I'm not going to talk ethics regarding the two examples above in this post because that's a thorny discussion indeed!  But you can't escape the mathematical outcome that results from allowing these people to impose their costs on everyone else.  There are plenty of people in the lower and middle economic strata -- in fact, most -- who can easily wind up being a net negative to GDP and the problem becomes much worse when medical costs ramp by a factor of six compared against GDP and not all of the conditions in question come as the result of voluntary lifestyle choices.

But in all cases you eventually run out of people who can and will pay when exponential cost expansion occurs, especially when at the same time you ramp cost the income base you rely on to pay taxes to fund it is being destroyed one drug addict or Type II diabetes sufferer at a time.


Starting in the 1990s and early 2000s and everyone in the industry, never mind anyone running a company (like me) knew this was coming.  The so-called "High Risk Pools" were collapsing.  That's a fact, and it was cited as one of the reasons we had to pass the PPACA - to put a stop to their collapse by forcing everyone into paying for those who were very sick or nearly dead!  The stories of people who were unable to get into those pools at all due to lack of funding were well-circulated and the crimp put on treatments paid for by them were both well-documented and publicized -- again, due to lack of funds.

I wrote article after article on this in the 2009 timeframe with the facts and figures from our own government and those making similar claims.  The PPACA was basically a bailout of the medical industry engineered to force a more-level slam of the cost on everyone in the country.

But... it failed.  It failed because nothing was done about the actual problem and costs continued to ramp.  The PPACA managed to get a lower spend in Medicare and Medicaid for one year (and a modestly-better increase in the two bordering it) but spending then returned to its previous trend!  The negative GDP problem got worse rather than better in aggregate and moved even further up the income scale on an individual basis.  The government tried to finance that through even more deficit spending but doing so just destroyed productivity and tax receipts.

That's the funny thing about cost-shifting -- it can never solve a cost problem.  It just moves the problem somewhere else.  Where it moved it was on the back of productivity and tax receipts, both of which have been horrifyingly bad since the 2008 crash.  Last fiscal year tax receipts rose by less than 1% despite all the new taxes in the PPACA and higher rates generally while productivity improvements have all but disappeared.

The AHCA cannot resolve this problem because it intentionally refuses to address the driver of the problem in the first instance.  Returning to "High Risk Pools" is idiotic because those very pools were on the verge of collapse prior to the PPACA and were a big part of why Obamacare was written and passed!  The insurance and medical lobbies wrote the PPACA to get rid of those problems and pools, or so they thought.

They tried denying math but failed because the laws of mathematics are not suggestions. You can't get rid of a cost by making someone else pay it; you simply move it and eventually it comes back and bites you.

The answer to the problem cannot lie in "more insurance" or "restructuring" health insurance and let me remind you that my debate "partner" admitted the AHCA will do nothing to address the total cost of health care.  It just moves money around, something I noted back when it was first released (and much to the detriment of state budgets.)

The answer to the problem is, and can only be, a return of the medical industry to its historical 3-4% of GDP.


Enforce the damn law -- specifically, 15 USC and State Consumer Protection laws.

You need just one simple requirement to be enforced against every medical provider of any kind: Everyone must post a price and everyone pays the same price; any sort of hiding, collusion, cost-shifting or similar is met with indictments, prosecution and prison for consumer fraud and racketeering along with violations of the Sherman, Clayton and Robinson-Patman acts.

What your insurance covers instantly becomes between you and the insurance company; the provider of service has nothing to do with it.  I remind you that insurance companies are not immune from anti-trust when they "negotiate" with providers and that this is a matter of settled law; they tried to run the claim they were immune under McCarran-Ferguson in the 1970s and lost at the US Supreme Court.

Forcing published pricing and charging everyone the same price for the same service or product of like kind and quantity, disconnecting it from alleged "insurance" using existing law, will force competition into the market immediately.

Medical costs will instantly drop like a stone.  How much?  Let me point out that from one "direct concierge care" site we have some examples of what market prices for common services and drugs look like - $4 for an A1c test, $3.13 for a CBC (complete blood count), $7 for a PSA screen, $275 for an MRI (damn close to what you can buy it for in Japan - cash, of course), $37 for an X-ray and $167 for a CAT scan.  On drugs how about $1.98 for 90 Prozac pills, or $1.44 for 30 Prilosecs? This place claims these offers are "at their cost" with your "membership"; note that they are not selling at a loss and the maker/operator of same is still making a profit!  Why would you fork over a "co-pay" of $10 or $20 when you can pay $1.50 for your prescription in cash?

Why would you need "health insurance" to cover routine medical care and prescriptions if you could buy services and drugs at prices like that -- or at a 20% markup from them with a bunch of competitors in a given area?

We can have that sort of pricing for medical care today, right now, right here, everywhere in the country: Enforce the damned law today and that's the pricing we will have for medical services and drugs TOMORROW.

Let me make this clear for you because we have proof of what the outcome will be: The known pricing we will obtain if we were to do this is, for most treatments and drugs, 80 to 90% LESS than paid today.  In fact most of the drugs listed on that concierge site are 10-20% of your copay under existing so-called "insurance" and so are the imaging and lab prices!

We do, however, need some legislation as well.  Specifically, we need to repeal the reimportation ban on pharmaceuticals, and we need to add to Robinson-Patman inclusion of international sales.  That will force "best price" everywhere and pharmaceutical costs will fall like a rock here in the United States.  Oh, those other nations?  They'll get to pay their ratable share of the development of drugs -- and it'll be about damn time.

In terms of legislation it's pretty easy -- you can see some ideas here and here.

Note the dates.

If we fail to address cost in this manner then it matters not whether the AHCA passes.  I hope it doesn't, simply because bad laws are worse than no laws, and I'm not vindictive.

You see, if they pass it they own it -- and everything that comes after it as a result.

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2017-03-20 09:09 by Karl Denninger
in Editorial , 980 references
[Comments enabled]  

Let's face it -- Ryan and Trump are not going to do anything to actually address the health care mess.

Health care is not about "coverage" or "insurance."  It's about price.

Therefore any discussion about "coverage", "insurance" or similar is an intentional deception until and unless price has been addressed.

The facts are that the federal government spent $1,417 billion dollars last fiscal year between Medicare and Medicaid.  In 1998 the federal government spent $379.95 billion dollars on the same programs.  That approaches a quadrupling of said spending over that time period, and an increase from 23% to 37% of the total. If you believe the bleating from hospitals and doctors about how Medicare and Medicaid "don't cover their costs" then private spending must have gone up at an even-faster rate than spending by the government.

The facts are that we spend twice as much as a percentage of GDP (and per-person, roughly) as virtually the entire industrialized world -- and nearly all of those nations have socialized systems.

Let me remind you that socialism always loses to capitalism, and the reason it loses is simple: There is no profit motive in a socialist system and therefore there is never an incentive to pound your competitor down the street over the head with a Clue-by-4 in the form of price.

Technology is responsible, in the main, for what is called productivity growth.  That's a very simple thing when you get all the wonky economist talk out of it: Productivity growth means doing more while expending less, whether the "less" is money, labor, time or material cost.

If you want to boil it down to what used to be MCSNet's slogan, it's this:

Better, faster, cheaper.

The usual chestnut adds "pick any two", but ours finished with "you don't have to choose."

Only true competition produces you don't have to choose.  Without it technology is a horrifying thing because it can be -- and will be -- used to obscure facts and screw you.

We live in a nation of alleged laws.  Our government has a duty to enforce those laws, and in the context of Health Care that means prosecuting all those entities that collude or screw consumers.  The very existence of an "Explanation of Benefits" statement that shows a "price" of $10,000, a "negotiated discount" of 80% and then some tiny amount you're expected to pay is proof of collusive action that is intended to and does screw you and, I'd argue, Racketeering.

Why?  Because you were never given a price or any way to negotiate it before you had the procedure.  Your "discount" is based on what insurance you have and is concealed from you until after you have already incurred the expense, which is an effective agent of extortion ("either buy this good insurance or get hosed with a smaller discount or no discount at all!")  It is further an attempt to force a tied sale for something that, absent the collusion, you might not have wanted to buy at all (in this case health "insurance.")  And finally without pricing being in the open and level you're either being discriminated against or for and that discrimination is based on what you did or didn't buy from a third party.

Then there are those who openly keep some of whatever "discount" they "negotiated", such as "pharmacy benefit managers."  The classic example is that you have a $20 co-pay for a prescription but you can buy the drug without any insurance at all for $10!  Not only is the pharmacist not required to post a cash price (so you know this before you pull out the insurance card) in many cases he's forbidden by contract to tell you.  Every time you fill such a prescription you get screwed out of $10 simply because you told them you had insurance!

How could you choose which station to pull into for gasoline if none of them ever posted a price and the pump didn't tell you how much it was until after the gas was in your tank?  Worse, what if you had to tell the gas station pump which car insurance you had before it would give you a price after you filled your tank?  How badly would you get screwed on the highway if that was the case?  What if there were no prices on the grocery store shelf -- just a barcode that looked it up but the register never displayed anything except a final total when you pressed "all done"?

What if after you pressed "all done" and were presented a price, having told the grocery store which homeowners insurance company you had they kicked back 5% of your bill to a firm employed by the insurance company -- all because they claimed they gave you a "special deal"?  The "special", of course, was that you paid double for your groceries over claiming you had no insurance at all.

You know the answer to this question -- you'd get reamed every single day.

Here's the other thing you also know: If a grocery store or gas station owner tried that sort of stunt nobody would shop there; they would go down the street.  If they got together so everyone did the same thing they'd all be in jail in an afternoon.

Please explain to me why the doctors aren't all in jail?  Why isn't the hospital administrator in jail?  Why isn't the pharmacist and the owner of the pharmacy in jail?  Why isn't the insurance executive in jail?  Why do not those who work in any of these fields and gain their income by screwing you blind find themselves with nobody who will even sit in the same pew with them in church, say much less find themselves in the graybar motel for the rest of their lives -- with all their material wealth confiscated to provide some restitution to the millions of people they screw blind every single year?

Folks, either this stops -- right now -- or we lose the country.  It's that simple.

On a personal level if you have recently been given some very bad news -- that you are now considered to have a chronic condition that's weight or metabolic disorder-related, or you're overweight (or just plain old fat) and thus clearly at risk for this to happen even if it hasn't yet there are things you can do beyond getting pissed off at the scam (which clearly you won't do, or this would have been addressed by now.) 

You can start by reading here.

And then, you might click here, which will give you (in reverse chronological order) the publicly-available articles I've penned on personal health and are marked as exempt from expiring.

And finally, if you are willing to get off your ass and start demanding that people face the music for what are quite-clear violations of 100+ year old law, you might try reading these articles -- which are (mostly) focused on policy, as opposed to personal health.

But we already know the truth on that last point, don't we?

Nobody, statistically-speaking, is going to do anything beyond possibly reading a bit, and for that reason you better do the first two -- right here, right now, today.

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