Why I Refuse To Shut Up About Health Reform
The Market Ticker ® - Commentary on The Capital Markets
Posted 2012-09-11 08:56
by Karl Denninger
in Health Reform
Ignore this thread
Why I Refuse To Shut Up About Health Reform
 

If you didn't watch the interview last night on Capital Account you can find it here.

Spend the 30 minutes.  Seriously.

It will make you angry. 

Very angry.

These facts and more are why I refused to put this issue down when it came to the Florida Libertarian Party and Gary Johnson.  It is why I refuse to put this issue down in general.  It is why there is a "Health Reform" section here on The Ticker, and why it features prominently in my public speaking engagements (and will for the foreseeable future.)

In short, this issue -- bilking of consumers via various games that would never work in a free market, and which are only effective due to special privileges granted by government to these firms, is the issue when it comes to budgets and fiscal sustainability.

We either deal with this or we as a nation, as a body politic and as a people, sink.

Literally sink.

There is no "half measure" that will work.  This is not about politics, it is about arithmetic.  It is about a greater than 9% increase in federal spending on a compounded basis from 1980 to last year.  It is about two decades of 10%+ increases in health premiums forced down the throats of businesses that have resulted in the skimming of nearly 20% of GDP by these firms into the pockets of some very wealthy individuals and corporate interests. 

It has follow-on lies and distortions as well; lies told about the "food pyramid" at the behest of agribusiness, attempts to control apparent inflation of the cost of living by enticing people to buy cheap crap in the store.  An agenda within Big Pharma's drive to not cure but control all manner of disease, thereby effectively generating drug addicts that are dependent on them for hundreds or even thousands of dollars of pills every month, fattening their balance sheets.  And an agenda within government to support all of it, driven by lobbying and campaign contributions, including the AARP's "scare seniors" tactics in a (fairly successful) attempt to drive them to affiliated businesses.

We have two options as a nation, and only two:

  • Stop it.  Now.  Repeal all the special protections granted health-related companies, "for-profit" or not, and allow competition to work.  Stop protecting cross-border pricing disparities with felony laws prohibiting re-importation and enforce the first-sale doctrine.  Repeal EMTALA.  Prosecute balance sheet games and claims repricing as a felony attempt to restrain trade.  Demand and enforce level pricing irrespective of the means of payment under threat of felony prosecution under the Sherman, Clayton and Robinson-Patman acts.  Make forced subsidies from those who can pay to those who cannot a criminal offense prosecuted as is any other form of grand theft.  Prosecute those who attempt to prevent others from opening hospitals, practices or diagnostic centers through CON laws and similar games as Racketeering, because it is.  Ban the "in-network/out-of-network" tying between alleged insurance companies and providers as a rank violation of the Sherman Act and bring felony Racketeering prosecutions against those who attempt it in the future.  Ban the sale of alleged "insurance" that is not actually insurance, forcing the separation between insurance (a product bought against a highly-unlikely but catastrophic event) and "prepaid medical services", putting an end to cross-subsidizations in this area as well.

  • Collapse the existing system and go to single-payer with hard rationing.  This is where we're headed, because the system will collapse if we don't act on it.  Our choice here is simply to evade the economic damage that comes from a government funding crisis in the middle of where we are now and this endpoint.  This will mean that if you need a coronary bypass your name will go on a list and when you get to the top of the list you get your procedure.  If you die first that's just tough crap.  This is the Canadian model, basically.  And if we get it here, it's going to suck.

I know people don't want to face this, because it means hard choices have to be made.  But this is not just a matter of whether our government will go broke -- it also bears directly on our international competitive posture when it comes to labor, manufacturing and cost of living.

We cannot continue on the path we are on.  This issue is the driver of federal and state budget problems, including the issues surrounding the current Chicago Teachers' strike.  It will get worse by the day, not better, until we tackle and resolve it. 

The only justway to address these issues is to put a stop to the abusive practices that riddle the health care industry and its exploitation of the people.  

This isn't about politics so much as it is about mathematics and the single largest existential threat to the continued fiscal solvency of our local, state and federal governments. 

Discussion below (registration required to post)
 

Main Navigation
Full-Text Search & Archives
Archive Access
Get Adobe Flash player





Blogtalk 3:30 CT Mondays
Items To Look At


Discuss The Capital Markets along with daily technical analysis with our Gold Donor program.

Where We Are, Where We're Heading (2013) - The annual 2013 Ticker

Links and Blogroll
Our policy on reciprocal links: Send us an email with your information and why you think your blog or news site would make a good addition - in most cases reciprocal link requests will be granted.
Legal Disclaimer

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.

Looking for "The Best of Market Ticker"? Check out
Ticker Classics.

Visit the forum to discuss this and other investing-related topics; see the FAQ on the forum for information about Gold Donor status including access to our technical analysis video server.

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 reproduced 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 or for commercial use.

Submissions 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.

Leads on stories of current economic and political interest are always welcome. Our fax tip line is 850-897-9364; please include contact information with your transmission.

 
Comments.......
User: Not logged on
Login Register Top Blog Top Blog Topics FAQ
Showing Page 1 of 2  First12Last
User Info Why I Refuse To Shut Up About Health Reform in forum [Market-Ticker]
Vicious_cycle
Posts: 253
Incept: 2009-03-10
Gold
Chardon, OH
Report This As A Bad Post Add To Your Ignored User List
Great topic, Genesis. Quite an eye opener.

Musicandnature
Posts: 1954
Incept: 2007-12-05
Gold
NJ
Report This As A Bad Post Add To Your Ignored User List
no doubt. I watched vid again just so I can articulate issues better to others.

----------
Since it costs a lot to win, and even more to lose, You and me bound to spend some time wonder'n what to choose. Goes to show, you don't ever know, watch each card you play and play it slow...Wait until that deal come round, don't you let that deal go down, no no. Garcia/Hunter.
Debtpie
Posts: 534
Incept: 2009-12-17

Report This As A Bad Post Add To Your Ignored User List
Capital account was an eye-opener; but I don't fear a single payer system.

"Get in line for your heart surgery" is just another boogieman that's suppose to scare me into keeping the status quo. There are plenty of examples around the world (while not perfect) that do a far better job of covering everyone at a much lower cost.

For Christs sake, people are leaving this country for destinations like India and Tiawan (both have government run systems) to get their heart surgery..what does that say about us...and what does it say about the single payer system in those countries?

What does it say when an anti-venom is $83,000 in the USA and less than $500 in Mexico...another Universal Care country.

Look at that hypochondriac Shona Holmes in the new Mittens commercials saying that the wait for care in Canada would have killed her...from what I've found so far, it would not have killed her...she was just scared and wanted surgery right now(understandable)...so she comes to the USA and gets it right now...for $100,000 which bankrupts her! She had to sell her house...Welcome to America!

I have relatives in Austria, Germany, Italy and Ireland...all Universal Systems...I hear no real gripes from them...especially when they hear what we're facing in the USA...and Italy was rated #2 in the world at one point and only spends 6% of GDP; we spend 18% and leave 10's of million uncovered for even the basics.

As far as waits, the wife needs a specialized test...first opening is in late October!...wtf...when did we become Canada?...lol

Single payer can be a disaster, a Nirvana, or something in between...it's not up to the system, it's up to us...the people must demand a system focused on caring for us rather enriching beyond imagination those at the top of the system.

NO MORE OF THIS!!

Compensation for 7 CEO's of Health Insurance Companies in 2008:

* Aetna, Ronald A. Williams: $24,300,112 ($66,600 a day!)
* Cigna, H. Edward Hanway: $12,236,740
* Coventry, Dale Wolf: $9,047,469
* Health Net, Jay Gellert: $4,425,355
* Humana, Michael McCallister: $4,764,309
* U. Health Group, Stephen J. Hemsley: $3,241,042
* Wellpoint, Angela Braly: $9,844,212

That's ~$68,000,000 per year ($186,300 a day) just in CEO pay for 7 people!

The end of our (perverted) "Free Market" system can't come fast enough:)



----------
A Leader, or an Opportunist? "A leader has the capacity of vision, the ability to see where things are headed before people in general see those things." Mitt Romney --- DebtPie's definition: a leader decides where "things" should head and "leads" us there.
Lowbeyond
Posts: 16930
Incept: 2008-02-11
Green A True American Patriot!
CO aka West NJ/East CA
Report This As A Bad Post Add To Your Ignored User List
Debtpie wrote..

Single payer can be a disaster, a Nirvana, or something in between...it's not up to the system, it's up to us...the people must demand a system focused on caring for us rather enriching beyond imagination those at the top of the system.

NO MORE OF THIS!!

* Aetna, Ronald A. Williams: $24,300,112 ($66,600 a day!)
* Cigna, H. Edward Hanway: $12,236,740
* Coventry, Dale Wolf: $9,047,469
* Health Net, Jay Gellert: $4,425,355
* Humana, Michael McCallister: $4,764,309
* U. Health Group, Stephen J. Hemsley: $3,241,042
* Wellpoint, Angela Braly: $9,844,212

That's ~$68,000,000 per year ($186,300 a day) just in CEO pay for 7 people!

Ok. Beyond "the people must demand a system focused on caring for us rather enriching beyond imagination those at the top of the system." which of course seemingly says a lot but in fact says absolutely nothing and is meaningless,

What is your solution for these salaries ?


----------
Maybe it was a birdy bread-bomber from the future?!
Mrobe10586
Posts: 112
Incept: 2008-12-30

Report This As A Bad Post Add To Your Ignored User List
I have a few questions about this "business model."

Who makes the diagnosis? Does this surgery center have its own diagnostics department or do they just take another physician's word on the scope of the problem? How do they vet the diagnostician, particularly for their Canadian patients or do they just eschew any responsibility for his/her accuracy?

What happens if they contract for a gall bladder removal and the surgeon finds that the gall bladder is OK, do they take it out anyway? What if the surgeon discovers that the problem is more extensive or different than previously thought--do they just close the patient up and subject them to another surgery or do they do more and inform the patient of the upcharge later?

The guy in the video didn't really like the question about "outcomes" citing better "outcomes" for unnecessary surgeries. WTF???

"Healthcare" just CANNOT be made to fit the capitalist model, primarily due to the assymetry of information between the "purchaser" and the provider and the nature of the "product." All of you who think it can need to give it up.
Geschrei
Posts: 472
Incept: 2009-02-23
Gold
Report This As A Bad Post Add To Your Ignored User List
I got to thinking about this topic last night, and your frequent posts about the rise in .gov health care spending since 1980 and the inflation in typical medical expenses (like a normal childbirth) since 1960. So I did a little Googling and some rudimentary calculations - tell me what you think:

According to this site http://www.cms.gov/Research-Statistics-D...., Americans spent an average of $1110, total, in health care in 1980, which increased to $8402 by 2010. Using this site (http://www.minneapolisfed.org/community_....) as a reference for CPI, I calculated that, if per capita medical expenses had only risen at the rate of core inflation over that same 30-year period, by 2010 the average American would be spending only $2938 annually on health care.

Based on that figure, and the 2010 census population of ~309,000,000, if US per capita health care costs had risen only at the rate of core inflation, Americans would have spent roughly $908 billion on health care (instead of the nearly $2.6 trillion that was actually spent).

To put it another way: according to usgovernmentspending.com, the combined total health care expenditures by state, local and Federal governments in 2010 was $1.6 trillion - a figure which does obviously NOT include private or employer-provided insurance, nor personal out-of-pocket spending. Had medical spending increased ONLY AT THE RATE OF CPI, we could have paid for EVERY SINGLE PENNY OF HEALTH CARE EXPENSE FOR EVERY SINGLE US CITIZEN for $700 billion LESS than we actually ended up paying for less than HALF of all Americans.

I realize these are very rough calculations, using less than reliable data (especially CPI) - but I think they are illustrative of your greater point, that a combination of cost-shifting, greed, and bureaucracy has distorted the health care market to the point of imminent collapse. And it appears that no one in a position of power is interested in preventing it from happening.

----------
“The danger is not that a particular class is unfit to govern. Every class is unfit to govern.”

Lord Acton (1834 - 1902)
Oystercatcher
Posts: 15
Incept: 2010-05-08

california
Report This As A Bad Post Add To Your Ignored User List
population grows exponentially, we just need more people being born
to increase the gdp to match the growth in medical costs.

let us see who wins the foot race.

coming soon to your neighborhood, water wars, food wars, shelter wars
and the military to keep order.
Reluctantdebtor
Posts: 131
Incept: 2010-03-05

ohio
Report This As A Bad Post Add To Your Ignored User List
"Single-payer with hard rationing"?

Sounds good to me. It's better than what I have now, which is no access to treatment, unless I show up at an emergency room near death. I qualify for no public benefits in my state. The ever-shrinking pittance I earn, which allows for no health insurance or doctor visits, crosses some kind of line which cuts me off from access to "free" services.
Mannfm11
Posts: 3551
Incept: 2009-02-28
Gold
DFW, Tx
Report This As A Bad Post Add To Your Ignored User List
There ain't so such thing as a single payer system. We all pay. There will be a single rationing system when the government takes over.

Think there isn't a racket going on, just go to the emergency room at your local hospital for a simple problem and get the bill. It is cheaper to rent a movie star for a night than to lie on a gurney for 30 minutes. Both ways, you will know you got screwed when it is over.

That guy talked about some stuff I don't quite comprehend. I have a good understanding of bean counting and a receivable is a debit that has to be supported by a credit. If the debit goes bad, the credit has to disappear. Thus in a real system, only the expense involved in delivery of a service not paid for is a loss. If I comprehend him, the government indemnifies the provider for what they didn't collect. The insurance companies run funny games. Looks like the entire business is funny stuff. I would have to see it on paper to buy into the entire story.

I looked at the website of the OK hospital. I might need a procedure myself and OKC is only 200 miles away. They aren't exactly giving anything away, but I know, having been within grasp of the typical hospital a time or 2 that $1000 is tip money and the meal always makes the $1000 a cheap tip. In fact, the $1000 could turn into the coffee in a high dollar restaurant.

----------
The only function of economic forecasting is to make astrology look respectable.---John Kenneth Galbraith
Geezerette
Posts: 14
Incept: 2011-08-22
Green
deep south Texas
Report This As A Bad Post Add To Your Ignored User List
For you non-covered poster(s)you might be eligible depending on your state. In Texas a citizen is by state law entitled to a 'one-time' temporary medicaid coverage. The term 'émergency' is the only qualification. All 'green carders' (legal aliens) are automatically medicaid-enrolled according to state law. The first federal law was actually included in the first constitutional amendent.The second federal law was Social Security, which actally became an 'entitlement' only in government terms. In correct terms Social Security is not an entitlement according to Supreme Court edict. Ergo, citizens are entitled to petition 'the government' and I would sign the petition if it also included an amendment to revise Social Security to a Roth-type making Roth an entitlement based only on Roth classification(meaning pre-tax dollars only.) Hint? Hint? To some you brilliant thinkers. who will be able critique both my fact-based and politically based opinions.
















































Reason: corrected placement??????
Abn0rmal
Posts: 9261
Incept: 2009-01-10
Green A True American Patriot!
Report This As A Bad Post Add To Your Ignored User List
This paper seems relevant. Imagine paying only a single day's wage for an entire year of medical care.
http://www.freenation.org/a/f12l3.html

Quote:
How Government Solved the Health Care Crisis

Medical Insurance that Worked — Until Government "Fixed" It

by Roderick T. Long

Today, we are constantly being told, the United States faces a health care crisis. Medical costs are too high, and health insurance is out of reach of the poor. The cause of this crisis is never made very clear, but the cure is obvious to nearly everybody: government must step in to solve the problem.

Eighty years ago, Americans were also told that their nation was facing a health care crisis. Then, however, the complaint was that medical costs were too low, and that health insurance was too accessible. But in that era, too, government stepped forward to solve the problem. And boy, did it solve it!

In the late 19th and early 20th centuries, one of the primary sources of health care and health insurance for the working poor in Britain, Australia, and the United States was the fraternal society. Fraternal societies (called "friendly societies" in Britain and Australia) were voluntary mutual-aid associations. Their descendants survive among us today in the form of the Shriners, Elks, Masons, and similar organizations, but these no longer play the central role in American life they formerly did. As recently as 1920, over one-quarter of all adult Americans were members of fraternal societies. (The figure was still higher in Britain and Australia.) Fraternal societies were particularly popular among blacks and immigrants. (Indeed, Teddy Roosevelt's famous attack on "hyphenated Americans" was motivated in part by hostility to the immigrants' fraternal societies; he and other Progressives sought to "Americanize" immigrants by making them dependent for support on the democratic state, rather than on their own independent ethnic communities.)

The principle behind the fraternal societies was simple. A group of working-class people would form an association (or join a local branch, or "lodge," of an existing association) and pay monthly fees into the association's treasury; individual members would then be able to draw on the pooled resources in time of need. The fraternal societies thus operated as a form of self-help insurance company.

Turn-of-the-century America offered a dizzying array of fraternal societies to choose from. Some catered to a particular ethnic or religious group; others did not. Many offered entertainment and social life to their members, or engaged in community service. Some "fraternal" societies were run entirely by and for women. The kinds of services from which members could choose often varied as well, though the most commonly offered were life insurance, disability insurance, and "lodge practice."

"Lodge practice" refers to an arrangement, reminiscent of today's HMOs, whereby a particular society or lodge would contract with a doctor to provide medical care to its members. The doctor received a regular salary on a retainer basis, rather than charging per item; members would pay a yearly fee and then call on the doctor's services as needed. If medical services were found unsatisfactory, the doctor would be penalized, and the contract might not be renewed. Lodge members reportedly enjoyed the degree of customer control this system afforded them. And the tendency to overuse the physician's services was kept in check by the fraternal society's own "self-policing"; lodge members who wanted to avoid future increases in premiums were motivated to make sure that their fellow members were not abusing the system.

Most remarkable was the low cost at which these medical services were provided. At the turn of the century, the average cost of "lodge practice" to an individual member was between one and two dollars a year. A day's wage would pay for a year's worth of medical care. By contrast, the average cost of medical service on the regular market was between one and two dollars per visit. Yet licensed physicians, particularly those who did not come from "big name" medical schools, competed vigorously for lodge contracts, perhaps because of the security they offered; and this competition continued to keep costs low.

The response of the medical establishment, both in America and in Britain, was one of outrage; the institution of lodge practice was denounced in harsh language and apocalyptic tones. Such low fees, many doctors charged, were bankrupting the medical profession. Moreover, many saw it as a blow to the dignity of the profession that trained physicians should be eagerly bidding for the chance to serve as the hirelings of lower-class tradesmen. It was particularly detestable that such uneducated and socially inferior people should be permitted to set fees for the physicians' services, or to sit in judgment on professionals to determine whether their services had been satisfactory. The government, they demanded, must do something.

And so it did. In Britain, the state put an end to the "evil" of lodge practice by bringing health care under political control. Physicians' fees would now be determined by panels of trained professionals (i.e., the physicians themselves) rather than by ignorant patients. State-financed medical care edged out lodge practice; those who were being forced to pay taxes for "free" health care whether they wanted it or not had little incentive to pay extra for health care through the fraternal societies, rather than using the government care they had already paid for.

In America, it took longer for the nation's health care system to be socialized, so the medical establishment had to achieve its ends more indirectly; but the essential result was the same. Medical societies like the AMA imposed sanctions on doctors who dared to sign lodge practice contracts. This might have been less effective if such medical societies had not had access to government power; but in fact, thanks to governmental grants of privilege, they controlled the medical licensure procedure, thus ensuring that those in their disfavor would be denied the right to practice medicine.

Such licensure laws also offered the medical establishment a less overt way of combating lodge practice. It was during this period that the AMA made the requirements for medical licensure far more strict than they had previously been. Their reason, they claimed, was to raise the quality of medical care. But the result was that the number of physicians fell, competition dwindled, and medical fees rose; the vast pool of physicians bidding for lodge practice contracts had been abolished. As with any market good, artifical restrictions on supply created higher prices — a particular hardship for the working-class members of fraternal societies.

The final death blow to lodge practice was struck by the fraternal societies themselves. The National Fraternal Congress — attempting, like the AMA, to reap the benefits of cartelization — lobbied for laws decreeing a legal minimum on the rates fraternal societies could charge. Unfortunately for the lobbyists, the lobbying effort was successful; the unintended consequence was that the minimum rates laws made the services of fraternal societies no longer competitive. Thus the National Fraternal Congress' lobbying efforts, rather than creating a formidable mutual-aid cartel, simply destroyed the fraternal societies' market niche — and with it the opportunity for low-cost health care for the working poor.

Why do we have a crisis in health care costs today? Because government "solved" the last one.
Geezerette
Posts: 14
Incept: 2011-08-22
Green
deep south Texas
Report This As A Bad Post Add To Your Ignored User List
P.S.

I think this is a correct addition to my above comment: The second federal law was the first(?)federal law to be non-constitutional--and that was the first(?)
time the 10th amendment(states' rights) was usurped--and that is still in effect?????????
Gamma
Posts: 5582
Incept: 2008-01-20
Gold
Northern CA
Report This As A Bad Post Add To Your Ignored User List
This topic is so huge, so encompassing...I see little or no difference between Gen's option #1 and #2. (Of course what "I see" is subject to the limits of what I can see, meaning, this is not meant ot be a statement of empirical impossibility)

There is no operators manual for the orderly shutdown of a giant, self-morphing-capable industry such as "healthcare". (nor is there one for banking) Nobody other than a few individuals like the Doc in OK will be able to afford to take the first move. My conclusion is that some form of chaotic collapse is inevitable. But such a collapse could well be worse than the disease. Isn't that the story of every embedded fraud in our society/system? Give us $787 billion or there'll be tanks in the streets and martial law.

----------
This stuff we're going through, this is nothing compared to the Middle Ages.
They told me if I voted for John McCain, an idiot would be a heartbeat away from the presidency. Sure enough...
Bertdilbert
Posts: 2662
Incept: 2008-12-22
Gold
CA
Report This As A Bad Post Add To Your Ignored User List
The practices that Karl is infuriated about are perfect for the system we live in.

The system we live in allows you to buy government. If the medical industry has bought and paid for the system, then they bought and paid for the system just like you can go into Walmart and buy a shirt. It is the American way.

----------
Dear Euroland: Relax, Germany has a plan for your money!

Political Capital Defined: We are out of money but will tax our citizens for whatever it takes to "SAVE" the Euro.
Bertdilbert
Posts: 2662
Incept: 2008-12-22
Gold
CA
Report This As A Bad Post Add To Your Ignored User List
Debtpie

Quote:
What is your solution for these salaries ?


Limited government

----------
Dear Euroland: Relax, Germany has a plan for your money!

Political Capital Defined: We are out of money but will tax our citizens for whatever it takes to "SAVE" the Euro.
Crzymorse
Posts: 1195
Incept: 2010-06-25

Maryland
Report This As A Bad Post Add To Your Ignored User List
Bertdilbert
Posts: 2662
Incept: 2008-12-22
Gold
CA
Report This As A Bad Post Add To Your Ignored User List
Quote:
The guy in the video didn't really like the question about "outcomes" citing better "outcomes" for unnecessary surgeries. WTF???


If you read between the lines of what he was saying... He implied that there are a lot of unnecessary surgeries performed by the medical industry. By that implication, he is saying that he does not engage in this practice and comparing outcomes of necessary verses necessary with unnecessary thrown in will skew the statistics.

There may be other factors that would skew a outcomes comparison. The fact that people paying cash up front may wait longer than someone having insurance and thus the operation when placed in their hands maybe proportionately greater than average. Such as, how far is your hernia sticking out before you decide to part with cold hard cash out of your pocket? Obviously that could have a significant impact on outcomes.

----------
Dear Euroland: Relax, Germany has a plan for your money!

Political Capital Defined: We are out of money but will tax our citizens for whatever it takes to "SAVE" the Euro.
Jaws
Posts: 1093
Incept: 2008-01-21
Green
Report This As A Bad Post Add To Your Ignored User List
How Government Solved the Health Care Crisis!



How Government Solved the Health Care Crisis

Medical Insurance that Worked — Until Government "Fixed" It

by Roderick T. Long
(to table of contents of FNF archives)

Today, we are constantly being told, the United States faces a health care crisis. Medical costs are too high, and health insurance is out of reach of the poor. The cause of this crisis is never made very clear, but the cure is obvious to nearly everybody: government must step in to solve the problem.

Eighty years ago, Americans were also told that their nation was facing a health care crisis. Then, however, the complaint was that medical costs were too low, and that health insurance was too accessible. But in that era, too, government stepped forward to solve the problem. And boy, did it solve it!

In the late 19th and early 20th centuries, one of the primary sources of health care and health insurance for the working poor in Britain, Australia, and the United States was the fraternal society. Fraternal societies (called "friendly societies" in Britain and Australia) were voluntary mutual-aid associations. Their descendants survive among us today in the form of the Shriners, Elks, Masons, and similar organizations, but these no longer play the central role in American life they formerly did. As recently as 1920, over one-quarter of all adult Americans were members of fraternal societies. (The figure was still higher in Britain and Australia.) Fraternal societies were particularly popular among blacks and immigrants. (Indeed, Teddy Roosevelt's famous attack on "hyphenated Americans" was motivated in part by hostility to the immigrants' fraternal societies; he and other Progressives sought to "Americanize" immigrants by making them dependent for support on the democratic state, rather than on their own independent ethnic communities.)

The principle behind the fraternal societies was simple. A group of working-class people would form an association (or join a local branch, or "lodge," of an existing association) and pay monthly fees into the association's treasury; individual members would then be able to draw on the pooled resources in time of need. The fraternal societies thus operated as a form of self-help insurance company.

Turn-of-the-century America offered a dizzying array of fraternal societies to choose from. Some catered to a particular ethnic or religious group; others did not. Many offered entertainment and social life to their members, or engaged in community service. Some "fraternal" societies were run entirely by and for women. The kinds of services from which members could choose often varied as well, though the most commonly offered were life insurance, disability insurance, and "lodge practice."

"Lodge practice" refers to an arrangement, reminiscent of today's HMOs, whereby a particular society or lodge would contract with a doctor to provide medical care to its members. The doctor received a regular salary on a retainer basis, rather than charging per item; members would pay a yearly fee and then call on the doctor's services as needed. If medical services were found unsatisfactory, the doctor would be penalized, and the contract might not be renewed. Lodge members reportedly enjoyed the degree of customer control this system afforded them. And the tendency to overuse the physician's services was kept in check by the fraternal society's own "self-policing"; lodge members who wanted to avoid future increases in premiums were motivated to make sure that their fellow members were not abusing the system.

Most remarkable was the low cost at which these medical services were provided. At the turn of the century, the average cost of "lodge practice" to an individual member was between one and two dollars a year. A day's wage would pay for a year's worth of medical care. By contrast, the average cost of medical service on the regular market was between one and two dollars per visit. Yet licensed physicians, particularly those who did not come from "big name" medical schools, competed vigorously for lodge contracts, perhaps because of the security they offered; and this competition continued to keep costs low.

The response of the medical establishment, both in America and in Britain, was one of outrage; the institution of lodge practice was denounced in harsh language and apocalyptic tones. Such low fees, many doctors charged, were bankrupting the medical profession. Moreover, many saw it as a blow to the dignity of the profession that trained physicians should be eagerly bidding for the chance to serve as the hirelings of lower-class tradesmen. It was particularly detestable that such uneducated and socially inferior people should be permitted to set fees for the physicians' services, or to sit in judgment on professionals to determine whether their services had been satisfactory. The government, they demanded, must do something.

And so it did. In Britain, the state put an end to the "evil" of lodge practice by bringing health care under political control. Physicians' fees would now be determined by panels of trained professionals (i.e., the physicians themselves) rather than by ignorant patients. State-financed medical care edged out lodge practice; those who were being forced to pay taxes for "free" health care whether they wanted it or not had little incentive to pay extra for health care through the fraternal societies, rather than using the government care they had already paid for.

In America, it took longer for the nation's health care system to be socialized, so the medical establishment had to achieve its ends more indirectly; but the essential result was the same. Medical societies like the AMA imposed sanctions on doctors who dared to sign lodge practice contracts. This might have been less effective if such medical societies had not had access to government power; but in fact, thanks to governmental grants of privilege, they controlled the medical licensure procedure, thus ensuring that those in their disfavor would be denied the right to practice medicine.

Such licensure laws also offered the medical establishment a less overt way of combating lodge practice. It was during this period that the AMA made the requirements for medical licensure far more strict than they had previously been. Their reason, they claimed, was to raise the quality of medical care. But the result was that the number of physicians fell, competition dwindled, and medical fees rose; the vast pool of physicians bidding for lodge practice contracts had been abolished. As with any market good, artifical restrictions on supply created higher prices — a particular hardship for the working-class members of fraternal societies.

The final death blow to lodge practice was struck by the fraternal societies themselves. The National Fraternal Congress — attempting, like the AMA, to reap the benefits of cartelization — lobbied for laws decreeing a legal minimum on the rates fraternal societies could charge. Unfortunately for the lobbyists, the lobbying effort was successful; the unintended consequence was that the minimum rates laws made the services of fraternal societies no longer competitive. Thus the National Fraternal Congress' lobbying efforts, rather than creating a formidable mutual-aid cartel, simply destroyed the fraternal societies' market niche — and with it the opportunity for low-cost health care for the working poor.

Why do we have a crisis in health care costs today? Because government "solved" the last one. D



Bibliogaphy

David T. Beito. "The 'Lodge Practice Evil' Reconsidered: Medical Care Through Fraternal Societies, 1900-1930." (unpublished)

David T. Beito. "Mutual Aid for Social Welfare: The Case of American Fraternal Societies." Critical Review, Vol. 4, no. 4 (Fall 1990).

David Green. Reinventing Civil Society: The Rediscovery of Welfare Without Politics. Institute of Economic Affairs, London, 1993.

David Green. Working Class Patients and the Medical Establishment: Self-Help in Britain from the Mid-Nineteenth Century to 1948. St. Martin's Press, New York, 1985.

David Green & Lawrence Cromwell. Mutual Aid or Welfare State: Australia's Friendly Societies. Allen & Unwin, Sydney, 1984.

P. Gosden. The Friendly Societies in England, 1815-1875. Manchester University Press, Manchester, 1961.

P. Gosden. Self-Help: Voluntary Associations in the 19th Century. Batsford Press, London, 1973.

Albert Loan. "Institutional Bases of the Spontaneous Order: Surety and Assurance." Humane Studies Review, Vol. 7, no. 1, 1991/92.

Leslie Siddeley. "The Rise and Fall of Fraternal Insurance Organizations." Humane Studies Review, Vol. 7, no. 2, 1992.

S. David Young. The Rule of Experts: Occupational Licensing in America. Cato Institute, Washington, 1987.


----------
"Once the middle class opts out of earning large sums of taxable income and the debt-dependent"American Dream",then
the ailing dinosaurs(state and plutocracy)will Fiscally Implode" Charles Hugh Smith-book Survival+
Sean
Posts: 1766
Incept: 2009-04-21

Report This As A Bad Post Add To Your Ignored User List
Quote:
population grows exponentially, we just need more people being born


Well then I'd better get to some serious fornicating!

----------
* I think Ann Barnhardt is more and more right. God help us!
* Progressives / Marxists / Communists are many things, STUPID and IMPATIENT are not two of them.
* A hot civil war is coming.
* And people wonder why I prep!
A1a2pch
Posts: 14
Incept: 2012-06-15

Cape Coral, FL
Report This As A Bad Post Add To Your Ignored User List
My Dad was Baker Acted twice this year, and received a bill for over $100,000. This for shared room, some meds, "food", and "counseling" for less than 3 weeks cumulative. I don't know what the negotiated bill was, but it was 100% covered. Initially the coverage was denied because there was no pre-approval [how do you get that when the subject shoots up his house with family members in it on a Sunday morning and the police respond in 15 minutes?]

I have been unemployed for over 2 years, and have not had insurance for over 1. My Dad brought some nasty respatory illness back from the behavorial center which he gifted to me, I ended up in ER for an afternoon: the bill for Dr. consult and prescription of antibiotics was over $600. I still have too many assets for Medicaid, but have recently been accepted into VA coverage based on means test. There is a 5 week wait to get screened and seen by a doctor, which may be close to "Option #2".

The family doctor made housecalls in the early 60's and medical care was affordable from what I remember. The system morphed into a disgrace that gets me as steamed as Penn State does to someone we all know :)

If you are a veteran in distressed circumstances, contact VA. If you have any suggestions on how to bring the needed reform, post it. If you are Karl, please keep hammering on this. Thanks

Erbo
Posts: 120
Incept: 2010-06-10

Denver, CO
Report This As A Bad Post Add To Your Ignored User List
Here's something I've never been able to get straight...

Part of the problem with the medical system is the fact that drug manufacturers are forced to sell their products at cost overseas, and then they got laws passed that restrict the re-importation of such drugs. Karl's been very clear about this.

That is, let's say BigPharmaCo develops its new treatment for procrastination, Inaminutemomaphine, and plans to retail it for $(X + Y) per pill, where $X is their actual cost of production, and $Y reflects a reasonable amortization of their development costs over expected demand. The government of Elbonia is interested in using Inaminutemomaphine in their socialized medicine system...but they say, "We want you to sell it to us for $X, not $(X + Y). And, if you don't, we'll break your patents and make it ourselves." BigPharmaCo caves, and now, since people in Elbonia buy it for $X, they have to sell it in the U.S. for $(X + Z), where Z is much greater than Y, because it reflects the amortized costs of developing the drug across the demand only in the United States, not worldwide. And American consumers have to pay it, because of the law...and, if that law doesn't exist, Americans buy it from overseas, and BigPharmaCo, unable to recoup its development costs at all, goes out of business.

But suppose BigPharmaCo actually grew a pair, and told the Elbonians, "Nope, our price for this drug is $(X + Y). Take it or leave it." And suppose the Elbonians did break the patents, and started manufacturing their own version of Inaminutemomaphine locally. What recourse does BigPharmaCo have?

Could BigPharmaCo sue? Where? How is an American court going to enforce a judgement against Elbonia? And an Elbonian court is likely to say something like "It's for the CHIIIIIIIILDREN, we can't side with a greedy foreign company against the needs of our children!" and throw the suit out. What's left? Ask the U.S. government for trade sanctions against Elbonia? Unlikely, if Elbonia happens to be sitting on top of a lot of oil that they could cut off the supply of in retaliation. Complain to the WTO? The bleeding-heart liberals in the WTO would probably side with the Elbonians.

I really hope someone has a good answer for this, because if it's that easy for the Elbonian government to just walk all over BigPharmaCo's intellectual-property rights, then there's no real alternative to the strategy that the pharmaceutical companies, in cahoots with the Federal government, are employing now...the one that results in American consumers getting the royal shaft.

----------
"There is a ready solution for anyone on the public payroll who feels that he is not paid enough: He can resign and work for a living. This applies with equal force to Congressmen, Welfare 'clients,' school teachers, generals, garbage collectors, and judges." - Ira Johnson

Reason: wrong variable
Genesis
Posts: 130779
Incept: 2007-06-26
Admin A True American Patriot!
Report This As A Bad Post Add To Your Ignored User List
Quote:
I really hope someone has a good answer for this, because if it's that easy for the Elbonian government to just walk all over BigPharmaCo's intellectual-property rights, then there's no real alternative to the strategy that the pharmaceutical companies, in cahoots with the Federal government, are employing now...the one that results in American consumers getting the royal shaft.

Of course there is -- if the drug is not produced at all then the Elbonians don't get it either.

They are simply told that they either cut that **** out or nobody will get it, and it's not negotiable because we're not going to allow the cross-border subsidization to continue.

----------
I don't care if it makes sense -- only if it makes money. -- Me
Bank (n): See scam, fraud and theft. Eat a bankster -- they're low-carb.
What part of "shall not be infringed" was unclear?
Mo
Posts: 12158
Incept: 2007-06-26
Silver
Pa.
Report This As A Bad Post Add To Your Ignored User List
Bomb Elbonia and kill the procrastinators there.

Problem solved.

----------
Welcome to Pottersville
Bertdilbert
Posts: 2662
Incept: 2008-12-22
Gold
CA
Report This As A Bad Post Add To Your Ignored User List
If the treatment for the Elbonian Government is too expensive, then the treatment does not exist. A lesser drug of generic availability would be approved for treatment. Problem solved.

----------
Dear Euroland: Relax, Germany has a plan for your money!

Political Capital Defined: We are out of money but will tax our citizens for whatever it takes to "SAVE" the Euro.
Login Register Top Blog Top Blog Topics FAQ
Showing Page 1 of 2  First12Last