The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions.
NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANCIAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES.
The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility. Market charts, when present, used with permission of TD Ameritrade/ThinkOrSwim Inc. Neither TD Ameritrade or ThinkOrSwim have reviewed, approved or disapproved any content herein. The Market Ticker content may be sent unmodified to lawmakers via print or electronic means or excerpted online for non-commercial purposes provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media, to republish full articles, or for any commercial use (which includes any site where advertising is displayed.)
Submissions or tips on matters of economic or political interest may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must include full and correct contact information and be related to an economic or political matter of the day. All submissions become the property of The Market Ticker.
Market charts, when present, used with permission of TD Ameritrade/ThinkOrSwim Inc. Neither TD Ameritrade or ThinkOrSwim have reviewed, approved or disapproved any content herein.
The Market Ticker content may be sent unmodified to lawmakers via print or electronic means or excerpted online for non-commercial purposes provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media, to republish full articles, or for any commercial use (which includes any site where advertising is displayed.)
Submissions or tips on matters of economic or political interest may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must include full and correct contact information and be related to an economic or political matter of the day. All submissions become the property of The Market Ticker.
Considering sending spam? Read this first.
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:
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.
Let's lay out the parameters for a bill, a fairly-modest update to my two previous missives on this point here and here (note the dates) and which can be easily turned into formal legislative language:
Now let's look at what you could expect under such a system.
Let me first note that such changes would drop Medicare expenses in the budget by at least 75%. Again, 25% comes off from changing how we handle Type II diabetes alone; these are not "pie in the sky" numbers. This results in a complete deletion of the federal budget deficit on an instant and permanent forward basis and as a result everyone in the country becomes richer every year because their purchasing power of money stops going down and starts going up.
The CBO is out with their latest estimate on the detonation of our federal budget, and it's not pretty. They point out what I've said repeatedly on the budget and "entitlements": Social Security is not the problem and in fact will start declining in share of the budget in 2028; politicians speaking of "entitlements" lumping Social Security in with Medicare and Medicaid are lying. The entire problem is in medical spending and if current trends are not reversed -- not just "adjusted" over time -- will destroy the federal budget and economy. We will not get to 2037 before it happens either; in fact, if we do not act we'll be lucky to get through the next four years as the markets will figure out that neither political party will take this issue on and resolve it. Simply put we must solve this problem and we must do it now.
If we don't this is what the federal government will try to do with debt
That will fail because it must; infinite exponential expansion of debt is impossible to sustain and will result in a fiscal crisis. Since this is being entirely driven by health care spending the only means to avoid collapse of the government will be forced rationing or even collapse of both Medicare and Medicaid -- an immediate disaster for everyone dependent on them.
We must act now to stop this, and the above plan (or something substantially identical to it) is the only workable means to do so.
Let's take some pessimistic estimates of the result from enacting this set of changes -- that Medicare spending will go down by half and Medicaid by 60%. These are in fact very pessimistic, since a 25% reduction is simply from policy change rather than cost control. What does that do to the budget even if that's all we get?
Total spending goes from $3.85 trillion to $2.92 trillion in an afternoon.
In other words we go from a $587 billion dollar budget deficit last year (on "official" terms) to a $342 billion surplus; that is, from a 15.24% deficit (as a percentage of the budget) to an 11.70% surplus! This change in spending and the surplus is maintained forevermore into the future -- in short this change ends, permanently, the federal budget deficit.
At least as importantly for you, as a consumer, we take the destruction of purchasing power of your money caused by deficit spending and permanently reverse that. Over time this will eliminate the federal debt -- without cutting any discretionary (or military) spending.
Let me add to this: I have, since The Market Ticker began publication, said that Social Security is not going to blow up; the entire problem is in health care. Lawmakers and candidates love to either scare Grandma by saying their opponent will "cut" Social Security or threaten that we must address "entitlements" in which they include Social Security. Here's proof from the CBO that I'm right and they're lying: Social Security does not materially increase in budget load over the next 30 years, and more to the point it starts declining in impact ten years from now as the Boomers begin to pass on!
Fixing Health Care prevents the destruction of the Federal Budget and prevents you from losing access to medical care -- especially if you're a Senior Citizen or poor. If we do not pass this bill or something substantially identical to it and you are either a Senior Citizen or poor within the next five to ten years you will face forced rationing of your health care or the government will collapse.
This bill will materially increase access to doctors, clinics and similar by Medicare customers since there is no longer any discrimination between who does and doesn't take the program -- Medicare is simply an insurance payer just as any private program is, and will list its payable amounts for care just as will any private party insurance does. This also leaves the Medicare Advantage programs, for those who decide they like that program better, fully intact. For those Seniors who have medical expenses that exceed what Medicare will pay they will wind up with a tax lien just as will any other citizen.
This bill will make customer choice not just a function of price but also of outcomes. Today there is no accurate way for a person seeking a procedure to compare the success rate between various providers of a given procedure. This must be fixed immediately if we are to have true competition as some doctors are outstanding, some are excellent, many are average and some are poor. There is literally no way for a customer today to know, other than by anecdote, which category a physician falls into.
The bill will also destroy PBMs and the outrageous extraction of funds they commit by forcing price transparency and decoupling price from "insurance." You will be able to call or go online to look up drug prices from any pharmacy and they will in turn have to honor the same price for all retail buyers. Competition will return at the retail level and the practice of "gagging" pharmacists, which is arguably illegal as it is done for anti-competitive purposes, will end immediately.
If you're unable to pay or accrue medical expenses in your Senior years (or otherwise) that wind up being paid by Treasury then when you die they go "poof" (Treasury eats them) to the extent that your estate is unable to pay them off as ordinary debt prior to distribution through probate (will) or trust. If you're married then your spouse cannot be punished for said debt during their life should they survive you despite some (or all) of your assets being titled in common, but your joint assets cannot be shielded when the surviving spouse dies against your medical claims nor can you marry after incurring such expenses as a means to prevent recovery from your assets. This prevents "serial marriage" or late trust-creation gaming of the system yet also protects a surviving spouse, which will be particularly important for poor couples and will prevent some of the nastiest situations that occasionally arise today (where long-married couples are essentially compelled to divorce for economic reasons due to medical expenses and collection efforts.)
Medicaid goes away entirely on a formal basis however poor people actually acquire superior access to health care. The amount spent by Treasury would drop by at least 80% instantly. A fair amount of the remainder would be, in future years, recoverable as some people leave the ranks of the poor and if and when they do their accumulated medical debt would be recovered over time.
This bill stops the detonation of all of the state public pension fund budgets -- a catastrophe that has been driving property tax increases and threatens to destroy all of the state budgetary systems. That all ends in one day.
It deletes all state Medicaid spending immediately (the states may choose to use said funds,or some part of them, to pay for low-income clinics and similar for residents in their states, much as County Health Departments do today in the States.)
It makes bilking the government by submitting false or inflated bills to the Treasury a severe criminal offense. The poor and disabled are the least able to press their own claims and fraud is rife in both Medicare and Medicaid today. This puts real teeth in the anti-fraud provisions for those individuals who, most of the time, cannot reasonably bring their own suits. It also protects the poor and disabled from improper tax liens while at the same time recovers from them the cost of their care should their financial situation improve in the future.
An often-repeated claim is that medicine is "highly variable"; the person who presents to the hospital or ER has an unknown expectation for complications and follow-up requirements. But this is true for car repair as well. I remind you that it was not that long ago (if you're old enough you remember) that the practice in car repair was to put your car on the rack, get a blanket authorization, rip it apart and tell you what the bill was when they were done. This often led to vehicles being literally held hostage and outrageous bills that nobody would have agreed to in advance. That was made illegal and during the debate over these laws all the car dealers and repair shops said they "couldn't" accurately estimate and would go out business if forced to do so. They lied; the dealers are still there but the racketeering they used to engage in and the rabid screwing the consumer used to take is gone. Car dealers dealt with this by introducing a "flat rate" book. The "flat rate" for repairing your front brakes is $400. This includes a set of pads and rotors and the labor to install them along with a margin for expected and possible complications; the dealer has no idea what sort of condition the vehicle is in other than that it needs brakes when he takes it into the shop. The flat rate book gives him the expected time to perform the procedure including a margin for possible complications. In some cases the dealer will take less time to fix the car and in some cases more. That doesn't matter; what does matter is that on average that's what it will take with a reasonable profit for the dealer, and in addition the dealer typically adds a "shop charge" that is a flat 10% of his repair price for small and hard-to-itemize things like shop towels, grease and similar. If he gets it done faster and cheaper, he wins. If he runs into complications, he loses. The book gets released with each new model and can be updated as actual service history is fed back to the manufacturer.
The "must post a price" model, incidentally, does not mean that providers cannot differentiate between customers who have objectively-measurable differences in presentation. For example a provider could charge 25% more for someone who is morbidly obese but must do so for everyone who is, and must post that up front on their price list. There may well be a higher complication rate for such a person in that practice's history. If a provider is willing to come in at 3:00 AM to take care of something urgent but wants to charge double to do so rather than waiting until the morning they can, provided they disclose it up front in their price list. Likewise, perhaps some practice has a lot of available appointments in the afternoon and wishes to offer a 10% discount for appointments between 1-4 PM. No problem. Competition once again comes into play; if some provider figures out how to get rid of the additional complication rate caused by said obesity they can then undercut the other guys on price and gain that business. If one provider is more skilled than another and thus has a lower complication rate they can undercut their competitors which is good for everyone except the lesser-skilled provider. Who do you want practicing their medicine on you -- the better guy or the lesser one? This is how progress is made folks. It's also why the shop charge to change an alternator in one make and model of car is different than the same job done on a different make and model; one may have easy access from the top, the other does not.
Likewise insurance companies employ a whole bunch of actuaries for the purpose of figuring out the odds of a given thing happening and what it will cost if it does. To do this they analyze previous events. After this change in law hospitals will be no different; the hospital has access to fine-grained data on all of its previous procedures done, for example, to perform a coronary artery bypass. It knows on average how many sutures must be laid, how many scalpels are used, how many units of blood get consumed, what drugs and in what amounts are consumed, how many hours in the operating theater and so on. It knows that X% of the operations go without a hitch, Y% have some minor complication and Z% are a disaster requiring other major interventions because of unforeseen complications -- some of which are avoidable (e.g. infections acquired in the hospital) and some of which are not. From all of this data the hospital can compute an average and that's the price they set. Just like the car dealer does not know if your car has frozen bolts that will have to be chiseled off in order to change your brakes or a caliper that will have to be swapped out because when it is reset it starts leaking fluid the hospital does not know all of the possible complications that may arise from a procedure when you are admitted. By mandating a quoted pricing model competition comes into the game and the hospital now has an incentive to find ways to reduce the complication rate and waste. The complication rate is very important to you as a customer since avoidable complications (e.g. MRSA infections) are severe consequences that you suffer and a good part of the time it happens because they screwed up. It is utterly essential if we are to improve the quality of care that the incentives align for the provider and customer in this regard and if the hospital across town (or across the state!) can reduce the infection rate, for example, that also reduces its average cost for a given procedure and thus said provider can offer a cheaper price. That's called innovation or, if you prefer, productivity enhancement and it is the driver for progress in your quality of life both personally and economically.
One of the often-repeated claims is that much testing today is undertaken for the purpose of "defensive medicine" in the form of preventing malpractice lawsuits (or at least making them harder to win.) Forcing the doctor ordering said tests to present a price to the customer and obtaining their consent before the test is done ends this instantly. If the customer refuses to consent to spending the money on some diagnostic then the result of doing so is on him or her.
"Poof" goes the defensive medicine problem in a puff of smoke because the customer made the choice rather than the doctor! Physicians often claim we need "tort reform" and that they order tests by the bucket-full as a means to defray lawsuit risk. Various advocates, for their part, want to outlaw bringing such suits. The problem with so-called "tort reform" is that sometimes lawsuits are appropriate -- the classic example is when the doctor amputates the healthy foot or hand leaving the diseased one attached! The best, easiest and most-equitable reform when it comes to the "tort lottery" game played today is to replace the current "order 10 tests" paradigm with informed consent and shift consent along with the cost and potential benefit analysis to the customer. If the doc says "I want you to take a CT scan because I suspect X and it costs $200" and I say "No" because I don't want to spend the $200 then if it turns out that the bad thing would have been discovered by the CT I cannot sue because I was offered but refused the test! Customers need to become the decision point, not doctors; they must be presented both the cost of such procedures along with the expected benefits -- including the odds of either proving up or refuting a possible diagnosis. My ass, my choice, my expenditure, my risk. That permanently resolves the entire tort lottery problem yet leaves the legal system intact for the outrageous cases where consumers should have redress in the courts.
Now on to some personal examples of expected financial outcomes.
First, let's compare against an Obamacare policy that contains a high deductible for a reasonably-healthy, 40 year old person. That person is today charged approximately $400 a month and the policy has a $5,000 deductible.
This means they pay $4,800 a year for exactly nothing and if they use any health services at all there is no coverage until $5,000 in additional funds are expended, at which point the insurance covers 80% up to the "cap" (typically $7,000 or $8,000.)
Under this system that customer would (voluntarily) pay $300 for a catastrophic policy. Since they are nominally healthy they might decide to have an annual physical (at a cost of $150) If they remained healthy they would spend nothing more through the year on medical care.
Their cost of health care would go from $4,800 a year today to $450 for a reduction in cost of 93.7%.
Now let's take the person who is nominally ill. Their current expense, assuming they consume $5,000 of medical care under the current insurance system is $9,800 a year -- $4,800 for the "insurance" and $5,000 for the deductible.
What do they pay under this system? $300 for their catastrophic policy which does not cover their existing conditions but does cover an accident or new catastrophe not caused by their existing circumstance and all of their current treatment at a discount of 80-90% of today's pricing.
How much medical care can you buy for $9,500? Well, you can buy one of many operations at the Surgery Center of Oklahoma, should you require one (and not many people need more than one in a year!) You can buy a hell of a lot of pharmaceuticals when they're sold at outside-US prices, which they would be immediately -- in other words divide current drug prices by anywhere from 5 to 20 or more. Monthly "specialty" visits to the doctor to monitor your condition would run you $700 over the entire year.
Do you really think you'd spend more than $9,500? Probably not, and you might spend a hell of a lot less.
In fact, in many cases you might spend 80% less depending on exactly what's wrong with you. Further, if you go from "ill" to "well" during that year your expense immediately stops since the $400 a month otherwise extracted from you is gone.
A poor person would enjoy dramatically improved access to care over what we have today since there would be no "Medicaid provider lists." They could access any physician or other treatment option that was medically indicated and there would be no discriminatory pricing for or against, nor any discrimination in access. Both access and outcomes would improve dramatically for poor people while cost to the government would be dramatically slashed.
How about the person "covered" through their employment, which is most of the population? Your employer would see thousands of dollars a year in cost reduction, and even more in his liability insurance premiums would disappear. For the average family of four the premiums covered by your employer are likely close to $10,000 a year. That is salary that you will receive.
To put this in perspective the average family makes some $50,000 a year. That "average" family would see an immediate 20% increase in spendable income; roughly $10,000 each and every year forevermore into the future. That's huge; there is no other way to have such a large impact on consumer income and wealth in this country on an aggregate basis than this.
Let's assume that "average family" has a kid during the year -- a routine, uncomplicated pregnancy. Today that's about $10,000 worth of expense, but if you have "good insurance" you don't see any of it directly. The cost of having that child as a matter of routine vaginal childbirth would drop to about $1,000. You'd get $10,000 more in salary and spend $1,000 of it; the other $9,000 would be yours. If something goes wrong then your $200 catastrophic policy would cover it, perhaps with a $3,000 deductible. You'd spend $1,000 for the routine part of the birth, $3,000 on deductible, the cat policy would cover the rest of the emergency and you'd be $6,000 net positive -- with a complex childbirth in the mix.
Now let's assume under this system you're nominally well and have a heart attack. What do you pay? The $300 you paid for the catastrophic policy, and perhaps a $2,000 deductible. The bypass you need to resolve the problem is $10,700 instead of over $100,000 because the local hospital has to compete with places like the Surgery Center, and that's what they charge. If they don't then they sell exactly zero bypass surgeries to anyone who isn't having a heart attack right now, and they're not going to give up the income. They'll compete because the alternative is that they have almost no business at all, never mind that you will probably choose to have the $10,000 procedure before you have the heart attack (saving you from the risk of dying during the heart attack outright!)
Ok, who gets hurt?
1. The lobbyists. They lose big. In fact virtually all of them wind up out of business entirely.
2. The administrators who aren't needed and are very expensive. Many, maybe most, get fired. The hospital becomes a place full of doctors and nurses but damn few administrators since now their cost can't be shoved off on others -- it's overhead, and is subject to competition from the hospital across town or in the next town over. Not only does this reduce employee cost at said hospital dramatically it also reduces the space the hospital uses for overhead which makes their per-person cost for actual procedures go down further since a larger percentage of their space goes to actually treating customers. Yes, those former administrators will lose their jobs. The good news is that the economy will expand due to greatly improved cost structures, so there will be new jobs in other fields available to them.
3. The drug reps. Gee, what happens when you can't be a pusher any more and have to price on a level basis? The rest of the world's prices go up some (there's many billions of "them") while ours fall like a stone (because there are only 330 million of "us")! That's math; take the amount of revenue necessary to make the drug and a profit and divide by the number of users; there's the price. Guess what -- forcing the US consumer to pay for the development cost of drugs used worldwide ends in a day. This costs us hundreds of billions of dollars a year today.
4. The PBMs. All gone. These organizations are all quite-arguably committing unlawful acts on a daily basis in any event under 15 USC Chapter 1; using market power to restrain trade and fix prices is per-se illegal. These firms appear to be nothing more than a racket -- and one that was tested in 1979 at the US Supreme Court with the drug firms losing their appeal.
5. Anyone who refuses to change their lifestyle and instead demands everyone else cover their willful acts. That's a tough nut to swallow, but it must be swallowed. If you can control a condition for zero cost you have no right to demand someone else pay tens of thousands of dollars a year to you every single year because you refuse. There are millions of Americans who do exactly that costing upwards of $350 billion every year just between Medicare and Medicaid and every penny of that expense must end right now.
That's a good start.
The problem isn't that health care is "expensive." The problem is that it's a rip-off and is laced through with fraud, theft and arguably even racketeering from top to bottom. You can find myriad examples of what competitive prices look like for health services and products if you bother to look around, even in the United States, and since we know what those prices look like what I laid out up above isn't a fantasy-land dream -- it's a reality we can have right now and forevermore into the future.
To do it we must demand that the politicians put a stop to the scam and back that demand up with whatever political and economic action is necessary until and unless they do so.
Perhaps we should all start showing up at town hall and campaign events with a simple plastic spork and wave 'em in the air from start to finish. They're obviously not weapons but the message ought to be pretty clear when it comes to what the people might, at the point the economic and political system collapses due to all the fraud and theft the political class is enabling through medical scams, choose to eat first.
What will implementation look like? Read here.
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.
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.
I can cut approximately 25% off Medicare right now without jailing one person, without breaking one monopoly, without doing one single thing to the actual health providers -- although all of those things should and in fact must happen.
In the private sector I can have a similar, but smaller (percentage-wise) impact. Ditto for Medicaid. The budget impact of this change would be roughly -$400 billion annually, which is wildly better than any projected "growth" addition (it would add to more than $4 trillion over 10 years.)
You simply have to allow me to make the following policy change with regards to one disease -- Diabetes:
Now before you scream in horror that I'm a monster, listen up.
Instead of medicine and, inexorably, amputations, dialysis, hospitalization and death we're going to prescribe a lifestyle of eating no more than 50g of carbs a day, all in green vegetables high in vitamin C (e.g. broccoli, brussels sprouts, etc.)
Caloric intake is to otherwise be 70% saturated (animal) fat and 20% protein. Sugars, grains and starches, including but not limited to "white" foods (pasta, potatoes, breads, etc) are all prohibited. Zero-calorie / zero-carb spices and condiments are unrestricted, of course.
In short you eat (and don't eat) what's described in this post, less the fruits (since they are all fairly high-glycemic and the vitamin C requirement is taken care of.)
For most Type II diabetics eating this way will reduce their need for other drugs, including insulin, to a literal zero and since their blood sugar will normalize their need for many-times-a-day testing will also disappear, getting rid of both the pain of sticking one's finger repeatedly and the cost.
For those who it doesn't the metformin is there to help.
We will also accommodate all actual, documented exceptions -- that is, those people for whom this lifestyle change legitimately doesn't work.
Those who claim "it doesn't work" will be locked in an isolation ward where they will be fed that diet for two weeks (with no access of any sort to any other source of sustenance) and be able to prove that for them, individually, it doesn't work. If they're right then they will get whatever medication or other intervention is necessary provided they keep to the lifestyle change. But if that empirical test shows that it does work (and it will for virtually everyone) then their ass will be discharged, the fact that they refuse to change what they eat will be noted in their chart and further complaints of "impossibility" will be ignored.
Type I diabetics will find their insulin requirement cut to a tiny fraction of what it is now and again those who claim "it doesn't work" will be subjected to the same empirical, isolation ward test -- with the allocated and paid for insulin amount (and/or other intervention measures) set by the results of said test.
If you are insulin-compromised but choose not to eat this way -- if you cheat, if you want those Doritos, potatoes, pasta, breads, cereals, sugars and similar, then have at it -- but you will get no medical care paid for by any insurance, by Medicare, Medicaid or otherwise. You may buy whatever you want with your own money but there will be zero further support from the government or anyone else.
When diabetes causes gangrene in your feet you can use your own chainsaw to cut them off and your belt can be used as a tourniquet until you can sew the gaping flesh shut with your own hands. When it causes blindness you cannot collect disability because you intentionally caused your own disabled state. When it causes kidney failure you can pay for the dialysis yourself or die. When the complications from all of the above kill you, tough crap.
If you're Type I your reimbursable amount of insulin under Medicaid, Medicare or private insurance will be limited to that which is required by a 50g/day carb load comprised of all low-glycemic green vegetables -- and not one unit more. If you want to eat carbs or load up with excess protein (which gets turned into glucose in the body!) you pay for both the carbs and/or protein and the insulin. Again, if you argue that the provision for what your coverage provides is too low or it's "unsafe" for your personal metabolic situation you get to do two weeks in said isolation ward and prove it. The results will go in your chart as irrefutable and individual evidence as to your actual requirements.
Not everyone is the same -- but the exceptions must be proved empirically, not just by what you claim.
It's simple, really: If you consume no carbohydrates of note and no fast carbs at all, along with little or no excess protein you need very little insulin. If you have damaged your endocrine system so badly that you actually need injected insulin as a Type II diabetic then you will need a tiny fraction of what you use now and you can pay cash for it.
If you haven't, and most Type II diabetics haven't you will need no "advanced" medication at all and most Type II diabetics will need no medication of any sort as their blood glucose will immediately return to the normal range.
At the same time you will lose the extra weight if you have it, your blood pressure (if it's high) will probably come down and the odds of you needing any other sort of medical intervention -- all of which are a consequence of something bad going wrong with you such as a heart attack, stroke, blindness, kidney failure and similar -- will go through the floor.
If you're Type II over time your endocrine system might heal. Or it might not.
But whether it does or doesn't isn't the point, nor is it the goal.
The point is that we're blowing over $200 billion a year in Medicare alone because people who are diabetic will not stop eating ****ing bread, pasta and potatoes while demanding that we pay for their pig-headed, self-destructive behavior!
That's not a disease it's a choice and by God we have to stop doing that crap right damn now.
Will Price and Trump mandate this?
You know good and ******n well neither will mandate any such change so **** them both.
Our current medical scam "system" is nothing more than feeding addicts -- sugar and carb addicts -- and then providing support for continuing addiction despite the fact that we know it is killing those who are addicted and have already had that addiction do severe harm to their bodies while stealing roughly four hundred billion dollars a year from everyone in the country.
We are, effectively, feeding crack addicts government-sponsored crack and forcing the public to pay for both the crack and the harm to the body that it does.
It's time to cut that crap out and indict, try and hang those who demand that it continue.
Yes, you're going to die.
We all will die.
We have some choice as to how and where, but not the final outcome. That's known in advance.
We have heard for decades about how "terrible" this part of medical care this or that might be. That administrative overhead has grown here, there, and everywhere. That cost is going up due to this, that or whatever.
The latest screamfest is about MACRA and claims that it will "destroy" Medicare doctor choice. Like so many claims before it this one centers on trying to get you buy into the idea that all these "great plans" are really about pushing Grandma, in a wheelchair, down the stairs -- or off the cliff, as Democrats have repeatedly charged.
But nobody wants to talk about the truth.
The truth is that technology drives productivity, and productivity drives down cost. It does so every time that the market is allowed to work. It is why you can buy a $35 computer today, right now, that is the size of a credit card, can run your house, browse the web or do all sorts of things that a computer costing a million dollars 40 years ago could not.
Oh, and did I mention that it requires less electricity than one 25 watt light bulb, where the former model 40 years ago required industrial power (and the power bill to match) along with forced air conditioning under a raised floor lest it literally melt down from its own heat.
You'd think medical care is exempt from this, but that's only because you live here in the United States.
Let's just take one example. MRIs have been revolutionary in many areas of medicine. By allowing imaging of soft tissue that was formerly impossible, along with having zero radiological exposure (that is, no risk of causing cancer or other problems as with an X-ray, CT scan or similar) they have brought precise diagnosis of maladies that formerly were nothing more than a guess.
But.... here in the United States they're expensive. If you have allegedly "good" health insurance you might not think so, but in fact they are. An MRI scan costs from $1,000 to $3,000 or so in the United States, and whether you pay it out of pocket or it is billed to some "insurance company" and thus is hidden in cost from you, that's what they cost.
We have US companies that make the machines used for those scans. We also have doctors trained to read them, which is inherently part of it. And, to hear the medical folks talk, they tell you these machines are expensive, trained radiologists are expensive, and, well, that's what it costs.
They're lying, they're bilking you, and they all ought to be in prison.
See, there is this little nation called Japan. Japan is also a first-world nation. Japan also has firms that make MRI machines. Japan has doctors, including trained radiologists. And in Japan, you can walk into a clinic and get your MRI done for somewhere between $100-160. In cash.
In the 1980s, when the first MRIs for clinical use were approved and entered service, scans were expensive everywhere, including Japan. But over the last 30 years the price there crashed, as happens whenever the advancement of technology and productivity intersects with the market and unlawful, felonious interference is absent.
But wait, we're told -- that 10x, 20x, 30x price here in the United States is reasonable and necessary.
Sure it is -- if you support being bilked, price-fixing, intentionally buying up competitors and either shutting them down or raising their prices, "affiliating" all the centers with hospitals (at even higher prices) and more.
And all of this, I remind you, is illegal. Not "a little" illegal either: Felony illegal.
So says 15 USC Chapter 1.
Said law is more than 100 years old. It bans, under felony criminal penalty and ruinous fines, any act that restraints trade, forms monopolies, price-fixes and similar. Trusts in restraint of import trade (e.g. prescription drugs) are also illegal, albeit at a misdemeanor level (15 USC Ch 1, §8)
We keep asking the wrong questions, and we do it because the media and political parties intentionally ask the wrong questions so as to keep us from asking the right ones.
The right question is: "Why do we need a thing called 'insurance' that is not actually insurance, and why aren't those who sell an intentionally falsely-labeled product or service all rotting in prison?"
You see, insurance is a thing you buy to cover your expense if an unlikely but ruinous event happens. Medical care in the general sense is not unlikely. Cancer might be unlikely, but prescription meds, a checkup or treatment for an existing condition are not "unlikely"; they are not only likely in the case of something you already suffer from they're guaranteed!
You cannot buy insurance on your house if it is already on fire.
Why can you buy "insurance" on your medical state to treat diabetes if you are already diabetic?
And finally, if you buy insurance on your house, and it burns down, you never pay another nickel in premium (on that house) -- now the insurance company pays you. But get sick and watch what happens -- not only must you keep paying but when your "annual insurance birthday" comes along the price can change, and so can the services, and you must pay whatever the new price is or they stop paying your already existing claim for the event that already happened.
I've been writing on this since The Market Ticker began publication and in fact have been advocating on this point since the 1990s when I ran my Internet company -- the trajectory, where it was headed, when it was going to happen and the outcome was easily projected even then. The number of "mainstream media" folks who want to have myself or others who have brought this up with facts and figures on the air, and the number of serious political discussions or debates on the topic over those last 25+ years?
The real discussion, which nobody wants you to ask, is why that MRI is $1,000 instead of $98 like it is in Japan? You see, the $98 you could pay out of your pocket, and in fact with most "insurance" the $1,000 MRI scan still costs you more than $98!
What does that mean?
Simple: If there was no medical scam in the first place you wouldn't need or want today's version of "medical insurance" and thus you would never buy it. You would instead be able to and would pay in cash.
There would never have been a "need" for Obamacare, there would have never been an outcry over health insurance, Medicare and Medicaid would not be 37% of federal spending, there would be no federal budget deficit, most of the Federal Debt would not exist and in fact there would be a multi-hundred-billion a year budget surplus, your spending power would be going up by about 2% a year instead of down by 8+%, there would be no impending pension crisis nor would cities have gone bankrupt and more.
What you might buy, and companies would offer, is true insurance. But since the cost of treating things such as cancer would also come down in cost by 80%, 90% or more the cost of insurance against those unlikely but expensive events would be reasonable to purchase. You'd probably pay a couple hundred bucks for it -- yearly -- which is affordable for basically everybody. And it you got sick? The company would pay to "fix" it and you would not need to pay any more for the actual insurance against the event that already happened. You might choose to continue to pay for possible future illnesses or injuries -- or you might not. But irrespective of that choice your treatment for the already-occurred event would be covered.
How does it happen in this country, if it is to ever happen?
Not new laws, not new regulations, not more hand-waving by Democrats, Republicans or anyone else.
Prosecution under laws that are over 100 years old, exist now, could have been enforced 30 years ago, 20 years ago, 10 years ago, 5 years ago, 2 years ago, 1 year ago, yesterday, today and tomorrow.
Laws that neither political party will enforce.
Laws that neither a Republican or Democrat White House, which I remind you is where the power to enforce laws rests (in the Executive) has ever in the history of this insane mess enforced.
Laws that no State Attorney General, despite there being laws on most state law books banning these practices as well, along with general consumer protection laws that prohibit deceptive practices (and performing a service without discussing price first certainly would fit that description) has ever enforced.
Laws that, I remind you, neither Trump or Hillary has spent one minute discussing in this Presidential Campaign despite it being within either of their power, if elected, to direct their Attorney General to investigate, bring to Grand Juries and prosecute the rampant, outrageous and clear violation of these laws.
Would there be losers if this was to happen?
There sure would. Anyone who says otherwise is crazy.
There would be a lot of out-of-work lobbyists, for one.
There would be a material increase in the cost of prescription drugs in other nations because level pricing would force same. But while their prices would go up, perhaps by a lot, ours would collapse by 70% or more. Why? It's arithmetic -- there are 330 million of us and about 1000 million in the OECD world of them, plus another ~300+ million in the "developing" world with a middle class or better income. We've been paying their bill for decades and the day we stop there is one pool with level pricing for all. Assuming no change in total revenue their prices rise by quite a bit but ours collapse by 70% or more -- in many cases that drop would be 80-90%.
There would be an immediate recession, and a deep one at that, as Health Care went from 19% of the US economy (where it is today) back to about 4%, where it was 30-40 years ago. However, at the same time that would increase business productivity tremendously, reallocate those funds to production, businesses would flock to the newly-competitive United States and ultimately, within a year or two, we'd win big on both productivity and GDP. But make no mistake -- there would be losers, and in the short term there would be economic pain, especially for those in the health care sector today. Indeed, if you're a health "administrator" I hope you can do something else, since your numbers have grown by over a factor of 30 in the last 40 years and none of those additional administrators would still have jobs.
If you have or develop a rare or "orphan" disease you might be screwed. Let's not mince words on this -- there are certainly things we can do technologically but we cannot afford to do for everyone, or even nearly anyone. While you will be able to buy insurance against those calamities many people will not, just as many do not buy flood insurance now despite it being cheap if you're in a "no special risk" zone. If you get flooded without flood insurance, or get an orphan disease without having insurance against it, you're going to be screwed. And? Life is a series of risks, some of which you can control and some of which you cannot. You can insure against whatever you wish but you must not be allowed to take your choices and make them someone else's obligation. That is how we got to where we are now, in short, and if we fix this that will end.
What if we don't fix it?
Then we all -- this entire nation -- economically die within the next few years. Not at some point in the reasonably-distant future, and not just a possibility either.
IT IS, IN FACT, A MATHEMATICAL CERTAINTY.
That's the choice folks, and if you choose not to decide -- if you choose to remain silent -- you are choosing economic if not personal, and painful, death.