29 January 2011

So let me get this straight...

The proposition for 'health care reform' is that the cost of health care, and thusly health care insurance is too high.

Why is the cost of health care so high?

Well, we subsidize it in the tax code, for one place to start.  The law of subsidies is that anything that is subsidized is no longer given a proper valuation, is over utilized and under appreciated, thus causing actual costs to rise and scarcity of what is subsidized.

Another place to start is that we have government run health care systems for the elderly and poor, and as government cannot pay the full cost of that health care, physicians and practitioners must cost shift that burden over to their paying customers.  Thusly, health care costs increase.

Why did we subsidize health care?  That started in the 1940's when the fit and able went overseas to fight.  Women and the retired had to have reasons to come into the workforce and Congress allowed for a portion of the cost of health care insurance to be written off as an enticement to those who were not working to come into work.  Until that point in time health care insurance was a 'perk' of the upper management of companies as it was seen as an overhead cost that, for a few individuals, was easily spread over the entire company.  When it was subsidized and expanded to cover more individuals, the overhead cost to run a company increased which was passed on in the cost of goods and services offered.

Women had not been a major part of the workforce due to cultural influences.

Why did retirees need to be offered a 'perk' to come back to work?

That is due to the Social Security system that was set up in the 1930's to retire out the older part of the workforce via government impetus in which all workers paid into the plan to pay out to new and existing 'retirees'.  These individuals who were 'retired' need a rationale to come back to work above and beyond the pay, thus health care costs were subsidized via the tax code.

Why are the elderly poor?

That is due to Social Security not providing enough 'benefits' to allow for a standard of living that would support them well, thus those who retire live from one benefits check to another in substandard living conditions.  These conditions are caused because they stopped working via government impetus at a set age when they are the most productive workers in the workforce and earning a proportionately higher wage.  By forcing these employees out they are not given the capability to earn enough to live on as they aren't allowed to by the system and its penalties for working past retirement age.  To address this Congress created a system in which workers could save money in Individual Retirement Accounts to help supplement their retirement checks via Social Security.  Through these means and modern investing vehicles, like mutual funds, many retirees now grow wealth during their working years to raise their standard of living during their retirement years.

Why doesn't Social Security pay enough to maintain a standard of living for retirees?

Social Security depends on a ratio of active workers to retirees, so that active workers pay into the system and those funds are paid out to current retirees.  At the start of the system that meant that approximately 6 active workers were needed to support 1 retiree at a minimum level of income.  If that amount were raised, the proportion would change.  Thus a doubling of output cost would mean that 3 workers were supporting one retiree.  This ratio changes as the population ages via demographics and via lower birth rates, so that there are not enough new workers in the system to support retirees.

Wouldn't allowing people to work longer, make more and, from that, pay into the system longer change that?

Yes, but then they wouldn't be 'retired' now, would they?  That is the point of the system.

Why was assistance for health care sought via Congress?

That was to pay for retirees who had health plans that stopped covering them when they retired as their past employers could not maintain that burden for both active and retired workers.  Prior to this companies could do this, but only if their active to retired worker ratio would support such an activity, and as the cost of health care rose so did the cost to companies of non-productive workers in retirement.  Over time company provided benefits decreased and Social Security was not providing enough money to allow retirees to purchase health care.  Thus government stepped in to provide a cost-shifting scheme so that everyone else paid more for health care.  As demographics and improving standards of living allowed for longer life expectancy, the number of aged retirees grew quickly and their cost to the health care system increased.  That required more expenditures by government that did not cover the full cost of care and treatment of individuals, thus shifting costs further into the actively paying pool.  Those in that pool were getting subsidized health care via the tax code not only for companies but individuals, which meant that the full cost of health care, medications and procedures were not being paid by those receiving them.

Were any means sought to allow individuals to better pay for their health care?

Yes, health care savings accounts were allowed to be tax free for their earnings but only if they were utilized within a single year.  We do not treat your health as a worthwhile investment to allow for tax free growth of money so as to pay for future health care.  If these accounts were treated like IRAs then individuals could invest money, even at minor rates, while young to ensure growth of capital over time so as to have more funds to address health care needs later in life when procedures and medical problems arise faster due to ageing.

Does this work?

To a limited degree, yes, but the loss of ability to roll-over such accounts year to year means that careful pre-planning is necessary to maximize their usage, unlike retirement accounts (by and large).  Without roll-over security for the funds in these accounts, their ability to help cost-shift are restricted to a single calendar year, not year to year or early to later in life.

So health care savings accounts set up to allow flexibility of payment within a given year to better handle the cost of health insurance is only limited in effectiveness because it doesn't allow for long-term planning?


Can individuals get other health insurance types to do this?

Yes, they can, but they must be picked up when relatively healthy, and therefore at a young age, and paid into every year so that catastrophic or long-term care needs are addressed.  The moment you actually get a long-term condition the cost for these plans skyrocket as you will need active payment from the insurance system to care for you, and you have not paid into the system to get such coverage.

If all of this is subsidized, why doesn't it work better?

Because of the subsidies, themselves, cost shifting from efficient, individual payments to less efficient bureaucracies in health insurance companies and via the least efficient means which is the federal government.  Every co-pay is a cost shifting event, so that every utilization of the health care system for non-emergency, non-chronic events incurs costs which are shifted in the way of higher prices paid by those able to afford it.  As physicians see the cost of overhead rising via the staff and infrastructure necessary to deal with health insurance companies and the federal government, they have fewer hours to deal with patients due to paperwork overhead and the cost of employees filling out such paperwork added into the cost of the actual health care.

Those overhead costs aren't paid for by the system?

If that means they are not covered by the system, that is only partially true as they are covered by the increased cost of doing business for a physician.  Physician reimbursement to see an individual utilizing health insurance is negotiated between the company and the physician, which does not allow for much variation in pricing between physicians, thus eliminating market forces for better utilization of physician's time and to lower cost per visit.  By attempting to standardize the system with bureaucracy, the ability to differentiate between the quality, cost and timeliness of delivery of care is removed as the burden of the reimbursement system layers on an overhead cost that must be borne by all those in the system.  You pay for that overhead in your direct co-pay and via your premiums used to pay physicians for treatment, and if you get a co-pay system your premiums rise disproportionately when overhead cost is increased.

Doesn't the new health care law add in more accountability?

Yes.  That is an overhead cost via tracking of paperwork and adding bureaucracy.

Doesn't that increase the cost of health care and health insurance premiums?

Drastically, yes.

How can the cost of health care be brought down?

Removing subsidies, overhead costs and reimbursement systems so that physicians can compete on cost, quality of care and timeliness of care.

Wouldn't that be more expensive?

To whom?  For those with 'health insurance' this would see doctors stepping away from a cost reimbursement system and lowering cost per visit which, while still higher than a co-pay cost, would be lower than the nominal charged through cost of physicians to health care companies via premiums.  By reducing staff size, office size and requiring the signing of non-malpractice waivers, physicians could move from our current, highly regulated system in which they bear the burden of costs for your health care to you necessarily managing your health care and assuming the cost of your decisions.

Wouldn't that increase the cost to retirees?

Yes, it would.  Not necessarily in direct physician cost but on medication cost for the maintenance of long term chronic disorders, like diabetes.  Many pharmaceutical companies have special plans and help systems for those unable to bear the full cost of such medications, however, as a form of charity which is lower cost that trying to shift the cost burden via health insurance.  With companies overstock and over-runs of production that would not normally be marketed would be accessible to the poor and elderly at a reduced cost with the company passing on the fractional cost of over-production (which it has anyway) to those currently paying the full cost for medications.  In addition we subsidize charitable contributions in the form of write-offs to companies.

Aren't subsidies dangerous, though?  I mean look at what they've done to the health care system, already?

They can, indeed, be dangerous: you might get more generous companies as a result and start removing the image of greedy companies for ones that will see a social good and value towards helping the poor and elderly.  Politicians need large corporations not only as donors but punching bags for re-election campaigns, and any attempt to let companies soften their image by actually helping people, directly, instead of indirectly means there are no pay-offs to political cronies and the amount of funds going into campaigns by generous companies are reduced.

They should be regulated to stop that!

They ARE regulated to reduce that and to otherwise add political input into the system.  The net result is that those companies being regulated feel the need to get their own input into the political system via lobbying of government officials and bureaucrats.  Companies have a vested interest in making sure that they can operate and secure market positions, and regulations are a prime way to reduce competition by increasing the barrier cost of entry into markets from smaller firms.  Bigger firms can pass on those overhead costs of lobbying easier than smaller firms, and the system is thusly biased towards larger firms.  The cost of that lobbying is passed on to you, through the higher costs of goods and services, including health care.

Why are these companies moving facilities and jobs overseas?

The cost of regulation means that the American worker is less competitive compared to their foreign counter-parts due to the cost of living in the US, the lack of low-end wage flexibility and the cost of overhead to run Social Security, health insurance and all the other regulations that impact US businesses on a daily basis.  Every hour spent filling out paperwork for the government or to receive reimbursement, which is an indirect payment, means that those are non-productive hours that the company still incurs as part of its overhead.  That overhead cost of all regulation is passed on to you through the higher cost of everything and the less efficient delivery of goods and services.  Every transaction has a cost to it, especially when reimbursement and accountability systems are added into the mix.  Each accountability and reimbursement system has its own cost per transaction that includes the cost of purchasing and maintaining the necessary infrastructure to the system and the cost of human oversight of the system.  All of those transactions bear the fractional cost of the annual operation and maintenance of the system or is otherwise passed on via premiums, price hikes and fees.  The cost of the government side is added in to your taxes and through the number of transactions that are layered on to the system to 'regulate' it.

Doesn't that change the ratio of active workers to retirees?

Yes, though indirectly.  Because of the lack of low-end wage flexibility and the cost per worker of federal, state and local regulations, companies find that it is not economically feasible to offer such low wage jobs in the US legally.  Such things as the minimum wage for citizens, and then trying to circumvent that via hiring non-citizens, points to a systemic incapability of the US system to employ its own citizens at low wages.  This then retards time to entry into the workforce and while increasing wages it reduced overall active time in the workforce to have gainful employment to invest for the long term.

So the illegal alien problem stems from the minimum wage and the cost of adding citizens to the workforce for short-term work?

Yes, to a degree.  Historically there has been a small, migrant population on the southern US border that tended to move with crops, but that only became a problem when we burdened the cost of legal employment for citizens.  There are no jobs that Americans 'can't do' but there are jobs for which the cost of hiring American citizens is economically inefficient.  Do note that this goes for the high tech industry as well as the agricultural community.

So government makes it harder to run Social Security via the minimum wage and regulations on business?


Is this sustainable?

No.  Social Security is now permanently in the red and will eat up more in the way of taxes from the federal government, which will increase the amount of taxes to run the federal government for all that it does.  Further the cost of Medicare and Medicaid, plus the new health and financial regulations are increasing the cost of paid-for health care and the transactional cost on everything these regulations cover, which is all of the financial community including your credit card and bank account.  Everything you now do will have an increased transactional cost due to federal regulations.

This doesn't sound good, does it?

If this were a private enterprise then any politician who voted for any of these regulations or signed them into law would be part of a RICO investigation to perpetrate multiple Ponzi Schemes on the American public via the abuse of their power.  As it is Congress loves to exempt itself and the government from such investigations.

Is there any way out of this?

Yes, it isn't nice but there is.

What is it?

End new entrants to Social Security, remove the medical subsidies and entitlements via a block-grant to the States and then phase them out over 5 years, the clean-sheet the tax code to get a single tax rate for all Americans, remove all deductions and benefits from the code, and proportionately reduce that under the poverty line so that each and every working American has a stake in the US government.  In addition clean-sheet government starting with just the few functions of the Treasury, Mint, Commerce, Defense, Coast Guard, and any interstate laws not connected to a federal agency (such as kidnapping, wire fraud and such).  All other government agencies and quasi-government entities would be abolished, and the postal system put into a standards carrier system to which any carrier could apply for pick-up and delivery service so long as they abided by a system neutral concept for exchange of packages.  We can pay for those already in Social Security through higher taxes, but Social Security, itself, must go as a concept.  States are better able to gauge the need for their poor for health care, and by removing the cost overhead of the current system, prices across the board for health care will drop.  State and local systems already duplicate many of the large scale systems at more sustainable and accountable levels and removing the duplicate work that is 'One Size Fits All, Fits None Well' from the federal side will allow for leaner and better crafted systems to take over at the State and local levels.

But won't that cause chaos?

You tell me what happens when the system collapses on its own, because that is the path it is on.  We can plan for it, do it, and remove the government retail or wholesale, but the cost of it must go one way or another.  The other choice is bankruptcy for the Nation and then all these things go, anyway.  The choice is yours.  You may feel 'entitled' to a retirement.  Tough.  You have been lied to for decades as one of the victims of multiple Ponzi Schemes and you believed that the first through Scheme indicated a viable systems while, just like any Ponzi Scheme, they are part of a confidence game to gain your trust and fleece you of your hard earned dollars.  The warnings have been out there for decades, if you did not pay attention to them then you did so willingly: You are the Mark.

Aren't the Marks the last ones to figure out a Ponzi Scheme?

Yes.  It is time to stop being a Mark and picking up your duties and obligations as a citizen of the United States.  You may not like that, but the alternative is chaos.  The choice is yours... just know that very little good comes from chaos within a Nation save for blood and loss.  That choice is yours.  We can do it fast, we can do it slow, but this must be done to survive as a Nation.  We can no longer gain international credit to run these Ponzi Schemes: we are no longer trusted on our own finances because we have tried to run them on unsustainable debt.  The bill can be paid if we stop increasing the debt load.  That means less government now and in the future, stable taxes and shutting down the Ponzi Schemes.  It is either that or you are the Mark... and down that path lies blood at your feet as you could do something, now, as a citizen to let government know it must stop this insanity.

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