The 6 Pack Economist

Apparently no body sent Jon Voight the memo about speaking out against Obama in hollywood.   Although some of the things Obama has been doing are not my favorite, most of it is politics as usual.  What will cause the civil war is this crap my Representative Eric Massa. “I will vote for it even if my constituents are against it”

I know that many politicians feel that the people that vote for them are ignorant morons but it is very rare and rather refreshing, if being hit the face with bucket shit is refreshing, for them to actually state it to their constituents faces.  As Massa states so clearly “I will vote adamantly against the interests of my district if I actually think what I am doing is going to be helpful.”  If we were talking about funding for a bridge that would be great for the district but wasteful, then he has a point.  But we are talking about riping the whole health-care industry apart and starting a new government entitlement program during a severe recession and increasing debt.

One last thing, Jon I will miss seeing you in movies and biting the occasional TV star.

p.s.  Jon Voight has not annouced his retirement as far as I know.  It is just satire.

The debate on health insurance reform has been pretty heated lately.  Much of it has been centered on a public option or no public option.  I don’t like the public option.  If this is not your first time reading my blog this should be no surprise.  But I do believe that government has a role in the nation’s health insurance or health care. 

In the following blog post I hope to address what is good about the current system. Explain what is bad about the current system. Finally I will explain my plan to change it without resorting to a public option.

In the United States if you have a good health insurance plan you get the best care in the world. If you need to see your personal doctor you can generally walk in that day.  Perhaps you need to see a specialist well maybe that will take a week. Perhaps you need a MRI, which takes a week at the most.  In comparison all of these tasks in many of the socialized medicine world would take much longer.  Statistics are readily available on the web from Canada’s and Britain’s own healthcare websites.

Canada: http://www.hc-sc.gc.ca/hcs-sss/qual/acces/wait-attente/index-eng.php

Some more: http://www.hrsrh.on.ca/PortalEn/tabid/859/Default.aspx

Britain: http://www.performance.doh.gov.uk/rtt/index.htm

and in english: http://www.guardian.co.uk/uk/2007/jun/07/politics.health

And England meets its goal: http://news.bbc.co.uk/2/hi/health/7966404.stm

So in the United States when you have good Health Insurance you are taken care of pretty well.  But the problems come in those who don’t have health insurance or those people that are impossible to insure.  The costs associated with these individuals are the problem.  It is not the profits that the insurance companies make that are causing the rising cost of insurance.  Even if the profits were paid back to the individuals most would be minimal reductions in premiums at best. 

Now let us talk about one solution to this problem.  We should take what works and keep that.  This is the traditional private insurance model, where premiums are pooled and costs taken from these pools.  Next we try to address the two primary reasons why the market is broken.  Those without insurance not paying for care and those that have such horrible health problems they are impossible to insure for premium that those individuals can afford. 

This is the point that government can step in.  The government can begin a plan as the catastrophic insurer, essentially taking over the costs of those who are too expensive to insure.  They would not do this directly but indirectly through the first party insurance company.  This is done on an individual basis, where the premiums paid by the individuals have been less than one third the cost of treatment over the past five years.  In other words, if an individual pays $3000 in premiums but their treatment is costing $10000 the government would pick up $1000(The numbers I chose are for simplicity and should be adjusted in any real world situation).  This solves a major problem which is the person who uses far more health resources then they have paid. They are still costing the insurance company more money then the premiums, but because it will only take two other people’s premiums to break even on this, rates will not have to be increased.

The second point at which the government can step in is regulating that all people in the country must purchase health insurance.  Those without health insurance will be penalized much like those without car insurance are today.  If you don’t have health insurance you will be reported to the proper authorities.  Maybe some type of subsidy can be provided but the market should be allowed to function.  And much like car insurance was very expensive it too will come down in price once competition and cost savings are implemented.

Now let us move on to what the private health insurance companies will have to give up.  Health Insurance companies must cover all non-cosmetic procedures, either pre-existing or not.  All people must be able to be covered and the difference between the highest premium and the lowest premium may not exceed a certain amount (or some other price capping mechanism, although the government stepping in as the catastrophic coverer should help with this).  This will eliminate those that can not buy insurance and everyone will be able to afford some type of insurance.  It may hurt for some but they will be able to purchase the insurance needed.

Some other miscellaneous things I would like to add to the debate. 

• Some form of tort reform is needed.  Loser pays is a nice option.  Also a cap on non-gross-negligence problems.  Nicking a blood vessel while doing all that is humanly possible, although tragic for those involved, should not award an ownership stake in the hospital, but cutting off the wrong leg should result in a hefty cash settlement.
• Keep the “health saving accounts” alive.  Allow people to put away a certain amount of money tax free that could go to health care related expenses.
• Move some medical school interns out of the hospital and into the doctor’s office.  These students could be cheaper alternatives for the run of the mill doctors visits.  A real doctor must be present in the office but let’s be honest how many times did the visit to the doctor’s office result in a prescription for an anti-biotic and some bed rest.  These could also be nurses with some additional training.  Or think of it as Doctor-Lite.
• Allow for both employer and self employed to purchase plans with pre-tax dollars. 
• Allow for people to form groups that can purchase insurance as a block and not as individuals
• Remove the State Restrictions from insurance sales.  Even this means the implementation of Federal Minimum Standards.  States could still come in to offer non-binding approvals.
• Finally an easy to read rating system would be very helpful.  Much of the problem of health insurance purchase it that there is too much lawyer speak and not enough easy to understand language. 

I want to end with one more observation.  The reason that such strides have been made in health care in the recent decades have been made is because of the money that can be made in the field. From the creation of the next Jack-Pot drug to a new surgical technique that revolutionizes the industry, most of these advances came about from people working long hours to become the leader in a particular market to make lots of money. 

As most of you know I am not a fan of government run healthcare.  The reasons of course are numerous.  Most of my reasons for opposing this have to do with the incompetence and corruption that government ventures bring like flies to shit. 

Simply being opposed to something is usually not enough for an argument.  Unless of course you believe the current situation is perfect.  I do not think the current situation is perfect but the alternative of increased government intervention will result in a worse situation.  Although a few additional people will have health insurance the vast majority will see their current coverage slowly die.  The reasons for this are multiple but most of the reasons have to do with the government run plan being subsidized by the tax revenue more and more till the private insurance companies cannot compete.

If we assume that the current plan is similar to a government run health insurance provider, similar to Aetna or United Healthcare.  The difference would be that, instead of being run for profit it would be run for the good of the people.  Those familiar with the term “good of the people” know that it means it will be thousands of jobs for the campaign workers of the winning party.  The most important difference although is not in how the theory of how the company is to be run, but by the sources of funding for the company.  While a private health insurance company is paid primarily by premiums paid by the policy holders, the public plan will be paid by a combination of “affordable premiums” and government taxes.

So far we outlined the future of the system under the current plan but what makes the current system so broken it needs such radical fixes?  There are a few pieces of the current system that are broken.  The first is the current price of insurance premiums.  Many people cannot buy health insurance because it is priced too high.  The reason for this is primarily that the person is trying to buy a policy just for their family.  While businesses have bulk policy leverage to bring the price down the individual does not.  The second problem with the current system is paying for coverage and not getting coverage.  This can range from “preexisting condition” to “uncovered procedure” problems.

I personally believe that when someone buys health insurance it should pay for all non-cosmetic issues a person should encounter.  How much of it the insurance covers can vary, but everything should be covered.  The counter to this is that a company simply cannot cover certain illnesses and still be in business.  So how do we fix this issue?  In this case I think the government can help.  I just don’t see any other way to solve this problem besides including the government. The government would simply have a catastrophic fund.  A person and the insurance company could register a person’s illness, be it cancer or another very expensive illness, at which point all treatments for this illness can be subsidized.  Other rules would of course be needed but the primary purpose of handling high risk cases would be handled.

 The other problem is of course with pricing.  The price of an individual family getting health insurance can be daunting.  The local corporation does not pay that price for its employee’s coverage.  Why? Because it is buying so much that it has leverage to bring the price down.  John and Jane Doe can’t do this.  To solve this problem, coops are the answer.  These coops would be non-profit and run by a small group of individuals.  The coops would charge a nominal membership fee that would be pay for the people negotiating the rates. 

The last problem is very simple to fix.  Although not outlined as a problem earlier it seems the simplest to fix.  All health insurance should be income tax deductible, both for the guy working for the corporation and the guy running a three person landscaping company.

The alternative to all this is a government insurance system that when it is run poorly it will simply ask for more funding from the tax base.  The private companies without this access to taxpayer’s piggy bank will slowly disappear.  Each one that disappears will put more pressure on the government system and more pressure on the tax base.  Because let us not forget that billions of tax income come from the people in the insurance industry.  Each one of the insurance companies that goes out of business means thousands of call center reps, secretaries, IT workers, and managers.  The great majority of these people are not different then me or you.  Although some executive loses his job and multi-million dollar salary, many more Joe Six-Packs are standing next to him at the unemployment line.

I wonder if I could possibly right? Could today’s healthcare system be replaced by some horrible public and private system cobbled together by a bunch of competing interests?  Or maybe it will be run like the DMV?

What fascinates the hell out of me is that some very smart people do not understand that not everyone can be rich.  Nor can everyone be poor either.  We are rich or we are poor based on the people around us.  Both Ted Rall and Cynthia Tucker do not understand how basic everyday economics work.

Although both are correct in criticizing the executive pay of these failing institutions, what they fail to recognize is aside from pulling back a little bit on the pay for CEO’s there will always be both wealthy, rich, poor, and a bunch of levels in the middle.  I also made a very conscience decision putting in both wealthy and rich as different levels. 

To the primary reason I wanted to post about tonight.  The amount of middle class people has not changed in percentage of the population.   The primary reason has nothing to do with economic policies or anything that complicated.  The middle class are the people who make more than the lower class but less than the rich.  The factory workers were never really middle class.  The manager at the plant was middle class and the diner owner was middle class.  Could the factory worker live comfortably with the two point five kids and a white picket fence?  Maybe it really depended on the supply of houses with white picket fences.  But that is my point.  What does the average person today have in comparison to thirty years ago?

Today the average household owns two cars (with reliability and features Mercedes Benz did not have), a HDTV in one or two rooms, air conditioning in almost every room, cell phones, cable TV with 100 plus channels, a computer with internet, some type of game system, and health care that those in the 1970s could only dream of (even if it’s expensive).   

Mean while in the 1970s when according to Cynthia Tucker all was great, the average American made car was complete junk, went 0-60 in 3.4 months, got about 15mpg, and were good for about 80K miles.  Air conditioning was something only the rich people in the neighborhood had.  A house might have two TVs only one worked.  Cable was something for rich people also, if they even had it all.  There were no cells phones.  Ok that last one is bonus.  The personal computer was just a series of blinking lights.  Geeks really were geeks.  The internet was for even bigger geeks.  And healthcare although cheap was abysmal by today’s standards. 

So where did all the productivity gains that the rich people ran away with go? It came back to the “poor people” in the form of better stuff for “poor people”.   One can argue that all the stuff is not worth it, but when it comes to economics the stuff and the services that people can have does matter.  Also if someone did not want the stuff they do not need to purchase the items.  

The second point I want to make is directly related to the statistic mentioned in Cynthia’s editorial.  I don’t think there is anything wrong with it.  I think it actually shows exactly what it should show.

A few years ago, Earl Wysong of Indiana University and two colleagues published a study on social mobility in this country. As outlined in the Economist, a right-leaning British news magazine, they “compared the incomes of 2,749 father-and-son pairs from 1979 to 1998 and found that few sons had moved up the class ladder. Nearly 70 percent of the sons in 1998 had remained at the same level or were doing worse than their fathers in 1979. The greatest social mobility occurred in those families already at the top of the income ladder,” the magazine reported.

So 70 percent of the study did not move up the income ladder?  No kidding.  Not everyone can move up the income ladder since they have to move past someone else and then that person would move down the income ladder.   I would bet the statistics would come out that 1/3 moved up, 1/3 stayed the same and 1/3 went down.  Also 66% is really close to “almost 70%”. 

The second part of the statement deals with that most of the social mobility was in the upper income brackets.  This too can be easily explained without it coming down to something evil republicans did by reducing taxes.  In 1979 a college degree was still a premium and those with them came from more affluent backgrounds.  While a high school education pre 1979 may have been good enough, after that is simply was not good enough.  One needed to have something besides a high school education.  So simply showing that those who were affluent made better gains was primarily because they had access to a college education and valued it earlier.  In addition it tends to the children of the rich that become the wealthy.  The grandchildren become drug addicts and home move porn stars.  So it sort of works out in the end.

Did some people become obscenely rich, while others were brushed to the wayside?  Yes.  Do I wish that people could live in a minimal of comfort even when they are on the lowest rungs of the economic ladder?  Yes.  And they do, but in comparison to the truly poor in this world they are doing pretty damn good, even if everyone else around them is doing better.

With all the discussions about the changes to the healthcare industry in the United States I figured I should put my two cents in.  Not  to mention with the way the dollars been going you’re better off using your pennies as projectiles thrown at the car in front of you that is too slow at the green light, then using them to actually purchase something.  Back to the point, which is how I see the new healthcare system shaping up. 

First and foremost I do not believe the private system is going anywhere.  Simply put there is far too much money in it.  In addition don’t forget that everyone with socialized medicine needs the USA’s private system for when things need to get done and it’s not an emergency situation.  Given that we are not going to get rid of the private system lets discuss the options.  The private system is there to make money.  Never forget that one fact.  The private insurance industry tries to insure people that it thinks will not cost them more then the premiums the people pay.   When someone has obvious aliments that will cost the insurance company more money than they can make in premiums it will not insure the person.  It is simply bad business.  I don’t blame them per say given that they are in the business to make money.

If a strictly government run system were to replace the current hodgepodge of private and public insurance with a strict government only system it will be a disaster.  The reason being is that the government run system will not start to fail till long after it was too late.  It will fail for the same reasons the rest of the government programs in this country eventually fail.  It will be run into the ground by a series of political appointees, unions, lobbyists and lawyers.  It will start off all well and good but in ten years it will start to show its strain.

Where does that leave us?  How can the two systems be combined to satisfy everyone?  Or at least long enough to function till artificial intelligences takes over our decision making for us all ( I for one welcome our future robot masters  and hope they enjoy my sarcastic humor).  I am usually a very pro-business kind of person and I am still pro-business when it comes to the healthcare industry, but something has to be done about the coverage given to high risk and those with prior conditions.  Those with high-risk conditions and/or prior conditions are almost impossible to insure and still be profitable.  The price to be paid would simply be too high for the person to pay.  What if the government plan would take care of this high risk pool? 

I am going to go out on a limb and say that the end result system will be something similar to the mortgage industry.  Purely private companies will handle the gravy of the healthcare industry.   This means that the industry will cover those they think will not actually need the healthcare.  After all they are betting that you will use less healthcare resources then you pay for each year.  The government program will then take care of the high risk people or at least handle the high risk portion of their care. 

The system will be able to leverage the existing infrastructure and allow for most the private insurance companies to slowly fade out of existence over the next twenty or so years.  This will primarily happen as each election will bring in a new politician who will promise to have the government funded system take on more and more of what was provided by the private companies.  The private insurance companies will react as most private business react, they will allow the government to keep nibbling at the services they offer, till one day before they know it, the private companies will have no use. 

I have one other way that this will go down too.  This is the more cynical approach but given the intelligence of those running the whole darn thing it seems just as likely to happen.  The politicians will create the healthy mae and pharma mac (HMPM) almost private not quite public either corporation.  But unlike the above mentioned scenario, HMPM will not be a retail service.  They instead will be a sort of re-insurer.  They will be the dump where the private insurance companies put the people they cannot make any money from.  In the first go round the system will work very well as common sense rules will apply.  HMPM will evaluate the people and do the right thing by taking only calculated risks.  But soon the pseudo private nature of the company will come through.

HMPM will have their CEOs make their bonuses not on the smart decision making of their auditors, the bonuses will be based on just how many people they “insure”.  The politicians will be paid a portion of the bonuses via campaign donations till soon every basket case the private insurance can find will be on the HMPM roles.  They will agree to insure them with sole express knowledge that they will dish the person off on HMPM. We all see where this going right?  The private companies will just dump and dump and dump till it all just collapses.  This should be just about in time for me to retire. 

This system should last long enough for either me to die or for our computers to treat like little pets.  Personally they way my dog spends her days are pretty damn good.  Sit down, lift a paw and get a treat.  I might even be able to do better than that.  With all this crap going on, smoking seems like a pretty good habit to pickup.  It could solve the social security problem.

I can’t think of better way to piss of the Europeans then to start universal health insurance in the United States.  I say why should we be paying for all the research and development costs of new procedures while they can just leach off of our hard earned money.  Not to mention all of the European firms that spend all that money on research and development of new drugs can save that money. 

The overpriced system in the United States allows for the socialized mendicene states to survive.  The new treatments are created so that they can be done in united states where they can charge and arm and a leg to fix your arm or leg.  Once the initial treatment is perfected and the initial investment is recouped the rest of the world can now benefit from it.  Pharmacutical companies will end up being the biggest losers in this new plan.  Primarly because the jackpot they get when they invent the next viagra will be eliminated.  But that also means that no one will invest to invent the next viagra. 

This brings me to one of my primary principles of life.  No risk no reward.  No reward no risk.  Talent will follow the money.  I can’t think of another cliche but you get he point.  The top researcher or two may do it for the love of the task but there are about another hundred people in the chain that are not doing their job for the love of it.  These include other researchers, book keepers, IT guys, janitors, and general managers.  Without these jobs being done the researchers can not do their job.  All of these other people want to get paid, because at the end of the day they want to take their money and do something or someone they enjoy.

So now that nobody can hit the jackpot by inventing the next great thing in medicine, the research and development will dryup.  Sure the charity money will still be their but the private money will slowly leave the market.  It will be replace by government research money which will be determined by the amount pictures showing hookers with the congressmen then the actual use of the end product.  Ironicly the amout of hookers and congressmen pictures is inversely proportional to the price of viagra.

Smokem if you got em.  Mind as well look cool

Deep inside the stimulus bill was a series of rules and regulations relating to healthcare records.  I highly suggest you read this link about the healthcare record system.  Did you read it yet?  Seriously just read the article. 

Ok now that you are back and hopefully you are scared.  If you are not scared then you did not read the article.  The stimulus package has essentially setup a great big database to keep track of your health records.  The basic idea is pretty noble.  Unfortunately it will not stay that way.

Let’s start off with the comedic result of this debacle since laughter is still not tracked. 

Heather recognizes her husband is having a heart-attack and calls 911.  Lucky for her she called during regular business hours so someone picked up.  Unfortunately she was directed to the non-heart related emergencies and had to call back.  When she called back it turned out that it was during a mandatory break period.  Heather gave up and dragged her husband into the back of the car.

Heather arrives at the Barney Frank memorial hospital but she cannot find a parking place.  She double parks and drags her husband to the emergency room.  With her husband in her arms she goes to the nurse’s station.  There are four people ahead of her.  Two have what looks like broken limbs of some sort, another has a bloody rag on his head, and one other is hacking away. 

After 10 minutes she moves to the front of the line to let the nurse know that this is an emergency.  The nurse responds that she is helping another patient.  But the nurse’s four inch long neon colored nails are preventing her from efficiently punching in the current patients name and address.  Heather drags her husband back to the end of the line again.

Forty minutes later she reaches the front of the line.  Shortly after explaining the symptoms her husband has the nurse tells Heather that she is in the wrong line.  The line for heart related emergencies is down the hall and to the left.  Heather exhausted by this point can barely explain the symptoms to the nurse at the heart related emergency counter.  Mid way through the explanation the nurse informs Heather that it is time for her break and walks away.  A new nurse sits down but the new nurse informs heather that she does not have the proper paper work for this emergency and proceeds to call a supervisor. 

The supervisor comes over to try and help out.  In between taking bites out of his ham and cheese sandwich he punches a few numbers into the computer and then allows heather to drag her husband to a bed. 

The doctor comes over to see her husband.  Heather believing her husband is only unconscious is relieved to see a doctor.  The doctor lifts up the husband’s wrist, pronounces him dead and walks out the room.   Heather in a fit rage screams at the doctor but he keeps walking away only the words “security please” are heard. 

Heather is thrown on the curb.  She is crying and gasping and sees her car is now being towed away.  In shock she has a heart-attack.   She is dead too.

Ok it is not that funny unless you have a dark, dry, and sarcastic humor like me.  In all seriousness I don’t think the system will break down like this quickly.  Instead it will take years for it to happen but gradually it will break down.  If you are one of the truly rich I would not worry as you will still be able to get care.  It is everyone else that will get screwed.