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Commentary on The Capital Markets
2016-11-29 07:41 by Karl Denninger
in Editorial , 518 references
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Price (Trump's pick for HHS, which I remind you oversees Medicare and Medicaid) has given zero indication that he has any intention of reforming any of the monopolist practices in the health care industry.

Price insisted that Republicans can keep the protections for those with existing medical conditions without mandating that all individuals carry coverage or pay a penalty to support an expanded insurance pool. Price said Republicans want to address "the real cost drivers" of health care price spikes, which he said were not necessarily sicker patients, but a heavy regulatory burden, taxes and lawsuits against medical professionals.

Not one word about monopolist pricing structures.  Not one word about CON laws.  Not one word about drugs that are 10, 20 or even 100x as expensive here as in other OECD nations and laws banning the arbitrage of those prices which would instantly collapse said price structure.  Not one word about a system that has expanded "administrators" at 5x the rate of care-givers, all of whom you pay for.  Not one word about a so-called "insurance" system that demands you pay continuing deductible amounts after the insured event happens should a calendar boundary be crossed, which is an out-and-out fraud.  Not one word about a refusal to post prices and presenting you with a document demanding that you accept any bill for anything done, with no cap and no binding estimate.  Not one word about charging different prices after the fact based on how you pay rather than what is done, which is not only improper it quite-arguably is felonious on its face as it constitutes a kickback (which are in many cases illegal and in all cases are taxable yet are not reported as such nor are the taxes paid.) Not one word about forcing you pay to correct errors made by the physician or, even worse, to treat infections and diseases contracted as a result of being in said hospital and inadequate sanitation.

Yes, lawsuits add cost. If you got rid of all of them you'd cut cost by.... a single-digit percentage. But, not all medically-related lawsuits are baseless or harmful; some are both reasonable and necessary. In other words while the issue of lawsuit abuse is real it's worthless and would do exactly nothing in terms of actually addressing the problem of medical cost -- and Price knows this.

Look to the right, click the topic entitled The CERTAIN Destruction of our Nation, and read it.

Then go get a drink.

Or three.

Or **** it, just drink the whole bottle.

The good news is that if you have no need for health care because several years ago when I started raising hell about this and writing about how you can change outcomes, and you did it, the "mandate" will almost-certainly disappear and you can stick up the middle finger and spend zero - for real.

The bad news is that if you do need health care you're going to be bankrupted, dead, or both unless you can manage to employ medical tourism. But for any given situation that might work and.... it might not.  If this becomes a matter of a chronic condition rather than something that is acute, and especially if it takes you out of the job market then you're flat-out hosed.

You might also want to contemplate, if the bad happens to you personally and you discover that your hourglass will run dry absent that which you can't afford or obtain whether you are afraid of consequences in an afterlife or not.

I'll leave the rest up to you to think about on your own because the fact is that as a nation it appears we are truly and completely ****ed.  Enjoy the next couple of years as we're now odds-on that they'll be the last good ones.

That's math, not politics.

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2016-11-28 00:00 by Karl Denninger
in Musings , 566 references
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So Bernie Sanders wants Trump to use defense contracts as a cudgel to force Carrier to keep its air conditioner assembly jobs in the United States?

"I call on Mr. Trump to make it clear to the CEO of United Technologies that if his firm wants to receive another defense contract from the taxpayers of this country, it must not move these plants to Mexico," the senator from Vermont said in a statement.

Why doesn't Sanders (or Trump for that matter) talk about what's really going on here?

The media has, accidentally.  They have pointed out that the cost of assembling air conditioners -- that is, manufacturing labor -- in Mexico is about $3/hour.  Incidentally it's probably not much more for assembling cars.

There are two options folks:

1. Make it uneconomic for companies to take such an action by causing the cost of labor there to reach effective parity with the cost herein which case the offshoring of labor will disappear

OR

2. Accept a $3/hour wage here in America as the labor rate to assemble air conditioners in Indiana.

The logic and math on this is pretty simple; if a company can have labor performed for $3/hour they will not pay $20/hour.  Nobody in their right mind will.  The problem is that you can always find a third-world ****hole where the rate of labor is $3/hour or less.

As such you either drag your wage rate down to that price or you make it uneconomic for companies to do this sort of thing.

The same is true for environmental laws.  It costs money to not dump your toxic waste into the water, air or on the land.  If you can place your factory in a location where such dumping is not illegal and does not lead you to go to prison then you will do so and thus the "cost" of producing that good or service appears to fall.

It did not, however, actually go down.  Instead the producer shifted the cost onto the people who live there in that environment without their consent.

The answer to both problems is, as I pointed out in Leverage,  to impose wage and environmental parity tariffs in an across-the-board fashion.  If the cost of labor in the United States is $20/hour and in Mexico it is $3/hour for comparable work then determine how many man-hours go into assembling an air conditioner, multiply by $17 and that's the tariff on said air conditioner.

If companies are in fact moving factories because it's "better" for their global supply chain or somesuch (which is the usual excuse) then this will not change their decision.  They will still put the factory there and pay the tariff, since it will not disadvantage them.

However, if the real reason is that they're exploiting the $3/hour wage then the factory will either not leave at all or will come back to the United States.

Do the same for environmental parity -- if the ability to pollute in location "A" .vs. not being able to pollute in the United States provides a "savings" of $100 million a year and the factory produces 1 million things in a year then the per-item tariff is $100.

This can easily be applied to steel, cars, computer chips -- or anything else.  Determining the value of such despoiling of the environment is not very difficult, since we know what it costs to prevent it here in the United States -- and we also know what sort of******of the land, air and water takes place "over there" on a top-to-bottom basis, including the production of energy (e.g. coal-fired power plants without scrubbers.)

Will Trump do this?  Probably not as I don't believe he really means a damn thing he said about it on the campaign trail, but he damn well should.

The usual argument is that if we do this then manufacturers will choose instead to build using robots.  Fine, let them.  That doesn't change a thing in terms of the calculations nor the business decision.  The environmental side still applies and if the assembly happens here but with robots then someone still has to build and maintain the robots and we'd prefer that to happen here, right?  Never mind that the labor rate to build the robots also goes into a wage parity tariff computation should a manufacturer choose to build "over there" with said robots!

In short the usual argument from various advocates of "offshoring" is that these choices are all about global supply chain management, not labor and environmental arbitrage.

I believe those claims are lies; the real choice is over 90% cost of labor reductions and billions of dollars of imputed costs to the people of a given region imposed by pollution that we do not allow here in the United States.

But the truth of my beliefs, or of the claims made by advocates of offshoring, is easily tested -- impose the tariffs and see what happens.  If the jobs keep leaving then I'm wrong but we still get the tax revenue from the tariffs and thus we can offset the social benefit costs of our lower-skill workers increasingly being left unemployed.

But if I'm right then the jobs come right back here -- we don't get the tariff revenue but we also don't need it for said social programs since instead of welfare we'll have jobs and people will be working for a living.

It's a win-win -- well, except for those in the business sector who are financially and environmentally raping people.

So what will it be, Mr. Trump?

Or, if you prefer and somewhat more to the point: What will you allow, America?

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The lieberal left is all over the news today since Castro has died.

Let's cut the crap, eh?

Mourn for a man who murdered on a mass-basis, including by firing squad?  **** that.

"Respect" a man who had zero compunction about shooting his political opponents?  Only his guns can be respected by anyone with an ounce of common sense, and since he's now dead and can't use them anymore, **** that again.

But let's have some cognitive dissonance along with our "news" today eh?  How about Saudi Arabia?  They stone you to death for any act of sodomy (as long as one of the participants is either Muslim or married) and have imprisoned, flogged and sentenced people to death for "apostasy."

Is this any better than Castro?  NO.

How about Qatar?  Any extramarital sex there if you're Muslim is good for the death penalty.

Oh there's more nations like that too, but those are a couple with which we actually maintain some sort of "relationship."  In the case of the former we also sell them a lot of weapons and buy a lot of their oil, never mind giving them carte blanche to engage in felony criminal conduct (15 USC Ch. 1 vis-a-vis OPEC) by specific exemption passed into law in the 1970s.

So before you simply blast the left (which they deserve) let's make sure we also blast the political right for their refusal to apply the same standards to a couple of nice little nations over in the Middle East.

As for Castro may he be eaten by snakes and burn in Hell, and I don't much care which comes first either.

PS: This applies to Trump too -- unless, of course, he keeps his promise on banning Saudi Oil imports and cuts them off militarily, along with telling Qatar to **** off.  I'll believe it when I see it.

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So which will it be?

I think it's "give the bird", although I'll suspend disbelief for a day in order to toss a bird on the grill before I flip a few toward Mordor located to the Northeast.

Without The Rule of Law there is absolutely no reason for anyone to hold any office in this nation in high regard, nor give the office or the person in it deference or any degree of respect.  That's true of the President, it's true of the FBI, it's true of the IRS, it's true of a state cop, it's true of every aspect of government from the highest to most-lowly.

Cooperate and volunteer?  No.  Engage in entrepreneurship?  No.  Innovate?  No.

Donald Trump was elected President in no small part because he promised to return The Rule of Law to America.  There is no place in this nation where the refusal to honor The Rule of Law has impacted people more than when it comes to Health Care.  Nearly one dollar in five spent in the economy and 37% of federal spending last fiscal year was consumed by it.

Yet at least half, almost certainly 80%, and perhaps as much as nine dollars in ten is "earned" by this segment of the economy under outrageously unlawful pretext and collusion.  In other words it's being stolen, not earned.

Collusion of any sort, when it is undertaken with the benefit of or intent to fix prices is illegal.  It has been illegal for more than 100 years.  It was made illegal in no small part because of the activities of Standard Oil, which undertook the same sort of outrageous actions in the context of fuels and led to the body of law embodied in 15 United States Code, Chapter 1.

Health care is not the only place where such practices run rampant.  They're present in the cellphone industry, where those devices not sold by carriers are often disadvantaged greatly compared against those on the shelf in the store.  Again, the impact is to reduce your choice and increase your cost.  It is found in cable TV boxes.  It is found in OPEC which controls oil prices (and which had a suit dismissed as a result of a foreign sovereign immunity claim -- a claim that came out of a 1976 law, but which in any event could not have applied to any non-foreign-government actor -- and there are many non-government oil companies.)  Indeed such violations are found all over the place and yet virtually none are ever prosecuted despite costing you, by a conservative estimate 20% or more of every dollar you earn.  Why aren't they prosecuted? The firms involved find it much cheaper to bribe (and, probably, blackmail) legislators, the Justice Department and the Executive than to play by the rules while you sit back and allow that to happen.

This issue is not confined to anti-trust although you can find blatant examples of collusive business behavior -- all illegal -- in myriad industries today.  The Rule of Law is why Hillary must be held accountable for her gross and intentional mismanagement of classified information.  Others have gone to and currently are in prison for the same violation but at a much smaller scale.

It is also why companies like Disney that have abused H1bs -- it is illegal to use them to depress wages and yet when you ask existing staff to train H1b replacements you are in fact documenting bad faith -- and thus the firm ought to be prosecuted and their executives jailed (along with ejecting all the H1b visa staff.)

And then there is Theranos.  Would someone mind telling me why Elizabeth Holmes and everyone else involved in that firm is not under indictment -- or already in prison -- right now?  Her company allegedly had technology that would have revolutionized blood tests of various sorts.  There was only one problem -- not only does it appear it doesn't work they deliberately covered up that fact and at the same time billed people for "tests" that were utter garbage -- which I remind you, might have easily compromised people's health or even put their lives at risk.  Rule of Law? Where?

If a law is inappropriate and should not exist then the solution to this is not to give one person a pass and imprison the next.  It is to repeal or modify the law.  There are myriad laws on the books that should not be, but that does not excuse letting a notorious and open violator walk.  If the law is to be declared invalid then everyone currently in prison must be released and their records, along with all previously convicted under same, must be expunged.

A law is either just or not.  It either should exist or it should not.  A law without a penalty is not a law, it is a suggestion.  The Federal Reserve wantonly and intentionally violated the law when it bought Fannie and Freddie paper, yet it did so without fear because there is no penalty clause associated with the "law" -- that is, there is no "or else."

If you cannot justify an "or else" then the law is in fact null since you can't do anything about someone violating it.  Remove it from the books, or add the necessary "or else."

If a law has an "or else" then it is either defensible (and a good law) or indefensible (and a bad law.)  If it is indefensible then repeal it.  If it is defensible then everyone who breaks it must face prosecution evenly, not at the whim of a bureaucracy.  We have courtrooms, judges and juries to determine the truth of a charge, not bureaucrats.

Donald Trump has in fact backed off virtually every promise he made during the campaign with regard to the Rule of Law.  Nowhere will it impact you sooner, and more firmly, than in regard to Health Care. There is less than one year available to resolve the cost problem before the Congress begins to run for election once again, at which point any laws dealing with the fallout from same will be impossible to pass and so will any additional legislation.

At that point our fate will be sealed. In four years on the present path and under present policies the federal government will be adding an additional $600 billion a year in deficit spending -- that is, in additional debt.

Worse, it will continue to escalate thereafter with Medicare and Medicaid threatening to consume $3.5 trillion a year within a decade.  This will not happen because it can't; the federal budget will collapse long before that, as attempting to do so would put close to $1.5 trillion of new debt on the balance sheet every year by that time.

So no, we should not give thanks -- not until and unless we see evidence that The Rule of Law is in fact returning to America.  That's what we were promised, that's what America voted for, from out-of-work coal miners to displaced factory workers all across the nation.

Until we get it there's no reason at all to give thanks but there sure is plenty of reason to give the bird, which I suggest as a worthy and well-earned substitute.

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2016-11-19 11:35 by Karl Denninger
in Health Reform , 2003 references
[Comments enabled]  

Recently I penned an article entitled Listen Carefully Folks.

It made quite clear what will happen if we do not address monopolists in Health Care -- all of them.

From hospitals, to doctors themselves to pharmaceutical companies to medical supply houses and even insurance -- all of them are filled with monopolists, and a monstrous percentage of what each of these firms and individuals do as it pertains to how charges are generated, billed and collected is a clear violation of 100+ year old federal law.

Let me remind you what that law says:

Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court.

Refuse to tell me what you're going to charge me before you perform a procedure?  You're restraining trade -- my ability to shop various providers before I commit to a procedure.  Go to prison.

Engage in conduct that prohibits or constrains someone from opening an MRI center near your existing one (thereby keeping that person from undercutting you on price)?  Go to prison.

Put together a "captive arrangement" so that I wind up having to pay $10 for an OTC Tylenol in your hospital, instead of paying ten cents for the same drug from the CVS literally next door to the hospital?  Go to prison.

Buy up (or consent to being bought) close-in practices so as to put doctors under salary and thus prohibit them from being able to negotiate prices with patients because it is now all under "central billing"?  That's restraining trade -- go to prison.

Obscure how you intend to and do bill so I can't possibly figure out that you're bilking me in this fashion, and even worse do it in collusion with damn near every other provider of similar services in the nation?  Go to prison.

Argue that none of this is interstate or international commerce?  Good luck -- where is the factory that made the drug, made the scalpel, made the colostomy bag?  Are any of them across a state line or national boundary?  GO TO PRISON.

Why has nobody gone to prison?  Because despite the clear evidence that these acts violate the law, and that's just the first section of the law (there are plenty more that are quite-clearly violated too, and that's before we get to the state-level consumer fraud and protection statutes) Washington DC is full of lobbyists that would go into anaphylactic shock should the mere mention of such an act come out of the Justice Department.  The same is true for lobbyists at the state level, which is why you don't hear State Attorneys General bringing consumer protection suits -- and criminal charges.

But what do voters want Trump to do?

Exactly this.

NEW YORK - Healthcare is the top issue Americans want Donald Trump to address during his first 100 days in the White House, according to a Reuters/Ipsos poll released on Thursday, reflecting apparent frustration over rising costs for prescription drugs and medical coverage.

Here's the problem that Trump has as President: Destroying the "everyone must be covered irrespective of existing conditions" mandate in Obamacare, or the "26 and under if in school or dependent" mandate will cause a massive voter revolt.

Let's say for the sake of argument that Trump doesn't care if the voters revolt (which I don't believe for one minute, by the way.)  He can't do it anyway, nor can The House.

You see when Obamacare was passed a supermajority Senate vote requirement for repeal was part of the bill and thus despite Ted Cruz's repeated spamming on Facebook and elsewhere demanding "Full Repeal Now" such a vote to repeal requires 60 votes in the Senate, not 51, to pass. Trump doesn't have 60 votes in the Senate.

What Trump (and Congress) can do with a simple majority due to the way budget reconciliation rules in the Senate are laid forth is to de-fund Obamacare -- stripping it of all budgetary spending authority.  Doing so, however, would leave the worst parts of the law intact (the mandate being one of the most-onerous) while destroying all of the subsidies and cost-sharing by zeroing the authority to spend money on them.  In other words it would take what is a "tolerable" law for many and turn it into an intolerable law for everyone impacted by it.

The only way to accomplish the goal of "repeal and replace", if there is any intent to accomplish that stated goal, is to make Obamacare -- and indeed virtually all health coverage unnecessary except for catastrophic, true insurance.

This can only be accomplished through a massive collapse in the cost of health care.

How massive?

80%+.

No, that's not impossible.  In fact it's not even slightly difficult.

Why is everyone worked up about "women's contraception" and demanding that "health insurance" provide it?  Because it's expensive.  Why is it expensive?  Birth control pills are off-patent and can be bought for cash in most of the world for well under $5/month.  In other words roughly a dime a day.  Who can't afford that?  Nobody!  Is there an argument here to be had?  Not really if we had a market economy in such things, because while you could choose an expensive option you could also walk into any pharmacy and buy an inexpensive option over the counter -- exactly as you can do in most of the world for less than the cost of a six-pack of beer or a couple of gallons of gasoline.

If you want to actually improve women's health and access to contraceptive products then get the damned monopolists out of it and if they won't stop put them all in prison.  Now no woman needs "insurance" for such a thing nor does she have to give up all sorts of private information to anyone -- all she needs to do is walk up to a pharmacy counter with $5 in cash, leaving exactly no record anywhere of her private, elective choice.

Let's take the other end of that (non) decision -- childbirth.  I have several copies of child birth bills from hospitals in the 1960s.  Inflating them by the CPI-U to today's dollars you should be able to have a normal childbirth in a hospital, with a several day stay, including the epidural and attending physician charges, for under $1,000.  Good luck attempting that; the actual charges today start at close to 10x that amount.  Why?  Monopolists.  Lock them all up and this problem disappears, along with the "need" for said "insurance."  Who can't come up with $1,000 to have a kid given nine months warning?  Almost-literally nobody.  To be sure there are a few exceptions but not many at that (realistic) price.

Let's say you discover you need a mastectomy.  How much will you be charged?  Who the hell knows, right?  Well, what if it was $6,500. It can be -- today, even with the supplies and other aspects (e.g. anesthesia drugs) being monopolist-provided!  Can you come up with, or finance, $6,500 if you need to save your life?  Probably, even if you're poor.  Hell, the average American household has nearly $16,000 in credit card debt!  You're telling me $6,500 is "beyond the ability of the average American" for a life-saving procedure?  Of course it's not but it's still overpriced by, probably, somewhere around a third.  If it was $4,000 then the argument would be even more-compelling.  The problem is that today you're probably going to face down a $30,000 bill for that procedure in most hospitals.  Why?  Because monopoly (and quite-arguably felony), that's why.

Cut the crap, Mr. President-Elect.  And cut the crap America.  This is the way forward.  It is the solution not only to the personal issues surrounding health care it is also the only way to prevent detonation of the Federal Budget inside of the next four to five years.

"Repealing Obamacare" is a non-starter -- unless you make it unnecessary first.  Then nobody will want it because nobody will need it, and it won't make any economic sense for anyone.  At the same time demand that insurance companies that want to sell "health insurance" sell actual insurance -- meaning that you pay a premium for coverage up until the covered event happens and then you stop paying and the company pays you because the risk you contracted for coverage against occurred.  That's exactly how it works in every other area, and we should insist that this is how it works in this area of the market as well.  But no, you can't buy fire insurance on a building that is already on fire.

Only by eliminating the monopolies -- and thus eliminating the screaming for coverage of buildings that are already on fire when it comes to health care -- can we accomplish this.

As a (beneficial) side effect we eliminate the federal deficit permanently, we eliminate state budget deficits permanently, we stabilize existing pension funds permanently and we enjoy a couple of percent improvement in purchasing power of money every year as the federal debt is paid down.

We do all that without raising a single tax anywhere.

If President-elect Trump is to not be an abject failure as President and in fact be the President who presides over the destruction of our nation's finances and economy this, above and before all else, must be what he does.  As the chief of the Executive he holds the power to do this even without Congressional help and indeed he can accomplish most of it even against attempted Congressional obstruction.

This is what the first 100 days must focus on like a laser.  If it is, Mr. President-Elect Trump, you will easily cement your legacy as the greatest President ever to serve the United States.

Yes, the challenge is that stark, the risks that high, and the potential reward that great.

There is no middle ground; there is only success or failure.

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