The 6 Pack Economist

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. 

In today’s America dual incomes are the norm.  But are they really worth it?  I am not going to look into the value that someone places on going out and earning an income but I am just going to look at it from the stand point of supply and demand.

 I believe that the first people that went out and began the dual income lifestyle were the only ones to truly see a bonus.  This is because they were able to take advantage of the market before it adjusted to the increased supply of labor.  When the two income household began to be the norm it increased the labor force.  And given supply and demand this would have decreased the price of this labor.  The market soon adjusted to this increased supply of labor and soon made dual incomes almost mandatory. 

 This of course was not all bad.  Sure one hours of work pre-dual income was not the same but it also brought down prices because it increased the amount of goods and services.  And I am not talking about the services offered at the Caesar’s of Atlantic city by the friendly women out of you league that talked to you.  They are usually single income households unless she lives with her pimp.  I am talking about the fact that there are more doctors, lawyers, factory workers, etc. that are in the workforce creating things you want or services you need.

 The one thing that I believe that did get out-of-whack was real estate.  This is primarly because no amount of extra labor can make more land.  Well it can but its very expensive and environmentalist don’t like filling in swamps.  The amount of land to put a house on has not increased but the money available for people to spend has.  So if there is more money going after the same amount of resources the price will increase.  And it has.

 I will speak about the other costs and bonuses of dual incomes from a day to day life in a later post.

If you are searching for some smut related material you are going to be sorely mistaken.  I am not going to be discussing about the actual act of getting laid.  Only getting to the bedroom, after that you are on your own (what perv searches blog posts looking for porn).

This insight came to be in a discussion about minimum wage.  I know minimum wage and sex how did they go together.   Well as a buddy and I were discussing the raising of minimum wage and the living wage laws, and we were drinking of course (see title of blog).  It came to me.  Why is a BMW different then a Ford, aside from actual driving dynamics, it is its exclusivity.  So why is exclusivity so important?  Because it shows the ability to gather resources and there by make a better life for your potential offspring and partner.  People like to hang with people that can make their life easier.  And in general people that have more money have the ability to make the life of those immediately around them easier. 

But here is the kicker to this whole thing.  Money or the amount that you have is relative.  A millionaire in a room of billionaires is the poor guy.  In more ancient times it was litarlly the size of your club.  And I am not speaking of the club between your legs.  The cave man that could swing the big club and kill the bigger animal or smash the guy who just worked hard killing the bigger animal had an advantage.  It really depends on your morale standard.  They could get more resources in this case food and there by those around them could have more to eat.  Being a little plump was at a time a sign that you were affluent now it’s just a sign you eat too many fries and quarter pounders. 

Ok now your fat and have a big club big deal what does it actually get you.  That’s right a mate.  We have evolved to search for things in our mates that are a sign of health and fertility.  Given our male dominated society this means that men who bring home lots of bank are more attractive.  Women with nice shapes (which depend on your taste, boob guys, butt guys, and leg guys) are a highly desired commodity.  Sorry ladies I am not trying to demean you.  But lets face it the hotties have a selection of men while the rest bitch and moan about blog posters. 

I previously stated that hotties have a selection of men, they begin their selection on some very superficial criteria.  Yes ladies you can be superficial too.  The guy you choose to end up marrying may be completely different from what you went for on first impressions, but getting past date one for those guys was a lot harder then most I am sure.  Just remember we are talking about generality’s here and not a case by case basis.  But lets be honest, a guy who takes you out on a date in a beat-up 80’s hatch-back is not nearly as impressive as the guy with the new Benz.  Why?  Simple a guy with access to the money for a Benz simply shows the ability to make you and your children better off and more likely to succeed. 

Now that we have established guys with cool stuff are better we must take in the relativity factor.  In high school, we students not in the 90210 zip code were moved to the top of the heap by just having a car.  (I did not have a car but I did have access to my parents van.  Yes I was the van guy in high school.  My buddies loved me, but it did not help me a whole lot.)  Having a car was a sign of some sort of success.  It was also and easy way for people to get together.  Of course after high school a car was not enough.  College brought on more competition.  Now you had to have a nice looking car.  You were not at the BMW, Lexus, or Benz level yet but a nice looking one of those cars was pretty useful but not a deal breaker.  After college the badge on the front of the car started to really matter.  So your level of success or access to resources depends on your competition. 

What the hell does this all have to do with minimum wage?  Simple if all you do is raise the last rung of the ladder nothing changes.  It is not about which rung on the ladder you are on or the height at which the ladder is at.  It’s about the height of everyone else on the ladder.  And chicks dig the guys at the top of the ladder.   

I see that the dollar is in a downward spiral again.  Which if you understand what money actually is seems completely rational.  We knock the interest rate to near nothing which will essentially put more dollars in the pool and with more dollars chasing the same amount of goods and services you have inflation.  This is what is happening with foreign currencies and the dollar now. 

I am not sure why the Euro is worth anything either as when was the last time you purchased an good or service (Amsterdam red light district excluded) from Europe that was not a super luxury item?  Volkswagen maybe but they are made in México usually. 

This brings me back to my point.  Money is merely a medium to allow an easily exchangeable representation of your good or service.  And when taken on a national level the goods or services you can purchase with the money of that nation.  If that was confusing let me give you a little story.

Tom works for a week at Widget Inc. USA for a week.  He earns 500 US dollars.  Tom then wins a free trip to some country in the EU.  Tom then takes his 500 US dollars and exchanges it for 370 Euros.  When Tom uses those Euros he should be able to buy things made by the Europeans in what he feels is equivalent to his week of work.  This does not mean that some European worked for a week to give Tom something specifically, it means that Tom agreed to an exchange of his week of work via the currency medium for some amount of some Europeans time. 

I will continue the discussion of worthless money in other posts.  And just remember that time is money.

There are no free lunches, just cheap food with a sales pitch.  Don’t be sad, this is just how the world works.  This is a good thing.  There is another cliché that goes along with this.  You get what you pay for.

But what about “love”, love takes time, and time is money.  I would also say that it takes money too.  How often do you stand in the street just staring at each other?  Not much, usually shared time involves getting dinner, seeing a movie, or taking a vacation.  All take time and money. 

I was watching the movie “The Beach” with Leonardo DiCaprio, which despite being a marketed as a chick flick, was rather good.  I know that I dismissed it when it came out eight years ago as just a movie for girls in love with Leonardo.  The movie focuses around a hidden paradise.  One of the striking things about the paradise enclave was that they still depended on the outside world.  To do this they sold Pot to the outside world to get various luxury items for themselves.  Even in this paradise they still needed an exchange of goods to survive. 

If you can’t get free stuff in paradise you ain’t getting nutten ‘ere either.

I am sure you had many some type of economics course and never had a good grasp of supply and demand, because most people do not. Unfortunately for you supply and demand controls almost everything in your life.

The reason that most people do not understand supply and demand is because the supply and demand curve is about price not supply or demand.  If the demand for something high but the supply is low the price is high.  If the demand for something is low and supply is high the price is low. 

If you want to see this action, go to a flea market.  Stop by in the morning and check the prices and the supply of what the vendors are selling.  Then stop by mid-day and see who has a lot of what ever they are selling and who has very little left to sell.  You will see those with a lot of stock left to sell, they will begin to lower the prices.  Why they don’t want to go home with the stuff.  They want to make money on it.  This is especially true if they do not have a new market to attend in the near future.

Ok that example was a little boring.  Here is a better example for you bar flies.  If you are at a bar and the ladies out number the guys say 2 to 1.  Or maybe you need 3 to 1 after all you have nothing better to do then read some guys blog.  In this case the supply of women has out stretched the demand (I know you may want two for the night but just be with happy with one).  This will immediately move your chances up.  As the night goes on people begin to adjust their standards (lower or raise their prices) till the final sale is made.  If an actual transaction of money took place you wasted a lot of time and should have spent more time on Craig’s List.

I hope this gave you a little help in understanding supply and demand.  But look forward to more on this in later series.