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Commentary on The Capital Markets- Category [Health Reform]

All it takes is a company to start doing medicine on a cash, no insurance, no-BS basis to point out the blatant and outrageous overcharging, monopolist robbery and gate-keeping, all of which add up to behavior and pricing that is felonious in virtually any other line of work (and arguably is here too according to 15 USC but is never enforced.)

The Surgery Center of Oklahoma put this in stark relief when they showed up on the scene, offering no-insurance, flat-priced common operations where the price is known before the procedure is undertaken and typically winds up costing 80% less than a hospital charges for the same procedure -- with no surprises.

Now we have Theranos, which has taken advantage of a new Arizona law that allows any person to order their own tests without doctor involvement, reading or gate-keeping.  In other words your tests are your tests, as are the records (and results) of same. And their prices?

Anyone can walk into these Wellness Centers at convenient hours and get accurate, rapid lab testing with transparent prices that are always at least 50-80% below Medicare reimbursement rates.

Got that folks?

Medicare is an 80/20 system; that is, you pay 20% of the charge.

Theranos just destroyed any reason to pay for or have Medicare (say much less Obamacare or "private" insurance) when it comes to testing because the full price is approximately equal to your deductible.

I argue this same paradigm in pricing would be the case virtually everywhere in medicine were we to get rid of the monopolists, and I cite as my evidence that every time we get rid of them the same thing happens -- price falls by anywhere from half to more than 80%!

Note that these numbers are from Medicare's reimbursement rates which are typically much lower than what "private" (or Obamacare) insurance pays.  In other words the "screaming" from providers that they cannot make a fair profit at Medicare's pricing is a lie; Theranos is willing to run the tests and believes they will make money charging anywhere from 1/5th to half what Medicare pays.

The same disparity exists in diagnostic imaging.  The $2,000 MRI that has a "usual and customary" $1200 allowance, meaning you will get rammed for $800 if you allow it to happen to you, can be purchased for cash at $415 right now.  The same abdominal scan as a CT, with contrast, is $340 again, for cash.  What do you need "insurance" for when having it means you pay more, plus the premium?

The entire "traditional" model we have for medicine in this country is not just broken it is a cesspool of collusion and activity that, were I to have engaged in any of it when I ran my Internet company, or if the local car dealer engaged in any of it, would land us in prison.

Now add to this that if you stopped this there would be no federal budget deficit, there would be no federal debt (over time, as it would all get paid off) and the state and local budget issues, most of which revolve around "rising" medical costs, would also be resolved.  All of them.


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The Supreme Court’s recent blessing of Obamacare has precipitated a rush among the nation’s biggest health insurers to consolidate into two or three behemoths.

The result will be good for their shareholders and executives, but bad for the rest of us – who will pay through the nose for the health insurance we need.


Insurers are seeking rate hikes of 20 to 40 percent for next year because they think they already have enough economic and political clout to get them.


The alternative is a government-run single payer system – such as is in place in almost every other advanced economy – dedicated to lower premiums and better care.

Oh really?

Well, let's see.  These other advanced economies appear to spend about half of what we do on a percentage of GDP basis.  Is this where a market solution would wind up?

The evidence is NO.

The evidence is that single payer may gouge you less, but it still gouges you and since it's a forced transaction it's not hard to see why.  The government pays and you consume; there is no connection between the two.  Nor is there any competition.

What does a market system look like?

We have plenty of examples.  We can start right here in this country with procedures that really haven't changed at all.  How about ordinary, uncomplicated vaginal childbirth?  There is no difference between how this was performed in the 1960s and how it is performed today.  We're not talking about the complex case, we're talking about the usual, every day, ordinary birth of a baby.  You have a hospital room, an epidural, a doctor and a couple of nurses.  Mom pushes out the kid, the medical folks pay attention just in case something goes wrong but since this is an uncomplicated birth nothing does, the cord is cut, the kid is cleaned up and swaddled and there you have it.

If you take the bill for such a birth from 1963 and advance it by the CPI to today you find that you should be able to have an ordinary, uncomplicated birth in a hospital with a three night stay (the standard then) for approximately $1,000.

It's virtually impossible to actually have that procedure in the United States today and not be billed for at least 10x that much.

Note that there's no difference whatsoever between these procedures and you get less, specifically, Mom is typically tossed out of the hospital in as little as 12 hours -- not three days.

Then there is The Surgical Center of Oklahoma.  They are a cash business and print prices.  On average the same procedure in a hospital in the same general area will cost five times as much as it does at their center.

If you think this is unique or somehow an unfair comparison I have another example being posted tomorrow.

The situation we have in America today with health care, the very situation that animates Robert Reich and many others in their proclamation insisting on even more socialism and government control is intentional and, I argue, constitute violations of the Sherman, Clayton and Robinson-Patman acts (collectively 15 USC) and state consumer protection laws.

You cannot take your car in for an oil change, new tires, or to fix a knock in the engine without being quoted a price.  That price, once quoted, must be honored for the work quoted.  If the service center tries to bilk you (say, by billing for work not performed or charging double their quote) that's treated as a crime, as it should be.  The price of an oil change is a routine service and is printed on big signs outside service centers all over your town.

Now try to get the price on a routine diagnostic medical test.  Even better, go ahead and try to shop and buy one on your own.  In virtually all states (the exception being in tomorrow's ticker, with the cost results) you can't without a doctor "ordering" the test which creates collusive opportunities and, it appears, results in prices that are as much as 500% of the free market price for the exact same service.

We do not need "health insurance" for any but the most-catastrophic events, and perhaps not even then -- if we do something about these scams.  The reason is simple -- the price will fall by 80%; that is, you'll be able to buy medical care for one-fifth of what it costs today or what you currently spend on your deductible.

Can the average poor consumer manage to come up with $1,000 for a childbirth?  Certainly, if you look at their living rooms -- that XBox and bigscreen TV add up to that much, and you have nine months to plan for the kid.  Or just look outside at the nice set of rims and tires on the car; again, there's $1,000.  Or, if you prefer, that $100/month cellphone bill that is paying for the $600 iPhone in said poor person's pocket.

Now on the other hand in the system we have today that birth is $10,000.  Now we're in a realm that the poor and middle class cannot afford, and thus there arises a need for "insurance."  That need is entirely artificial; it has exactly nothing to do with the actual cost of the service being provided if you get rid of the monopolistic and price-fixed games played in the medical industry.

So what's it going to be, Robert and the rest of you?  Why don't we have an honest discussion about this issue and go where we should with it, which is demanding that those who violate the clear language in the Sherman, Clayton and Robinson-Patman acts, along with state consumer protection statutes that mandate that goods and service sellers post prices and charge on a non-discriminatory basis either cut the crap or we start sending them to prison and asset-stripping the companies and persons involved -- all of them -- down to their respective birthday suits?

Finally, were we to do this we'd also fix the entire federal budget deficit problem at the same time as the cost of Medicare and Medicaid would fall by that same 80% and we'd resolve most if not all of the state and local pension-based budget problems as well.

Last year we spent $1,113 billion between Medicare and Medicaid, to put numbers to it.  That's roughly a quarter of the entire federal budget.

Virtually all of the Medicare spending, and 80% of Medicaid spending, would have been unnecessary but for these medical monopolies, price-fixing and other activity that in virtually any other line of work is a prosecuted crime.  Note that since Medicare is an 80/20 program the elderly person on it would pay the same 20% but that would be the cash, paid-in-full price for their medical care so there would be no need for them to pay a Medicare premium at all.  For those who want a catastrophic policy they could buy one for less than their current Medicare premiums -- and those who choose not to could pocket and spend the money instead.

"Single Payer" won't fix any of this because it doesn't change the dynamic; the same "providers" will still argue that they're entitled to a "reasonable" profit margin (10% is quite reasonable) but the gross amount will remain jacked up to the moon just as it is in other nations with single-payer systems.

We can solve this problem tomorrow by simply enforcing existing laws.

So why don't we?

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Oh oh.... the dam is cracking...

On second thought, however, one is inclined to put the blame mainly on the nation’s business, health-industry and political leaders who over the past half century have joined forces to structure our health system so that U.S. health care now is twice as expensive on a per capita basis than health care in any other industrialized nation. Most of that differential cannot be explained by differences in the use of health care. It is driven mainly by much higher prices of health care in the U.S.

And what drives "higher prices"?  The absence of market forces, which only happens when unlawful things occur since it is explicitly illegal to attempt to restrain trade or fix prices (15 USC, if you care to read on it.)

Oh, and in fact, prices aren't twice as high as they would be under a market system where the rule of law was actually enforced.

They're five times higher, which means that with the typical 20% deductible you should be able to buy the care you need with no insurance at all.

This scam only continues because you, America, allow it -- you refuse to demand that long-standing law that makes such practices as refusing to quote prices, quoting a price and then billing 2, 3, 4 or 5x more later, billing for things never done and charging based on what you think someone can pay instead of charging everyone the same amount for the same service illegal be enforced and everyone who violates said law gets to inhabit a prison cell for a couple decades while being asset-stripped to their birthday suit.

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