The Market Ticker
Commentary on The Capital Markets- Category [Health Reform]

Have you seen the reaction that GOP congressfolk are getting in the streets Mr. President when it comes to your so-called repeal and replace (which is nothing of the sort, and you know it)?

I think you have, if you're paying attention.

A lot of it is pretty ugly, and all revolves around the same sort of thing: Someone with a "pre-existing condition" that is facing a bone-crushing screwing.

Look, as a 53-year old who's healthy, and in fact while you're reading this I'm out in the woods enjoying myself instead of engaging in entrepreneurship if I "lose" the health lottery I'm ok with getting on a plane to buy whatever I need where I can't get butt-sexed by the monopolists you and Paul Ryan keep protecting, and if that is impossible due to an exigent circumstance I'm ok with dying. I've not had a bad run and I'm sure as hell not going to hand over a material portion of my wealth to people I believe are simply robbing the people of this country blind every single day.

But then again, that's because it's me.  You might want to consider that this sort of problem could befall someone else that a person cares about.  Like their wife or child, for instance.

That could lead to some very severe political solutions, and if you don't cut the crap it's going to, because your margin of victory wasn't really very big.  You know damn well how this works because you played the game; it's all about electoral votes, not popular ones, and you only needed to lose one "big" state and one smaller one and Hillary was President.

You didn't win Florida by much, and it's a big state.  If you'd lost Florida then just 8 more EVs and you would not be President.  Pick any of the heavily-populated states you won in the Midwest -- or Missouri -- and it's all over but the shouting.

I'll leave aside the potential for some non-political solutions that people might resort to if you and Congress keep ignoring the real issue and throwing BS at the people, because if we go there as a country then everything that makes America unique in the world is lost.  There's enough heat in the country right now that it wouldn't take much to set that off and you have to be a special brand of crazy to have any desire to see it happen.  There are, however, a fair number of people who are that nuts.  I'm quite sure you're not one of them and I thank the maker for that.

2018's election season is just around the corner.  Yes, you're not directly part of this one, but all 435 House Members are and either cementing those seats held by your party or destroying them is happening right here, right now and that fight will only intensify in the coming weeks and months.

President Trump, you simply have to come to grips with where the problem lies in health care. It's not access to insurance; as you know damn well if there was a terrorist bombing of a building every week where your properties were located it would be impossible for you to get insurance on those buildings at any price you -- or your tenants -- could afford. One of the reasons I believe you were a better choice than Hillary, incidentally, is that you understand this and as I said to a large number of people before the election "You have to be rather crazy to think that Trump would do things as President on purpose that would lead his own properties to be replaced by big smoking holes in the ground.  I'm not sure Hillary has the same level of concern; in fact I'm quite sure she doesn't."

Health insurance accessibility is, at its core, all about the price of the underlying service.  And let's cut the crap, eh -- that price has no market force or discovery mechanism available to the common man today, and hasn't for 30+ years.  That is why -- and is in fact the only reason why -- health care is so damned expensive and health "insurance" is what people are "falling back on."

This is why "single payer" cannot work, incidentally.  It fails to control cost because it has no mandate on price discovery.  It provides even more protection for those doing the screwing today than they have in the present.  It would destroy the few outlying beacons of competition that exist now and which make quite clear that common hospital procedures are priced at ten or more times a market rate -- such as the Surgery Center of Oklahoma.

Why does it cost $100,000 to treat cancer?  Why does it cost the federal government 25% of its Medicare spend (and likely that amount in Medicaid too) to treat a condition, Type II diabetes, that can be relieved in most sufferers at a cost of zero?  Why does it cost $80,000 to cure Hepatitis C in this country and under $900 in India?  Why is a scorpion sting a $50,000+ occurrence in Arizona and less than a hundred miles south in Mexico it's $200.  Why is a rattlesnake bite $150,000 when there is exactly nothing proprietary about rattlesnake venom?

You know damn well the answers to those questions: It's impossible to get a price for anything as a customer before it's done and what's worse is that the price you pay is based on a tied sale with what "insurance" you carry instead of the condition you have or how complex it is.  If you don't have insurance then you are charged 5, 10, 20 or even 100 times what is charged to someone who does.  If you don't consider this to define extortion and racketeering then you either have an IQ smaller than my hiking shoe size or you're profiting from doing it yourself. There is not one other industry where this kind of crap is or would be tolerated, from gasoline to groceries to construction to re-roofing a house or fixing a car and it certainly doesn't appear to be legal either under 100+ year old law (15 USC) which is a section of law designed, written and passed specifically to prevent exactly these sorts of abuses.

The so-called "medical industry" has built edifices worthy of the Taj Mahal and stuffed them full of administrators who do not provide one scintilla of care to anyone, all financed with debt up to the rooftops.  What's worse is that the medical industry has been sued over these practices and gone to the Supreme Court twice since the 1970s to try to get it all declared "legal" and lost both times yet neither the state AGs or Federal Government has come after these jackals with prosecutors and grand jury indictments a-blazing. Nor will the FTC chase down the medical industry for deceptive and unfair practices -- can you please tell me how refusing to quote a price or honor it, say much less billing someone for a "drive by" consultation in a hospital where a doctor literally says "hello" from the door and then sticks an out-of-network charge on your bill is anything but a fraudulent and deceptive practice?

I get it that if you take this on using existing law, which certainly appears fully adequate to put a stop to all of this, and demand (1) price lists be posted publicly for everything, (2) everyone pays the same price for the same good or service no matter whether they have insurance or not, who it's through or how they're paying, (3) that consent on an individual and priced basis is required for anyone able to give it; if you're unable due to unconsciousness or similar "drive by" and similar types of charges are deemed felonious and (4) the United States demands and enforces "most favored nation" for pricing of drugs and devices with any firm that refuses loses all its US patent protections and US licensing that we'd have a deep and immediate recession since roughly 15% of GDP would disappear in a puff of smoke in an afternoon.

All those facilities built with debt -- which is most of them, as I'm sure you know -- would be bankrupted immediately.

But that's good, not bad.  Someone would buy that bankrupt hospital the next day for 5% or 10% of what it cost to build, and the lights would remain on.  Costs would plunge like a stone thrown off one of your high-rise buildings; in fact, they'd fall by up to 90%.  Telling "practitioners" that Jeff Sessions will be as rough on them as you want him to be with dope dealers with maximum charges for peddling known lies when it comes to disorders such as Type II diabetes -- that one should "chase" their fast carbs with drugs instead of not eating the damn things in the first place would go a long way toward resolving not only the cost issues in health care but the underlying diseases themselves.

We have an opiod epidemic in this country in no small part because of the loss of jobs available to blue-collar workers -- people who are not rocket scientists; people with no hope, no future and no job prospects often turn to intoxication.  There's a lot of people in this country facing this situation today; most people fall under the "average" area of the bell curve when it comes to intelligence.  Their jobs went overseas or simply disappeared not only because of bad trade deals but because the medical system got parasitic to the point that it now consumes nearly one dollar in five in the United States.  Laws such as ERISA, EMTALA and similar anti-discrimination statutes along with this parasitic sector of our economy mean that a small business offering health coverage as a benefit will be instantly bankrupted by one person who gets hired and has a $100,000/year chronic condition, and the owner of said business is forced by law to conspire with the ill applicant that comes in his door seeking work to screw his other employees.

The result?  You're nuts to hire your first employee and you're definitely nuts to violate any of the thresholds that trigger various requirements in laws when it comes to benefit packages and similar.

One-person businesses are great but they need to grow into 5, 10, 20 and 50 person businesses for the United States to be great again.

They can't under the present system because just one event completely out of the owner's control destroys everything he or she has built, it is trivial for anyone who has such a condition to target said company and if they do there is nothing that either the employer or other employees can do about it.

If you put a stop to all of these abuses then all the small firms in the United States and those not-yet started suddenly have every reason to hire the first, 5th, 10th, 20th and 50th employee.  The threat of being destroyed by a parasitic venomous health care system that you are forced to conspire with as a boss is removed and American entrepreneurship is instantly unshackled.  Our nation becomes the country in the world with both the best system of law and a much lower cost of labor.  People with hope and opportunity have far fewer reasons to find solace in the bottle -- or the needle.

The recession such a change produces will be deep and nasty but it will also be over very quickly and the recovery will quickly eclipse anything this nation has experienced over the last 30 years.

You must accept the temporary (and severe) contraction in the economy that will occur when you fix this problem.  I know that economic contraction will happen, you know it will happen, and I'm sure you've had lobbyists via various indirect forms such as Paul Ryan tell you it will happen and thus you "can't" do anything like this.

You have to do it anyway Mr. President, and you have to do it now because if you don't not only is the political firestorm going to overrun you and the GOP the economic storm bearing down on this nation caused by 30 years of this mafia-style racket in the health "industry" is going to destroy our way of life and may destroy the American political system entirely.

I know you're aware of this which is why the AHCA tries to throw off some of the damage onto the States via block-granting Medicaid.

Take those people who are ready to lynch their representatives and turn into your strongest advocates.  Take the $50,000 cancer bill and make it $5,000 in a daywhich is not only able to be financed and paid in cash by the average American and insurance to cover it, if you're not yet sick, will cost a couple hundred bucks a year.  Take the person who has Hepatitis C and make that $80,000 bill for a drug that cures it $900 which they can put on a credit card, even if it's a 24% interest subprime card, and be cured.  Take the person with Type II diabetes and insist that their physician tell them the truth about their condition and that ceasing eating all carbohydrates other than green vegetables will probably result in not only zero medical expense but also normal blood sugar levels and prevent the otherwise-likely blindness, amputations and kidney dialysis.  Take the $8,000 "routine" childbirth and make it $900 which again can be paid by the average couple who wants to have a baby.  Take the person bitten by a rattlesnake and turn that $150,000 bill into a $5,000 bill -- still nasty, to be sure, but able to be paid. Make America a place where I want to start a new business that hires people instead one a nation where I'd be nuts to do so.

Give me a reason to set up shop where there used to be hope and bring that hope back with me, working toward alleviating the opioid epidemic instead of hiking in the mountains -- which is what I'm doing right now while you're reading this, and the reason I'm out hiking instead of bringing to market products and services I have invented is that you and Congress keep allowing this screwing to go on and I refuse to participate.

In short take all the people who hate you and the government generally because you have all allowed them to be butt-sexed for 30 years by the medical industry and turn them into people who love you because now their child, their wife or their husband can pay for the medical care they want and need rendering the entire "Obamacare" debate and discussion moot.

You can do this President Trump.  The Executive can enforce existing laws without Congressional involvement.  In fact Congress and their lobbyists can't stop you.

You not only can do this you must do it President Trump, and you must do it now.

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The topic line says it all.  It's the way both sides of the political aisle shut down discussion on any particular topic they don't want to have a civilized debate on, especially when money is involved and someone's scamming someone else.

Take the abortion issue generally.  What always comes out at a pro-life march?  Photos of an aborted fetus.

Why? Because it's guaranteed to nail the emotional response button and as soon as you accomplish that rational debate and discussion on any public policy matter ends.

Where did it start this time?  With a TV host who made an issue out his newborn kid that had a congenital problem and required immediate and very expensive surgery to correct.  He waved the aborted fetus picture and got Obama to chime in immediately on Obamacare and the AHCA.

Then I had a guy who ran that same crap in the thread on my reform bill proposal.  I banhammered him and explained why -- I simply will not tolerate the waving of "aborted fetus pictures" on any topic here and his was one of the most-egregious examples I'd seen in my time writing The Ticker.

So let's analyze the root of these issues in the context of health care, without waving said pictures around.  Be warned, however, if you choose to comment: I don't do the aborted fetus thing and if you try it you'll get banhammered too.  Keep the discussion on policy rather than trying to play the "emotional" game and you'll be fine.

These issues all turn on what are called "pre-existing conditions", for the most part.  All of them are very expensive in our current medical system.  About 5% of the population have them in the most-serious (expensive) form at any given point in time but a quarter of the population (and that estimate may be low) has them in some form or fashion in a means that may not be ruinously expensive now but it will be later.  For the purpose of health insurance how you wound up in that 5% or 25% does not matter -- only that you are if in the 5%, or are very likely if in the 25%.  The former will preclude you from being insurable under any rational system because the probability of the bad event is 1.0; it already happened.  The latter will radically increase the cost of being insurable under any rational system because the probability of the bad event approaches 1.0; that is, while it didn't happen yet it is nearly-certain to do so.  Think of the latter case as being similar to trying to buy house insurance while under a hurricane warning -- there's no guarantee you will get trashed but no insurance company will ever write such a policy because the risk of damage is so high that they'd be crazy to do so.

These issues come in three basic forms distinguished by how and why they occurred.  Let's enumerate them:

  • Chronic and expensive conditions that are a result of either lifestyle choice or bad luck and which can be relieved or eliminated through a lifestyle change.  Type II diabetes is the poster child for this group and I've written an article on the issue called "The Low-Hanging Fruit" for that reason.  For scale that's about a quarter of all Medicare and Medicaid spending today -- an utterly monstrous amount of money that, were it to cease, would almost balance the federal budget on a perpetual forward basis standing alone.

  • Chronic and expensive conditions that are a result of lifestyle choice but cannot be relieved through lifestyle changes after the fact.  There are a huge number of conditions for which this applies, including drug or alcohol abuse that has resulted in severe body malfunctions (e.g. cirrhosis, cancer, etc), lung cancer, emphysema, heart disease or strokes as a result of smoking, HIV contracted due to consensual anal sex or IV drug use, the majority of cases of Hepatitis-C (same), destroyed hips as a result of being 200lbs overweight and more.  These are all disorders and diseases for which the person involved was responsible for the condition but can't fix or materially improve it by changing their lifestyle now, although they certainly could prevent or reduce future harm were they to cease whatever they were doing.

  • Chronic and expensive conditions that are the result of bad luck.  We all get one draw at the genetic lottery.  Some of us get a great draw, most of us get an "ok" draw with a few bad spots mixed in, and some get a really crappy draw.  The kid born with hemophilia, a genetic heart defect, Down's -- all are examples.  There are plenty that come along later in life too although many are not obvious.  It used to be that virtually anyone with periodontal disease or a high cavity rate (leading ultimately to root canals and tooth loss) was accused of failing to brush and floss.  We now know that's false; a huge percentage of the people who have such problems in fact got a bad genetic draw and even with perfect oral hygiene they're likely to have major problems down the road.

I separate this into three subdebates for a reason, but as a group all three of these are something that a large percentage of the population -- somewhere around one quarter of all persons in the country -- will fall under at some point in their life, with about 5% of the population under the most-severe (in terms of expense) forms of one of the above in the present tense.

The basic issue with all three is that all are flatly unaffordable under our current medical system.  None are "acute" situations (e.g. a broken leg, a car accident, etc.)

There is a further division found in the latter two of the above categories -- whether there is any rational expectation that the condition, even with the most-aggressive treatment, will ever be remedied.

For a huge percentage of the sufferers in the second two categories the answer is no.  If you have MS you will always have MS.  You might control it, at least for a while, but it will never go away.  The same is true for the person with Downs; they will always have Downs.  Ditto for hemophilia.  There are many such disorders and diseases; hell, even Lyme can fall into this category and while many cases are preventable not all are. 

One person with such a disorder who goes to work for the hypothetical company with 100 employees can destroy the salary prospects for everyone who works there permanently.  Take the person with MS that has a $70,000 drug they need to take to control their condition.  If they're hired by an employer with 100 employees that person will literally steal about $1,000 a year from every other employee in the firm for as long as they work there.  Why?  Because with overhead that $70,000 drug is about $100 large and the company will be forced to pay it in the form of medical insurance premium increases.  This means they will be forced to reduce the salaries paid to everyone else by, on average, about $1,000 a year!

What's even worse is that the employer is forced to conspire with the applicant to screw his or her employees!  It is illegal for an employer to discriminate on this basis and as a result they are actively engaged in stealing the money necessary for that person's treatment from everyone else on their roster and there is nothing they can do about it. In very severe situations this can actually force a company out of business entirely, at which point everyone winds up out of a job.

This is why "single payer", incidentally, can't -- and won't -- work.  A "single payer" system provides no incentive for any drug or medical company to figure out any way to reduce that cost -- in fact, it provides the exact opposite incentive because everyone gets the treatment!  Single-payer in any form always leads to rationing and the least-able to be paraded around on TV as "victims" are the first to be left out in the cold without a jacket to die.  Governments are brutal in this regard because they're faceless; witness the fact that everyone "hates" Congress but keeps voting to send their particular Congressperson back to their office!

Let me say this again just in case you missed it in the last paragraph: Single payer will kill 30 million Americans within five years of enactment because government will simply make a list of disorders and diseases sorted by cost and "aborted fetus" factor and draw the line at a point where the cost is high and the "swing the baby" factor is low.  Anyone with a disease or disorder below the line will have their care denied and will die.  Government won't do this because it's "mean", it will do this because without immediate and continuing collapse in cost the government itself will be unable to fund not only the medical system but the lights in the Capitol.

 A "no insurance" system (at all, at any price) on the other hand provides an incentive for firms to come up with a treatment people can afford to pay because otherwise they die and thus spend zero on health care (or anything else) in the future.  Leave the social side of this alone for a minute and it's quite clear what happens to cost if you give someone a blank check -- and this is demonstrated repeatedly in the real world by the skyrocketing price of chronic disease drugs and treatments.  Obamacare has made this much worse; witness the ratcheting up of Epipens, asthma medications and similar over the last eight years despite the so-called "underpayment" by Medicare and Medicaid that providers continually bleat about.

I'll just take one example: Epipens.  You may or may not know this but epinephrine, the drug in those pens, costs literal pennies.  A (large) vial intended for veterinary use can be purchased over the counter for under $25.  A 1mg ampule intended for "individual" use (1mg/ml) on humans can be bought for under $5 but requires a prescription.  Diabetic-style syringes cost pennies each.  Note that the usual Epipen dose is 0.3mg which means one "individual" ampule contains about 3 doses; the per-dose cost including the syringe is about $2.00!

It is only the lack of competitive pressure that leads people to be able to charge 100x the retail cost of the supplies for these things, and providing them under 'insurance' just makes the problem worse.  If they had to sell them for cash Epipens would be $10 while the company would still make a 500% margin over the cost of the materials for packaging and similar.

For those people in the above three categories the first can be handled quite-effectively by simply cutting them off if they won't make the required lifestyle change.

There is no answer in any form of public support for the second and third groups.  The only means by which we can resolve that problem in the intermediate and longer term is to stop enabling people to steal a never-ending cost-spiral from others.  If we do that then companies will be forced to compete and find ways to treat these conditions at prices people can individually afford to pay for in cash because the alternative to doing so is that they will sell nothing.

When you wave the dead fetus around what you are doing is enforcing theft against millions of others.  You are destroying businesses on purpose by trashing their ability to pay their employees competitive wages because someone with a high-cost condition joins their staff.  If you keep this up for long enough you will keep screaming until the government puts in place single-payer at which point the government will be unable to pay and thus will draw that line on the list of diseases and conditions which will kill millions of Americans outright.

There is one -- and only one -- answer: We must break the monopolies and enforce existing law.

If everyone has to pay the same price for the same drug or procedure then the only way a company can make money is to provide solutions to problems at a price people can afford to pay.  The 0.1% are, in fact, 0.1%!  If you can't market your drug, device or procedure to the vast majority of the population of the nation because they can't afford to buy it then in the medical field you have no market at all since these are not "aspirational" or "luxury" purchases and if the only person who can afford your product is Bill Gates you effectively have no market at all.

This is what it comes down to folks, and if we are to make progress we must stomp on any who try to play a wave the dead fetus game -- whether it be politically, in the media or our social circles.

The continuation of our way of life along with the operation of our federal and state governments depend on it.

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2017-05-07 14:05 by Karl Denninger
in Health Reform , 1049 references
[Comments enabled]  

If you want to know why fixing "health care" is so difficult you need only read this article.

From Akron to Youngstown and Canton to Cleveland, as in cities and towns across the country, workers who once walked out of factories at the end of each shift now stream out of hospitals.

While manufacturing employment has fallen nearly 40 percent in northeastern Ohio since 2000, the number of health care jobs in the region has jumped more than 30 percent over the same period. In Akron, the onetime rubber capital of the world, only one of the city’s 10 largest employers still makes tires. Three are hospitals.

If these were doctors and nurses that might be understandable.  But they're not.

They're nearly all paper-pushers who contribute exactly zero to actual consumer care.

The problem is that all of these people draw salaries and thus drive up the cost of medical care by ridiculous amounts.  In fact last month some 20,000 people were added to the "health care" employment rolls and nearly all of them will never provide one second of actual care to an actual person -- but every one of them has and will massively drive up your health care costs.  In fact if the average "administrator" in that group makes $40,000 in the last month alone a whopping $800 million per year before their health insurance and employment tax cost was added to your medical bills and yet not one single person got one minute of additional actual care out of that expense.

Next month there will be another $800 million added on which you will be forced to pay.

The next, and at least as-large problem is found in the continual bleating of hospitals and similar that "Medicare doesn't pay what X costs" as their justification to gouge private parties.  But this claim is false; if you look at many of the so-called "non-profits" you can find myriad examples of this being a flat-out lie, and nowhere is it easier to find than in the hospitals' lab sections.

Direct operating costs are usually about 10% of the revenue amounts!

In other words the hospitals are making 1,000% profit in their labs, net-net including all expenses, on balance.  That is, Medicare and Medicaid, when you look at the actual operating cost of these labs, is paying a price that approximates cost plus a bit.  And oh by the way that's what the law governing Medicare and Medicaid requires.  If private parties paid 10% more that would be a rational profit margin.

1,000% more is a******job.

This is why alleged "non-profit" hospital administrators frequently get seven-figure salaries even when they're associated with a university system where the head of said school makes 1/5th to 1/10th as much.

No competitive business can maintain 1,000% net profit margins in any segment of their business for any length of time at all, because as soon as someone figures out that you're making that sort of profit they come in and open a competing business.  It will happen every time, simply because the new entrant can undercut the other guy by half on price and still make 500%!  There will be dozens of new business entrants within days.

The only way to keep that from happening is to do anti-competitive things, such as conspire with others to fix prices or form "networks" that forcibly lock out competitors.

All of those acts are illegal under law that has stood for more than 100 years yet both State and Federal governments refuse to enforce said laws.

We can solve the "Health Insurance" problem in a literal day by enforcing those laws against everyone in that sector of the economy.  But if we do so then the 1,000% profit margins collapse by at least 90% in an afternoon and along with the screwing on the billing end goes a lot of jobs.  Health care collapses as a share of the economy from over 19% today back to about 3-4% and this is recognized as the mother and father of all recessions -- because it will be.

That recession won't last long though because with the amount of money that now remains in consumer pockets instead of being stolen through extortionate "health insurance" schemes America becomes the most-competitive place to run a business in the Western World.  We would see an enormous influx of firms to the United States beginning within days and it would not be long at all before all of the jobs displaced would be recovered and then some.

If you want an example of what this would look like from the economic point of view have a look at 1920-21.

But the fact of the matter is that those who would lose during that transition whine big, they whine loud, and they lie.

They scare you with knowingly false claims that you'd have no doctors, nurses or hospitals, and thus would die.  This is trivially seen to be a bald-faced lie when one simply looks at the growth of administrators .vs. physicians in medical practice -- the latter actually diagnose and treat persons, the former do not and if nearly all of them disappeared tomorrow there would not be any impact on the number of physicians and nurses -- and thus there would be zero impact on the ability to deliver medical services either.

If you get the force, fraud and extortion out of the medical system at all levels from pharmaceuticals to hospitals to the local imaging center and testing company you'd find that most of those administrators would lose their jobs -- under a competitive market they would produce far less in value than they cost.

Indeed, you only need to look at the quarterly filings for virtually any public company that operates in a competitive market and you will find that SG&A (that's sales, general and administrative expenses) typically runs about 10% of revenue and most of that is G&A.  Businesses in a competitive market can't spend more because if they do someone will come in, compete with said firm and destroy it by undercutting their prices.

Really competitive business (e.g. Amazon) have G&A costs of ~2% of revenue!  That's how they hammer their competition and how you get better prices -- they keep their costs down.

Now look at any of the health care public firms. Aetna, for example.  Their G&A is 23% of revenue, and the only reason they get away with it is that they are protected from competition.  In other words they blow 2 and a half times what a business in a competitive market does, and 10 times what Amazon does on administration as a percentage of revenue without fear -- because they can without having their head cut off by a competitor.  And oh, by the way, there's plenty of creative accounting too; health-related firms have every reason to understate their actual G&A expense lest the pitchforks and torches come out.

We will never get health care under control nor will it ever be affordable until and unless the underlying issue -- cost -- is addressed.  Cost is only addressed through market forces, and that means enforcing the law by hammering every single anti-competitive agreement and practice that these companies engage in.

If we do that the cost of medical care will drop like a stone -- 80 to 90%.  There will no longer be a "pre-existing condition" problem because for virtually every situation you will be able to pay cash.  For the few where people literally cannot because even when the $90,000 annual cost of treatment is $500 (as is the case for many MS patient drugs if you buy them outside the United States) our "social safety net" can afford $500 -- but not the $90,000 tab today that escalates at 10% or more a year.  In the case of people with Type II diabetes the cost of treatment for most of them would drop to an actual zero were they to stop eating carbohydrates other than green vegetables.  That sounds like a hard sell given how many people like pasta and pizza unless you explain to the 250 (or 400!) lb diabetic that if they do this not only do they spend zero on meds in addition all their extra weight will come off without being hungry or exercising to death and they won't have a heart attack, stroke or destroy their hips by trying to carry an extra 100+ lbs around either.

What will said Type II diabetic choose if the options are (1) pay for testing strips and medication out of his pocket (albeit at a much lower cost than today) while eating pizza or (2) pay zero for testing strips and drugs because you no longer need either but don't eat pizza?  The obvious choice is to eat the steak, forego the pizza and as a result drop both the medication and the extra 100+ lbs while keeping the money you used to spend on meds and testing supplies in your pocket.

Those who are screaming about "pre-existing conditions" and similar have a choice to make.

You can either continue to support the blatant rip-off of the current medical system in this country which thus compels you to argue for stealing from others or you can argue for putting the monopolists and extortionists in prison using existing, 100+ year old law which will collapse the cost of your medical care by 90% or more in an afternoon.

Oh, and one of those choices can't work because there simply isn't enough money to continue doing it no matter who you steal it from, while the other both can work and will, after the adjustment in the economy takes place, lead to much higher productivity employment throughout America.

That choice, if you take it and demand that it happen right here, right now, today means your wages will go up, your cost of living will go down and your life will dramatically improve.

If you take the other choice -- to either sit on your hands or make more and more demands for "single payer" and cost shifting instead of collapsing the monopolies and extortion rackets you will not only fail to obtain the health care you desire you will cause the collapse of our Federal Government, State budgets and the nation's economic future.

Read here for the answer.

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2017-05-05 07:00 by Karl Denninger
in Health Reform , 918 references
[Comments enabled]  

Sometimes the mainslime media manages to write a story that actually illustrates an issue, if you have an IQ greater than your shoe size.

This is one of those times.

John S. Williams, an attorney in New Orleans whose multiple sclerosis medication costs $70,000 a year, buys insurance through the Affordable Care Act’s marketplace. Without protections for pre-existing conditions he fears he would have to close his law practice and find a job with that offers a group insurance plan.

“We always hear about job growth and business creation — being able to have affordable health care drives that,” Williams said. “I have tremendous satisfaction with owning a business, but I know that if I can’t get coverage, I would be forced to get a different job. I can’t not have coverage for my multiple sclerosis.”

So let's analyze this man's statements.

1. He has a chronic, serious condition.

2. The current cost of controlling (not "curing") this man's condition is $70,000 a year plus physician monitoring.

What he currently does is steal from other people in order to pay the $70,000.  If he is denied the ability to do this through subterfuge as he currently does he will do it through subterfuge with an employer instead.

Let's be clear: Applying for work at a place while not disclosing that you have a condition that costs $70,000 a year to manage and which you expect the employer to pay via their health insurance is theft.  You are not only stealing from the employer you apply with (who is prohibited by law from refusing to hire you if he detects it beforehand) you are also stealing from every other employee who will see their wages damaged if you are hired by the expense you impose through your act of fraud. It happens to be legally-sanctioned and in fact protected theft because employers are barred by law from discriminating on the basis of your health status whether they figure it out before or after hiring you, and since this man is an attorney I assume if he detects what he believes is such discrimination he will sue.

But the fact of the matter is that there is only one way to characterize intentionally concealing the presence of a nasty and expensive health condition from an employer so as to con your way onto their "group" health plan and steal money from said company to fund your condition.  The words for it are theft and fraud.

So how can we resolve his problem?  Further enabling and supporting theft and fraud is not the answer.  In fact anyone who does so is rightfully considered a mobster and a racketeer, and thus deserves to be prosecuted and, if caught in the act, well....

There is only one answer: Remove the monopolist protections that make this man's treatment so expensive.  In other words instead of $70,000 that treatment will cost anywhere from a few hundred to a few thousand dollars a year -- a price he can pay without scamming anyone.

Let me point out something you have probably not thought about: If we took all of the R&D spending by the top 10 pharmaceutical companies and added it up we'd get about $70 billion.

Last year the Federal Government spent $1,400 billion on Medicare and Medicaid alone, with over $300 billion of that on drugs. 

We do we allow this?

We could spend the $70 billion publicly and pay nearly zero for everything that R&D produced.  It would amount to five percent of Medicare and Medicaid spending and would cut the cost of Medicare and Medicaid by more than three times that amount.  Further, the private spend on such drugs would fall by 90% or more too and now this guy's drug would be cheap.

Look, I have no problem with capitalism; in fact I live on it.

But what we have isn't capitalism.  It's monopoly, it's fraud, it's theft and it's a ******ned scam that needs to stop with the people involved in protecting and promoting going to prison.  Those involved in this in a commercial fashion must have their businesses legally burnt to the ground through lawsuits and indictments and the ashes used as chrism so the example set by them is clear to all.

Those protecting this scam in Congress and the White House, Mr. TRUMP, had ******n well better cut that **** out right now or it is going to destroy the federal budget.

That's not politics, it's math.

And no, it doesn't stop with pharmaceuticals.  In fact the worst offenders are found in hospitals and diagnostic businesses!  $3,000 for an MRI that you can buy for $150 cash in Japan?  Cardiac bypass surgery that's $100,000 in a hospital, $10,700 at the Surgery Center of Oklahoma or $2,000 in India -- with the latter two having lower complication rates than the first!

Folks, we're out of time and we're way past the point of tolerating the sort of bull**** that the AP ran without a single critical word toward that quoted gentleman when it comes to the root of the issue: COST.

Technological innovation reduces cost everywhere when a free market and competitive pressure exists.  When it fails to do so that is prima facie evidence that conduct is taking place that is not only inappropriate it's a crime under 100+ year old law.

We either stop this crap -- now -- or it consumes our nation.

That's the beginning and end of it.

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2017-04-04 09:16 by Karl Denninger
in Health Reform , 630 references
[Comments enabled]  

Let's talk about the implementation of my model bill that I recently posted to reform health care on a permanent basis.

It's fairly easy to envision timelines based on complexity.  Simply put, most of this isn't complex because providers have price lists now -- you just can't see them.  So with that said, let's look at an example and assume The Bill was passed and signed somewhere around 30 September -- or the close of the fiscal year.

What's next?  The following timeline appears to be reasonable.

Beginning immediately on signature with implementation required on or before 1/1/2018:

  • CMS (Centers for Medicare and Medicaid Services; the existing federal agency) would be required to spin up the interface for Treasury to verify whether someone who presents credentials as a US citizen or lawful permanent resident is, in fact, a citizen or lawful permanent resident.  Treasury already has this via the Social Security Administration, since they have the records of all issued Social Security numbers and addresses from tax filings.  In fact you can get at this right now (for yourself) via http://ssa.gov.  CMS also already has an electronic interface system for all medical providers who are registered in order to submit Medicare or Medicaid billing; ergo, the infrastructure is already in place along with access credentials.  Medical providers who wish to avail themselves of the ability to bill Treasury for indigent patients would have to register, but the number of providers currently not registered is a tiny minority of the whole.

  • CMS begins publication of Medicare reimbursement rates for all procedures, drugs and devices.  CMS already has developed and maintains this information so this is simply a publication of existing data and can be done very quickly.  The list may be updated annually as is now the case however with Medicare being a reimbursement source but not a direct billing source as of 1/1/2019 fair notice to all non-Advantage Medicare recipients so they can start shopping providers and services is necessary. (Medicare Advantage customers will have this data from the Medicare Advantage company they select and it may well be different between different Medicare Advantage providers.)

  • Providers must put together their price lists.  They have three months to do so; failure to have and post one as of 1/1/2018 means you're closed!

On 1/1/2018:

  • Providers must post their prices and on demand honor them, along with affirmative consent requirements.  A customer may present him or herself on January 1st 2018 and request the published price.  If they do so then binding, fixed-price treatment per the price schedule and treatment consent rules in the bill must be honored.  Note that all such binding prices must include any consequential events or complications (e.g. those caused by the treatment or the facility in question.)

  • No event caused by a provider or treatment may be billed to the customer.  Alignment of the customer's interest in NOT having an MRSA infection, for example, with the provider's interest in reducing their cost must take place on an expedited basis.

  • "Most favored" nation pricing for drugs begins.  No exceptions, no apologies.  Drug prices drop like a stone.

  • Open testing begins.  If you wish to purchase a test or other diagnostic without invasive exposure beyond a blood draw and not bearing radiation or similar exposure, you may -- for cash and without a prescription or doctor's order.  Since all medical providers must have posted prices on 1/1/2018 you have a list of prices available to you and places to shop from.

  • Auxiliary services must be open.  You can buy said test wherever you want and bring the results to your doctor for consultation or treatment, without limitation.

  • A 365 day period begins during which medical providers may continue to maintain records and coding, but they must also provide human-readable records at the point of service to the consumer.  Since there is basically no medical office in the nation that doesn't have PCs or similar this is trivially done; 3 months is more than enough time to put in place the policy to provide records at the time of treatment to the consumer.

  • CMS and Treasury continue their tax processing and billing integration work with a start date of 365 days hence, or 1/1/2019.  This will be necessary to deal with EMTALA repeal and related from the bill.

  • A 180 day notification period begins during which lifestyle modification is mandatory for those with existing conditions on public medical assistance in order to receive Treasury Billing (and potential medical debt forgiveness at death due to their indigence.)  This specifically applies to Type II diabetes suffers on publicly-funded health programs, although the list of conditions will likely expand.  Those who claim that cessation of eating carbs and PUFAs are not sufficient to bring their blood glucose either under control or materially improve their condition may challenge the individual applicability to them during this time, and must prove same via isolation test (which will likely take less than 48 hours!) with them bearing the cost of the testing in cash if they lose.  Since nearly all of these people either have or should have home instrumentation (e.g. a blood glucose meter), and those who don't can certainly buy one for a few dollars at any drug store including such outlets as WalMart over the counter, they ought to have damn good evidence before attempting to claim an exemption.  These people will also know in advance, or easily be able to determine, if they're going to get caught if they try claiming an exemption and are lying.

  • A 180 day period begins during which Health Insurance companies are required to put together true insurance offerings as required under the Bill to continue selling any health-related policy with effect beyond 12/31/2018.  Since state regulators typically require some notice period (usually six months) this means they must submit same by 6/30/2018.

On 7/1/2018:

  • Medicare and Medicaid recipients with diabetes who have not made the lifestyle adjustments required are cut off from further government funded or transferred billing for their condition until and unless they make the required lifestyle change for at least six months.  They had six months warning and ability.  For the last six months of 2018 the Federal Government, during the remainder of the transition, will see approximately $200 billion in reduced spending. 20% of the adults in the United States have had their pants fall off.

  • Health insurance companies must have posted to the states their catastrophic plan pricing and coverage, along with whatever other offerings they wish to make for the 2019 calendar year.

  • All providers who intend to bill indigent customers must be registered with CMS to provide CMS with sufficient time to process any pending applications and resolve questions prior to 1/1/2019.

On 1/1/2019:

  • Level pricing and quote-before-service (and the procedures for exigent circumstances) for all customers is mandatory.

  • Centralized medical record and coding requirements end and all customers must receive their medical records at the point of service.  The AMA's monopoly on coding revenue (which, IMHO, should have resulted in them being indicted years ago) ends.

  • EMTALA repeal is effective; illegal immigrants no longer can access emergency services at the public's expense.

  • Medicaid repeal is effective at both State and Federal levels; all Medicaid spending ends.

  • Medicare Part "B" repeal is effective.  For "HMO" or "PPO" style coverage post this date Seniors can buy Medicare Advantage policies as they do now but they are not compelled to do so (as they are now.)

  • PPACA repeal is effective; all Obamacare policies, taxes and tax credits end.

  • US Code and CFR amendments to remove the PPACA, Medicaid, and Medicare Part "B" components become effective.

  • Lifestyle requirements continue.  Again, this specifically applies to Type II diabetes where a zero-cost lifestyle change simply comprised of what one eats is sufficient to reduce or eliminate drug and procedure requirements along with the degenerative effects of the condition.

  • All citizens or permanent residents who assert inability to pay a provider now have their bills submitted to Treasury for payment within 30 days.  The customer can choose any provider but the price charged must be level as for anyone else.  Providers who have more than 50% of their customers submitting invoices to Treasury on an annual dollar-billed basis are subject to audit for charges being reasonable and non-collusive (see below.)  The 60 day "no fault cure" policy begins for those who have bills submitted to Treasury due to a claim of inability to pay and tax liens begin to accrue on March 3rd, 2019.

  • For those on Medicare CMS continues to provide the payment rates it will cover to the public for Parts A and D but the customer must submit claim for payment and is responsible for the difference should the price charged be higher than the reimbursement amount.  Medicare customers thus now have an incentive to shop and no restriction on which provider they use for services.  For Medicare customers not using an "Advantage" plan Medicare Part "B" ends both as to the premium collected and benefit disbursed since Part "B" has been deleted.  For Seniors who find themselves unable to afford the portion of payment they must make even with Medicare's typical 80/20 split due to indigence they may assert that indigence just as can a former Medicaid customer and as such low-income Seniors are protected to a much greater extent than is currently the case with Medicare since they enjoy 100% access to all medical providers -- a huge increase in choice compared to today and they have access to the same billing deferral via Treasury that former Medicaid consumers have.

  • For former Medicaid consumers they may assert indigence and thus may access any medical provider as may anyone else who can pay cash.  This is a massive improvement in their access to health services over today as many providers today refuse Medicaid patients (other than via the ER!), but it comes with a tax lien that, should their economic circumstances improve in the future or should they have refundable tax credits, they will be expected to pay.  As a result former Medicaid recipients will, for the first time, have an incentive to both shop and consume medical services wisely.  Many former Medicaid consumers will choose to pay cash, especially for drugs, since a large variety of drugs will be available at monthly costs similar to that of a cup of coffee from McDonalds, but for services where they cannot afford to pay directly the safety net will be available via the Treasury.

  • Private and corporate-funded catastrophic plans, along with any new "PPO" type plans, take effect.  
    With price transparency and no billing obfuscation or "hiding" insurance costs drop like a stone.  Typical "catastrophic" coverage will be available for a few hundred dollars a year.

  • Direct and hidden billing of insurance companies of all sorts, along with "explanation of benefits" nonsense and the implied extortion attendant with same ends.  The customer is billed at a level price as with all other customers for the same good or service; whatever insurance they may have, whether it covers the service(s) provided and how much it will cover is between only the customer and the insurance company.  Collusive behavior, hidden pricing, performance of procedures without prior consent (except in exigent circumstance) and price-fixing disappears entirely.

  • For the first time in 30 years real competition breaks out in the medical field -- not just on price but also on quality of service.  With cost and outcomes exposed customers will be able to research and choose just as they choose a cellphone or automobile today.
  • Non-citizens/non-green-card holders have no right to treatment of any sort nor does any provider have liability for refusal to provide it without payment.  Non-citizens and non-green-card holders (visitors, illegal immigrants, etc) may purchase services and products for cash should they be willing and able to do so.

  • State CON laws and similar are all pre-empted.

  • Mandatory enforcement of 15 USC and the civil rights of action for individual consumers against medical providers for price-fixing, collusion and similar offenses begins.  Note that providers who collude or attempt to defraud Treasury and allegedly low-income customers claiming indigence (who really aren't) are subject to mandatory prosecution and punishment under the Bill.

And.... it's done.

The medical scam has ended.

There are no more Federal Deficits; in fact, we run a perpetual budget surplus and begin paying down the national debt.

Your standard of living starts going up every year even without a raise by about 1% each and every year instead of going down as it does today.

We no longer pay for illegal immigrant medical care at all from public funds.

You get a price that is the same as everyone else for the same good or service in the medical field just as you do at the grocery store, the gas station and the local restaurant.  The outrageous price discrimination (sometimes as much as 10, 20 or even 100x or more) served up on some people -- discrimination that usually bankrupts the consumer in question -- ends permanently.

You know exactly how much you will be billed for a medical procedure, drug or device before you choose to undergo that procedure or accept the treatment.  Your insurance company, if you have one, will have to make available what they will pay and the hospital, doctor or pharmacist must tell you what they will charge.  You will thus know what the total cost to you will be -- before you sign a consent form or have a procedure done.

If you get an infection from a hospital you cannot be billed for the drugs and time to treat that which they gave you due to their incompetence.  That risk and cost is finally on them, which will drive innovation and greater care to prevent such infections that harm and even kill Americans today.

If you can't pay you will still be treated and can still choose your doctor, but you will be responsible to cover the (much more-reasonable) bill if you become able to pay it in the future.  This will permanently put an end to the practice of poor people using the ER like a doctor's office since this sort of abuse will no longer be advantageous compared against going to a regular physician.

Drug prices fall in the United States by at least half (and more likely by 80% or more on an average basis) and for those with chronic diseases that have been sucking down drugs and procedures while refusing to make simple, zero-cost lifestyle changes they finally have a strong incentive to both do so and have their health improve materially at the same time.

There will be no more $300,000 snake bites, $150,000 scorpion stings and $1,000-per-stitch fees that get lumped on you without any way to prevent them when something bad and random happens.  Any medical provider who tries it will find their bill void and they will be prosecuted for fraud.

Obesity and diabetes incidence falls dramatically since it is now strongly in everyone's best interest to practice simple changes in their lifestyle.  An epidemic has broken out -- of people having their pants fall off.  It's a good epidemic and America is noted and lauded as being the first nation to have reversed the increasing rate of obesity and Type II diabetes.

The nation becomes far more productive as the cost of employing someone drops by a solid 15% and America becomes the place to put a multi-national business.  In short labor expense drops tremendously and productivity soars.

If you're not a currently-overpaid administrator you get a raise; for a typical median family it will be about 10% immediately as your employer's cost of having you on staff will drop by at least that amount.  For the average family of four you will see, net of your medical expenses, roughly $7,000 richer in cash spending power after tax each and every year.

Those who are currently-overpaid administrators in health care will find jobs in other sectors.  It may take a while but it will happen, as the economy comes roaring back with the newfound efficiency and productivity improvement from deleting the fraud currently consuming almost one dollar in five.

State and local pensions and budgets stabilize and, over time, taxes come down at the state and local level as the levies put in place to try to stay ahead of the pension destruction are no longer necessary.  Specifically, property taxes decrease materially which will cause both the cost of owning a house and rents to decline.

Your car insurance gets cheaper as your liability policy, much of which covers medical expenses coming from accidents where you are at fault, along with uninsured motorist coverage, will decrease dramatically in cost.

Federal Spending will contract to something similar to this -- and I note that this chart presents a pessimistic estimate. We would almost-certainly do better than what is depicted here and, I remind you, both Seniors and indigent citizens would receive better care and more choice than they have now.

And we prevent this -- our federal debt -- from blowing up in our face as the CBO currently predicts -- an event that, if it occurs, will destroy the nation just a few years from now.

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