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Commentary on The Capital Markets
2017-03-26 10:45 by Karl Denninger
in Editorial , 498 references
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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 the following 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, if you want to 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 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 their fiscal) 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) 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 , 10702 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.....

Yeah.

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?

REALLY?

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.

Always.

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.

How?

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 , 963 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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2017-03-15 21:57 by Karl Denninger
in Editorial , 2643 references
[Comments enabled]  

Look, this is math.

I don't want credit.  I don't care if you never admit you talked with me.

Seriously -- I don't care.  This isn't about glory.

It's about the Republic and its survival.

The arithmetic is clear.  It's irrefutable.  There's no discussion to be had.  It's fact.

I called this in the 1990s when I ran MCSNet.  I called it again in 2011 in Leverage.  I've been raising Hell about it since 2007 on this blog.  It wasn't hard and I claim no special knowledge or insight.  All that was required was reading the MTS and either a $3 calculator or a piece of paper and a pencil.  An act, I remind you, that every CEO does every single month -- that is, reading the financial statements.

Look, I get it.  The political side of dealing with this is hard.  You're going to******off a lot of very powerful and wealthy people.  They're going to get very angry.

The bottom line is this: You have the ability to put a stop to all the medical scams now -- right now -- using existing law.

If you don't then the nation fiscally dies.  Ryan's bill or no bill; doesn't matter.

If you do it then "insurance" is something that 95% of Americans need only for catastrophic events because the cost of medical care will fall by at least 80% and for most items by 90% or more.  Said insurance will be cheap - under $100/month for a family, and about $25-50/month for a single person.

Nobody will need "insurance" for routine events because they will be able to pay cash.

Birth control will cost under $10/month.

Routine labor and delivery will cost under $1,000.

This isn't hyperbole -- it's fact.

We know this is true.

We know because The Surgery Center of Oklahoma performs cardiac bypass surgeries all day long for $10,700, complete, no surprises, no extras including complications that may arise -- done.  $10,700, period.

The hospital across town charges five to ten times as much.

But even the prices at The Surgery Center, nice as they are by comparison, are chock-full of monopolist price fixing. Why? Supplies, devices and equipment are all provided under monopolist, price-fixed schemes for starters.  We know this because the same bypass surgery is about $2,000 in India where there is no such collusion, the doctor was trained in the United States and the supplies and devices are the same as in the US but unlike in the US the suppliers have to compete for business.  The difference is that in India competition reins because there is no hiding the cost, there is no extortion via "explanation of benefit" statements from providers and thus price reflects competitive pressure not only on cost but quality of service between providers.  Not surprisingly the complication rates in India for that surgery are lower than they are here in the United States.

You can find bills for routine childbirth from the 1960s -- including epidural, doctor and nursing charges, charges for care of the baby, three nights in the hospital, soup-to-nuts.  Inflate them by the CPI to today's price.  You wind up right around $1,000.  Routine, vaginal childbirth certainly hasn't changed in the last 40 years in terms of what's required.  The only "change" is that the medical establishment has decided to ramp the price by a factor of ten and screw you out of the money.  It has been able to do so only because there is no competitive option available to you.

In Tokyo, Japan, you can have an MRI done for $200 or less on a walk-in basis -- cash.  How much does an MRI cost here in the US?  You can literally fly to Narita from any major city in the US, take the NEX to Tokyo, have the MRI done and read then get on the NEX again and fly back for less than it costs to have the scan done in the United States.  There is a person on my forum who was just quoted over $5,000 to have said scan done here in the US yet he can fly to Narita round trip and have the scan done for $1,200 -- $1,000 of which is his airfare!

He can fly to Japan four times and have four MRI s done for the cost of one here in the US including four intercontinental airplane rides!  If the price of the scan being 20 times higher here in the US doesn't meet the definition of a scam would you please explain what would?

The entire medical system in this nation is a massive fraud and scam.  It's not a mistake, it's not an error, it's not an aberration it's a scam, it's robbery and everyone involved ought to be in prison.

You're out of time Mr. President.

You either do the right thing with regard to medical care, now, or this nation dies.

We either do the right thing or we let Paul Ryan and his buddies in the Congress, along with the doctors, hospitals and lobbyists and others screw millions of Americans -- a crime for which all of them should be indicted, tried, convicted and hanged.

You choose.

The math is clear.

The facts are clear.

The acts by which these individuals and corporations screw America are illegal. These laws, which include both ruinous civil and felony criminal penalties barring said conduct were passed over 100 years ago and are embodied in 15 United States Code.  They were challenged in the 1970s, the case went to the Supreme Court and the insurance companies and their buddies lost.

It's not a close call.

It's not a matter of opinion.

It's settled law.

You, as President, are able to direct the AG to enforce said 100+ year old law.  In fact, as head of the Executive branch of government, which is responsible for enforcement of the law, it is your job to do so.

Or not.

As Barack Obama didn't.

As Bush didn't.

As Clinton didn't.

As Bush before him didn't.

Four Presidents willfully, intentionally and knowingly refused to enforce 100+ year old law that would have immediately and permanently put a stop to the medical scams and the escalation of cost.

I get it.  This expansion from 3% to 19% of GDP over the last 30ish years has put a half-percent a year on GDP expansion that would not otherwise have taken place.  It has made "growth" look better.  It has wildly expanded the "market cap" of various public companies and their stock prices, including pharmaceutical firms and other health-related conglomerates, along with insurance companies.  It is politically enticing to continue doing it, except for one small problem: 10% expansion annually at 3% of GDP is 0.3% of GDP, a relatively small number both percentage wise and in terms of dollars.  At 19% it's 1.9% of GDP -- a much larger percentage and dollar amount, more than six times as much.

Oh, and this exponential growth, which your predecessors and now you have allowed, is also responsible for more than half of the Federal Debt, all-in, as that same expansion has added to Medicare and Medicaid spending.

I understand that collapsing health care from the current 19% to 3-4% of GDP will produce a huge recession.  It will produce a monstrous movement downward in the stock market.  That freed-up spending will go somewhere else in the economy and the recession produced will be quickly recovered from -- probably like 1920/21, in fact when the entire drop and recovery took less than two years.  The cost of operating a business will drop like a stone; not only will employee costs drop so will any firm's and individual's liability insurance where injury is a risk insured against.  From car insurance to business liability to trucking firms these costs will drop tremendously -- and be reflected in the competitiveness of American business.

This is not a matter of choice any more Mr. President -- other than on time.  We can either do it now, take the adjustment and become the most-competitive place to do business in the Western World or we can keep playing this game right up until our economy and budget collapses -- and collapse it will if you do not put a stop to this crap now.

Last fiscal year the Federal Government spent $1.417 trillion on Medicare and Medicaid, 9.3% more than the $1.297 trillion it spent the previous year. Last year was not an aberration; it was in fact very close to the historical expansion rate from the 1990s forward.  Spending has almost quadrupled on these programs since FY 1998.  Total outlays in 1998 were $1.651 trillion of which Medicare and Medicaid comprised 23%. Last fiscal year 37% of all fiscal expenditures were made on these two programs.  The ACA (Obamacare), for all of its warts, only managed to dampen that rate of expansion in spending for two years, after which it returned to trend.  At this rate of spending expansion within the next four years the government will attempt to spend $2.02 trillion on these two programs combined which will blow an approximately $600 billion additional hole, per year, in the deficit.  That will not be able to be financed since if it you ignore this issue it will be clear that within 10 years the government would try to spend $3.4 trillion per year on the same two programs -- an utter impossibility under any rational expectation for economic expansion.  The impact on private health spending has been even larger on a percentage-of-increase basis due to the blatant cost-shifting that is well-documented in myriad reports and is responsible for a large portion of the stunting of economic progress in America that has occurred over the previous two decades.

We can't keep doing what we've been doing Mr. President.  We cannot continue to allow the monopolists in the medical and health-insurance industries to continue to expand their influence -- and consumption of GDP.  Not for long.  Not for the rest of your first term, and certainly not into the second.  That's the math, like it or not.

Further, that math was either known to you or you would have known if you looked before you ran for President, which means you took the job without any ability to claim "surprise."  Thus, it is not only reasonable to expect you to resolve this problem now, in the present time (particularly given that you have tools as the head of the Executive to do so) it is also quite reasonable for the people to hold you personally to account as President if you don't.

We either admit to what we've been doing and stop the scam or it will overtake the economy and our ability to pay -- both in the government and otherwise, within the next 4-5 years.

We either stop it now or it destroys the economy, asset prices and the nation.

This isn't politics.  It's math.

The facts are what they are.  Demonstrating them is easy and irrefutable.

I'm a (long) day's drive from DC and about the same from Mar-a-Largo.

You name the place and time.

I'll be there -- with the laptop, charts and figures.

I have only one "ask" -- you listen and then act predicated on that which is obvious given the numbers -- politics be damned.

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2017-03-15 20:56 by Karl Denninger
in Editorial , 234 references
[Comments enabled]  

You figure out the rest.

Do or do not.

There is no try, and there is no excuse either.  I tire of hearing the latter.

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