Wednesday, December 23, 2009

Health Care in Your Own Hands

As the year comes to a close, it seem inevitable that the current Senate Health Care bill will become legislation in some way, shape, or form. Sure, maybe it will be watered down without all of the goodies that the progressive left would like (i.e. public option), but everything in it will basically transform the health care "framework" into something we won't recognize.

Obviously, I've written several pieces laying out free market solutions that would achieve all of the items that plague our system. I won't re-write all of those opinions here, but I will say that no matter what the idiots in Washington do to our health delivery system, we still have the power to control our own destiny and our own health.

About 2 years ago, I really took a hard look at my health and felt rather frustrated with my body. I was not obese by any means, but I did feel unhealthy and uncomfortable inside my own skin. I am about 5'5" and weighed about 162lbs. Not skinny, but not fat. One day, something just snapped in me and said, "you can do better"... and I decided to change many of my habits. I started eating differently. I started running on my treadmill. I began doing resistance training with dumbbells and other exercise equipment (bands). Over the course of 3-4 months, I had lost close to 20lbs and weighed 140lbs. I had lost about a pound a week and I felt the best I had since high school. I had energy, stamina, and I was extremely lean. I also went in for a physical and got excellent results on all of my bio-metric results (cholesterol, triglycerides, blood pressure, etc). I basically felt like a million bucks.

I share all of these things because one of the best medicines and prescriptions to maintaining your own health care is to eat well, exercise, and do resistance training. Obviously, there are degrees to which one can measure how well you are doing, but the motivation must start within yourself and not be forced by anyone else. It makes absolute sense why we have a huge obesity problem in this country and why diabetes and other diseases are so widespread.

Now, I have no reason or motivation to point fingers at other who may not be in the best shape or who have no desire to make dramatic changes to how they eat or exercise. Everyone must make their own decision on how they want to live. I only raise these points as ways to not be dependent on anyone else for what you can control with your our own medical care with little or no cost to do it. There are so many cheap and easy ways to sustain a healthy life without having to go vegan, spend thousands of dollars on organic foods, or even sign up for rip off health insurance plans .

If we want to remove the stress and anxiety from what the charlatans in our government are doing, we should realize the power we hold deep within our being of the independence we have when take the initiative to chart our own courses in life.

We are sovereign individuals who can do anything we want when we put our minds to it. Let us never forget where that power comes from or where it resides. Do yourself a favor and start living your life today.

Wednesday, December 16, 2009

Health Care - Why Does It Cost So Much?

I'm curious to know what percentage of people who go to the emergency room do so because it is an actual emergency or because their liability to pay for said service in the emergency room is because some other entity is paying for it. What percentage of folks who use the emergency room are on Medicare, Medicaid, SCHIP, or some other State-sponsored health care (State's version of SCHIP)? I would think the percentage is pretty high.

Health care is a product/service just like any other consumable good (although it is somewhat inelastic since the doctor, nurse, surgeon requires a great deal of skill/education ). But the consumer hardly ever knows or is aware of the prices of what he/she is paying for when receiving a procedure. Thus, consumers have little if any incentive to shop around for the best value. When this happens, a distortion exists when calibrating supply and demand to allocate resources in the market.

Before the Great Society reforms (Medicare/Medicaid) and Health Maintenance act of 1973 (genesis of HMO style insurance) , patients used to pay their medical provider directly and providers had to be conscious of what they were charging to compete with other providers. Through these 2 reforms, the 3rd party payer (gov't/HMOs/Insurers) system transformed the free market of health care into a totally mixed market. One could argue that we have about a 50% single payer system with the gov't already deeply involved in dictating how care should be delivered.

But, instead of looking to the cause and affect through history and economics as our guide of learning how the free market has been totally distorted and has driven up costs... a majority of folks (namely in Washington) want MORE gov't control and distortion instead of less.

People should take responsibility for their health care and bear the sole responsibility of maintaining their care. They should be required to use the fruits of their labor to determine to what extent they are willing to pay for health care products and services just like individuals do for transportation, food, clothing, housing (which are far more essential goods than health care).

Catostrophic events do and will happen and life threatening disabilities, diseases, cancer, disorders, and other life-threatening things will affect people's health. But, that is where people should actually look for insurance to cover the unlikely or rare event instead of relying on it for every single element of ones health care.

It's really sad that our educational system is really deprived of applying the laws and science of economics and human action to the current debate of health care.

Hopefully what I've said will make people think more critically about health care when applying economics and history to this issue.

Tuesday, November 24, 2009

Health Care - A Free Market Economic Take

More thoughts I have on health care.

Disclaimer: I believe in a free-market capitalism and could give a crap about partisan politics. I do believe there is a role of gov't to uphold contract rights, private property rights, and upholding the right of the individual to their own life and their own liberty. With regards to "public goods" (roads, bridges, water, sanitation, energy, schools, defense, etc), I do think there are debatable things that the gov't can/should do versus what it was enumerated to do (but that is a separate debate). If that makes me whatever perjorative you want to label me, so be it.

I highly recommend that anyone who wants to have a serious discussion about the dynamics of the Health Care industry learn about how government interventions distort the free market and make things worse... not better (highly recommend reading Mises, Hazlitt, or Rothbard). A free market much allow prices to adjust to the supply and demand of the market as well as allow for the allocation of scarce resources to be set by consumer preferences. Anything else is a centrally planned market that will not meet the needs of the consumers (in this case "patients").

Now, we all know that Health Care is a relatively inelastic bundling of products and services since not everyone can be a Surgeon or Nurse or Doctor and there are only so many MRI machines in the world, etc. Each provider is not going to provide the same type of homogenous product/service since humans are different and sometimes curing the sick is an inexact science. You can't say, "I'll take one breast cancer protocol cure for $5000 please."... and expect it to come out with the same result every time for every patient. But, this is the same for other types of products like food, clothing, housing, transportation, etc. There are going to be services that cost more than others and a different amount of resource allocation based on the differentiation of the product/service. This is WHY we need to have prices for a market to work.

The major problem that we have with health care (and health care insurance) is that we do NOT have freely floating prices that consumers are aware of that they can make rational and reasoned purchasing decisions on about spending their health care dollars since a 3rd party payer assumes a large majority of the cost and risk. When I go for a check-up to the doctor, I don't ask him how much it will cost. When I get an X-Ray or MRI done, I don't ask what it costs or if it is absolutely necessary.... because I'm not paying for it... someone else is (gov't or insurer). But, when I crash my car into the ditch and want to repair it, I shop around for the best value for my dollars and/or most reputable repair shop depending on my insurance deductible/liability (and whether my car is a jalopi or not). Conversely, when i go to get an oil change, I can see how much it will cost and I know my insurance will not pay it as a part of my "benefits". The oil change guy asks me for all of these other services available to me (like transmission flush, tire rotation, windshield wiper replacements, etc). I can either choose to pay for those or not. It's my car and it's my choice and it is my dollars that I am spending with the fruits of my labor.

Because of this fact that prices are not used or even known to the end consumer, prices rarely if ever will fall to meet the supply/demand of the market. This is because weare always looking for someone else to pay for all of our care and we could care less if the cost of doing the service exceeds what the reimbursement will be by our insurance or gov't run insurer (medicaid, medicare, schip).

Here is the crux of the "mixed market" of health care. It is not a free market. It is a market where gov't has its hands deeply intertwined in the market. We have price controls (between insurers/gov't and providers for reimbursements). We have rationing (insurers/gov't dictating benefits and coverage). The supply of the providers (doctors, nurses, etc) are limited by the AMA and medical/nursing colleges through high barriers to entry (acceptance and limited resources for instructors). Health care is anything BUT a free market. Gov't controls close to 50% of the health care market. I would argue that it controls much more than that with all of the other things I've suggested.

Yet, we all think that gov't is the solution. Based on all of the things I know, the current health care legislation WILL lead to a virtual single payer style system ... no ifs ands or buts about it... we will have a pseudo single payer system. The public option is Medicare-for-all. The coverage will be guaranteed issue with a community rating. That is not insurance. That is an entitlement. They are not the same. Medicare is not insurance, although we all think it is. It is essentially a single payer system for the elderly. Medicare has proven to have billions is fraud and waste and does not live off of it's premiums (FICA taxes) and draws money from the general fund. It is bankrupt and we all know why that is. And, while the public option is a nightmare, virtually everything else in the health care bill is a nightmare.

Insurance (any for of it) is just a form of pricing risk. If an insurance company cannot adequately price risk, the premiums will never be high enough to cover the benefits for whatever you are insuring (life insurance, auto insurance, home owners insurance, etc). Just because you have insurance does not mean you are guaranteed unlimited benefits or services.

As for the anti-trust exemptions, they only exist today so that insurance companies can compare actuarial tables with each other to price risk pools. So, the anti-trust exemptions are for information sharing and not for collusion purposes. Otherwise, we'd have one insurance company per state, right? State mandates are the real culprit. Essentially they are the key barriers to entry that do not allow for greater competition from new entrants. And, they are the reason for the cartel-like reality that we have few choices in the individual health insurance markets. This is the reason why you see a crowding out of other competition and you have either oligopolies or duopolies in certain states like NY, NJ, etc BECAUSE of limited competition. The federal gov't is going carve out these barriers to entry for insurers only on a much larger scale at a federal level. So, you are going to have far fewer insurers who will become even bigger cartels. Or, they will simply close their businesses and their stocks will be worthless by not being able to compete with any form of the public option since it will have an implicit tax payer backing from the gov't and undercut the private sector insurance (like Medicare). Right now, there are 1300 insurance companies in the nation, yet you can only buy plans from a hand full of them.

Whether the public option is in there or not, the mandates and requirements that all insurance be guaranteed issue with a community rating will destroy health insurance companies over time since obviously many folks in Congress are on record to wanting a single payer system. If you don't believe me, maybe you should google Jacob Hacker from the Tides Foundation or any of the Congress/Senate/President's comments on their positions of a single payer. If people want to have a single payer, while I may disagree, folks should be honest about it instead of doing it through methods of behavioral economics.

Saying the public option is "optional" is like saying that seniors have an "option" to get Medicare. It's a gov't monopoly that does not need to make a profit (and never has for that matter) to keep the risk pool solvent.

Health Insurance should be like any other type of insurance product that is allowed to price risk and set premiums based on that risk. There should be high risk insurance and low risk insurance for health care consumers just like it exists for other insurance markets like car insurance. We don't charge the teen age driver who crashed her dad's Beamer 3 times last month and has 10 speeding tickets the same as a driver with a clean driving record. There unlimited ways to create insurance products that can meet the needs of the consumers based on pricing, competition, and an election of "optional" benefits that the consumer can chose between. If someone wants a "Cadilac" health insurance plan, so be it! I just know that the premiums are going to cost more than someone who wants a high deductible and assumes all of the risk out of pocket to pay for whatever medical needs he/she wants.

The best method to solve the health care model is to transform it back into a free market system that existed before the Great Society, HMOs, Medicare, Medicaid, et al. Most people don't realize it but people used to deal directly with their doctors for health care. My dad still has the check that his father paid the doctor with to deliver him.

And, if we are going to mandate everyone get Catostrophic Health Insurance, it should be done at the state level (like it is done for car insurance under the 10th Amendment). Or, if the federal gov't demands all citizens buy a product or good such as health insurance, it MUST require a Constitutional Amendment passed by at least 38 of the states just like Prohibition required it and was later repealed (18th and 21st Amendments respectively).

Obviously, all of what i'm saying will be heresy and tons of folks will post numerous fallacies on how gov't is good and a free market is bad. If you're willing to listen to these ideas I've shared and actually think outside of the box and forget a lot of what our society has baked into your head, maybe there is hope for you. Free-Market Capitalism (while obviously not perfect) with political, economic, and individual liberty while honoring private property and the rule of law is the best and most moral system the human race has ever known.

Sunday, November 8, 2009

Paul Krugman's call for a "WPA"... an intelligent idiot or a misguided buffoon?

I know that Paul Krugman is an intelligent person with wonderful credentials. Plus, I hear he writes for the New York Times! He's an uber-winner in my book! I mean, my God he went to MIT and he won the Nobel Prize for his work on Free Trade (as opposed to any ground braking economic theory). Let's not question the bona fides of Mr. Krugman's mental prowess or how great he is at scrabble. I bet he kills anyone with some sweet 24 point triple word score-like talent. I do, however, question the reason and logic behind his repeated fascination with flawed Keynesian economic/big government fetishes.

It amazes me that people dismiss the facts of history and do not acknowledge the failed FDRs policies (WPA, CCC, wage and price controls, etc) which perpetuated the depression. They failed and didn't work .... yet folks like Krugman seem to think they got us out of the depression as advocated in his recent column as the path towards sustained economic growth. I mean, who would argue that trillions of dollars of government spending would be quote "cost effective". Color me a cynic I guess because I am not buying it Paulie.

While I don't have a PH.D in economics, it would not be a revolutionary analysis for me to point out that stealing money from private citizens through taxes to pay folks to dig ditches and then fill them back in would be a sane policy for our country to build wealth and create economic growth. The government is not a wealth producer. It is a wealth re-distributor. The private sector and free market are the best places to allocate resources, labor, and capital to make us a more productive society and fill the needs and wants of its citizens given limited and scarce resources. There is no way for a central planning government to recognize better than the market how best to meet the demand and supply of the market given freely floating prices and changes in preference to the consumers.

The facts I've just described are things Krugman either does not want to acknowledge or is too misguided to accept. The free market is a mutating creature that evolves constantly to adapt to human nature and the elements that drive it. While I am not an anarchist, government's role should be limited to the enforcement of our common law, provide a mechanism for commerce and free trade to flourish, execute on its limited and enumerated powers given in Article I Section 8 of the U.S. Constitution, and provide for our national defense to keep us free (as opposed to keeping us safe). It should not be the driver for creating jobs since it has no capital of its own. God knows that someone like Krugman will never advocate this so it's my duty to take up the torch and pass on this knowledge to those who will listen.

Paul Krugman... if you do by chance happen to read this, check out an oldie by Henry Hazlitt, Economics in One Lesson, since that MIT education might as well be a diploma from Disneyland based on your grasp of economic logic. There is still hope for you my friend.

Friday, October 2, 2009

The Falling Dollar and the Slumping Economy

It's clear to me that with the ever growing spending, borrowing, and printing of money by the federal government and the Federal Reserve's monetary nymphomania, dark times seem inevitable in the economy as well as the value of the dollar. We as a country have zero savings domestically and are basically have been running a phony economy built on out of control spending for quite sometime. There is no way that we can keep this up for very much longer even though it seems we've done it for eternity. I'm going to say it now that I believe we will have to go through some type of a very tough, deep, and long recession to put our country back towards a path to prosperity.

Citizens are now starting to wake up to the fact (while others refuse to realize) that we half to accept a retraction in our standard of living and liquidate all of the malinvestment we have in our economy. It saddens me deeply to say this because the eggheads in Washington are the few minority of folks that will never come to accept the coming collapse of the dollar and the possibility of the "double dip".

Here are the reasons why I feel this will happen:

1) The Chinese, Japanese, and Saudi's ARE slowing down the amount of long term debt (U.S. T-Bill Notes) they buy from us. And, while they do own a good chunk of our debt (close to $2T dollars), they are looking at ways to slowly divest those holdings and convert them to gold or other more stable investments.

2) The Federal Reserve policy being set by Bernanke makes no sense to me. He has continued to keep rates way too low for too long and seems to be doing exactly what Greenspan did during the early 2000s except Bernanke is doing it on a MUCH larger and deeper scale. The problem with the low interest rates being basically "price fixed" by the Fed is the whole genesis to creating a false "boom". When rates are set artificially low, they induce investments toward capital that may or may not be what the short and long term market would have you think. Austrian economists are chief experts on the "Austrian Business Cycle Theory". This is caused by the Fed setting interest rates instead of the free market of consumer and commercial lending facilities setting where they need to be. In addition to the low interest rates, Bernanke is using the money supply to buy up bad assets from an assortment of primary dealers (like Fannie Mae, Freddie Mac, JPMorgan Chase, Goldman Sachs, Bank of America, etc). The Fed's balance sheet now holds at least $2T worth of assets. The quality and amount of collateral for these assets cannot be determined since the Fed cannot disclose the assets that it holds since it likes it's secrecy....oops... I meant it's "independence".

3) The tax policy set by Barack Obama does not seem to be a beacon of hope for businesses to increase capital or look to expand it's businesses in a time when we need it to most. Instead of gutting government to free up money that can be redirected back into the private sector, we have the exact opposite. Now, we hear all about this wonderful "Stimulus" plan and how it is going to be so great. However, all of the money that funded the stimulus plan had to come from somewhere and it surely did. I mean, what could be better than having a helicopter dump money from the sky? Why doesn't every country just do that? What could be the downside to this? Well, maybe it relates to our Treasury Department issuing more debt this year than probably another other period in history. So, we have funded the stimulus with money and wealth that has not yet been created. We are borrowing from TOMORROW's future to fund TODAY's government. Obviously, any of this is deeply lacking in common sense.

In an nutshell, I've laid out just a small set of items here that do not manifest a rosey outlook. While, I'm not an economist, financial analyst, or political science hack of any kind, I do know when I can smell "bs" as they say. We are essentially being sold some snake oil and told it will all be okay. It will not. We're told that the government knows best and we can trust them. They don't and we should not. We're told that the stock market is up and it's all sunshine and lollipops going forward! The stock market is up and it's nice that we all think it will last. I hope it does, but it's hard to argue the facts that I've discussed. I don't see any lollipops.... do you?

Thursday, September 10, 2009

President on Health Care

After listening to President Obama speak for almost an hour on things he's said over and over and over for the past several months, I came away with the same questions in my head again that He failed to answer.

1) How do you increase the demand (insuring the uninsured), bring quality up, lower costs, maintain the current supply side (docs, nurses, hospitals, etc)? Don't these items all go in the opposite direction of decreasing costs?

2) How does our President expect to honestly pay for this program especially after the 10 year window the costs explode to close to $2T?

3) How can the President dismiss that there will be no rationing of care or decrease in quality to Medicare when it calls to cut some $600B funds from it? If this were simply fraud and abuse that they are going to remove, why isn't it being done today?

4) Why is it that the President cites "competition" and "choice" that consists of ONE that the gov't will control and regulate the benefits/costs? All of the new federal mandates will trump the state mandates if not add to the layer of limited options. If we're talking about creating choice and competition, why doesn't the president use the intended interpretation of the interstate commerce clause and open up new insurance markets between the states and have them drop ALL of their state mandates.

5) Why doesn't the President either all tax employer provided health benefits and/or give employees the same tax benefit employers currently enjoy? If we want to untie employer based insurance coverage, wouldn't this make sense?

6) Why hasn't anyone in Congress discussed the popularity and success of high deductible - health savings account style plans that millions of people love?

One last question...what gov't program has the gov't run well that is not currently insolvent?

I don't understand why health care reform even has to cost a dime....let alone $900B.

These are common sense solutions I think most people would understand.


Monday, September 7, 2009

Economics - Keynesianism

With all of the economic news of the past year or so dating back to the 2008 downturn, there seemed to be a huge deal of focus on this debate of what caused the downturn and what should be done to put us on the right path.

Having taken both Microeconomics and Macroeconomics in college, I had a pretty basic knowledge of the theory behind many elements of economics. Clearly, Macro-econ teaching is heavily tied to the theory of John Meynard Keynes. Basically, his theory relates to the fact that gov't should step in and stimulate spending when the private sector contracts or shrinks to keep employment sustained which will lead the economy to recovery. In a nutshell, if we drop money from a helicopter into the economy, it will get the economy going again.

I argue that Keynes theories are flawed in several ways:

1) All of the money needs to come from somewhere and it can't just magically be grown on the infinite money tree. Before sending money INTO the economy and to workers, corporations, etc... it first has to take money FROM the economy. Gov't doesn't boost nation income, it only redistributes it. The notion of "aggregate demand" make assumptions that our gov't can and should be some sort of "central planner". In free market made up of individuals making their own decisions on how to be productive, build wealth, spend money, and make their own decisions ... how can a central planning board possibly know better than the market what ample demand should be at an "aggregate" level? The answer is that the gov't cannot know better than the market. Does my neighbor do a better job telling me how to spend my household money than I do?

2) When gov't continues to spend money on a given spending item, subsidy, or public works program, the receiver of that money becomes addicted to it and continually relies on it in perpituity. Take cash for clunkers for example. The central planning keynesians putting the progam together estimated the "aggregate demand" for the progam would last 3 months with $1B of resources alotted for it. The "aggregate demand" projection was undoubtedly wrong and it only lasted one week. Now, instead of looking at the mistaken allocation of funding and mis-diagnosed reading of demand, the gov't called the program a "success" and allocated an additional $2B to last to the original end date in Oct/Nov. The extention only lasted 2 additional weeks. This program while it stimulated demand did not make the receivers of the program any wealthier or more productive other than having received a federally subsidized rebate for the their shiny lawn mower with 4 windows.

Bottom line, we cannot expect the central planners in Washington to know how to allocate resources or know what type of "aggregate demand" is needed. That is for the market to decide. The Keynesian model is flawed in so many ways, but mostly because it relies on government intervention to facilitate a planned economy. Let free markets ring!