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2017-03-22 05:00 by Karl Denninger
in Health Reform , 516 references
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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 growth rate in Medicare and Medicaid spending for two years but it 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.  Enforce them in a simple fashion: 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 is 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 that claim 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" will force competition into the market immediately.

Medical costs will immediately 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 would 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.

We need no legislation to do any of this -- just enforcement of existing law.

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 , 890 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 , 2291 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 , 225 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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2017-03-14 12:40 by Karl Denninger
in Health Reform , 2498 references
[Comments enabled]  

Where is the discussion of facts when it comes to health care?

Why do we keep talking about the cost of "health insurance" when that's a symptom and not the problem?

Why do we keep talking about "subsidies" (tax credits, etc)?

If you're coughing incessantly because you have lung cancer do you simply take a cough suppressant and call that a "fix" when you stop coughing for a while?

That entire line of discussion, which is the only discussion being held politically and in the news, is a fraud.

Why?

Two reasons: First, "health insurance" is not insurance to the extent it covers an event that is either certain to happen or has already happened. Insurance is a thing you buy to cover a possible future event you cannot pay for yourself.  It is less expensive than the event will be only because the probability is less than 1.0 -- that is, the event is unlikely.  If the event is either certain or worse, has already happened then the probability is 1.0 and the cost of "insurance" against such an event is always more than simply paying for it in cash because the insurance company has costs it must cover or it will go out of business.

Let me repeat that just in case you missed it: The cost of insuring against a bad event is directly and mathematically determinable by the cost and probability of said event.

Second, due to the above mathematical fact if you wish to decrease the amount "insurance" costs there is only one way to do it: You must decrease the cost of the event, the probability of the event or both.

This is arithmetic, not politics and anyone arguing otherwise needs to be indicted, tried, convicted and imprisoned for their intentional act of fraud upon the public because that's exactly what they're doing -- defrauding you.

I don't care if they're pundits, media personalities, Congresspeople or the President -- and I remind you that The President is well aware of how insurance actually works since he's been a Real Estate developer and operator for decades.

Now let's address the only two means by which we can lower health insurance costs.  And lower them we can -- by 90% or so, and quickly too -- in fact, within months.

First, insurance must be actual insurance.  In other words it must only cover events for which p < 1.0.  By definition those are events that are neither certain to happen (e.g. routine, every-day visits to a doctor) or have already happened (e.g. pre-existing conditions.)

While you might be able to buy fire insurance on your house if it's on fire (or you are in the process of setting it on fire!) the cost of that insurance will always be more than the fire damage to said house because the probability is 1.0 and the company has to cover its cost and make a profit or it goes out of business.  It is therefore always cheaper to simply pay cash for the fire damage than to buy said "insurance" and this is true irrespective of what you're "insuring" -- including health.

Again, this is math, not politics.

Second, we must address both "p" (probability) and "c" (COST.)

We must address "p" (probability) because it will directly and grossly reduce the cost of insurance since it is a multiplier to cost.  Reducing "p" by 10% directly reduces cost of insurance by 10% all other things being equal.

We must address "c" (cost) because that not only reduces the cost of insurance (but on a smaller basis than "p" since it's multiplied by the fraction of risk) for the person who has already had the bad thing happen to them medically it enables them to pay directly for the treatment required. I remind you that paying directly is always going to be cheaper than running that same payment through an "insurance" company (typically by about 10-20%) because said company has costs that have to be covered.

Let's take "p" on first.  An utterly enormous amount of health expense occurs because people choose to be overweight or obese.  As noted in a previous Ticker the American Diabetes Association claims $250 billion a year is spent by Medicare alone due to both the disease and its effects.  Best guess is that another $150 billion is spent by Medicaid (which they don't specify.)  This is for one disease and essentially all of that money doesn't have to be spent.  It is spent because people choose to consume foods that promote and exacerbate the condition rather than reduce or even eliminate its effects.  The cost of changing what you put in the pie hole, medically, is of course zero.  Therefore for each person who is diabetic (Type II) and makes said lifestyle change resulting in either the control or elimination of the harm to their body from same we eliminate all of the health spending by said person on said disorder!

There are myriad other diseases and disorders associated with being obese and overweight.  Hip and knee damage, eventually leading to (expensive) replacement surgeries, for one.  Heart attacks and strokes (many caused by high blood pressure that, again, is often a result of being overweight) for another.  These are all avoidable costs and if we wish to address the cost of health care reducing "p", the probability of bad events, is a key item.

It is absolutely true that personal choice is a huge factor here and the government does not have the right to tell you how or what to eat.  However, you do not have the right to demand that someone other than yourself pay for the consequences of your personal decisions.

It is therefore perfectly reasonable to put in place a protocol that says if you are overweight or obese and diabetic then the lifestyle change in terms of what you put in the pie hole that has a near-100% record of reducing or eliminating your need for drugs and medical procedures and has a cost of zero will be the only option offered under said publicly-funded programs until and unless you prove, by individually-shown test, that it doesn't work in the case of your particular metabolic makeup.

Doing this for one disease alone would cut roughly $400 billion off the federal budget this year and every year thereafter and would cost the patient exactly zero on top of it.

Can we extend this demand to private health care policies by force?  No, but we can certainly allow companies to multiply their pricing by the change in "p" that not following such a lifestyle, if you're overweight or obese, comes with.  Since this one disease is such a huge component of said spending my best guess is that the surcharge for refusal would likely be 25% or more and if you're already diabetic then it can (and should) be an immediate disqualifier for any coverage of any consequential event whatsoever unless you prove, by individual test, that the lifestyle change outlined above doesn't result in control of your condition.

Second, we must break all the monopolies in the medical system.  There are in fact simple ways to do this, requiring no new laws, which I've outlined before going way back in time.

If you force price transparency by treating any health provider who refuses to do so, or who tries to bill on a discriminatory basis as committing a criminal act under existing consumer protection and anti-trust laws (at both the State and Federal levels) you will instantly and permanently remove all so-called "network" games, break the monopoly pricing games played by the health industry and as a result competition will cause prices to fall like a stone.

It's worthless to even attempt to argue that this "can't" or "won't" work because we know it does.  The Surgery Center of Oklahoma does exactly this right here, right now, today and their pricing with the monopolist-laced chain of supplies for drugs and surgical devices still undercuts "traditional" hospital prices by 80%.  For example a cardiac bypass is $10,700 -- cash, all-in, one-price and if there's a complication taking care of that is included.

Can you come up with $10 large to save your life if you need it?  Almost-certainly, even if you're poor.  Yes, it would be a lot of money for someone without material means, but remember -- we're talking about a price that's anywhere from 1/10th to 1/5th of what that same procedure costs in a "traditional" hospital setting and you're choosing between that and death.

Don't tell me it can't be done and wouldn't result in these sorts of cost reductions because it is being done right now, right here, today and has resulted in these cost reductions -- even with a huge part of the medical scamjob monopolist games still embedded in their pricing because they can't get away from the drug monster in their ORs at present.  In other words their pricing is high (probably by 20% or so) compared to what it would be if we stopped all of the monopolist games.

Here's the bottom line folks -- if you think "health insurance" costs too much you're being misled.  The problem isn't health insurance it's the cost of health care.  The solution to the problem is to first require firms to offer true insurance (that is, does not cover events where p = 1.0) then require all providers to post prices and charge everyone the same amount.

Next, using existing law you then indict and prosecute all violations of 15 USC Ch 1; the health insurance and related industries already tried to claim exemption in a case that went to the Supreme Court in 1979 and they lost.  It is therefore simply a matter of political willpower to get out the handcuffs and start issuing indictments.  That will further collapse prices since now providers will be forced to compete for business.

To put numbers on this we're talking about "health insurance" for catastrophic events being something that costs the average person well under $100 a month and for virtually everyone they would pay only a few hundred dollars more a year in direct, uninsured cost.

With the cost of care collapsed to 1/5th of what it is now for the truly indigent we can certainly afford to help -- but for nearly everyone we won't need to, because even those of modest means can afford to pay cash at a price 1/5th of what is charged in the United States today.

The obvious question is "Why won't Donald Trump or Congress take this position, since it's clear on the math that it will solve the problem permanently and at the same time nearly eliminate both the Federal budget deficit and all State and Private Pension budget problems at the same time?"

The answer is quite simple: Doing so will cause an immediate and deep recession as the health industry collapses from ~19% of domestic output back to its historical level of about 3-4%.

Said recession won't last very long because that money will get redeployed in other areas of the economy but until it does the impact on GDP will be severe, immediate and deep -- and both Congress and Trump know it.

Oh, and it will put a whole bunch of lobbyists out of business too.

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