The Bill To Permanently Fix Health Care For All
The Market Ticker - Commentary on The Capital Markets
2017-03-30 09:57 by Karl Denninger
in Health Reform , 45158 references Ignore this thread
The Bill To Permanently Fix Health Care For All*
[Comments enabled]  

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:

  • All providers must post, in their offices and on a public web site without any requirement to sign in or otherwise identify oneself to access it, a full and complete price list which shall apply to every person.  This instantly allows customers to compare pricing between providers for services and products in the medical realm.

  • All customers must be billed for actual charges at the same price on a direct basis at the time the service or product is rendered to them.  This immediately and permanently decouples "insurance" from the provision of care.  The current system of an "explanation of benefits" that often features a "negotiated discount" of some 90% is nothing other than an extortion racket and is arguably felonious -- threatening to bankrupt someone if they don't buy your "insurance" through a threat to charge them ten times as much certainly appears to be a criminal enterprise and, given that more than one entity is involved, looks like it meets the definition of Racketeering.  Insurance coverage may well cover some, part or none of a given bill, and nothing prevents an insurer from telling you in advance of your visit how much they will pay (if anything) for a given procedure or drug.  Indeed you should demand that information from them and use it as part of choosing where to obtain treatment but the bill still has to be rendered to you, you have to be the one to file the claim and everyone must pay the same price to the same provider for the same kind and quantity of product or service.
  • For a bill to be valid and collectible it must be affirmatively consented to in writing, with a disclosure of the actual price to be charged from the above schedule for each item to be provided whether good or service, prior to the service being performed or the good furnished, subject only to the emergency exception below.  A bill that is increased, has items added to it after consent is obtained, which contains any open-ended promise to pay without an actual price listed for each service or good prior to customer consent or is issued with no consent at all (including having a customer sign a consent form while under the influence of drugs the facility gave them as occurs in virtually every instance today while you're being wheeled into the OR) is deemed fraudulent and void. This instantly stops "drive-by" doctor charges in hospitals as just one example.  It also prevents charging $20 for an aspirin; nobody would tolerate being billed by the square for toilet paper in a hotel!  Hospitals will of course squawk that they cannot operate like this as they "can't" figure out what is required until after-the-fact but that's false; nothing prevents them from advertising "Appendectomy: $2,000" and that being the soup-to-nuts price.  In fact that's exactly what the Surgery Center of Oklahoma does today so quite-clearly it both can and does work.  In addition this change will permanently and immediately put a stop to the ridiculous practice of defensive medicine (read below for the explanation.)  You would never accept a gas station that only displays the cost of your gasoline after you pumped it and varied that price based on who your car insurance was bought from or a grocery store that had no prices posted at all and only gave you a total after your groceries were taken out of the store and the transaction could not be refused.

  • No event caused by or a consequence of treatment can be billed to the customer.  This instantly aligns the interest of the customer in not having such an adverse complication (e.g. MRSA, etc) with the medical provider.  As it stands right now hospitals actually have an incentive for you to have a complication since they make more money if you do.  If you call me to fix your roof and I drop my ladder causing it to crash through your picture window I get to pay for the glass I broke through my ineptness.  The same must apply to medical providers.  For those who claim hospitals and similar can't adopt such a model I point to the OKC surgery center, which does exactly this -- and has a lower complication rate (gee, I wonder why when they have to eat it if they cause it....)

  • All true emergency patients, defined as those who are unable by medical circumstance to choose where their treatment is to take place and require immediate medical intervention to either stabilize their condition, prevent severe permanent impairment or death (e.g. transported by an ambulance, unconscious with no person with medical power of attorney at-hand, having a heart attack in the ER, etc) must receive the same price for the same service as a person who consents to said service.  For a bill to be valid for a true emergency documentation must be maintained and presented showing that the customer was unable, due to exigent circumstances at the time they presented to the provider, to provide consent prior to services being rendered.  Any medical provider who attempts to bill any service or product above that price to a person in exigent circumstances forfeits 100% of their invoice and is guilty of consumer fraud.  Note that this does not prohibit a hospital from having a published price list that charges more for services rendered through their Emergency department, those that are provided at 3:00 AM, etc. so long as those who walk in, are conscious and able to consent get the exact same price as someone who is unconscious and flat on a gurney.  If you demand that an A/C repairman or plumber come out now at 3:00 AM he most-certainly can charge you more than if you call and ask him to show up during normal business hours!

  • All medical records are the property of, and shall be delivered to, the customer at the time of service in human readable form (a PDF provided on common consumer computer media such as a "flash stick" shall comply with this requirement.)  Any coding or other symbols on said chart must include a key to same in English delivered at the same time.  No separate charge may be made for the provision of a contemporary record of a medical visit or treatment other than a reasonable charge for physical media if the customer does not have same with him or her.  The obvious way to do this is for the customer to bring a flash drive to which the human-readable chart is written.  If the customer doesn't have one the office can certainly maintain a small supply of $10 flash drives and charge the $10 to their bill.

  • All surgical providers of any sort must publish de-identified procedure counts and account for all complications and outcomes, updated no less often than monthly. Consumers must be able to shop not only on price, but also on outcomes.  Because outcome odds do vary with the seriousness of the presented case providers may classify severity as well provided it can be done in an objective way.  Complications must be broken down as to type (specifically identifying any that are not due to presentation but rather the facility via infection or error), severity of injury (including death) and additional time and/or drugs and procedures to resolve on a ratable scale commensurate with the original prognosis.

  • Auxiliary services (e.g. medical or dental Xrays, lab testing, etc) may not be required to be purchased at the point of use.  If you wish to buy your tests from the lab down the street (which also must post a price) that's up to you.  If you wish to have your bitewings taken at the imaging center across town, that's up to you.  The dentist or doctor cannot require that you buy those services from them; they must compete for them like everyone else.

  • All anti-trust and consumer protection laws shall be enforced against all medically-related firms and any claimed exemptions for health-related firms in relationship to same are hereby deemed void; for private actions all such violations proved up in court are entitled to treble damages plus a $50,000 statutory civil penalty per impacted person.  If the government won't bring these charges (and we know they won't since despite not one but two US Supreme Court cases here and here making clear anti-trust laws apply to medical providers of all stripes not one charge has been leveled against any of the medical firms) let's make it damn attractive for individual private suits by making the price of losing such a suit for a medical provider ruinously expensive (and lucrative for the attorneys bringing them!)

  • Any test or diagnostic that carries no exposure to drugs or radiation, nor is invasive beyond a blood draw, may be purchased without doctor order or prescription.  If you want an A1c or CBC you thus need nobody's permission to have one.  Same for an MRI.  For those tests and procedures in which exposure to drugs or radiation are involved, or are invasive (e.g. internal biopsies, etc) requiring some sort of chain of evidence of need due to that risk is reasonable.  But for most diagnostics this is demonstrably not true.  There is a clean argument to be made that for young, outwardly healthy adults a metabolic panel and CBC might actually be more useful in catching incipient serious disease than an annual physical which typically is nothing more than 5 minutes of observation and no checking of metabolic parameters beyond blood pressure and pulse rate!  The former can be had for $10 while the latter is often a $100+ charge.  Let the people and evidence show which is superior on a cost:benefit basis; after all it's my ass on the line from my decision not yours.

  • Wholesale drug pricing in the United States must be on a "most-favored nation" basis.  The impact of this would be to force a level price across all nations for drugs produced by any pharmaceutical company marketing both in the US and anywhere else in the world.  Violations, including attempts to "offshore" via subsidiaries to evade this requirement are deemed criminal and civil acts.  The civil penalty shall be 300% of the difference paid to the customer who got screwed, and another 300% for each instance of a prescription filled at an inflated price paid as a fine to the government.  This would drive drug prices down by at least half in the United States and for many drugs by 90% or more.  It would instantly and permanently end, for example, the practice of charging someone $100,000 for scorpion antivenom in Arizona when the same drug from the same company is $200 for the same quantity 40 miles to the south and across the Mexican border.  Since all prices must be posted at the retail consumer level for both goods and services controlling the drug pricing problem at a wholesale level is both simpler and sufficient since competition will already exist at the retail pharmacy level.

  • No government funded program or government billed invoice will be paid for medical treatment where a lifestyle change will provide a substantially equivalent or superior benefit that the customer refuses to implement.  The poster child for this is Type II diabetes, where cessation of eating carbohydrates and PUFA oils, with the exception of moderate amounts of whole green vegetables (such as broccoli) will immediately, in nearly all sufferers, return their blood sugar to near normal or normal levels.  The government currently spends about 25% of Medicare and Medicaid dollars on this one condition alone and virtually all of it is spent on people who can make this lifestyle change with that outcome but refuse.  If you're one of the few exceptions and it doesn't work in your case you have the burden of proof.  Nobody has the right to light their own house on fire on purpose and then claim FEMA benefits for same.  This one change alone will cut somewhere between $350 and $400 billion a year out of Federal Spending and, if implemented by private health plans as well, likely at least as much in the private sector.  That's more than three quarters of a trillion dollars a year that is literally flushed down the toilet due to people being pigheaded and refusing to do things that would not only save the money but also save their limbs, eyesight and ultimately their life.

  • Health insurance companies must sell true insurance to sell any health-related policy at all.  A true insurance policy is defined as one that (1) does not cover any condition you have received treatment for over the last 24 months (in other words, p != 1.0), (2) if an adverse event does occur your obligation to pay any further premium ends with regard to coverage for that event and all consequences thereof while the company is required to pay reasonable costs of treatment until and unless the condition has been resolved without limitation on the necessary amount or duration of said payments and (3) does cover, with a selection of deductibles available to the buyer, all accidental injuries and truly life-threatening emergency medical events.  Medical underwriting is permitted for such catastrophic policies but once undertaken is transferable to a new company without a new round of underwriting provided no interruption in coverage of more than 60 days occurs.  Such a policy may exclude intentional acts (e.g. acute drug overdose by other than non-consensual consumption), perhaps with an exclusionary period (such as that for suicide on life insurance.)  A common policy of this sort with the above reforms would cover things such as heart attack, cancer, liver failure by other than alcoholism, rare diseases and similar and would be very inexpensive.  For a young person of normal weight the cost of such a policy might be $100 a year.  For a 50 year old, maybe $300 a year.  If you're overweight or obese (or worse, have a high A1c) then it's going to be considerably more-expensive because your risk of heart attack, for example, would be much higher.  Ditto if you're a smoker.  To protect against fraudulent misconduct by insurance companies with regard to rescission of policies after an event, which used to be quite common, the only grounds for rescission is evidence that you actually underwent medical treatment for the condition that is medically proved as the underlying cause of the claim or fraud in the application (e.g. claiming to be a non-smoker when in fact you are.)  The two-year "no treatment" period balances sufficient protection against anything that (1) is degenerative and emergent and (2) would otherwise lead to a claimable event against the abuse of rescission against the possibility of a customer attempting to rip off the insurance company (and thus all the other policy holders) by buying a catastrophic policy after a serious event has become evident to them.

  • All health insurance providers selling true insurance, in whole or part, must provide within their "true insurance" the ability to "replace like with like."  This is the premise of insurance, subject to policy limits.  If you wreck your car you're not entitled to a new car, but rather either (1) repair of the one you wrecked to "as before the wreck" condition or (2) its current value in money.  To the extent reasonably possible health insurance for "true insurance" events (as above) must therefore cover the provision of services and goods to return "like for like" within the area where you are at the time the event occurs, or to where you are involuntarily transported in the event you are incapacitated.

  • Medicare becomes just another insurance provider.  There is no "special" Medicare-accepting doctor list; it is simply an insurance plan and one that does not pay for routine physician visits and similar but rather covers unexpected insurable expenses.  In other words Medicare Part "A" will continue as-is along with Part "D", but Medicare Part "B" will be deleted.  Since Medicare was sold to the public as an "80/20" plan (the customer bears 20% of the cost of care) this change represents no violation of that promise.  In addition Seniors can still buy "Medicare Advantage" plans should they wish that covers all medical costs (with possible deductibles and co-pays) as is currently the case.

  • Medicaid is repealed entirely. No, we're not leaving the poor out in the cold.  See the next point; the poor will in fact obtain better care than they have now as they will have full access to the entire body of physicians, hospitals and facilities.
  • For those who have no means to pay and find themselves with a need for medical attention the following provisions shall apply:
    1. EMTALA is hereby repealed.
    2. The provisions of this section, bearing on those who cannot pay for medical services, shall apply only to US Citizens and lawful permanent residents. This instantly puts a stop to the "uncompensated care" problem for illegals and the "come here pregnant and poop out a kid" expense issue as well.  No medical provider shall have any liability, whether civil or criminal, for their refusal to provide care for which they are unable to secure payment when furnished to other than lawful permanent residents or Citizens.  Other nations that wish to negotiate a billback provision for their citizens in order to insure that payment is secured may, of course, do so but under no circumstance shall a person who is not a citizen or permanent resident obligate any provider to provide services without payment, nor may they avail themselves of the backup payment provisions of this section, nor does any cause of action in favor of any person arise in equity or law for a provider's refusal to provide care to a person who is not a citizen or permanent resident without sufficient guarantee of payment for medical goods and services.
    3. For those with true emergencies (as defined above) and who are lawful permanent residents or citizens and thus can identify themselves as such but are unable to pay the treating hospital/ER shall bill the US Treasury for the lawful charges incurred under the above framework and shall be paid within 30 days.  All provisions of the above shall apply for what constitutes a lawful and payable bill and shall be provided to the customer at the time of service along with the fact that same has been forwarded to the US Treasury for payment.
    4. For those with non-emergency conditions who are (1) US Citizens or (2) lawful permanent residents and who assert they are unable to pay the medical provider shall bill the US Treasury for the lawful charges incurred under the above framework and shall be paid within 30 days with the provision that government billing shall not be available for any condition, drug, device or treatment for which a lifestyle modification that the consumer refuses to make will alleviate any or all of said expense and need for medical goods or services.  Again, all provisions of the above shall apply for what constitutes a lawful and payable bill and shall be provided to the customer at the time of the service being provided.  Treasury shall provide a means of rapid verification of citizenship or permanent resident status for the use of medical providers, with access to same restricted for this exclusive purpose so as to allow validation of such claims at the time of service (if we can have a background check call-in number for gun sales we can certainly verify citizenship status for those who claim to be indigent and in need of medical care!)
    5. Said charges under (3) and (4) will, when submitted to Treasury, result in an invoice being sent to the taxpayer in question and may be settled within 90 days of submission at no penalty.  This allows a person who temporarily cannot pay or who is misidentified as not having a means of payment (whether insurance-based or otherwise) to make payment directly to the US Treasury without risk of an adverse tax action.  If said bill(s) are not paid in full within 90 days then they become a tax lien subject to collection exclusively from any or all of (a) refundable tax credits, which may be garnished at up to 100%, (b) tax refunds, which may be garnished at up to 100%, (c) other entitlement checks excluding Social Security retirement which may be garnished at a rate of no more than 25% (e.g. social security disability, general assistance, etc) and (d) windfall amounts in cash or property that cumulatively exceed $10,000 in a rolling 12 month period from any source (e.g. inheritances, lottery winnings, gifts, etc.) that may be garnished for payment up to their full amount.  Statutory interest at 110% of the current 1-year Treasury bill rate, with the rate adjusted on the last business day of each calendar quarter, shall be applied on any remaining balance until paid in full. This will be vastly cheaper than Medicaid -- about 10% of what is spent today, in fact, and a good part of it will be recoverable over time.
    6. At death if a tax lien exists for unpaid medical bills it shall be treated as any other tax lien for the purpose of claim against the decedent's estate except that in the case of a married couple with a surviving spouse who's marriage pre-dates the medical expenses in question any such claim shall not be recoverable during the surviving spouse's remaining life but rather shall become a claim against said surviving spouse's estate at the time of their death.  Remarriage, creation of a trust or other estate-planning vehicle after the event(s) giving rise to the medical tax lien shall not modify or defray this liability and may not be used to shield the assets of the surviving spouse from an existing claim.
    7. Any provider of service that falsifies billing under this section, bills at inflated prices or otherwise violates the provisions of this law in regard to any bill submitted to the US Treasury for payment shall be deemed guilty of a criminal felony for which the punishment shall be the forfeiture of three times the billed amount and each individual who has caused such an invoice to be issued, transmitted or otherwise participated in same shall be subject to a fine of not less than $1,000 nor more than $10,000 and imprisonment of not less than 2 and not more than 5 years.  Each fraudulent invoice shall constitute a separate and distinct offense, all penalties shall be consecutive and additive, and liability for same shall be joint and several.
    8. Misrepresentation of citizenship or permanent resident status for the purpose of obtaining health care to be billed to the Treasury shall be deemed a criminal felony punishable by not less than one and no more than ten years imprisonment and a civil penalty of three times the amount of the charges incurred.  Upon conviction said individual shall also be immediately deported and suffer permanent exclusion from the United States; said penalties may not be decreased or waived irrespective of other circumstances.

  • ALL provisions of the PPACA and other public health related laws contrary to the above, whether in law, CFR, Internal Revenue Code or otherwise are declared contrary to public policy, void and unenforceable, and all State Laws and Regulations contrary to same are preempted, void and unenforceable since medical care inherently involves commodities that travel in interstate commerce and thus the sale of such goods and services fall under the Commerce Clause to the US Constitution.  Rather than go through and strike them all (which of course Congress could do) that one sentence will take care of it until the necessary clean-up can be performed on a chapter-by-chapter basis.  Yes, this means the taxes, mandates and similar -- all gone.

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!

 by tickerguy

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 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.

Go to responses (registration required to post)
 
Main Navigation
MUST-READ Selection:
A One-Sentence Bill To Force The Health-Care Issue

Full-Text Search & Archives
Archive Access

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.

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.

 
Comments.......
User: Not logged on
Login Register Top Blog Top Blog Topics FAQ
User Info The Bill To Permanently Fix Health Care For All in forum [Market-Ticker] Item is pinned to the top of the forum
Login Register Top Blog Top Blog Topics FAQ