The Market Ticker - Health Reform

Health Care FARCE Voted Up Last Night

nospam@example.com (Karl Denninger) — Sun, 08 Nov 2009 12:33:00 -0500

Do we live in a Constitutional Republic any longer?

The 16th Amendment made lawful the income tax - that is, a direct tax on Americans.

But nowhere in The Constitution is the power found to force people, under penalty of law (including fines and imprisonment), to pay private parties for services they do not desire to purchase.

Yet that is in the bill passed last night.

Yes, we have Congressfolk - both men and women, and all Democrats (save one Republican) who voted for this.

This sure appears to be blatantly unconstitutional - and, I would argue, those who voted for the bill know it.

If you watched CSPAN yesterday you heard the speeches. All those who rose in favor of the bill talked not about The Constitution and how this bill was a solution to the problems facing America's Health Care System - a system that consumes some 17% of our GDP - but rather it appealed to how individuals with specific circumstances would be helped.

But a desire to help someone is not the test for legislation. All legislation by definition is designed to help someone. The test is whether whatever is being proposed comports with the black-letter requirements of The Constitution, and the even-blacker-letter requirements of the laws of mathematics.

This bill meets neither essential test of all legislation; it instead proposes to destroy our Constitutional system of government.

Yet despite member after member rising last evening in opposition and stating that these mandates were unconstitutional not one rebuttal of that point was made by those in support.

The "Holy Grail" for the so-called "private" insurance businesses is forcing everyone onto one of their plans. This is due to the problem of "adverse selection" - that is, you would not buy insurance until you got sick if it is quite (or very) expensive. The more expensive the insurance gets the worse this problem becomes and the "insurance" ceases to be insurance at all. Remember, "insurance" is a thing you buy to protect against an unlikely outcome - if you're already ill or believe you will become ill the outcome isn't unlikely - it is either probable or known.

Yet the desires and demands of private business do not give license to use The Constitution as toilet paper.

But the extra-constitutional game didn't stop there. Oh no. This 1990 page monstrosity goes much further. It mandates that employers not only cover everyone they hire and pay at least a specific percentage of their premiums (or face a fine) it also mandates that said employer cover all members of that employee's family. While it is unlawful to discriminate against people based on their family status, what do you think is going to happen to salaries across the board to cover the risk of someone showing up for a job interview and having eight kids?

Does Octomom become permanently unemployable - or does every employer in the nation reduce your salary offer now and forever to guard against the possibility of another Octomom showing up for a job interview?

You know the answer here - nobody is going to take the risk of a multi-million dollar discrimination lawsuit. Your salary offer will be reduced, and if you are currently employed, you can forget about raises for a long time.

There are Constitutional solutions to this mess. I have posted about them before. My chronicle of those posts in The Ticker is found here; it encompasses a reasonably small set.

Left un-addressed (intentionally, by the device and drug lobbies) are the reasons we spend so much on health care in this country. Put simply, America pays for the development of every advanced treatment in the world and has for the last 30 years, yet every other nation's citizens get to enjoy those advancements for free.

That's right. The Pharmaceutical and Device industry has managed to get legislation enacted prohibiting the re-importation of devices or drugs sold overseas. These overseas markets demand price controls on the drugs and devices sold there, and get it. We, on the other hand, have a "price at what the market will bear" system.

The result is that the heart stent that is used in Canada costs a tiny fraction of what the same stent costs in The United States even though they are made by the same company.

Normally such distortions are instantly corrected by cross-border arbitrage. That is, if I sell a widget in Canada for (US) $1.00, and for $10.00 here in the United States, someone will order 10,000 of them in Canada and ship them across the border back to the US, driving the price in the United State back down close to the Canadian price.

In general, once I own a thing I have the right to dispose of it as I see fit. Nobody would accept the idea that by purchasing a car I can not then sell it at some later point for whatever price I desire. Nor would they accept this in the price of houses, lawn mowers, life jackets, boats, toothpaste, books or Christmas decorations.

Yet today it is not lawful for me to buy 100,000 doses of Viagra in Canada (where they sell for a fraction of the US price) and then ship them back to the United States. This "unlawfulness" has been artificially created by the drug and device manufacturers, who claim concern for "purity" and "counterfeits" - a red herring and in fact a false claim. There has never been a right to import or sell a counterfeit product; what these manufacturers have managed to prevent is the importation of lawfully-produced and properly labeled drugs and devices made in their own factories!

The fact of the matter is that if the world is to benefit from the innovation of US companies they should pay the same price as everyone else does - including the United States. The solution to this sort of improper and outrageous forced subsidy by the American Consumer and Taxpayer is to remove the laws that bar importation of lawfully-produced and properly-labeled drugs and devices - that is, to enforce the general principle of common law that once I buy a thing to whom I resell it and under what terms is a right that I acquired in exclusivity through my original purchase.

But fixing this distortion - one that costs Americans hundreds of billions of dollars annually - means removing a "special law" that is used by drug and device companies to screw Americans out of that money, and serves to force medical spending to the moon - all for the profit of a few oligarchs in the medical industry.

Also left unaddressed in The House Bill (again, intentionally) are two other factors that serve to together comprise more than half of our spending on medical care. These are:

The fact that 90% of your health care spending happens in the last year of your life. We must have a societal conversation on this issue, and determine what society's responsibility is for that last year. I argue that the answer to that question is in fact zero - we all begin to die the moment we are born, and yet none of us know exactly when the clock will expire in advance. As a consequence a perfect separation at that "last year" is not possible, but there are some realities we can - and must - face. First among them is that when you are in declining health, irrespective of your age, you do not have the right to impose your desire for additional hours, days or months of life on the back of others. You have the absolute right to expend any or all of your own resources in pursuit of that goal, but you have no right to reach into my or anyone else's pocket to do so. There are literally thousands of instances every day across this nation where persons who are in their waning hours or days - persons where the outcome is, within medical certainty - known - are hooked to machines and monitors in hospital beds that cost tens of thousands of dollars a day, simply because they do not have to pay for that last hour out of their own resources. This must end. We are a compassionate nation, but this is not compassion - it is barbarism. When my time comes I should be offered as much pain medication as I desire to take, including a sufficient amount to render me unconscious either in effect or fact - but I should have no right to expend any amount of society's funds beyond that pallative medication and care. While this would not save 90% of the nation's health care expense, it would save 30% or more, and we can do it right now, without any impact whatsoever on treatment and care that has a reasonable chance of resulting in a cure of the patient's condition.
Tort reform. Simply put, we call it "practicing" medicine. There's a reason for that. The law must change, even though this will outrage attorneys and their lobbying interests. A right of suit and recovery must remain for those cases in which gross negligence is shown; we have all heard of cases where the wrong arm or leg is amputated, the perfectly-good eye operated on rendering the patient totally blind, and other similar outrages. No society can or should accept outrageously negligent activity as "the cost of doing business", including ours. But most so-called "malpractice" isn't of that form. It is instead a lawsuit due to a bad outcome - an outcome that was known to be in the realm of possibility by the patient prior to the procedure, or due to an unforeseen risk. Medicine is not a science; it is an art. As an art we must accept that there is always the choice to do nothing and accept whatever outcome God (or Darwin if you prefer) ordains; it is by man's intervention that one attempts to change that natural course of events. Such an attempt will not always be successful. Defensive medicine to avoid the possibility of lawsuit costs hundreds of billions of dollars, all occasioned not by medical necessity but rather by documenting evasion of all reasonably-foreseeable risks - a ridiculously expensive practice for which we all pay. This must end.

If we cannot have a reasonable set of reforms as I have outlined in my "Wake up Washington" Ticker in September then we should instead pass a single-payer system such as exists in Canada, but (unlike Canada) let those who choose pay in cash for "excess services." No, it's not perfect, and yes, it is rationing. But so is what The House passed - they're just hiding it in their 1900+ page mess so you can't easily find it. A Canadian-style system, funded by general revenues, is Constitutional, unlike the outrage passed last night.

Either of those outcomes would produce marked improvements in the system we have now along with driving down costs dramatically - perhaps as much as 50% - from what is spent today.

The House Bill not only fails to address the problem but is an outrageously-broad and, I would argue, an unconstitutional reach into Americans most private parts. The Administration's own spokespeople admit this bill will cost us some 5.5 million jobs - on top of the 8 million we've already lost in the present economic malaise since the peak of employment in the summer of 2007. My "back of the envelope" computations are similar - I come up with 5 million jobs lost with a 20% variance and 95% confidence level - that is, somewhere between 4 and 6 million should be the total. Darn close, given that I'm not privvy to the Administration's facts and figures and am forced to work off published information.

When Pelosi and her gang of thugs took their place behind you they didn't even bother to snap on a glove first.

Health Care: WAKE UP WASHINGTON!

nospam@example.com (Karl Denninger) — Wed, 09 Sep 2009 22:18:00 -0400

Ok, so President Obama once again wants to act like he's still running for office instead of inhabiting the Oval Office.

I get it.

My objection is simple: Neither the Republicans or Democrats have put forward a plan that actually addresses the structural problems we have with medical coverage in America.

I am going to reprint and expand on my actual fix for Health Care, for the following reasons:

It will work and control costs by dramatically increasing competition. Today, employed persons typically have one choice for insurance coverage. This plan will bring them dozens to hundreds of choices at competitive prices. You wouldn't accept a system where there were a dozen stores but only one where you could shop because of the company you worked for, but if the grocery business had such restrictions a gallon of milk would cost $20, because the store you could buy from would know that you couldn't go next door.

It will end cost-shifting and cost-hiding, which is bankrupting millions of Americans and is the core problem underlying the imbalances in the system today.

Finally, it will not increase the budget deficit one nickel.

Here it is; you can read the original as well if you want:

Let's reprint the key points, simplify and expand on them:

If you sell "insurance" to anyone in a given state, you must accept all persons in that state on the same terms and at the same price. If an insurer has a "we accept anyone at the same price" policy for a business, you must be able to buy into their plan for the same amount of money that the employer is charged on a per-person basis. That is, all plans must be "open enrollment" for everyone within the state - period. This immediately gets rid of the "tie" between employment and health "insurance", and it also removes one of the biggest issues that small business and self-employed people face - the inability to buy insurance at any reasonable price if there has ever been anything wrong with them medically. The solution to the "adverse selection" problem is identical to that which exists in corporations - you typically can only elect out or in of a policy or plan on an annual basis - that is, you're obligated to participate for a full calendar year. Enforcing the same terms (you can only opt in during one month, and are obligated for the entire year) solves the problem of someone deciding to buy only when they get ill, as you would have to wait for the enrollment window to open. For acute conditions where adverse selection becomes most important this restriction resolves the problem. This also resolves the pre-existing condition problem that the self-employed have today.

All health providers must publish a price list and may not bill or accept payment at anything other than that price; doing so becomes a violation of Robinson-Patman and exposes the provider to civil suit for treble damages. This instantly stops the practice of billing the uninsured or privately insured at a higher price than Medicare, for example - a practice that is rampant, particularly among hospitals. Every hospital has a detailed price list for every function and thing in their health care panoply - this enforces even billing and even pricing for everyone, without discrimination. The complaint that health providers cannot make a living at Medicare's reimbursement rates does not give that provider license to cost shift the expense of government-subsidized care to privately-insured or uninsured patients. Everyone would raise hell if your car was three times as expensive if you worked for Ford than if you worked for GM, yet it is accepted that if you're not insured by Kaiser (for example) your heart bypass surgery costs a different amount. If Medicare's "price schedule" is inadequate the solution is for providers to refuse to provide the service at that price and thus negotiate for a higher price for that procedure, not cost-shift the care of older Americans onto younger. This is a more than $200 billion dollar a year rip-off of working-age Americans, it bankrupts the uninsured or those denied coverage after a health event, and it must be made explicitly unlawful.

If you show up without insurance or ability to pay with a life-threatening condition, you will be treated, but the hospital cannot cost-shift the bill - it instead bills The Federal Government. We have created an expectation that if you show up needing emergency treatment you will get it, irrespective of ability to pay. This creates a monstrous problem for hospitals and results in the $30 aspirin, among other outrageous distortions. The solution is to have The Federal Government receive all uninsured and unpaid bills, with the debt being immediately paid by the government. Said debt then becomes a collection item against the citizen - a debt to the Treasury, administered by the Internal Revenue Service. If you cannot pay cash, that's fine - the IRS will be happy to take payments (at interest.) If you're an illegal alien the Federal Government will be mandated (by statute) to collect from the other nation, and if they refuse to pay, to deduct any such amount from foreign aid of any type and source on a dollar-for-dollar basis.

We must reform the tort system. The trial lawyers will hate it. So what. The simplest proposal is this: you may sue only for gross negligence. If the wrong arm is amputated, you have a lawsuit. But we, as a society, must admit and accept that we call it practicing medicine, and by the very name - "practice" - we therefore admit and accept that outcomes will neither be perfect or predictable. But while we must accept that medicine is not a perfect science and outcomes cannot always be predicted, every person has a right to know their physician's record. In exchange for this partial immunity from suits all outcomes and counts of procedures performed, by the patient's own evaluation as to degree of success or failure, are to be published online in a searchable database for use by any person at any time in making medical decisions, and the intentional concealment or tampering with such reporting shall be made a felony. The patient's evaluation shall be an absolutely protected form of speech.

If you want a health care solution, there's one that will work.

Four points that will:

Bring instant competition to the health care system, enabling citizens to choose between dozens if not hundreds of competing insurance plans for the precise same price that an employer pays to cover the same person were they working for that company.
Allow you to keep your current plan and doctor if you wish. Since this does not tamper with any existing insurance program there is no impact for those who like their current health care plan. If your plan is particularly good, in fact, it is likely to get cheaper as more people join it.
Stop the pre-existing condition problem dead in its tracks. No large or mid-sized employer accepts this in their plans. You shouldn't have to either.
Prevents illegal aliens and the uninsured from shifting their care onto your wallet. You're free to be uninsured but you will get billed by the government if you need emergency care. Illegal aliens will get emergency care but the government of their citizenship will be billed. The day of the $30 aspirin will be over.
Prevent gouging for cash-paying customers. Level billing will stop the abusive cost-shifting that bankrupts tens of thousands of Americans every year.
Not cost the taxpayer a nickel. No budget impact - period. In fact forcing the uninsured and illegal aliens' bills back onto the responsible parties will almost certainly decrease costs for Medicare and Medicaid, thereby saving money.

In the current debate why isn't a plan like this part of the discussion?

If you have a Tickerforum Login ID please vote on which of the three proposals you would like - no changes, the Obama Plan, or what is outlined above (if you are not logged in you cannot see the poll choices.) The entire thread will be faxed, with results, to Congressional Leaders and President Obama when the poll closes in 7 days. Registration on the forum is free and while you must wait 2 days after a new registration to comment, you can vote immediately.

Fixing Health Care: A Real Solution

nospam@example.com (Karl Denninger) — Fri, 07 Aug 2009 12:34:00 -0400

Back on July 7th I wrote a piece on Health Care Reform and laid forth some general principles.

I have since done some more synthesis on this and have a more-fully-fleshed out, and yet simpler, set of proposals to solve the problem. With no further ado, here they are:

All "insurance" companies must offer a true insurance policy covering only unlikely-but-catastrophic events on the same terms as their "full service" policies. These were formerly called "major medical" or "hospitalization" policies, and have become very difficult to find. They're relatively inexpensive as they do not cover routine doctor's visits or medications, but do cover catastrophes (e.g. a heart attack, cancer, stroke, etc.) We must provide consumers with a reasonable-cost alternative to HMO/PPO coverage, and this is it. If a company wants to sell "full-featured" policies that are unaffordable to a huge percentage of the population, we must mandate that they also offer affordable catastrophic coverage for those who prefer it (or can't afford anything else!)

All health providers must publish a price list and may not bill or accept payment at anything other than that price; doing so becomes a violation of Robinson-Patman and exposes the provider to civil suit for treble damages. This instantly stops the practice of billing the uninsured or privately insured at a higher price than Medicare, for example - a practice that is rampant, particularly among hospitals. Every hospital has a detailed price list for every function and thing in their health care panoply - this enforces even billing and even pricing for everyone, without discrimination. The complaint that health providers cannot make a living at Medicare's reimbursement rates does not give that provider license to cost shift the expense of government-subsidized care to privately-insured or uninsured patients. That sort of discrimination is outrageous and must be made unlawful. Everyone would raise hell if your car was three times as expensive if you worked for Ford than if you worked for GM, yet it is accepted that if you're not insured by Kaiser (for example) your heart bypass surgery costs a different amount. If Medicare's "price schedule" is inadequate the solution is for providers to refuse to provide the service at that price, not cost-shift the care of older Americans onto younger. This is a more than $200 billion dollar a year rip-off of working-age Americans and it must end.

No event caused by the provision of your treatment may be billed to you. Period. Specifically, MRSA infections and similar contracted in a hospital cannot result in billing of that treatment to the consumer. If you call someone to fix your roof and they break a picture window, they have to eat it - they can't bill you for the roof and the window which they broke! The best incentive for better-quality care, particularly when it comes to controlling in-hospital cross-infection rates, is to make it ruinously expensive for hospitals to fail to prevent these adverse events. Prohibiting by federal law the billing of any amount for a condition caused by the provider of health care (or a health facility) puts in place a very strong free-market disincentive for lax infection and process control.

Five points and a fully free-market solution that brings affordable health care coverage to all who can buy it, yet protects those who cannot, while, to the greatest possible extent, forces everyone to bear the cost of their own decisions.

If you choose not to be insured and pay cash you are free to make that choice. If you have a catastrophic illness or injury, insist on treatment but have no means to pay then you are subject to attachment of wages and assets by the IRS, a debt that is only discharged by your death.

Simple, fair, free-market and this path will dramatically control costs as free market competition will be forced to the forefront among health providers who will be compelled to make available their pricing schedules to everyone before they show up for treatment and are presented the bill.

Health Reform: Who Are They Trying To Fool?

nospam@example.com (Karl Denninger) — Tue, 07 Jul 2009 12:22:00 -0400

Health care "reform" is the current hot-button, with the Obama administration now talking about a "public" health-insurance system to "keep the system honest."

Uh huh.

Look folks, you want to know why we have the health cost problems we have? I'll lay it out for you - in a way you can't refute or argue with:

There are no published prices. In no other line of work is it legal to do this. Nowhere. You can't sell someone a hot dog and tell them after they eat it what it just cost them. You can't hire a lawyer and have him tell you "I'll tell you what this will cost when we're done." You can't hire an electrician and have him tell you "I'll make up a bill when I'm done." In every line of work except health care, this is illegal. There are even laws for "major" consumer work (e.g. contracting, auto repair, etc) where they must give you a binding written estimate before beginning work!
Robinson-Patman makes it illegal to discriminate against like kind purchasers of goods in pricing decisions when the effect of doing so is to lessen competition. While it does not apply to services, it darn well should. Whether you are paying privately, you have private insurance or you're a Medicare patient if you need to have a breast reconstructed due to cancer the complexity of the procedure does not change. Yet it is a fact that the privately-billed amounts for uninsured ("rack rate") patients are often ten times or more that billed to insurers or Medicare. Try charging a cash purchaser 10x more for a TV than someone who finances that TV on your in-house credit facility and you would be shut down and thrown in jail.

#1 and #2 exist because of explicit efforts by the "health care" industry to exempt themselves from the laws that every other merchant of every other good and service in the United States must adhere to.

To put this bluntly the medical industry has intentionally put forward a system by which it can screw you with impunity, obtaining exemptions from the laws that cover every other area of commerce, thereby effectively forcing you to buy overpriced services you do not want to purchase lest an unexpected life event literally wipe you out.

This is an extortion racket and absolutely none of the proposals being put forward have done a thing to address any of it.

If we want to fix the health care pricing problem we can do so. It isn't very difficult. Here's the prescription:

All health care providers must publish a price list for the procedures and services they offer and the patient must be presented, when possible, with that information before services are performed or goods (e.g. medication) supplied, consenting to the charge in each case. All normal anti-trust provisions with regards to collusion between providers apply. If a physician doesn't like "flat-rate" billing they're free to publish a per-hour fee much like an attorney.
No physician or group may discriminate based on the form of any external payment. If they want to internally finance procedure(s), that's fine - they can charge interest or discount for that, or whatever. But for anyone who pays via any other means (including the government) money is money - the price may not change based on the source of payment.
No event caused by your presence in a medical facility or the actions of an employee there can come with cost to you. It is absolutely common for people to be billed for treatment of MRSA infections acquired in the hospital! That is equivalent to a mechanic that through incompetence or even malice cuts a wiring harness in your car while it is on the rack having the oil changed and then tries to charge you to fix what he broke!

Now clearly #1 doesn't work so well when you're unconscious due to a heart attack or just wrecking your car. But setting your broken leg or performing a cardiac procedure is something that's done for people who aren't incapacitated too, so guess what - the price is already published and thus the charge known.

This prevents the common practice of hospitals gouging private payers, it exposes prices and brings competition to pricing, and allows the free market to work. It ends the preference for "insurance" on routine procedures.

Next up, if you want to sell "insurance" in a market you must sell it to all persons in that market, defined as an area of at least one US State. You may discriminate in your pricing only based on age and gender - nothing else. If you sell that "insurance" product to any person you must sell to all persons within that state at the same price, and you must publish all your plans and offering prices.

"Insurance" products that are not true insurance products may not discriminate on reimbursement dependent on where the service is performed. The practice of requiring "in network" doctors or even hospitals lest you get "rejected" must end. In addition pre-qualification for any bona-fide non-elective procedure must be absolutely barred as a matter of law.

Finally, all providers of "insurance" must sell a true insurance product. Common HMO/PPO plans are not insurance - they are pre-paid medical care. Insurance is the purchase of a contract to cover damage caused by an unexpected event. Everyone needs health care of some form. Those who want to sell "pre-paid health plans" may do so, but they must also offer true insurance (e.g. covering ONLY hospitalization and related events, etc.)

These changes instantly destroy the connection between health "insurance" and employment. If you leave your job you have the absolute right to keep your health plan by continuing to pay for it. If you don't like your health plan or move out of the state you can buy any plan offered to anyone in your state, at your choice, for the same price they pay.

All mandates to provide specific services and products under "insurance" are federally preempted. Women should be able to choose a health plan that does not include abortion (and/or pre-natal!) services, for example, if they would never use either. Some women (e.g. those who have chosen to have a tubal ligation!) can't use these services, yet they often wind up paying for them in their premiums. Men should be able to choose a plan that does not cover things like Viagra - or, if they choose, perhaps they do want "ED" coverage.

If the health lobby won't cut out the nonsense and work for this sort of change to the system then I am forced to advocate for full nationalization of the entire health system, effectively placing everyone under Medicare. This will lead to forced rationing due to cost but that's happening already, and such a forced system will put a stop to the discriminatory practices of insurers, physicians, hospitals and others in the medical field who commonly bill private parties ten times what health "insurance" plans or Medicare pay for the very same procedure, while playing "let's deny coverage any time we think we can get away with it."

It is my opinion that we should be treating those in the health-insurance lobby, including hospitals, physicians and health-insurance providers, as co-conspirators in a racketeering scheme that effectively trades on the fear of disease and imminent bankruptcy to bamboozle and screw the population, while waving around their "hippocratic oath" - something better described as the "hypocritic oath."