The Market Ticker
Commentary on The Capital Markets- Category [Health Reform]

Yes, you're going to die.

We all will die.

We have some choice as to how and where, but not the final outcome.  That's known in advance.

We have heard for decades about how "terrible" this part of medical care this or that might be.  That administrative overhead has grown here, there, and everywhere.  That cost is going up due to this, that or whatever.

The latest screamfest is about MACRA and claims that it will "destroy" Medicare doctor choice.  Like so many claims before it this one centers on trying to get you buy into the idea that all these "great plans" are really about pushing Grandma, in a wheelchair, down the stairs -- or off the cliff, as Democrats have repeatedly charged.

But nobody wants to talk about the truth.

The truth is that technology drives productivity, and productivity drives down cost.  It does so every time that the market is allowed to work. It is why you can buy a $35 computer today, right now, that is the size of a credit card, can run your house, browse the web or do all sorts of things that a computer costing a million dollars 40 years ago could not.

Oh, and did I mention that it requires less electricity than one 25 watt light bulb, where the former model 40 years ago required industrial power (and the power bill to match) along with forced air conditioning under a raised floor lest it literally melt down from its own heat.

You'd think medical care is exempt from this, but that's only because you live here in the United States.

Let's just take one example.  MRIs have been revolutionary in many areas of medicine.  By allowing imaging of soft tissue that was formerly impossible, along with having zero radiological exposure (that is, no risk of causing cancer or other problems as with an X-ray, CT scan or similar) they have brought precise diagnosis of maladies that formerly were nothing more than a guess.

But.... here in the United States they're expensive.  If you have allegedly "good" health insurance you might not think so, but in fact they are.  An MRI scan costs from $1,000 to $3,000 or so in the United States, and whether you pay it out of pocket or it is billed to some "insurance company" and thus is hidden in cost from you, that's what they cost.

We have US companies that make the machines used for those scans.  We also have doctors trained to read them, which is inherently part of it.  And, to hear the medical folks talk, they tell you these machines are expensive, trained radiologists are expensive, and, well, that's what it costs.

They're lying, they're bilking you, and they all ought to be in prison.




See, there is this little nation called Japan.  Japan is also a first-world nation.  Japan also has firms that make MRI machines. Japan has doctors, including trained radiologists.  And in Japan, you can walk into a clinic and get your MRI done for somewhere between $100-160.  In cash.

In the 1980s, when the first MRIs for clinical use were approved and entered service, scans were expensive everywhere, including Japan.  But over the last 30 years the price there crashed, as happens whenever the advancement of technology and productivity intersects with the market and unlawful, felonious interference is absent.

But wait, we're told -- that 10x, 20x, 30x price here in the United States is reasonable and necessary.

Sure it is -- if you support being bilked, price-fixing, intentionally buying up competitors and either shutting them down or raising their prices, "affiliating" all the centers with hospitals (at even higher prices) and more.

And all of this, I remind you, is illegal.  Not "a little" illegal either: Felony illegal.

So says 15 USC Chapter 1.

Said law is more than 100 years old.  It bans, under felony criminal penalty and ruinous fines, any act that restraints trade, forms monopolies, price-fixes and similar.  Trusts in restraint of import trade (e.g. prescription drugs) are also illegal, albeit at a misdemeanor level (15 USC Ch 1, §8)

We keep asking the wrong questions, and we do it because the media and political parties intentionally ask the wrong questions so as to keep us from asking the right ones.

The right question is: "Why do we need a thing called 'insurance' that is not actually insurance, and why aren't those who sell an intentionally falsely-labeled product or service all rotting in prison?"

You see, insurance is a thing you buy to cover your expense if an unlikely but ruinous event happens.  Medical care in the general sense is not unlikely.  Cancer might be unlikely, but prescription meds, a checkup or treatment for an existing condition are not "unlikely"; they are not only likely in the case of something you already suffer from they're guaranteed!

You cannot buy insurance on your house if it is already on fire.

Why can you buy "insurance" on your medical state to treat diabetes if you are already diabetic?

And finally, if you buy insurance on your house, and it burns down, you never pay another nickel in premium (on that house) -- now the insurance company pays you.  But get sick and watch what happens -- not only must you keep paying but when your "annual insurance birthday" comes along the price can change, and so can the services, and you must pay whatever the new price is or they stop paying your already existing claim for the event that already happened.


I've been writing on this since The Market Ticker began publication and in fact have been advocating on this point since the 1990s when I ran my Internet company -- the trajectory, where it was headed, when it was going to happen and the outcome was easily projected even then.  The number of "mainstream media" folks who want to have myself or others who have brought this up with facts and figures on the air, and the number of serious political discussions or debates on the topic over those last 25+ years?


The real discussion, which nobody wants you to ask, is why that MRI is $1,000 instead of $98 like it is in Japan?  You see, the $98 you could pay out of your pocket, and in fact with most "insurance" the $1,000 MRI scan still costs you more than $98!

What does that mean?

Simple: If there was no medical scam in the first place you wouldn't need or want today's version of "medical insurance" and thus you would never buy it.  You would instead be able to and would pay in cash.

There would never have been a "need" for Obamacare, there would have never been an outcry over health insurance, Medicare and Medicaid would not be 37% of federal spending, there would be no federal budget deficit, most of the Federal Debt would not exist and in fact there would be a multi-hundred-billion a year budget surplus, your spending power would be going up by about 2% a year instead of down by 8+%there would be no impending pension crisis nor would cities have gone bankrupt and more.

What you might buy, and companies would offer, is true insurance.  But since the cost of treating things such as cancer would also come down in cost by 80%, 90% or more the cost of insurance against those unlikely but expensive events would be reasonable to purchase.  You'd probably pay a couple hundred bucks for it -- yearly -- which is affordable for basically everybody.  And it you got sick?  The company would pay to "fix" it and you would not need to pay any more for the actual insurance against the event that already happened.  You might choose to continue to pay for possible future illnesses or injuries -- or you might not.  But irrespective of that choice your treatment for the already-occurred event would be covered.

How does it happen in this country, if it is to ever happen?


Not new laws, not new regulations, not more hand-waving by Democrats, Republicans or anyone else.

Prosecution under laws that are over 100 years old, exist now, could have been enforced 30 years ago, 20 years ago, 10 years ago, 5 years ago, 2 years ago, 1 year ago, yesterday, today and tomorrow.

Laws that neither political party will enforce.

Laws that neither a Republican or Democrat White House, which I remind you is where the power to enforce laws rests (in the Executive) has ever in the history of this insane mess enforced.

Laws that no State Attorney General, despite there being laws on most state law books banning these practices as well, along with general consumer protection laws that prohibit deceptive practices (and performing a service without discussing price first certainly would fit that description) has ever enforced.

Laws that, I remind you, neither Trump or Hillary has spent one minute discussing in this Presidential Campaign despite it being within either of their power, if elected, to direct their Attorney General to investigate, bring to Grand Juries and prosecute the rampant, outrageous and clear violation of these laws.

Would there be losers if this was to happen?

There sure would.  Anyone who says otherwise is crazy.

There would be a lot of out-of-work lobbyists, for one.

There would be a material increase in the cost of prescription drugs in other nations because level pricing would force same.  But while their prices would go up, perhaps by a lot, ours would collapse by 70% or more.  Why?  It's arithmetic -- there are 330 million of us and about 1000 million in the OECD world of them, plus another ~300+ million in the "developing" world with a middle class or better income.  We've been paying their bill for decades and the day we stop there is one pool with level pricing for all. Assuming no change in total revenue their prices rise by quite a bit but ours collapse by 70% or more -- in many cases that drop would be 80-90%.

There would be an immediate recession, and a deep one at that, as Health Care went from 19% of the US economy (where it is today) back to about 4%, where it was 30-40 years ago.  However, at the same time that would increase business productivity tremendously, reallocate those funds to production, businesses would flock to the newly-competitive United States and ultimately, within a year or two, we'd win big on both productivity and GDP.   But make no mistake -- there would be losers, and in the short term there would be economic pain, especially for those in the health care sector today.  Indeed, if you're a health "administrator" I hope you can do something else, since your numbers have grown by over a factor of 30 in the last 40 years and none of those additional administrators would still have jobs.

If you have or develop a rare or "orphan" disease you might be screwed.  Let's not mince words on this -- there are certainly things we can do technologically but we cannot afford to do for everyone, or even nearly anyone.  While you will be able to buy insurance against those calamities many people will not, just as many do not buy flood insurance now despite it being cheap if you're in a "no special risk" zone.  If you get flooded without flood insurance, or get an orphan disease without having insurance against it, you're going to be screwed.  And?  Life is a series of risks, some of which you can control and some of which you cannot.  You can insure against whatever you wish but you must not be allowed to take your choices and make them someone else's obligation.  That is how we got to where we are now, in short, and if we fix this that will end.

What if we don't fix it?

Then we all -- this entire nation -- economically die within the next few years. Not at some point in the reasonably-distant future, and not just a possibility either.


That's the choice folks, and if you choose not to decide -- if you choose to remain silent -- you are choosing economic if not personal, and painful, death.

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2016-08-23 17:08 by Karl Denninger
in Health Reform , 1602 references

How many times will you hear crap coming out of your Tee Vee and various reps and senators before you drop everything you're doing, get off your ass, show up in DC and refuse to leave until everyone involved in this garbage goes to prison?

The EpiPen isn’t new; it has been in use since 1977. Research and development costs were recouped long ago. Nine years ago, it was bought by the pharmaceutical company Mylan, which then began to sell the device. When Mylan bought it, EpiPens cost about $57 each.

Few competitors existed, and for various reasons, that has remained the case. The device actually worked and saved lives. People needed it. Mylan raised the price. It also began to raise awareness.

"Raise the price" is sure a decent description... if you consider a 500% increase a "raise"...


No competition.

Or is there?

Yes, there is.  You can buy these over the counter virtually anywhere in Europe for about $20 each.  You can buy insulin over the counter in France for about the same price for a month's worth of supply.

And yet if you bring just one of either back over said border with you then you are breaking the law.  Bring a whole suitcase back and you're going to prison.

Yet if you did exactly that, were not put in prison and sold them, how many $600 (for a pack of two) pens would be sold in America?  Zero, because even if you charged $50 each (a $30, or 150% profit) you could make a hell of a business out of flying back and forth between any EU country and the United States doing exactly this.

How long would Mylan sell them for $300 each ($600 for a 2-pack) if you started doing this?  15 seconds, which is how long it would take them to figure out that they'd sell zero of them if they didn't drop the price back to about $50.

Now note very carefully that absent government force it is blatantly illegal under 15 USC, with a ten year per count felony prison term, to attempt to monopolize, restrain trade or price-fix.  Therefore it is only because of the explicit, intentional and outrageous conduct of your own government that you are getting raped like this on a literal daily basis, and this issue, as I've repeatedly pointed out is not limited to EpiPens -- in fact, Mylan has raised prices on dozens of off-patent, generic medications by about the same 500% in the last few years and the only reason they get away with any of it is the above use of government force.

Note that while the law may prohibit you from bringing said things back from Europe under penalty of imprisonment nowhere in that same law does it exempt the makers from 15 United States Code -- in other words, said law and regulation prohibiting your reimportation doesn't grant them an exemption to 15 USC prohibiting restraint of trade or pricing-fixing.  If that law were ever to be enforced those executives would still go to prison and their firms would still be bankrupted by ruinous fines, in short.

That is exactly where they, and all of Congress, damn well ought to be facing right here, right now.

If you want to know why medical care is so expensive and you need the fraud called "insurance", if you want to know why Obamacare was "sold" to people and is now going to collapse, if you want to know why Medicare and Medicaid were sold as "necessary" and yet continue to bankrupt the nation the answer is right here.

You are paying roughly five times what virtually everything ought to cost when it comes to medicine, and the reason you are paying it is because every firm and person in the business either is wantonly violating the law (and nobody ever gets indicted or goes to prison despite doing so) or even worse they've conspired with the government so they can enforce what is an otherwise-illegal act of restraint of trade under penalty of throwing your ass in jail instead of theirs and yet the're still quite-arguably violating the law themselves!

Let me know when you're ready to cut the crap, America, because until you do en-masse and descend on Washington DC to demand and enforce that this garbage stop right here and now, with every one of the co-conspirators drawing 20+ years of hard felony federal time along with each and every one of the involved firms being dismantled from the millions of dollars of fines per count, with each person harmed being a separate count, you deserve to be screwed, blued, tattooed and finally dead as you continue, each and every day, to give your consent to exactly that.

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Is that the sun I see this morning?

It might be.

Look folks, I don't trust Trump.  Then again I don't trust politicians generally, no matter who they are, simply because they have a proven record of lying and yet while their lies are never punished ours are turned into felonies whenever those they empower are asking the questions -- including themselves!

So here's the challenge before us: As I've pointed out repeatedly in these pages since 2009 when the health care debate came into the forefront of American politics, and turned into Obamacare, we have only two choices fiscally as a nation:

1. Enforce the law against hospitals, doctors, pharmaceutical firms and those running clinics and diagnostic centers.


2. Our nation will be fiscally and, in all probability politically destroyed.

This is not hyperbole.  It is arithmetic.

Anyone denying arithmetic is not only a fool they're both a tyrant and a thief.

To those who claim to be "conservative" yet who have failed to act on this matter for the last three decades: You're liars, thieves, tyrants and unfit to be citizens of this nation -- you most-certainly are not conservative.  Deliberately subverting the rule of law, whether done by action or intentional inaction, disqualifies you on all counts.

To those who claim to be "evangelicals" or "Christians" yet who have failed to act on this matter for the last three decades: You are not Christian; no person who is can permit the sort of ravenous theft and fraud that has driven the expansion of this racket to nearly a full 20% of our economy.  You are Satanists to an individual and that's a fact. Either repent here and now or own and be proud of your serpent behavior.

The laws in question are very clear.  15 USC (collectively), otherwise known as the Sherman, Clayton and Robinson-Patman acts declare that attempting to restrain trade or fix prices is felonious at a federal level.  Further laws at the state level typically declare that it is a criminal act to, through any means, deceive people as to the cost of a good or service or bill them at a rate exceeding that quoted without their affirmative and prior consent.

There are other laws that also bear on this matter, including laws prohibiting extortion (the obtaining of something, particularly money, through threats or force) which facially appear to be violated thousands of times on a daily basis by the medical and insurance industries. Then there are laws that prohibit discriminatory pricing; the usual means of getting around this is to claim that the "chargemaster" price is the actual price but that then turns the so-called "negotiated price" on your EOB from the insurance company into a kickback to the insurance firm which is also prohibited in many cases and in those where it's not that's taxable income to the insurance company as debt forgiveness yet they have never been prosecuted for the outrageous level of tax evasion -- to the tune of over a trillion dollars of undeclared and untaxed income a year -- that such a scheme involves.

Hillary Clinton, should she win the Presidency, will not only refuse to address this problem she'll make it worse.  We know this because she, along with her husband Bill, tried to cram down our throat what is now Obamacare when Bill was in office -- an attempt to take a set of facially unlawful acts by an industry and compel compliance through the use of government force.

Trump has hinted at dismantling this scheme, but he hasn't come out with a full-throated intent to do so.

He needs to, and he needs to do it now, explaining why it has to happen and what will come if we both do and don't take that path.

To be clear, doing it will not be painless.  There will be an industry that is turned on its head and, for a short time, a nasty recession.  We must accept this, because in doing so we will take roughly 15% of the cost structure out of not only your personal life but also that of every business in America.

This will not end drug R&D in the United States or anywhere else.  It will cause prices to go up elsewhere in the world, in some cases by a lot, but it will also cause them to come down here in America by as much as 85%.

It will render paying cash for medical care, even fairly complex care, practical for most Americans.  For those events where it is not it will turn the cost of insurance into a bill similar to that which is paid for homeowners insurance on a modest home -- a reasonable and routine expense, since with the cost of care coming down by 85% so will the cost of insurance similarly fall.

It will permanently resolve not only the Federal Deficit and, over 30 or so years, the entirety of the federal debt, it will also permanently resolve the financial problems our state and local governments face -- threats that if not addressed will cause property and other taxes to rise to unpayable levels for most Americans.

By replacing the federal deficit with a 30-year unbroken records of surpluses it will also take the current ~2% loss of real purchasing power that you have suffered every year for the last 30 and turn it into a 2% compounded annual gain over the same amount of time.  You may not get a raise but you don't need one when you are gaining 2% in real purchasing power each and every year; over 30 years this will almost double your real buying power without a single penny of increase in your wages.

And finally the dramatic reduction in business cost will mean that firms will flock to both manufacture here and run their offices and administrative functions in the United States, freed from what is currently certain fiscal disaster that any reasonably-competent CEO can and has foreseen and thus is trying, in today's business climate, to avoid.

Will Trump do any of the above?

Maybe.  Or maybe not.

But unlike the other candidates he has hinted at it, and he knows where the problem is, because he's lived with it through the 1990s forward, as have I.  As a former CEO myself this was the issue I identified while running MCSNet that was guaranteed to destroy my company financially given sufficient time if it was not addressed.

Competitive pressures are always present in any business; they're a function of the market and part of the job is navigating them.  Arithmetic is not something you can navigate; you must face it and, if you cannot convince the political powers that be to change the underlying facts that lead to these disasters you have no choice but to move as much of your operations as possible away from the jurisdictions where these disasters will take place, lest your company be destroyed.

We have a choice in this country and the time to choose is now.  In 2009 my best estimate was that we had 10 years left before the fiscal pressures reached the point of doing critical and possibly irreversible damage.

It is now 2016, and that means we have less than four years remaining.

We either act now or we fail to act at all, and our decision determines whether the light that I see this morning is in fact the dawn of a new and better day..... or an oncoming train.

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This is an interesting piece, but not because of the root numbers in it.

In 1940, entitlement payments, which include everything from disability payments to Social Security to Medicare, amounted to just over 20% of annual government spending in the United States.

Today, entitlement spending has swelled to nearly 70% of the annual federal budget.

Things are about to get a whole lot more complicated. The 20-year baby boom that took place after World War II is now beginning to result in a retiree boom.

For context, Druckenmiller points out that in 2030, the average age of an American citizen will be older than the average age of a resident of Florida today.

This demographic trend is going to create an entitlement spending catastrophe.

It doesn't have to, and the root of it isn't "entitlement spending", in the main.

Let's think this one through.

Social Security is funded by a "one in 8" tax, basically.  That is, about one dollar of every $8 you earn up to a given cap is confiscated before you ever see it.  You think it's half that, but it's not because the other half is paid "by your employer" and this fiction is maintained so you don't revolt.

However, your offered wage is reduced by that amount -- guaranteed.

So let's assume that we have a 2.5:1 ratio as is put forward.  That sounds horrifying, except that it's a temporary problem (it lasts 20 years, roughly), and then everyone involved in "causing" it is dead.  Further, there will be some that will "file late" for Social Security in an attempt to get more -- a strategy that only works if you live a very long time in terms of total funds, and lose their bet because they will die before the break-even is reached.  In fact, actuaries don't care if you make this bet because they know that on balance while some will win, some will also lose and it will all even out.

No, the problem here is not the "one in 7.5" tax for Social Security.  It is the one in 34 rate assessed for Medicare.

To put not too fine a point on it, Medicare and Medicaid (combined) are roughly double the outlay of Social Security and yet they are funded at a rate of less than 1/4 that of Social Security via taxation.

Further, Social Security outlays are indexed to alleged inflation, which is intentionally machined to show smaller than real figures, and thus there is a built in depression of Social Security obligations in real terms, especially over long (20, 30, 40+ year) timeframes.

Social Security itself is unlikely to go broke.  If it does "run out of money" 30 years hence there will be some reduction in benefits, but remember that even a 1% inflation "miss" against reality over 30 years turns into a 35% reduction in real expense.  In other words the "you'll only get 70% of your promised amounts" out of Social Security claims are probably dead wrong; you'll get the entire amount but it will be short in purchasing power by 30%.

The disability fund is another matter; that's bankrupt now and politicians have been stealing from the retirement fund for a while to cover it up.

On the other hand Medicare and Medicaid spending is going up at a radical rate compared to inflation, government-stated or not.  How bad is this?

Fiscal Year 2005, for example, spent a total of $652 billion.

Fiscal Year 2015 spent a total of $1,297 billion, or close to a clean double in 10 years.

This was not mostly-centered in Medicare -- that is, retirees.  Medicaid went from $182 billion to $349 billion, damn close to a double standing alone.  In other words it was across-the-board in all age groups served.

That's a 7.2% growth rate which far exceeds alleged inflation -- inflation allegedly was up 20% over the same 10 years, or an annual rate of about 1.8%.

In other words that segment of the economy as spent by the government went up at a rate four times that of general prices.

Need I remind you what happens any time two exponential growth curves have a different growth rate?  Go look at Leverage; there's a damn good reason that this is covered in the front of the book because if you don't understand and deal with it nothing else matters.

This, and only this, is the cause of all of the federal debt expansion, pension fund problems both private and public and the detonation that will occur in the federal budget and forward liabilities unless it is stopped and reversed.

Note carefully that we spend as a nation roughly double as a percentage of GDP what other developed, G20 nations spend on health care -- and virtually all of those other nations have socialized medical systems.

Socialism is always less-efficient than capitalism because there is no reward for innovation in a socialist system; you cannot take market share from someone else since market share is not a function of market success or failure.

This, in turn, means we're definitely overpaying by more than twice for medical care; we are in fact probably overpaying by as much as 80% across-the-board.

It is not hard at all to find examples of people being billed 10 or even 100x a price in another nation for a given thing.  It is cheaper for me to fly to Narita, Japan, round-trip, and have an MRI done there by more than 50% than the average amount charged for the same scan here in the United States.

While you can in some cases get that scan done for a few hundred bucks here they're all $200 or so in Japan, and most people grossly overpay here in the US.  Why?  Because of various practices that all amount to consumer deception, extortion, price-fixing or all of the above -- all acts that are supposed to be crimes.

Let's say you go to the ER "in-network" on your alleged health insurance.  While there some doctor sees you.  He isn't in your network and you get a bill for hundreds or thousands from him.  The hospital administrator should be imprisoned for allowing this along with the doctor who did it; you neither consented to such a bill nor in many cases had any ability to refuse, but the administrator could have required that said doctor be "in network" to be there or if not that he take the same reimbursement rate as if he was.  He didn't and thus they both took advantage of your "in extremis" situation to bilk you.  That's supposed to be illegal as a matter of general consumer protection yet not one person has gone to prison for it -- ever -- that I can find a record of.

Drug companies set prices by nation based on various things, including GDP and what they think their drug is "worth" in terms of your life or health.  It's illegal to restrain trade (15 USC, Sherman, Clayton and Robinson-Patman) yet that's exactly what they do, with the help of the Federal Government, in that if you get on a plane and buy a suitcase full of some drug at a much cheaper price to try to bring it back and both make a profit while dropping the cost here in the United States it is you rather than they who will go to prison.

It is virtually impossible to get a binding quote on a procedure from nearly all medical facilities in advance.  The notable exception are places like The Surgery Center of Oklahoma, which posts "all-in" prices.  I note that said prices are typically one third to one fifth of what is charged in hospitals that don't post prices, including hospitals in the same general area of the country.  Gee, I wonder why, and then one wonders why there haven't been thousands of criminal indictments and lawsuits alleging racketeering and extortion filed against the administrators and doctors in all the other hospitals.

Here's the reality folks, and it's a matter of arithmetic, not politics:

If we stop this right now the Federal Government would immediately and permanently run a roughly $400 billion a year surplus.  In other words your purchasing power would go up rather than down every year and the federal debt would slowly be retired at a rate of about a trillion dollars every three years.

In addition the "entitlement bomb" being discussed in the linked article would instantly and permanently disappear.  It simply would not exist; the short-term stress on Social Security would be manageable without material changes to the program due to the inherent understatement of inflation in the CPI used to link benefits and over the longer, indefinite time horizon the program remains stable.

Finally, were we to stop this keeping the Medicare impact on Seniors as it is today would allow Medicare to almost entirely disappear.  The reason is that Medicare is an 80/20 program; if the base cost of medical care decreases by 80% (and if we only equal the socialist nations it would fall by 50%; we can do better than that with capitalism) then exactly zero needs to be spent for the cost to an actual Senior to remain the same.  However, since we did promise such an 80/20 program keeping that promise is not an irrational act and thus some spending (about 1/8th to 1/5th of what it is now) would remain.  Likewise, Medicaid is currently basically-zero cost for beneficiaries; if the cost of care drops by the expected amount we might well be able to get rid of many of the beneficiaries entirely since they would be able to afford to pay cash.





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Let's update one of my Tickers from a few years ago.

We're going to use official government figures hereignoring, for now, the private sector.

The figures of note are the following (figures to the nearest billion), out of a total of $3,688 billion.

Military programs: $563 billion or 15%

Social Security Old Age: $741 billion or 20%

Social Security Disability: $146 billion or 4%

Medicare and Medicaid: $1,297 billion or 35% (Medicaid amounts to $350 billion granted to the States (no breakdown on what part is drugs), Medicare Part D (drugs) is $75 billion; the rest is clinical services for the most part -- hospitals, doctors and similar.  S-CHIP, the children's portion, is $9 billion (insignificant) and administrative expenses are about $14 billion total, which is damned efficient -- only 0.4%.  Incidentally I don't believe that figure, but even if it's three times as much it's still damned impressive.)

VA (Veterans Health) approximately $61 billion or 1.7%

SNAP - food stamps -- is $104 billion and is up from last year, despite so-called "improvements" in the job market.  TANF is a separate line item, $16 billion.  Together, 3.3%.

That's where the money goes.  Conflating Social Security and Medicare/Medicaid is the common horsecrap line run by both parties, but it's intentionally dishonest.  Disability is a fraud-riddled mess, but the "old age" part of Social Security is neither going to bankrupt the nation nor is it an immediate budgetary problem.

But the $1,297 billion in Medicare and Medicaid is.

Now let's look at what Trump is proposing against this.

Price transparency in the pharmaceutical area alone would be a monster.  Let's assume that of the $350 in Medicaid 10% is drugs.  That makes drugs a roughly $110 billion annual federal expense.

What happens if you ban the gouging that is done today across the entire medical industry?

Well, let's remember that Medicare is an 80/20 program.  That is, the government pays 80%, you pay 20%.  If you look at the cost of procedures at the Surgery Center of Oklahoma, which I have posted multiple times, you'll find that many of them are about 1/3rd to 1/5th the price of local hospitals.

In other words a very material percentage -- perhaps as much as 80% -- of Medicare's non-drug spending would disappear and your bill as a Senior would drop by the same amount.

That is, of the $872 billion spent now on non-drug services on Medicare, not Medicaid, and we manage only to cut the cost in half, which just takes us to where socialized medicine manages to get in other G8 nations, $436 billion of spending by the Federal Government would disappear each and every year.

In reality competitive markets outperform socialized ones in virtually every case where there are multiple and diverse providers of products and services.  As a result that 50% decrease is ridiculously conservative; I expect we'd achieve 70%, leaving us with just over $600 billion less in Federal spending every year.

Now take the drug side, which is $110 billion and presume that by leveling prices on an international basis (by ripping down the barriers) we also get a 50% savings there.  That's another $50 billion every year and again, that is probably conservative; the actual drop would likely be higher.

Now let's turn to Medicaid.  If we save half under the same approach, and do not drop any of the poor from the rolls (which we should be able to do for the same reason; some currently on Medicaid with this very large drop in price would be able to pay cash) we'd save another $157 billion.

We just generated $800 billion, or $8 trillion over the usual "10 year" period that is quoted, in spending cuts and not one person had one benefit they currently enjoy from the Federal Government touched in real terms.

What's even better is that we did it in one literal day starting on the first day rather than some mythical Unicorn-style belief of savings a decade hence (that have never materialized, incidentally) that the GOP typically puts out in their "budget projections."

It gets better.  The Federal Government, as noted, spent $1,300 billion last year on medical care (ex the VA.)  The economy as a whole spent about $3,420 billion; the other $2,100 billion or so was spent by the private sector.

These same ratios would apply to the private sector and thus you, as a consumer, would see an approximate 10% immediate and permanent increase in your real purchasing power because you would no longer be spending it on health care, either through "insurance" or directly.  If your "health insurance" is through your job you'd get that 10% in the form of a raise as the cost of said insurance to your employer would drop precipitously.

Even better, the benefit would skew wildly toward those in the lower income but insured income brackets (e.g. full-time middle-class workers) because the percentage of your pay that goes to health insurance is much higher than it is for someone who is making $300,000 a year.

Of course the medical, pharmaceutical and insurance industries will scream.  But there's really nothing to scream about; the claim of "charity care" is nonsense in a world where Obamacare and expanded Medicaid exists; you either have one or the other, right?  As for pharmaceutical companies if they charge $2,000 everywhere for Sovaldi or $1,000 in Pakistan and $80,000 here in the United States they make the same money; what they can't do any more, nor can other nations, is soak the United States, effectively forcing our citizens to fund 100% of the development costs for drugs they then get to use.

If you're middle class these changes would mean you would be able to pay cash for anything routine and normal, and catastrophic insurance against the unthinkable (e.g. cancer, etc) will now cost a tiny fraction, 10-20%, of what it does now.  That in turn means you can afford to buy it on the open (cross-state, in Trump's case) market so if Obamacare is repealed even the modest-income household can pay for said catastrophic coverage and cover the rest in cash.

Even having done so you will still be ahead on purchasing power by about 10% if you're in the middle class and quite-possibly materially more if you're in the lower income brackets and have a chronic illness.  If you're wealthy you'll see a benefit too, but on a percentage basis it will be quite a bit less.

And that's just the direct impact on your personal budget that you will see immediately.

The real benefit is the long-term macro-economic benefit that comes from getting rid of federal deficit spending on an immediate and permanent basis.

Because the United States will now be running a roughly $350 billion a year surplus instead of a deficit we will start to retire the national debt.  Yes, it will take decades; four or five to be exact.  But that $350 billion in debt reduction every year means your purchasing power goes up even more; that is, there are fewer dollars in circulation and so each is worth more in goods and services.

This is the invisible benefit but it will accrue to everyone in the United States equally.  Rich, poor, white, black, yellow, green, young, old, doesn't matter -- everyone will see an exactly identical percentage benefit.

How much?  About 2% a year, every year, until the debt is retired.

That's right -- instead of you suffering inflation of the mythical 2% a year and your purchasing power being destroyed you will instead be able to save for retirement and see a 2% compounded improvement in what that money buys without taking any risk in the stock market or even being paid interest at the bank!

Finally, at the same time all of these really good things happen to you personally and the federal budget, state and local budgets, which are under severe pressure due to these spiraling costs embedded in their pension expenses, will all be immediately and permanently returned to a stable state as well.

Now this is, admittedly, assuming that Trump is actually able to implement his proposal and you can bet that there will be a lot of corporations and pressure groups that are going to do everything they can to derail it, especially when it comes to anything that has to pass through Congress.

But I will remind you that while the Executive (which is the part of the government the President controls) cannot make laws it is the Executive's job to enforce laws and there is a large body of law, specifically 15 USC, that makes felonious any attempt to monopolize a market or fix prices.

The executive is empowered to enforce existing laws without any act of Congress whatsoever.

In fact, barring passing a new law there is absolutely nothing Congress -- or the lobbyists -- can do to stop him or any other President from doing so.

The reason none of the recent Presidents have done so ought to be obvious; they, along with Congress, have all been bought and paid for.

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