Ronin of the Spirit

Because reality is beautiful.

The Health Care Debate II

Ok, so last blog, I looked at the insurance companies.  Basically, there is large room for improvement, but I didn’t find the huge smoking gun of “THE WHOLE THING SUCKS BECAUSE OF THE INSURANCE COMPANIES” I thought I would.  In fact, ultimately, premiums are high because hospital care (which premiums insure) are high.

A hospital is a business, even when it is a non-profit.  If cash out exceeds cash in, like all other businesses, it fails.   Right now, hospital costs are higher then they have ever been, so we would think that hospitals are making money hand over fist.  Actually, not at all.

Over the last 10 years the average profit margin (the amount of economic surplus) has increased. It’s gone from (ready for this)… 4.9 to 5.2%.  An oft quoted stat is that many of the most profitable hospitals are making a 20.1% profit margin.  It’s true.  Some of the most profitable hospitals are putting a 20% mark up on certain procedures.  It’s to cover the 15% loss they take on the other ones, leaving an end of the year balance of…5%.

Why are they taking a 15% loss?  Well, because Medicare, Medicaid, SCHPs, (all the gov-care) doesn’t pay the full cost.  Note, this isn’t saying gov-care doesn’t pay the full charge.  Think of it this way. A procedure costs the hospital $100.  They bill $120 for a twenty percent markup.  Private insurance pays $120.  Gov-care pays whatever it can afford, usually around $85.  A 15% loss means 15% below cost, but about 43% below the price.

The reason for this is the program is never given enough money to pay all the expenses it incurs.  If the program was supposed to pay for 100 procedures at $1 each, and there are 140 procedures, then all the hospitals get $0.71 instead of a dollar.

Further, remember that gov-care is only about 1/3 of the number of patients, 2/3rds are private insurance, so how does the hospital not make a killing, taking 15% loss on 1/3 and getting 20% gain on 2/3rds?  Because the 1/3 of people on gov-care are the most expensive patients.  Despite the fact they make up only 33% of the hospital population, they make up 50% of the expenses.

Hospitals can refuse gov-care patients so why don’t they? If taking a patient on medicare meant you were going to loss 15% of the cost of care, why would hospitals take them in?  Because of the Emergency Medical Treatment Act of 1986, which means, “regardless of citizenship, legal status or ability to pay” any patient who needs emergency care must receive it.

Hospitals loss on average, about $84 per emergency room patient.  Emergency rooms account for about 20% of the total cost of running a hospital.  So, why have one? Because 1/7 patients who visits the ER will have a highly profitable inpatient transfer.  The best way hospitals can get the profitable 2/3rds of insurance payers into inpatient surgery is through the ER doors.

What about people who don’t have insurance, and don’t qualify for gov-care and simply refuse to pay? They are very small part of hospital losses, about 3% on average.

So if, 97% of the hospital customers are paying, and half the cost is at a 15% loss, and half is at 20% profit, that doesn’t really explain why health care is so expensive.  I mean, yes all the responsible people are effectively paying a 20% sales tax to the hospital to cover the portion of socialized medicine that the their income tax didn’t pay.  But, 20% sales tax does not 200% overcharging make. (The cost US health care exceeds the cost of better health in many other industrialized democracies.) So what gives?

The most expensive thing in the hospital is labor.  If we are serious about reducing the cost of health care, we have two very basic options. One is make labor cheaper, the other is use less of it.

What about cheaper labor? The most expensive section of hospital is ICU and 80% of the cost of ICU is labor.  ICU nurses make about 46k a year.   I’ve often mentioned France in this study.  Nurses in France make half of what American ones do, and health care is cheaper.

As to reducing the number of hours nurses have to spend with patients, let me rip this long section from this article.

For example, if you are a Medicare recipient and you have a heart attack in a region where doctors practice less aggressive care, like Salt Lake City, your care will cost Medicare about $23,500 over the course of a year. But if you have your heart attack in a place like Los Angeles, the bill will be closer to $30,000.

The wide gulf in spending between the two cities is not because of different prices. Sure, everything costs a bit more in Los Angeles, including nurses’ salaries and the laundering of hospital linens, but not enough to account for the extra amount Medicare pays for a heart attack. The reason the same patient’s care costs more there than in Salt Lake City is that doctors and hospitals in Los Angeles tend to give their patients more tests, procedures, and surgeries, and their patients tend to spend more days in the hospital.

But here’s the important part. All that extra care in L.A. doesn’t lead to better outcomes. As it turns out, heart attack patients who receive the most care actually die at slightly higher rates than those who receive less care.

So, um, why are we doing this to our selves? Again, same article:

Why? Because doctors believe patients will be less likely to go to a lawyer if they think the doctor did everything possible—even when doing so doesn’t help the patient or causes harm…

The article puts forward the idea 50% of medical procedures are basically done to make people feel better rather than be better.  That is to say, nearly half of all procedures done have no backing in reality which suggest they are necessary.  At least one large portion of the problem is that lack of skepticism and respect for the scientific method exhibited by American medical consumers.

Tune in next time, when I tie the this blog and the last one together to create a cohesive solution.


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August 24, 2009 Posted by | Pharmacology, Politics, Science, skepticism, Uncategorized | , , , , , , , , | 2 Comments

The Health Care debate.

Health care as I see it.

I started this blog just writing down as many facts as I could about the health care system, trying to make sense of it all. The first assumption is that health insurance is the right way to pay for health care, and this leads to two problems. One, that insurance is too expensive, and two since it’s so expensive, to few people have it.

Well, I’ll begin by saying there could be serious improvement to health insurance. First off, insurance is a method of sharing risk. Everybody pays a foreseeable and affordable loss (premium) to the company, who in exchange pays unforeseeable and un-affordable loss affecting a small minority of policy holders.

I’m not sure insurance is a totally appropriate method of paying for health care in this day and age for three reasons. One, modern diagnostics, predictive methods, and techniques mean the unfordable loss is no longer unforeseeable. Two, the big three killers: hypertension, smoking, and high cholesterol, are all preventable and highly dependent upon lifestyle choices. Again, this does not meet the criterion “unforeseeable”. In fact, we could even say high treatment costs for chronic illness are so foreseeable as to be statistically unavoidable. Three, the rate of premium depends upon how expensive the policy holders un-affordable loss is to the company, and the number of policy holders who need it. In an age of 32% obesity rates (obesity exacerbates almost every chronic health condition.) that are likely to be approaching 40% in the next ten years, health care expenses don’t meet the final criterion of only a small minority experiencing an un-affordable loss.

Is insurance too expensive? Probably. Everything I mentioned above can only go one place: premium increases. Are insurance companies pushing the boundaries of ethical behavior? Probably. Is that failure of the insurance companies? Well, not exactly. People and groups have the ethics they can afford. The average health care insurance company runs a 5.5% profit margin. In a free market economy you get what you pay for. The higher the premium the better the service. The lower the premium the worse the service.

The answer to improving the insurance industry is pretty simple. Consumers need better info, with less dead weight losses to changing companies. The insurance companies need to write their contracts at a 6th grade level (Average US reading comprehension), and switching insurance providers needs to be a single sheet of paper or a phone call. However, other then codes requiring simplicity, transparency, and interchangeable standards, the industry needs to be heavily deregulated. This encourages the sort of cut-throat capitalism that makes America a land of opportunity. Also, medical saving accounts are an option. Between private capital in medical savings accounts, credit union style insurance companies, and D-regged private insurers, competition would make companies leaner.

But ultimately, we are talking about companies fighting for tenths of a percent. The cost of premiums is decided by the frequency and cost of care. Insurance companies can profitably only reduce unnecessary visits. Visits which prevent costly claims increase profitability, so a huge reduction is frequency of care is unlikely. The real cost of health care rests not on insurance companies, but upon care providers.

This case is further born out by the fact that about 1/3 of the cost of health care in the US is paid for by the Medicaid, Medicare, SCHP, and VA government plans. If the problem of cost was one of insurance alone, one would expect that there would be a significant saving to socialized health care, but analysis of the cost of gov-care versus private care show no significant reduction in price for identical procedures. The additional 5% private insurers make as profit disappears into the significantly more expert administration of the private insurers, so gov-care is not 5% cheaper.

So insurance is just a middleman, the real cost in the health care providers. Why is American medicine so expense? Supply and demand says, consumers demand will use up the supply, raising costs until producers can create more. The producers will make so much it will lower the price. The tension of supply and demand drives the price down to market equilibrium, where the consumer is paying as little as he can, and the producer is charging as much as he can. That’s the miracle of free market economy. It pushes the price to where it the lowest possible, ensuring the greatest number have access to the good. Yet in the US 100 million people are on some kind of gov-care. That’s a third of the population!

Every body needs health care, the demand is universal, so it should be decreasing supply, increasing the price, raising the incentive to enter the field which would result in increased competition. This competition would result in innovations which would increase the supply and lower the cost. For some reason, this isn’t happening. In fact, the American medical system is running so badly, that planned economies are achieving greater results with less spending, both in raw dollars and as portion of GDP. The US spends more on gov-care (Medicaid, Medicare, SCHP, VAB, etc.) than countries with fully socialized health care spend on it, to get lower rates of health for a 1/3 the per capital population. Then the 60% of Americans pay again! American private health care costs more then any other industrialized nation. France in particular stands out (!) with the average American paying over 200% more for private health care, and 75% more for gov-care, while having maintaining statistically worse health.

When planned economies are running better then capitalism, we know something is rotten in Denmark.  I’ll address what later.

August 23, 2009 Posted by | Government, Pharmacology, Self discovery, skepticism, Uncategorized | , , , , , , , , | 5 Comments

Americans Hate Freedom

I realized something today.

Americans hate freedom.

Now, this statement will offend some. They will cry out, “We are the freest nation on earth,” “Americans love freedom,” and “Americans love freedom so much they will fight for the freedom of others.” I say, bologna.

As to the first: “We are the freest nation on earth.” How would one measure that? Well, how about percentage of the population incarcerated? Communist China has a population of 1.3 billion with 1.5 million in prison. America has a population of 300 million with a total of 7 million in prison. (1.) The US has more people in prison, both as a percentage of the population and as raw numbers, than any other nation on earth. The United States has 5% of the world’s population and 25% of the world’s incarcerated population. (2.)

Perhaps it could be measured by the amount of red tape through which people have to wade? Well, the tax code (which is not even considered part of the enormous US legal code) is 13,458 pages in total length. (3.)

Well, perhaps, our constitution would tell us. Our first Amendment promises us, among other things, free speech. However, according to Brandenburg vs. Ohio, the Federal government is allowed to stop speech which will result in lawlessness. (4.) Boy, that would make it hard to organize the Boston Tea party, wouldn’t it? Also limited by B vs O is speech which hurts peoples feelings and speech which causes discontentment with the existing government. Second amendment? Superseded by US Code Title 18, Part 1, Chapter 44. What about the 3rd and 4th Amendment? Canceled by eminent domain. (Yes, I am aware that the Bush signed a law that says owners must receive just compensation. How do we figure a fair sale price for that which is stolen?) 5th Amendment? Still good. Except for the eminent domain part. 6th Amendment? Speedy Trial. Need I say more? 7th Amendment? Still good. 8th? Not so much, if you end up as an American citizen in a black site prison (5.) (6.) 9th Amendment? If we don’t follow the constitution, why would rights listed elsewhere be followed? 10th Amendment? Thats, funny. That would mean that any federal power not mentioned in the US constitution belongs to the states. Like the alphabet soup of Federal agencies that dot our political landscape, for instance.

So, pretty much the whole Bill of Rights has gone down the crapper. What about the “War for Iraqi Freedom”? Don’t we love the people of the world so much we will fight for their freedom for them? See, that’s kinda funny, to say “fight for their freedom for them” We go to someone else’s country and say, “We are free. You will be like us, and we will smart-bomb everyone who disagrees.” If you are not free to disagree with the occupying US government, exactly how much freedom are we exporting? You can’t fight someone else’s war for freedom. Not won’t. CAN’T. Freedom is a choice. You can’t make someone be free. It’s like a toddler with a gun saying “Have fun, or else.” Not much fun is it?

If you look at a pie chart of government expenses (Provided conveniently by the US accounting office.)

Federal Budget Pie - where it goes

the government's deceptive pie chart

So, you can see that at least 50% of the spending of the government is social programs. However, the truth is somewhat higher. Many things which you might not consider social programs at first blush, in fact, ARE social programs. The Department of Agriculture administers the Food Stamp program, the WIC program, and makes subsidy payments to agri-industry. $17 billion to Cargill for instance. Not to bad for a company that made $88 billion in sales and is the second largest privately held company on earth. (7.) (8.) Things like that make the above charts a little optimistic.

After spending around 20 to 30 hours (over severals months) here it seems the cost break down is more like 70% handout, 15% defense, 10% debt, and 5% all other federal costs. But, I digress. An examination of social security is sufficient to make the point that Americans hate freedom. The purpose of social security is to take a portion of your income for the rest of your life to pay for the current users. When you need the system you trust that your kids and any recent immigrants will make enough money that their income will pay for your RV. There is a name for an investment system where each set of new investors pays the dividends of the previous investors. It’s called a Ponzi scheme. What if you don’t want to trust a bunch of strangers and the future economy to provide for you? Well, you can still do your own retirement… while paying for everyone else who doesn’t. You can’t love freedom and social security! If you love freedom, you have a problem taking money from other people against their will for yourself, and you have a problem having your money taken away from you to give to other people. Love of freedom and acceptance of coercion can not dwell within the same heart.

So, I conclude, Americans hate freedom. We love coercion. We love it with every part of our hearts. We love telling others what they must do so much, we will surrender our right to decide what we want to do. I could go on and on. But this is only the setup for what I really wanted to talk about today, which is WHY American’s hate freedom.

I can only come up with 2 basic reasons that a person would hate freedom:

1. Freedom is hard work

and

2. Fear of responsibilty.

(One) breaks down into hard physical work and hard mental work. Imagine a person who is not very smart and not born to money. If they want to retire they will have to work many, many hours at unrewarding jobs for many years. They will have to live in bad parts of town (to have low rent) and never drive a new car. This is hard, and not fun, but not as hard as the mental part. The poor person who is trying to save does not get to buy whatever they want, they have to think about every purchase. If they are unintelligent, this will be very time consuming, and again, not enjoyable. They will have to chose work carefully to not spend too much time and money getting to work everyday. They will not be able to vote for whichever politician they like, for they will have to consider things very carefully before they vote or their hard earned money will go away.

(Two) This one is about fear. A person who loves freedom has no scape goat. When they suffer from heart disease at the age of 29, they cannot sue Krispy Kreme. They cannot blame bad parenting, or poor schooling. They can only say, “I did this of my own freewill. I alone am responsible and I alone bear the consequences.” This is anathema to the average American.

I say again. Americans hate freedom and love coercion. Americans hate freedom because they are lazy and afraid.

Now this presents me with a conundrum. All my life I have studied the form of government. I mistakenly thought the important part of government was the form. I realized this was false with the following thought experiment: Who rules more democratically? The king who fears revolution or the president who does not? Obviously, the ruler who must obey the desire of the people or lose his job rules more democratically. The form is meaningless. People who love freedom will self correct any error in form. People who hate freedom will bring coercion upon themselves.

The question facing all government, be it family government of children, church government, or national government is not, “What is the form?” It is this: how do we make people love freedom? The purpose of government is force. (I hear liberals whining about this. I say to them, “Do you think people would pay for those social programs you love so much if no one made them? Government is force.”) Since you can’t force someone to be free, government can do nothing to encourage freedom other than allow it.

But where does that leave me, the little man who wants to make the world a better place? How can I personally encourage freedom? I can’t force anyone to take it. I can’t talk about it for if people desire freedom only because of my words, they aren’t really free.

The only answer I know is this: I must be free. I must enjoy freedom whenever I can. I must fight for my freedom and allow others to do the same. People can then see my life and choose whether they like what they see or not.

March 17, 2008 Posted by | Government, Politics, skepticism, Uncategorized | , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 1 Comment