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2017-07-11 07:00 by Karl Denninger
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Here we go....

Were it not for the provision that Pat Toomey, the Pennsylvania Republican, put into the Senate's proposed health care reform, this legislation would be moderately important but hardly momentous. Toomey's provision, however, makes it this century's most significant domestic policy reform.

It required tenacity by Toomey to insert into the bill a gradually arriving, but meaningful, cap on the rate of growth of per-beneficiary Medicaid spending. It is requiring of Toomey and kindred spirits strenuous efforts to keep it there, which reveals the Republican Party's itch to slouch away from its uncomfortable but indispensable role as custodian of realism about arithmetic.

Well, no it doesn't and he isn't -- that is, being realistic about arithmetic.

The argument in this article is that the expansion in cost is all about "mission creep."  Nonsense.

The facts are that medical spending has gone from ~3-4% of GDP to nearly 20% and continues to accelerate.  This of course means that ultimately it would exceed 100%, which is impossible.

Unfortunately the choking off of economic vitality has already started to take place from this growth in expense and is now threatening to drive the nation into a permanent state of economic funk -- masked, for a short while, by alleged "gains" in health care spend.

You can see this now in the employment report.  The one sector that continually gains people at an astounding rate is health care.  Yet almost none of those people are actual health care providers -- that is, doctors and nurses.  They're all administrators and salespeople, which is great for them (they get a paycheck) but horrible for you (since you pay for it.)

Remember this fundamental truth: Services are all about passing money from one person to another; they actually make nothing.

This means that while you can be a "service-based" economy under those services must be the making of things -- goods!

If the entire economy is predicated on you pumping me full of drugs because I eat like a total jackass and drive my blood sugar and body weight to massive heights what do I produce in actual goods in the economy in order to earn the money to pay you with?  

The sad answer to that today is "damn little", and that's where it all comes apart.

There is a certain level of this activity that is both necessary and healthy.  The gal who cuts my hair every month keeps me from looking like Tarzan, which has tangible benefit.  The doctor who sets my broken leg -- likewise.  But what happens when the amount of money that I spend exceeds the amount of physical output I generate?

I now become a net negative impact to GDP.

Like...... here.

FORT LAUDERDALE, Fla. (AP) — Amy Bernard and her brother kept their mother out of a nursing home as long as they could, until Parkinson’s and dementia took their toll and she was seriously injured in a fall.

Bernard is happy with her mother’s nursing home care, but it comes at a steep price: $7,000 per month, an amount that would be way beyond the older woman’s means if not for Medicaid, which picks up $3,000 of the tab.

Don't take this the wrong way: I am not suggesting that these facilities are not needed in many cases, because they are.

But think about this folks: $84,000 a year?  What the ****?

Think about that one.  What sort of insane skim is going on in these places?  Let's say you have a floor with 20 double rooms, so 40 fairly-severely impaired people per floor.  You need two qualified nurses on-staff and present 24x7 per floor, so that's eight full-time equivalents (3 shifts plus weekend coverage is 4 people for 24x7, and yuou need two of them.)  You also need available on-call and on-staff during normal hours at least a couple of physicians.

Let's look at the numbers.  We have 8 people making somewhere between 50-75,000 a year -- let's call that a half-million in salary.  This is an annual burden of $12,500 per person in the place for full-time, 24x7 coverage with two said highly-capable people.   Now add to this the ordinary requirements of a two-in-one room residence (e.g. a reasonable long-term rate in a modest hotel, which is about what the furnishing levels look like in these places) along with food and you're around double that.  There's some balance here - the shower/tub/toilet is all "ADA compliant" of course, but that's not much more to install than standard fixtures (again, hotels do this all day long!)

Where the hell is the rest of the money going?

Remember that nursing homes are not "hospitals."  They're not "intensive care" or anything like it.  They have available trained medical assistance and intervention on a 24x7 basis but even for someone wit dementia we're not talking about an isolation ward environment -- or a jail!  It's essentially a place where you have shared access to a nursing staff if you need assistance at any given point time, along with some degree of supervision.  It removes the "leave your stove on by accident and burn down the house" risk, in short, along with light to moderate daily medical assistance.

But there's no way that sort of level of living assistance should cost $84,000 a year.  It does only because we have set up a medical system that skims off half or more of every dollar spent and has generated a crazy number of entities who now rabidly fight to protect their ability to steal.

This has to stop folks, and it will stop.

There is a good way for it to stop and a really bad way.  The really bad way is to do nothing about this politically. This fanged monster will continue to consume the economy until it forces GDP negative to a sufficient degree that state and federal budgets collapse.  This day is coming and soon -- my best guess is that we have less than five years remaining.  That same estimate I made in the 1990s, by the way, was only off by about three years -- and that's truly frightening, in that this means that not only I but many others have known for two decades not only what was going to happen but roughly when and yet nothing has been done politically about it.

The second, and good way, is to force into the light price and enforce all anti-trust laws.  This will bring the market into the game and costs will fall like a stone.  If there is one nursing home charging $84,000 a year and a second one that the long-term hotel converts and charges $20,000 how long does the first one remain in business unless it gets the skim out of its operation and dramatically reduces its operating costs?

This is not limited to nursing homes, of course -- it's everywhere in the medical system.  From routine diagnostics, to hospitals and even at your local doctor's office the skim is outrageous, it's aggressive and it's eating the nation alive.

We must stop it, and stop it now or will consume us economically.

To start with we can go right here, which would instantly end the "uninsured" extortion games.  Read to the bottom and click that link, and you'll find the rest of the answer as well. 

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For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.
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There is a lot to the whole Medicare/aid thing and how it relates to what Karl just said.

Two years ago I was caring for two dying family members. In some situations at some point it is no longer possible to make the person comfortable or meet their needs at home. Usually there is some sort of crisis building and with one person it was a turn for the worse, hospitalization for immediate needs, evaluation and future planing. Once it is determined that the condition is terminal and a home passing is not advisable, the nursing home is the next step. Here is where the BS in the system becomes apparent. Both patients were fully insured so there were no lingering medical bills, however the nursing home facility is a different thing. It is not covered by health insurance. No matter to me, monies were available to pay. Patients with no assets are fully covered by Medicaid.

A Karl described in his posts, there is no equal billing. For the same care, the bill for the "private payer" as nursing homes call people like me in my community is multiple times higher than the Medicaid rate. Additionally any providers such as the oxygen service (Yes, a separate company when they should have this in house. Vendor scams are multitude in health care. The place used to have their own oxygen system; the unused ports were on the wall.) bill at a higher rate. Additionally most require the private payer to pay a month ahead.

What usually happens is that a patient with assets is vetted by administration and the estate becomes liable after death. Hard assets are liquidated after liquid assets are depleted. Pension and social security are rerouted to the care facility. If the convalescence is to be long, the liquidation commences early, liens are placed. The primary residence is fair game at least in my state. If there is a spouse, the property has a lien placed until the other spouse passes. Of course the facilities employ attorney firms and real estate brokers to handle this and there is no shortage of graft and corruption here.

Families started playing a game big time starting in the 1980's of depleting, transferring and otherwise hiding assets from the care facilities, usually starting around age 75, sometimes earlier. The care facilities responded by strategically accepting patients. The mentality then became to leave a little money for them to get, sweeten the pot with the higher billing rate and then the patient converted to full Medicaid.

In the hospital and nursing system a crisis of Medicaid reimbursement occurred starting in the late nineties and became very heavy after the tech bust as a lot of portfolios of the institutions were damaged. Some nursing homes were once founded by communities who created endowments and everyone was a cash payer, a different time, gone forever. The conditions in all of them have deteriorated where you can see that the facilities are just getting old. Some have added assisted living as the most recent way of bringing in cash. A lot selectively pursue certain patients such as long term vent units as these are good Medicaid money makers.

What I believe occurred is that there was a real boom for these institutions, including hospitals in the late 1980's and early 1990's especially with the Medicaid money that started to be thrown around with the AIDS issue. It would amaze you what they were paying for with AIDS. Administrative bloat grew and grew and I have first and second hand knowledge of this. Pursuing medical facility admin became the new cushy job and I know many who really cleaned up here. It is very clean, unaccountable work. Medicaid did not keep up with the inflation of administration costs and vendor costs and they refused to contract this cost. So they blamed declining Medicaid reimbursements throughout the nineties and cut in areas of actual treatment, care and facility maintenance. Less nurses, nurse's aides (who do the majority of work), cleaning staff. The main local hospital in a borough of NYC actually allots linens and blankets on a two day basis, just below what they really need when the facility once had its own world class laundry service. Now they use a vendor. Face it patients are sick and things need to be changed more often.

This while not a single administrator was cut back, took a pay cut. The SOB's have done nothing but hire more for more money and increase their salaries. And I know this for a fact as there were community business leaders, me included, who had access to the numbers that never make it to the media. We were conducting endless postmortems on the hospital finances as volunteers. This place has had crisis after crisis starting in the mid 1990's. Yet the pseudo conservatives have a good time when they hear that the nurse's aids unionized to make the same money adjusted for inflation that they did in 1975. They are not the problem and honestly in my awful situations were really excellent workers to a person. Hey, those of us that busted our asses in life appreciate it in others.

The next time your loved one looses everything, you get hit with a miserable bill for services or whatever BS the healthcare system dishes out today, remember that level billing and price discovery are the solutions. I SAW the numbers. If we let the system clean itself out with accountability and bankruptcies we could actually pay the people who provide the care and take care of the facility more and hire more of them. Admin has to be curtailed as they will not curtail themselves. These admins also seed the debate as we now have a very large, concentrated and cohesive generation retiring. This generation is fearful perhaps rightfully so. The health admin class is using the meme of everyone wanting to cut the old people's care now and in the future to save money as a way of saving their cushy positions. They are also using the poor this way. The health admin class is in the position where they are perceived to speak authoritatively on the issue and thus are not subject to scrutiny. What I always do is tell people how much the doctors and other care workers actually make and how many admin staff there are and what they make and how their numbers have grown. It is very hard to push this as people do not relate to this aspect as it is not apparent. Remember Hillary in the early 1990's trying to socialize medicine. The debate was always about what the doctors were earning, not the admin or lawyers in the system or the vendors. This set the direction of the debate permanently and hides the real problem.

I disclose that I never worked in health care its admin, nor pursued a position in.

There are two ways to be rich: One is by acquiring much, and the other is by desiring little.
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The entire system front-to-back is shameful, and horrifying.

I will not let the system suck dry my family's assets. I am currently getting down to my high-school weight. I am early 40's and was never too far off - maybe 20 lbs, but it is time. Sad how many people don't know how key this one thing is to everything else.

And I have prepared my wife and kids that if the day comes when I am terminal for any reason, we will say our goodbyes with pain management only. It sickens me that we have somehow made it the "Christian" solution to prolong life at all costs. Hundreds of thousands of dollars for a few more months? No.

Me? If it comes down to it, I'll do a Chris McCandless "Into The Wild" kind of thing and walk off into the next life. No way I am going to put my family through hell so I can eat one more birthday cake. And NO WAY I am going to let the medical monster drain us to do so.
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To be fair, the nursing home thing isn't US-only. When my aunt went into one in the UK, I believe the cost was 1,000 pounds a week, which is about the same as charged here.

Basically, a large fraction of Britain's old farts are spending decades paying off a huge mortgage so they'll be able to sell the house when they're eighty and give the money to a nursing home. When, if they had no money of their own, the taxpayer would end up paying it instead.
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Toomey shoves his head up his ass daily in order to receive a brain transplant.
Try to talk to people about his crap and all you see are blank stares and hear the bromides regarding his performance. None of these people can do the math.

Because he supports ESOPs some people treat him as gold. What good does it to support him on one single policy when all the others are designed to rob you blind?

"Mass intelligence does not mean intelligent masses."
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Hope you don't mind me picking up on one small, but important bit, even though I agree with pretty much all of what you said.

Services: it took me a long time to work out how to make sense of them. For example, if you give some money to a street performer, the performance is gone but the money's still there. How to make sense of that?

Now I think of it this way. You give some of your net worth to the performer, because you preferred to have the entertainment than the ability to buy goods or services from someone else later. It reduces your net worth (you've given away money and all you have to show for it is a happy memory), but that's not necessarily a problem. You don't need to produce enough goods to make up the difference - you could just as well provide services to someone to restore your net worth. (You get some of their money, and you do something for them which they want e.g. mow their lawn.)

If you have a remote island with a population of two, it's fine for one person to do enough fishing for two, voluntarily exchanging half of their fish for the service of being entertained by the other's singing in the evening. In a large economy, as long as there are enough tangible goods produced by someone to meet everyone's needs, you can still have a vast services economy on top, and that can greatly enhance everyone's standard of living, including the producers of tangible goods. You can sometimes even use services to compensate for insufficient goods e.g. carrying someone's bags of compost for them if there aren't enough wheelbarrows. Of course, you can't always do this - if there isn't enough food to feed everyone, you can't provide services to compensate.
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About 9 years ago, my mother took a bad fall here in the house, and so we sent her to the hospital for observation. She had not broken any bones, but since she was almost blind, and had dementia, we wanted her looked after. The hospital suggested that she might benefit from physical therapy, and the best place for that here was the County Home. We had her admitted. She freaked, and refused to cooperate with the staff there in any way, and they tested her and found that her dementia had advanced to the point where she was a danger to herself.

My dad had been paying into an AARP insurance plan for many years, and he thought that nursing home care was covered by it, but it isn't. Medicare only covers nursing home care if the patient is making progress, and mom wasn't. So, it cost us about $73,000 to keep her there for about a year until her congestive heart failure took her life. The staff there was superb, and they took very good care of her, but we were no doubt subsidizing most of the other residents who were mostly on public aid.

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