A Centered View of Our Times

The Debt Ceiling

2011-07-26T15:18:00.009-04:00

The "crisis" in Washington over the Debt Ceiling would be comical if it was not so serious. Ringling Brothers could not have staged a better performance of a "debt defying act" -- oops, that's "death defying act."

There is no reason not to raise the debt ceiling. It must be done sooner or later. Tying a vote on raising the ceiling to spending cuts is taking our fiscal process hostage. It is being done to leverage a particular solution to a separate problem - an imbalance between tax revenue and spending.

Whether you believe the imbalance is because we spend too much, or because we tax too little, the imbalance is its own problem. It is, however, linked to the debt, because the imbalance is what drives the debt upward. Fixing the debt problem must be accomplished by fixing the imbalance in the annual operating budget of the government. It is the only prudent way. Because the imbalance is so large (roughly $1.4 trillion), the gap can't be closed only by spending cuts or revenue increases, it requires both. The gap must be bridged by building from both sides, not just one.

Defaulting on the debt is highly unlikely. The consequences are not exactly known, but are surely exceptionally unpleasant at the least. Given that fact, the government would choose to channel available funds first to debt service. Cuts would come from other programs. And they would be drastic. So the more likely fear is not for debt default, but for service shutdowns. It will not be bondholders, but service recipients, a.k.a. taxpayers, who will be affected the most.

Ron Paul suggested in a piece carried on Bloomberg, that default now would be better than default later and there was no other answer. The equivalent on a personal level would be something like saying that everyone with a mortgage and an unbalanced monthly budget would have to declare bankruptcy to fix their problems. Simply not so. This either/or thinking is fallacious. Mr. Paul is part of the problem, not the solution.

Whatever you think of Pres. Obama and his speech on July 25, he got a lot of it right. This is not a problem with a one sided solution - cut spending. Unfortunately, when a Democrat suggests a tax increase you get the Republican reaction (shared by non Republicans as well), that it is just another pick from the pocket of the taxpayer, (albeit wealthier ones) aimed at avoiding hard cuts and political disfavor. As it turns out, President Bush (W) gave taxpayers a gift he couldn't pay for in the form of tax cuts and President Obama gave one he couldn't afford in the form of a stimulus package. Mr. Obama is now in the unenviable position of having to take the gifts back in the form of spending cuts and tax increases. It's probably not the "change" he anticipated when he ran for office.

To filter the rhetoric coming from Washington, we need to remove the term "government" and substitute the word "taxpayers" when talking about money. The government is only an intermediary in taking money from taxpayers and dispersing it to others to acquire goods and services for the benefit of taxpayers. The government, per se, has no money. IT gives nothing to anyone. It merely takes from some and redistributes to others. This is not to disparage government, only to recognize that any discussion of spending cuts and revenue increases ultimately rests on the taxpayers. Nothing about the government is "free."

Today the cost of running the government is about 40% greater than the incoming revenue. That "excess" is the annual deficit and is financed by borrowing. To bring things in line requires a combination of: a) cutting services we can do without and b) raising the funds to pay for those we deem essential. Continued borrowing is like buying groceries on credit with no intention or means of paying it off. That's truly a "moral default." Unfortunately, it is politically expedient for those seeking reelection and it has been going on for a long time.

It is worsened by the fact that roughly half the working population pays no federal income tax, yet enjoys nearly the same or greater benefits than the paying population does. This lopsided financial distribution in a democracy means the "getters" can force the "givers" to put even more into the system simply by applying majority voting power.

There has already been at least one bipartisan committee (Simpson-Bowles) who looked at this situation and made recommendations. They may not be perfect, but they probably represent a reasoned compromise. Certainly, they have to be better than what is coming from our politicians lately. That's one solution.

Interested in another solution? It's not pretty, but it is simple. Adjust spending and revenue by 7% each year (roughly $170 billion). The first year, cut government spending from current levels by 7% and leave revenue alone (no tax increases because the economy is still fragile). In the second year, cut spending 6% and increase tax revenue by 1%, then 5% and 2% in year 3, etc. Continue to change the mix until the annual budget is balanced in approximately 7 years. Then, go one or two more years further to create a surplus to use to reduce the debt. This approach forces changes immediately and avoids the Congressional ploy of claiming "cuts over 10 years" where all the savings supposedly happen at the end and nothing changes now. This approach also does not mean every part of the government goes down by the same percentage. In any given year, the defense budget could go down twice as much as say the education budget.

Would this be painful? Absolutely. It would likely mean the loss of employment for people on the government payroll and those providing services to the government from private industry. It would also mean limits to the growth of social benefits or possibly some reductions. This economy is a bad time to do this, but it is what we face sooner or later - and later only means the debt has grown even more.

The first place to start? Congress. Their budget is $5 billion a year. Not much compared to the trillions of deficits, but a little taste of this medicine would be good for our friends in DC.

How Congress Can Show Fiscal Leadership

2011-04-19T15:05:00.007-04:00

I listened and watched the latest haggling in Congress over the "budget." It was more than dismaying to watch 435 people quibble over a fraction of 1% of federal spending like it was the end of the world. Even worse was the attempt to mix in social policy (Planned Parenthood) with fiscal necessity (an operating budget).

In the last three years, the federal government has spent about 40% more than it has taken in. With the debt at over $14 trillion dollars and equal to the Gross Domestic Product (the value of everything our nation produces in a year), and an annual deficit that creates an additional $1.3 +/- trillion of debt this year, the time for real action is upon us. The president wants to cut $4 trillion over about 10 years, Congressman Ryan wants to cut about $6 trillion in that time. Sounds good? Not hardly. These people are trimming a projected "deficit," not the debt. They are not even getting the budget to balance for years and years. Meanwhile, the debt will continue to expand. What looks like action is only a bandaid over an infection. The recent downgrade by S&P of its expectation for the government dealing with its debt sends a clear signal that the financial markets are getting tired of rhetoric without real action.

Congress is addicted to spending. While the economy cannot handle cold-turkey withdrawal at the moment, Congress needs to become a "Big Loser" and not a casual dieter. Here is one way it could get serious about being fiscally responsible.

Congress and the White House should set an example of fiscal discipline. It will not cripple our economy for Congress and the White to each cut their spending by 10% each year for the next four years. That simply brings these parts of government into fiscal balance. It's time to "man up" and "spend down" in Washington.

With Congress and the President in the lead, the rest of the total budget can be trimmed 5% per year during these next six years to achieve 30% spending cuts while we grow tax revenues by 2% each year for six years to eliminate the deficit and create a surplus to begin modestly retiring the debt. Will this be hard? Absolutely. But failing to act strongly now only makes acting later even more drastic. Don't like 5% and 2%, then try 4% and 3%. This problem needs worked from both directions.

The four largest items in the federal budget are Social Security, Medicare, Defense, and Treasury. Nothing else is even close. With baby boomers banging on the door of the first two programs and an increasingly overweight and obese younger population, who will become sick earlier, SS and Medicare are headed off a cliff. Toss in the government IOU's sitting in the SS Trust Fund and the situation is sad beyond belief. It's time we admit we made promises that changing demographics mean we cannot keep. We must shift from "spending" on services to "investing" in education, infrastructure, and research to rebuild the backbone of our nation and protect our future. Getting less than you thought you would from SS and Medicare is better than getting nothing at all which will happen if the government lets this escalate.

Everyone is nibbling at the margins. That is woefully inadequate given the size of the problem. Send this message to your senators and representatives. Tell them to lead, not squabble.

State of the Union 2011 - Citizen's Edition

2011-01-26T16:14:00.003-05:00

The State of the Union 2011 - Citizen's Edition

If I were the president, this would be my state of the union address. This was prepared prior to the president’s speech on Jan. 25, 2011 with some slight revisions and additions afterward. Similarities between this piece and President Obama’s remarks are entirely coincidental.

Greetings, fellow Americans. Let me begin this address by asking our Congressional representatives to “cross the aisle” and join with the other representatives of their state and sit together through these remarks. We are not a nation of Democrats or Republicans. We are a nation of United States and that is our strength. For too long this aisle has stood as symbol of a nation divided by politics and not united by values. If our joining together here and now is good, so it should be for every state of the union address and for every day this chamber is in session. From this day forward, let this body work as one for the success of our country. So, Mr. Speaker, I ask you, “Close down this aisle.”

Let me address the state of our nation. It is mixed. If you are in a corporate boardroom, it is improving significantly. If you are in an unemployment line in Memphis, it is not. If you are drawing a large bonus on Wall Street, it is good. If your home has been foreclosed in Las Vegas, it is bad. In short, we have a nation where some of us are doing very well and many of us are not. The problem is not with the success of some, it is with the failure of many to achieve that same success. We will not make our nation wealthier by taxing the rich and subsidizing the poor. We will only have prosperity by preparing our workforce to generate and share a larger economic pie.

The persons in our workforce who got the message about staying in school, learning, and applying their talents are generally succeeding in America. Our formula for success still works. It is no guarantee, but it is a proven path for many. On the other hand, it seems like we have a growing part of our population that believes school is not worth the effort, that working hard for an employer is too inconvenient, and that good jobs with good pay should be given to them anyway. To this group I say, “Wake up!” That doesn’t work. You cannot skip school, do dope, get pregnant in high school, or choose your spouse foolishly and expect to succeed. In America, you earn your prosperity, it is not given to you by someone else. Get serious. Don’t just attend school, learn to read, write, and do math well! Don’t just collect a paycheck, make an effort to improve your employer’s business! If you have the skills of a third world worker, in today’s global economy you will be earning third world pay. As a nation we cannot afford this. It translates into nearly half our households paying no federal income tax. As a government, we will try to make education accessible and affordable and job opportunities available. It is up to you to do your part to keep this nation strong and prosperous. To those who have skills and are trying hard, but are finding success out of reach in today’s economy, I say, “Keep trying.” We cannot fix the economy over night, but we are working on it and things will get better.

Now, let me address our national priorities. Our priorities are a safe, prosperous and free United States of America. We have sought to achieve that safety by attacking those who have attacked us. We have done it on their turf in Afghanistan. The previous administration judged that Iraq possessed that same potential to endanger us. It did not. We are now disengaging from the war in Iraq. We have stepped up our engagement in Afghanistan with the hope that it will bring us to a faster conclusion there. Our goal is to be disengaged there by 2014. We will meet that goal and accelerate our withdrawal at a rate that prudently protects our forces. We will not remain in either Iraq or Afghanistan in order to prop up their governments. Both countries will have had ample time to put their own houses in order. As an outsider, the United States cannot bring long-term security and stability to these nations. Only when the citizens of those countries act in their own best interests and police the radical elements that bring them grief, will their lives be better. We cannot do for other nations what they will not do for themselves. It is time they stepped up so that our armed forces can stand down and come home.

In addition to drawing down our active military in those two countries, we will also significantly reduce our overseas military presence in peaceful, allied countries. We no longer need and cannot afford to serve as the world’s protector. We must protect our shores first. This is not isolationism, it is pragmatism. The reduction in our military will aid in our overall deficit reduction efforts.

To further strengthen and protect our nation, a portion of the military savings will be used toward increased domestic security. We are not engaged in a “war on terror” that can be fought on a conventional battlefield. We are engaged in a worldwide police action to find, root out, and prosecute those who would harm us where we live. That is a job for our local police and FBI. We will see to it that they are better equipped to do this at home and to do it in conjunction with their overseas counterparts. Furthermore, we will improve the protection of our borders and our ports of entry. By reducing spending abroad, we can improve our defenses at home.

Reducing our military is only one small step in setting our national financial house in order. For far too long your government has not been a prudent steward of its financial resources and has not met its fiscal responsibilities. Your Congress has failed on numerous occasions to accomplish the basic task of approving a budget in a timely fashion to ensure uninterrupted operation of your government. This would never be acceptable in the world of business and it is not acceptable for our nation.

The executive branch has curried favor with the electorate by giving the nation tax cuts that created deficits. We have been borrowing from our future to pay for benefits in the present. In this past year, your government borrowed $0.41 cents of every dollar it spent. You cannot do that and keep your household solvent. Neither can we. This must stop and it will stop. The deficit reduction commission recently made sound recommendations for across-the-board changes in how we raise and spend money. Many people are unhappy with those recommendations. That probably means the commission got it right. We will aggressively pursue implementing those recommendations starting this year. We will not continue to postpone actions to fix problems we know need fixing now.

To drive home the urgency of our need to control spending, balance our budget, and bring down our debt, I will take the following two actions.

First, the operating costs of the Executive function of government will be reduced from their current levels by 20% each year for the next two years. No longer will the White House spend 40 cents we do not have.

Second, by executive order, I will direct all branches of government to reduce spending from current levels by 10% each year for the next four years. This will undoubtedly be a struggle and as a result you may see less service from your federal government. The simple truth is, that through the use of debt, you were getting service that your children and grandchildren will be paying for. They cannot afford it and we will not enrich our time by impoverishing theirs.

We cannot improve our nation without improving the way we govern it. Our constitution is an anchor for our values, but not our methods. We must find ways of managing our nation that are for the 21st century, not the 18th. To that end I will submit the following two constitutional amendments and three bills:

A constitutional amendment reducing the number of representatives in the House of Representatives from its current 435 members to 220 members. The simplest way to have less government is to have “less government.” I challenge Congress to reduce its operating budget by 40% over the next four years in anticipation of this amendment being ratified.

A constitutional amendment limiting the total terms of office for both house and senate members to 18 years or until the end of a full term if the 18 years was reached during a term. Serving in elected office is not a career, it is a service.

A bill called the “One Law Act” requiring that legislation contain only provisions directly related to the primary purpose of that legislation. No longer would individuals in Congress be able to attach pet projects or questionable legislation to ride on the coattails of necessary legislation. We cannot run this nation by using legislative gimmicks to get what we want as individuals.

A bill called the “Right Pay Act” regulating the salaries of elected federal officials, including myself so that salaries are based upon the economic status of the population at large. I do not believe it is appropriate that a Congressperson earns more than $170,000 per year when half his or her constituents are earning roughly one fourth or less of that. I recognize that living in a home state and maintaining a second residence in Washington is a burden a Congressperson faces that normal citizens do not face. If we set Congressional wages at 2.0 times the median family income, then we are closer to reality. We are not trying to set a competitive salary for hiring politicians. We are setting a salary to reflect the prosperity of America. As the country prospers, so will Congress. As for my salary, it will be the same as Congress. To govern with appreciation for our people, requires us to live like the nation lives.

A bill limiting campaign contributions to $100 per person or entity such as a corporation or union. This will be adjusted for inflation with each election cycle. If it this does not pass muster with our Supreme Court because it conflicts with free speech, then we will find something similar that does. Free speech and free money for campaigns are clearly not the same thing. We need the best government we can elect, not the best government special interests can buy.

We will reform healthcare a second time. It is evident from polls and discussions across the land that while many of our citizens endorse much or all of the legislation that was passed, an equal number do not. This cannot be a situation where the nation is divided so strongly within itself.

Frankly, we are on the horns of a dilemma. We have millions of Americans who either cannot afford health care and health insurance, or who are not considered eligible by insurers. Compassion dictates we help them. On the other hand, extending coverage costs money. We cannot pretend, or play slight of hand with the figures, by postulating future savings. Too often in the past has government promised a benefit at one price and found it costing far greater. We know better. Therefore, only after we run a consecutive budget surplus for two years, we will know we are in a position to consider increasing our government expenditures for health care. We will not plan to spend money we do not have. To do so is to offer a false promise to those getting the benefits - it is a promise made today that we cannot keep tomorrow.

Our new focus in the reform of healthcare will not be the extension of benefits, but rather the reduction of costs. The cheaper healthcare becomes, the more people will be able to receive it on their own. It is not by more government intervention, but by promoting innovations and cost reductions that we will extend health care to more families. Nearly everyone has a TV. Why? Because they are cheap, not because the government provides them. Where it is most necessary, the government will continue to provide compassionate care with the understanding that it is not limitless.

Healthcare takes me naturally to our next national need - our national health. We are literally killing ourselves and driving up our national health care costs as we do it. The percentage of overweight and obese citizens in our country is unacceptable. The same is true for smoking. The good news is that number of smokers in this country is half what it was 50 years ago. The same thing can be true for being overweight. Diseases like diabetes, heart conditions, joint problems, are all aggravated or even instigated by being overweight. Treatment of these conditions pushes up healthcare costs for everyone. What’s more, our military is having increasing problems with recruits who are not physically fit. This is a problem we can solve ourselves. It is time for America to literally shape up. At no time in our history have we been more out of shape as a nation than we are today. Your government cannot fix this. We cannot legislate thinness, but we can give you an incentive to be healthy.

I will introduce to Congress the “Healthy America Act.” This will cover all those receiving health insurance benefits from any federal government program. Persons, who in consultation with their doctors, actively manage their health, stop smoking, avoid drug abuse, and bring their weight and other health factors such as blood pressure and cholesterol into proper ranges through diet, exercise and proper medication will receive better coverage than those who do not. If you want to be overweight and out of shape and sick by your own choice, you have that option. America is a free country. But, please, do not expect your fellow citizens to foot the bill for your chosen behavior.

As we approach April 15, we are all painfully aware of how distorted and complex our tax code has become. We have created an entire industry of tax preparers to help ordinary citizens give the government its due. We have taken a simple system whose purpose is to provide revenue for the government and turned it into the most byzantine form of social engineering. The larger the code has become, the more special interests have a section they wish to protect and the harder simplification is. Chipping away at the problem is futile. We will take a sledgehammer to it.

I will introduce legislation titled the “Simple Tax Act.” This will eliminate all deductions and special treatment of incomes. It will reduce the overall tax rates to make up for those changes. Obviously this will put some people at a disadvantage, like those who deduct mortgage interest. We will give people ample notice and phase in the provisions so that taxpayers have time to adjust, but adjust we will. Our goals are simple: you will be able to do your own taxes, and, we will have enough money to run the government. This system will not be perfect, but it will be better.

On the subject of having enough money to run the government, it should be clear to everyone hearing these remarks that we have a problem in this regard. We have been spending more than we have been taking in for approximately the last 10 years. The plunge in our economy made a bad situation even worse. Lately, we have been overspending to the tune of about 1.3 trillion dollars each year. This has driven our total deficit to more than 14 trillion. As the executive officer of this nation, let me say clearly that this is totally unacceptable. Just as reducing nuclear arms makes our nation safer, so does reducing our national debt.

While we will do our best to control spending, it is clear that we also need to increase government revenues in the short term. The best way to do this is to stimulate the economy so that more taxpayers have bigger paychecks and pay more in taxes. That is ideal and we will work toward that end. In the meantime, we will raise tax rates on higher incomes and certain commodities that will help move us in strategic directions we need to take as nation. I will do my best to hold these taxes to the minimum required. However, unless we begin paying our own way in the here and now, and stop borrowing from the future, we will find ourselves in the unenviable position of some European countries who have for years extended benefits beyond what was fiscally responsible. They are now facing drastic reductions accompanied by riots in the streets. Our aim is to make modest changes to prevent drastic ones. Whether we like it or not, in our hearts we know this is necessary.

At the same time we are getting our fiscal house in order, we must realign our expenditures to prepare ourselves for a prosperous future. We are falling behind in the areas of education, infrastructure, and energy innovation. We are living off the achievements of past generations. Bridges, tunnels, sewers, power lines, and roads built decades, even centuries ago, are in need of repair and replacement. Our interstate highway system designed for the age of the automobile needs to be complemented by other forms of high speed transportation. Our dependence on oil, whether imported or domestic, to power our economy makes us vulnerable to economic disruption. Over the long haul, it makes us dependent on an increasingly expensive and decreasingly available energy source. The same is true for other hydrocarbons like natural gas and coal, although their supplies will last longer than oil.

We cannot manage our nation’s energy supply for this year or even this decade, we must do so for the next 100 years. If we want America to prosper in the 22nd century as it has in the 20th, then we must aggressively develop non-carbon energy sources in abundance. The marketplace will do this for us. Unfortunately, the marketplace on its own may not recognize and respond to the problem fast enough to avoid economic calamity. Price is the driver of choice in our economy. The higher the price, the less we use. I will introduce legislation to slowly raise the tax on oil from all sources in order to make alternative energy more competitive. In short, we will cause the market to do sooner what it would naturally do later when acute shortages would drive up prices rapidly. This will enable us to transition our energy economy so that we can remain a global leader.

When it comes to education, if we can put a man on the moon, we can educate a student in a classroom. We will find a consensus among leaders in the field so we can define effective learning methodologies. We will provide funding for schools to use those methodologies. We will test the students to see the results. If you do not pass, you will not advance. We will not measure and reward activity like graduation rates. We will measure and reward competence among both the faculty and the students. Trying is not good enough for America. Succeeding is.
We will push hard for schools with poor parental involvement and minimal parental support for education to get extra resources to compensate for this missing element at home. But we must all keep in mind, that no school can do what a parent will not do. It is past time that we, as parents, told our kids in no uncertain terms to put away the video games, stop texting, and do their homework, and do it well. If we continue producing marginally literate graduates, whose best work is a 140 character Tweet, we are all in trouble. Every generation depends on those coming after it for its sustenance in old age. As parents, grandparents, and as citizens, we have a personal stake in getting this right.

One scourge of our youth, and even those well past adolescence, is drugs. We have an epidemic in progress involving all manner of substances. Drugs contribute to problems with theft and violence, health care costs, prison costs, domestic abuse and child neglect, and others. Fix the drug problem and many other problems get better. Going forward, there will be greater law enforcement activity in the area of drug enforcement coupled with increased treatment, and when necessary, tougher sentences. To make that effort easier, we will decriminalize the use of marijuana. No longer will police be chasing after pot smokers when serious offenders deserve serious attention. At the same time, we cannot simply open our culture to potential drug abuse with marijuana.

To that end, I will introduce the “Marijuana Regulation Act.” Its basic provisions will include the requirement that smokers be at least 21 and purchase a license to smoke marijuana. This license will appear as an endorsement on their driver’s license or personal identification card. The license will be renewed with the renewal of the driver’s license providing the user provides a doctor’s proof that they are not addicted or otherwise impaired through their use. This same type of legislation will be offered for the consumption of alcohol and smoking regular tobacco products. In this fashion, those who want the privilege of using alcohol, marijuana, and tobacco will have it. And, we as a nation, will have some ability to monitor and control it. If you become medically impaired from your use, you will no longer be able to legally purchase the substance. Likewise, employers will be able to examine a person’s license to determine an individual’s “substance use” status. Both individuals and employers will be free to make their own choices.

Jobs are on the minds of everyone. The good news is that about 90% of our workforce is working. The bad news is those who aren’t and those who could be working at better paying jobs. We will continue to do whatever we can to get our economy back on its feet. But let me be clear, government does not control the economy and it does not make jobs. The economy is a complex mechanism with many parts some of which we can influence, but few of which we can control. When it comes to jobs, private industry is our engine for job growth. We will work with private enterprise to find ways to adjust taxes and regulations to make America a haven for responsible businesses.

The role of your government is to make it easier for private firms to start businesses or grow businesses within our borders. We will not do this any longer by “stimulating” the economy with government spending. That is over. Our stimulus spending has only robbed future consumption and pulled it into the present. A good example was the tax credit that provided an incentive to purchase a home earlier this past year. It drove up purchases prior to the end of the credit and then they dropped and stayed down afterward. We did not create additional demand for housing, we merely dragged it forward in time. It was a sugar high for the housing industry. So was “cash for clunkers” for the auto industry. We are not doing programs like those again. Our focus is on education and infrastructure for the long-term.

For those of you on unemployment, we will continue to do our best to sustain you until the economy recovers. To the extent that, as a nation, we can keep people in their homes and avoid future disruption to the housing market, we need to do it. Unemployment is temporary, not permanent welfare. It will go away. For those reasons, I support it.

Lastly, I need to reassure those of you currently on Social Security and Medicare that we will work diligently to uphold the benefits that you rely upon. By the same token, this is to put on notice anyone not yet enrolled in those programs that you should not expect to get the benefits past enrollees have received. It is simple math that the percentage of our government budget spent on social programs has increased and increased with each year those programs have been in existence. We are now at the point where our aging population relative to our working population makes these programs unsustainable on an indefinite basis. There is no pile of cash under the capitol dome to pay for future Social Security or Medicare benefits. These programs operate by the current workforce paying for the benefits the current recipients are getting. In the past, there has been a surplus of payments over expenditures and the programs operated “in the black.” However, the government did not set this surplus aside as gold or currency. It was spent and replaced with IOUs from the treasury to the programs. These are essentially IOUs to ourselves. We borrowed from Peter to pay Paul and at some point Paul must pay Peter back. As citizens and taxpayers, we are both Peter and Paul. Meeting the IOUs that will come due in the future will require increased tax revenues. We are staring down the barrel of a loaded gun. Changes to Social Security and Medicare for future beneficiaries can no longer be “off-the-table.”

As noble as it is to support our sick and our senior citizens as a government, it will bankrupt us at the rate we are going. A dollar spent on these services has a far different effect on our nation than a dollar spent on education or infrastructure. Education and infrastructure are investments in our national future that will sustain us all. Social payments are a current expense paid to the beneficiaries. In the cases of Social Security and Medicare, we must balance compassion for some with responsibility to all.

In closing, let me encourage every citizen, regardless of your politics, to be actively engaged in improving your health, your government, your community, your schools, churches, and most importantly your families. America will be as great as we make it, not as we wish it. Thank you.

Ambling for Congress in 2010

2010-11-06T22:40:00.004-04:00

Having posted extensively about health care on this blog, and being motivated to improve government by the dismal work I saw going on in Congress, I took it upon myself to run for Congress in 2010. I knew that I couldn't philosophically be a Democratic candidate and the Republican party apparatus already had a favorite. Therefore, since I am an independent person anyway, I ran as one.

With the tiniest bit of research, it is easy to discover that independents do not get elected to the U.S. House. Thus, I knew from the outset that expecting to win would be delusional on my part. As a result, I directed my efforts to setting forth items for the voting public to consider as essential to good government. My primary campaign tool was my campaign web site (which is now gone).

My other aim was to visit the election process from the candidate's side of the ballot and learn more for myself about how campaigns and elections really work. Just how hard is it to run for national office? I succeeded more with this task than getting the issues before the public. Here's what I discovered.

It's not that hard to get on the ballot. In my case, it took 25 registered voter signatures on a petition form. The election people were very friendly and made a big point of saying to get extra signatures because not everyone who thinks they are registered really is. It does take some personal courage to ask people to sign your petition. You do need to think about your campaign finances. If you keep your spending and your fund raising each under $5,000 you do not trigger the reporting requirements of the Federal Election Commission. Go over those amounts and you are in for a mountain of disclosure about your personal and campaign finances. I opted to stay well under the trigger. But, as you will see shortly, if you do, you will never win.

As an independent 'You don't get no respect.' All the press coverage and speaking invitations go to the two major party candidates. I suppose if I had pushed, I might have gotten on some platforms with them because some other independents did. The League of Women Voters (praise be upon them) invited me to two of their forums, a Tea Party group to one, and a college radio station to one. Chambers of Commerce ignored me despite the fact that I belong to one outside my district and am a small businessman. Go figure.

Voters buy the brand. It seems to be a foregone conclusion that independents have nothing to offer, or what they are offering is too extreme to be electable. Voters, therefore, pay attention to the two main candidates after the primaries are over. If you want to get elected, you must go through one of the two parties to get there almost without exception. Despite the recent push by the Tea Party, there is no organized alternative to the Democrats and the Republicans.

Money buys office. I am sad to say this, but it takes loads of money to get your message out. Whether it is flyers, roadside signs, or TV ads, unless you are willing to be a heavy spender, you aren't in the race. That translates into something else. It means that either you invest your personal fortune (e.g., Meg Whitman in CA), or you raise lots of contributions or both. In the former case, only the rich can run for office. In the later case, only the well-connected, or the soon-to-be-beholding can run for office. Translation: national public office is out of the reach of the average person (local office is not). We might like to pretend it is not, but the presence of 170 lawyers in the U.S. House would suggest the odds are against it.

You gotta have an ego. This is not necessarily a bad thing. Serious campaigning requires a lot of time and energy. You've got to want the office and you've got to believe you are the best person for it. Plus, you've got to take some hammering from the opposition. In my race that never got out of hand, but in some other local races it was disgustingly nasty. Really low ball stuff. If you beat your spouse, cheat on your taxes, default on your loans, or toss trash out your car window, plan on it coming out. The one good thing about being a lowly independent is that no one cares enough to dig and dish dirt on you - not that there was any, mind you.

Voters are concerned with the immediate, press-fed concerns of the day. It does not matter that the current hot buttons like immigration, term limits, etc. are not as serious as longer term issues like oil shortages and fiscal failure of the government. The voters get hyped up over pet peeves and popular concerns. Some of the ones who get hyped get active and this election that took the form of the Tea Party. The energy was great and some of the concerns well founded, but worries about 2nd amendment rights (gun control) and a return to a late 1700's government really did not serve the forward progress of the nation. The big issues of tomorrow just don't catch on compared to the popular issues of today. The one big exception this election was fiscal responsibility. What I project this to mean is that we will have government by crisis and not by foresight. The mounting debt, Social Security and Medicare, oil supplies and prices, global warming, etc. which are major long-term issues won't be acted upon until it is literally too late. That's so scary even I don't want to think about it.

When you run for office you become popular with two groups. The first are the election sign printers. You'll get postcards aplenty from them. The second are all manner of organizations with surveys they want you to fill out. Many of these are poorly-concealed attempts to force you to either adopt their position or look like a jerk. The one good one was from VoteSmart and I answered it.

It may turn out that you are no dumber than the other guys. If you are a novice seeking office, you might think that your competition has a head start on you regarding the issues. Think again. If you do some research on important topics, you can stand tall when you talk. As an example, the Democratic candidate did not seem to know the difference between the annual deficit and the accumulated debt of the government. This wasn't his first time running for the seat. (In all fairness, I never put the question directly to him, but his remarks suggested this was true.)

I'll leave it at this for now. Maybe I'll have more reflections later. Pose a question in the comments if you are curious about something specific.

In Debt in a Big Way

2010-02-18T15:51:00.006-05:00

By now, most of us know that debt is a problem for our country. The first obvious sign was when the savings rate dropped to zero in 2005. That meant consumers were spending more than they were making. The trend had been downward for quite some time. The dip below zero was the cough of the canary in the coal mine. (For non miners, canaries were used to test for lethal levels of ordorless gas in mines - if the bird died, it was time to get out quickly.) The drop in the savings rate was accompanied by the rise in people taking on mortgage debt they could not afford. That led to the really big crisis in the housing market and the subprime loan disaster with its consequent foreclosure binge. The effects of that are still lingering despite government attempts to help home owners renegotiate mortgages. After one year in operation, about 0.2% of the $75 billion to help that happen has been deployed in the market. So much for government help for homeowners.

In the press lately is the government's debt level. It has been escalating dramatically. It was driven upward in the Bush years by ill-conceived tax cuts and two "off-the-books" wars. To the new administration's credit, they have moved the cost of war back on the books where it belongs. The debt continued to grow with the TARP program to bail out the banks who help bring us the mortgage fiasco (egged into it by Congress and the Community Reinvestement Act provisions and administration). Most recently, it has been further compounded by the stimulus bill, aka, the American Recovery and Reinvestment Act (ARRA). Add to this a decline in tax revenues from the deprecession and the deficit situation worsens. In the past ten years we have gone from a budget surplus to continually escalating government deficits. The national debt has tripled from $4 trillion to $12 trillion. Sadly, the trajectory upward looks to be continuing.

The federal government is now feeling some of the pressure that state governments have felt. Many state governments are required by their state constitutions to maintain a balanced budget or a surplus -- no deficit spending. As a result, they must cut expenditures (services) or raise taxes. The newly elected governor of New Jersey is on a crusade to do this with a venegence necessary to save his state. California seems to keep dancing around its equally hard facts of fiscal life. Many states have survived the last year or so due to the stimulus funds provided to them by the federal government. This is so brutally ironic that it seems unthinkable.

The states cannot run a deficit. The feds can. The feds create a deficit and give the money to the states. This is back door deficit financing for the states. It is beyond absurd. All this money needs to be recovered at some point from the taxpayers. It matters not if it comes from state or federal taxes with the exception that the different taxation systems may redistribute who ultimately pays the lion's share.

The ultimate meaning of all this is that the government has been living beyond its means just like the overmortgaged homeowners were. The size of the debt is about to become like the little puppy who grows up to be the 150 lb dog that pulls the owner down the road. The government's answer is to keep on running deficits. All this does is postpone the inevitable and guarantee the payback will be bigger and harder tomorrow than it is today. More and more it appears our choice will be between a depression today or an all-out collapse in the not-so-distant future. This is not a problem for our grandchildren, it is our problem now.

Tack onto this the huge amount of the budget consumed by Social Security and Medicare and the problem expands even more. The influx of baby boomers into these two programs will place demands on them they are unable to meet financially. This becomes an economic perfect storm. The government cannot practically fund these programs at their current levels for the incoming recipients (even without the added pressure of current and future deficit spending). Given the lack of retirement savings rampant in the USA, it looks like the next 30 - 40 years will see the return of "poor old folks" who move in with their children to survive. We will go from "boomerang kids" to "boomerang grandparents."

The book, "Comeback America" presents a good picture of what is happening to our debt and what can happen to our country because of it. It will be painful to reign in spending, but many Americans must radically change their view of government from the omnipotent overseer and benefactor of the populace, to a barebones protector of state security, personal freedom, and facilitator of fair-handed commerce. We simply cannot afford the government we have because we have been buying it on credit.

What are we fixing with healthcare reform?

2009-11-10T17:56:00.005-05:00

The House has passed its healthcare reform bill. The Senate has one out of committee. The two don't match. Why can't the members of Congress agree on what to do?

One reason is that we have apparently rushed to "reform." Reform what? Who has been the voice to ask "What is the problem?" or "What are the problems?" or even "What should the ideal future look like?"

Instead, it seems like individuals have their pet peeves with items under the umbrella of healthcare. We need tort reform? That's a fix. What's the problem and its cause? Some would say that lawsuits are too costly and drive up malpractice insurance costs. Ah, here is a cause for the problem lurking below the solution. How about another problem? We must reduce unnecessary medical procedures. Oops, that's another fix. What's the problem? Is it fear of lawsuits causing doctors to cover their unclothed hospital behinds (a problem every patient can relate to)? Ah, yes, another cause pokes it heiny out. But wait, is it the real cause? What about the poor coordination and information sharing among medical providers that causes duplicate testing ("We only trust 'our lab'"). Do we have more than one cause for the same problem? If so, which solution do we use, or do we need multiple solutions? Are these even the top priority problems? No. They are merely easy examples of what seems to be a non-systematic approach to the entire issue.

The rush to fix a system that is suboptimal is overdone. The current system may be imperfect, but it is not on life support. It seems unbelievably optimistic that legislation hammered out in a matter of a few months will effectively deal with such a mammoth and complex issue as healthcare. Particularly when it is brought to us by the same body that cannot make Medicare financially viable in the near future.

Even the terminology belies the insufficiency in the approach. People talk about healthcare "reform." You can "reform" a lump of clay, but it is still clay. You can "reform" an alcoholic, but he is still an alcoholic. You can reform healthcare and simply substitute one symptom for another. What we need is healthcare "improvement." Reform can be worse than the current situation and still be reform. This isn't just picking on terminology, it goes to the whole perspective being applied to the effort.

Bob Corker, the senator from Tennessee, made a short statement on TV news. He correctly pointed out that the current bill is hugely deceptive in its costing. The revenue support portions are due to start immediately to pay for the program, while the actual program itself does not begin for four years. Ten years of revenue vs. six years of costs is blatant distortion of the operating costs for this legislation. How can any reasonable Congressperson subscribe to this mockery of intelligent administration? No one in business could do this without being labeled a fool or a liar. This is nothing short of political camouflage for fiscal irresponsibility of the worst order. And, if I have this correct, Congress will maintain its own independent healthcare coverage after they "reform" it for the rest of us. A dose of its own medicine might cause it to cough up a more realistic result for everyone. Tell your Congressperson you want Congress to participate personally in the reform by using the system it creates. While you are at it, ask them to list the problems they are fixing and the causes of those problems.

The Role of Insurance

2009-10-05T11:34:00.001-04:00

John posted a comment on Sept. 24 discussing insurance and this post is a result of his comment.

Does insurance siphon off money that could otherwise be used for providing direct health care services? Yes. Is this a bad thing? No. The cost of operating an insurance program consumes resources that could otherwise be used for other purposes. However, insurance exists for many things (cars, homes, businesses, etc.) for good reason. Health insurance is no accident, but a response to economic forces. Here's why.

The purpose of insurance is to minimize the cost to a single insured by sharing the risks and costs across a wider group of insureds. The insurance firm "bets" that only a fraction of the insureds will require payments to them, while the great majority of insureds will be paying in. It also bets that claims will be spread over time and not concentrated too heavily in a short period. By accumulating many small payments and building up a reserve, the insurance company can distribute a few large payments to handle claims. The more claims that are made and the higher the value of each one, the more income the insurance company needs to cover those claims. That gives rise to higher premiums. If you can belong to an insurance pool of individuals who file only a few small claims, then you can enjoy lower premiums. That explains why insurance companies want to exclude sick people (pre-existing conditions, dropped coverage, etc.). By eliminating potentially expensive claims, they control the premiums charged and hold onto other subscribers. Sounds harsh, but it is just basic business. It is why homeowners' insurance is not underwritten by some firms in hurricane-prone areas. It is why accident-prone drivers pay higher premiums. It is why smokers pay more for life insurance.

The risk inherent in health gives rise to the use of health insurance. If you could predict constantly good health, you would not need insurance. It is both the unpredictability (disease, accident, etc.) and the potentially high expense that causes us to seek protection through insurance. Insurance spreads the risk. In exchange for many "smaller" payments, you get the security of being covered if you experience a major expense.

It is true that adding an "extended" warranty for repairs to your regular "collision / comprehensive" auto insurance would increase the total premiums paid. This happens because the insurer must now cover more frequently occurring expenses. If you want to get more benefits, you pay more for them. If you have a problem-prone car, you should get the extra warranty. If you have a high-quality car, it is a waste of money. If you are healthy, buy coverage with a high deductible and save on the premiums.

Health, however, is not as predictable as auto repairs and typically more costly for major items. The cost of a major auto repair is usually under $3,000. While problematic, most auto repairs are manageable by most families. Not so for health repairs. The cost of repairing a heart versus repairing an engine is not even close. Only wealthy families could forego insurance and handle such expenses out-of-pocket. The rest of us seek shelter through insurance. Poor, uninsured, sick people either must find charity care, or live with their ailments.

Increasing insurance to cover more routine services and to cover the currently uninsured will cause an increase in payments to providers for increasd services. That increases costs. Only by increasing payments into the system (higher premiums and/or taxes), or by cutting costs across the entire process, can we cover the increased outlays. One suggestion is to cut $500 billion from the costs of Medicare and Medicaid in order to expand coverage. Is this realistic or wishful thinking? Because cost cutting projections often fail to materialize, expecting increases in rates is not unwarranted. Just as "there is no free lunch," there is no free healthcare.

There is criticism of the health insurance industry over their cost of operations, in particular salaries paid to top executives. Can insurers operate more efficiently? Probably. Are some execs getting paid unbelievable amounts? No doubt. Is wringing costs out of the insurance industry a good thing to do? Yes. How does that happen? Competition.

No matter how you arrange it, handling health care expenses for a large population will require insurance or its equivalent under a different name. Everyone will contribute to a pool that will be used to pay for those in immediate need of care. The more care dispensed (preventive in addition to curative), the more money must go into the pool. Call it insurance or call it an association or simply a pool, it will require administration to collect and distribute the funds. It will be defacto insurance in how it behaves. Unless everyone can pay their own way for all their health care costs over a lifetime, then , "Yes, Virginia, we will need an 'insurance' arrangement."

Installment #11. Please read posts starting at 8/25/09.

2009-09-22T11:01:00.002-04:00

In Conclusion

The nation is not in the midst of a healthcare crisis. The bubonic plague would be a healthcare crisis. Right now the country is simply more aware of its painful situation. We have reached a point where we can do more for more people. The question is, "Can we do it affordably?" To make healthcare affordable means to reduce the need for it and to reduce the cost of it. Reducing the need is significantly in the hands of the individual through choices in lifestyle and seeking appropriate preventive and palliative care. Unfortunately, unless everyone does this, the cost benefit to the individual is lost in the pool of all those insured. The prudent person has better health, but not lower costs because less health-conscious persons use the savings. A personal financial incentive is currently missing.

Reducing healthcare costs requires a national initiative to truly systematize the process of healthcare to improve: standardization of records and insurance coverages, exchange of best practices, transparency of information regarding provider fees and success rates, affordable training for additional medical personnel to treat a growing and aging population. Just one example would be the creation of a linked database of provider healthcare records so that any provider, anywhere in the country could access complete and current patient information when needed. Persons with privacy concerns could opt out or could carry their information on a computer chip in their wallets or key chains. It will take big steps to solve a big problem. Small enhancements will not make a material difference.

Solving the problem of extending healthcare to the uninsured requires mandating coverage regardless of existing conditions, government subsidy of premiums for low-wage individuals and families, and increased free public clinics. Some of this already exists, but expanding it requires the willingness of everyone else to pay more taxes so that all citizens can access at least a reasonable level of care. Limits on public-paid care will be required. Free care does not mean unlimited care. The price of free care will be a ceiling either on individual treatments or lifetime benefits. The public purse is not bottomless. It is sustained by the tax paying generosity of fellow citizens and the nation’s need for productive functioning.

Behind much of this discussion has been the assumption that the money pie is relatively fixed and that we must allocate it to different items, including healthcare. If healthcare needs a larger slice, then something else will get less. Another viewpoint is to grow the size of the money pie – our national wealth as individuals created through our earnings. If everyone was wealthier, more people could afford healthcare. The government would have more tax revenue without raising tax rates and that could fund more public healthcare. Such an increase requires the nation to increase its productivity which rests on the skills of the workforce and the availability of capital for investment. Perhaps the way to more healthcare is through a better educated workforce.

Finding the right balance of the five Cs of cost, control, content, contribution, and compassion will not be easy or quick. Rushing a 1,000 page bill through Congress in six months does not look like the way to a workable solution. Political urgency can produce poor social engineering because importance and urgency are not the same thing. Only with a shared frame of reference, a willingness to be more logical than partisan, and to be more practical than political, will we be able to find a better way. Is Congress capable of this? We shall see.

As we look forward, it may be useful to look backward in history. Thomas Jefferson had this to say about government: "The government is best which governs least, because its people discipline themselves." And Alexis deTocqueville, a marvelous observer of America in the early 1800's, said: "The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money." The more things change, the more they are the same.

Postscript

Over the years, I have experienced a lot of the healthcare industry as a consumer. I have had extensive family dealings with doctors, hospitals, private insurers, Medicare, and TennCare. I’ve dealt with insured and uninsured situations. I have been an employee and a self-employed business owner. The cumulative medical bills I have seen easily reach six figures. I have witnessed good medicine and poor medicine – both for the same price. Getting good care does not always come easy, regardless of your insurance situation. There is ample room for improvement so that a healthcare dollar buys more.

What have I ultimately learned?

Stay as healthy as you can.
Stand up for quality care for your loved ones.
Always be insured.

Healthcare Installment #10. Please start with post of 08/25/09.

2009-09-10T17:58:00.002-04:00

The Effect of Lawsuits on Healthcare

It is unquestionable that lawsuits have an effect on the cost and practice of healthcare. What is hard to determine is the true extent of that cost. Better data might be developed with some dedicated research. This is particularly true for the cost of malpractice insurance for doctors, hospitals, nursing homes, etc. Less easy to quantify are the costs for additional treatment and testing done as "defensive medicine." Studies of this have been very limited and not easily generalized to the entire healthcare industry (Kessler-McClellan 1996, GAO 1999, CBO 2004). As a result, statistics cited by different groups vary widely.

What is obvious is the cost of settled lawsuits. These range from thousands to billions of dollars. Large drug makers are particularly susceptible to huge damage awards as their products are used by millions of people and class-action lawsuits result in billion dollar settlements. Large insurance firms also are hit with large pay outs. Some of these are the result of jury verdicts, while others are settlements to avoid ending up in court with unknown outcomes. Doctors are also targets for suits, but settlements are lower because their ability to pay is limited. Insurers are sued for failing to authorize treatments, some of which are unproven, or for failing to compensate doctors and hospitals fairly. Nearly everyone can be sued for something.

Lawsuits and their settlements have very mixed effects. On the one hand, they compensate persons or families who have been truly harmed by poor medical practices. There is such a thing as bad medicine and doctors, hospitals, and insurers who provide it should pay a price. Classic stories like amputating the wrong leg, leaving surgical instruments in the patient, neglecting to turn patients to prevent sores, generally poor cleanliness leading to infection, etc. all show why lawsuits are needed. Conversely, piling people onto class-action suits where they have not personally suffered injury, but have merely taken a suspect drug, does not help the case for suing. Neither does the fact that some legal jurisdictions are favored by attorneys because of their inclination to be sympathetic to any claimant and to award large settlements. There is no "equal justice" because it varies widely from state to state. Ironically, the plaintiffs who receive the settlement may get only about half after paying for attorney and administrative fees. Thus, part of the cost of healthcare is not for medical care at all, but for legal expenses.

There is ample evidence that the legal costs of medicine are affecting both its price and its practice. The increasing cost of malpractice insurance is passed along in the form of higher bills to patients. Doctors admit to ordering tests just in case they might get sued. Some doctors, particularly obstetricians who find themselves sued more often, simply stop practicing or move to locales where their malpractice premiums are significantly lower by a factor of one-half or more. The result is no one to deliver babies in some locations. Doctors also stop prescribing drugs that are subject to lawsuits, even though the original benefit of the drug is unquestioned and may be highly appropriate for specific patients. Drugs whose overall medical benefits outweigh their side effects are forced off the market because of the high costs of legally defending them. Anyone can sue a drug company regardless of the merits of the suit and it costs the company money to defend itself. There are no penalties for meritless suits. Part of the cost of a drug is for its legal defense, or the defense of other drugs made by the manufacturer.

Unfortunately for all concerned, when a suit goes to trial, the jury may not be equipped to understand the case presented to it. Medicine, and the science behind it, is complex. Juries are made up of jurors who may have had one biology course in high school. That is hardly sufficient preparation for understanding complex surgeries or drug testing procedures. This can make it very difficult to weigh the conflicting claims of adequate science versus personal injury. The human cost may be all too real compared to the abstractness of the scientific testimony. Worse yet, juries may not be able to distinguish real science from "junk science." Junk science often alleges causation when the only connection is casual association. The debate over mercury in vaccines as a cause of autism represents this problem. Science is not perfect so that what seems true today may be replaced by a better understanding tomorrow and that also casts doubt on every case.

The fact that the medical profession has not done a particularly good job of weeding out poor providers or bad practices contributes to the number of lawsuits. Self policing by doctors, hospital agencies, and the drug industry are necessary, but apparently not sufficient. The fact that Pfizer was hit with a $2.3 billion fine by the government for unlawful drug promotion practices only reinforces negative perceptions of the profit motive within the healthcare industry.

There is little doubt that reining in the excesses of the legal system with regard to healthcare suits and settlements would lower the costs of insurance premiums and probably the use of some diagnosis and treatment procedures. Just how much that would save is uncertain. A good step in healthcare reform would be to study the situation to see what was being spent and what could realistically be saved before suggesting how to save it.

Healthcare Installment #9. Please start with post of 08/25/09.

2009-09-02T13:36:00.003-04:00

Nationalizing / Socializing vs. Privatizing Health Care

In basic terms, "nationalizing" healthcare means having the government as the single payer that reimburses services provided by private providers. Private enterprise still runs the service sector. "Socializing" healthcare means the government owns the healthcare facilities and its employees (doctors, nurses) are on the government’s payroll. Failure to distinguish between the two leads to a lot of confusion about the extent of the government’s involvement in healthcare. To make matters worse, both can be referred to as "universal" healthcare. For example, Medicare is a nationalized system for post 65 yr. olds who can go to virtually any private provider. The Veterans Administration healthcare system is a socialized system – veterans go to a VA hospital. Some foreign countries have nationalized systems and some have socialized ones which complicates comparisons.

Persons advocating nationalized or socialized care have probably not read the newspapers in countries with those systems. Those papers report complaints about the problems inherent in such systems. Healthcare appears better on the other side of the border, regardless of which side you stand on. The more healthcare is "free," the more it will be used and the more difficult it can be to get. Private, for-profit practices spring up to fill a void in nationalized countries the way free clinics fill an opposite void in a private healthcare country. "Free" systems end up adding copayments.

It helps to keep in mind when making comparisons with other countries, the economic and political positions of those countries. The United States is the world’s leading democratic country, and as such, shoulders the burden for the defense of democracy. Whether or not you agree with U.S. policies, it nevertheless spends much more than other nations to extend an umbrella of protection over other democracies and to protect itself because it is the primary target of terrorists. Countries not devoting as much to national defense are able to use tax dollars/pounds/euros/yen for healthcare.

The move toward "N/S" healthcare (our term for nationalized and socialized) is driven in part by dissatisfaction with private healthcare insurance companies who control coverage payments. For-profit insurance companies, however, are not always the villains when they deny payment for certain types of healthcare. The insurance company serves all its members in two ways. The obvious one is by covering the cost of healthcare for members. The other is controlling the price the member pays for the insurance. Individually, we all want maximum payments for our bills. Collectively, we all want lower costs for our premiums. The two are not easily compatible. The insurance company is in the uncomfortable position of allocating the limited premium dollars to its members which inevitably means some limitations for some members. Many of these are spelled out in the policy and some are determined on a case-by-case basis.

While some premium dollars turn into profits for the insurers, it may not be a significant factor in the total cost to the consumer. For example, Healthcare Service Corporation (which operates Blue Cross Blue Shield programs in four central states) earned a profit of less than five cents on its premium dollar in 2008. This is not a remarkable level of profitability for any firm. Cutting the cost of operations of insurers by using simpler, standardized, industry-wide, electronic processes might achieve more cost reduction than arguing for lower levels of profitability. Cutting the salaries of the top executives in insurance firms is an example of administrative cost reduction. Unfortunately, while individual compensation packages may look large for a single person, the savings achieved is likely to be only a drip from the IV bag in terms of total costs.

Any time we join a group insurance pool for added protection against risk, we give up some of our individual control over the decisions for members of that pool. The policy lays out those limitations. It does not matter if the pool is government insurance or private insurance. Policy provisions are the rules governing pay outs regardless of whether they are administered by government bureaucrats or corporate bureaucrats. While private insurers have a profit to protect, government administrators are known to be unbending adherents to rules and regulations to avoid favoritism. In the end, one hardly seems better than the other. Persons who want complete coverage for all forms of healthcare will only get it by belonging to an insurance pool with very high premiums.

Coming to grips with the fact that a lifesaving treatment is cost prohibitive (from a societal point of view) when an individual’s life hangs in the balance is a problem many people would rather avoid than address, but it is central to the cost of healthcare. Economically speaking, who decides what care is given and received is determined by the combination of individual wealth and/or the policies of an insurance provider. The only way to keep your healthcare fate completely in your own hands is to have the money to pay for it yourself. Lobbying for the government to mandate total healthcare for everyone shifts the economic burden to the entire society through taxation, but that may be a tax burden too great for the society to bear for the benefits it receives. Medicare, as it currently operates, will not be able to sustain itself after 2019 according to a 2007 report by the Medicare Trustees.

Those who advocate for increased government involvement in healthcare bring pros and cons into the debate. A single-payer system such as Medicare offers some "systematizing" benefits that reduce administrative costs. However, any government program is subject to "corruption" by public and political pressures in a way no private plan is. An example of this is the addition of the prescription benefit to Medicare by Congress without any adjustment to the federal budget to pay for it. In short, to please the public, Congress added more debt to be paid in the future by the taxpayers. President Obama said exactly this in his town hall meeting in Colorado in August 2009.

When the government becomes a larger and larger participant in the healthcare marketplace as an insurer, it exerts pressure on the other insurers. One view is that this pressures private firms to hold down their costs. That may be true. Unfortunately, pitting private enterprise against government may not be a fair game because of inherent differences in the cost structure of each.

Increased government involvement in health insurance is the proverbial slippery slope. If instead of competing successfully with the government, private insurers fail, the government becomes the dominant insurer/purchaser. The market now has a monopoly purchaser of services who can dictate terms to the providers. This is called a "monopsony." Eventually the private providers work only for this one customer. At that point, it seems unnecessary to separate the insurer from the providers and in the name of efficiency, the government takes over the suppliers. At this point, "nationalized" healthcare becomes a "socialized," government paid, government run enterprise. Private suppliers exist on the fringe providing services to those individuals with the personal financial resources to buy their own supplemental care. This scenario is what opponents of expanded government dread. In it they see the rise of big government and the death of personal control of healthcare. The inability to predict this future makes proving or disproving this possibility nearly impossible and stymies the resolution of the healthcare problem.

In the free enterprise system, the role of government is to regulate the marketplace, not to be a participant in it. Virtually every entitlement program (Social Security, Medicare, etc.) costs more than projected when it was passed, grows with the addition of more benefits over time, and either leads to increased taxes or debt. Social Security, when passed, set 3% as the tax on personal wages and employers effective in 1948. Today that rate is 6.2%. Tennessee’s version of Medicaid (TennCare) began in 1994 with a budget of $2.6 billion. Ten years later it cost $8 billion – about one-third of the entire state budget. The number of insured parties remained fairly constant around 1.3 million persons, or about 1 in 4 residents. In 2005, the program went through massive change because of its unsustainable cost. Good intentions created mixed effects on the road to expanded healthcare.

Gains in administrative costs achieved in N/S healthcare systems, can be negated by the political expansion of benefits. We end up spending more than we save. For that reason, more direct government intervention in healthcare does not seem like a long-term, cost-effective solution. Finding ways to increase the efficiency and reduce the costs of private healthcare would seem to be a way to achieve the gains without the political problems.

Healthcare Installment #8. Please start with post of 08/25/09.

2009-09-01T11:52:00.003-04:00

Immigration and Healthcare

A sore point with some taxpayers is the use of government funds to provide healthcare for immigrants. There are two kinds of immigrants – legal and illegal. Legal immigrants are supposed to be supported by their sponsors so that they do not need government healthcare. That has been government immigration policy since the founding of the republic. In practice, it does not always happen that way. Illegal immigrants, by definition, fail to meet that requirement.

The result is that less-educated, lower-earning immigrants (more illegal than legal) place a burden on healthcare because they cannot afford to pay for it themselves. The nation gets the benefit of cheap labor that lowers consumer prices, but at the cost of subsidizing some immigrants’ healthcare. It is unrealistic to expect sick immigrants not to want medical care and to get it if they can. We are all human. The solutions to this burden on healthcare costs are to clamp down on immigration or to help immigrants earn wages where they can pay for their own care. The former solution would appear to be much faster to implement than the later.

Paying for Healthcare

Solutions to the healthcare problem are many and varied and endorsed and denied by various groups. One reason for this diversity is the variation in the prices paid depending upon who does the paying. What you think may depend upon how you get and pay for your coverage. Here are some examples.

Uninsured individuals, who can least afford high prices, are charged the highest retail rate for services. (Some providers do give discounts to the uninsured, but not the equivalent to the discounts they give large insurers.) Uninsured people fall into four groups:

Ones who pay their own way.
Ones who get some form of government or charitable support.
Ones who get service and simply do not pay for it.
Ones who do without.

Insured parties get a better price, the savings being proportional to the influence of the insurer in the negotiation process (Medicare vs. Blue Cross Blue Shield).

Employees of many larger employers have a larger portion of their premiums subsidized by the employer.
Employees of small employers pay a larger percentage of a larger premium (more total dollars) because small employers lack the bargaining muscle to get lower premium rates.
Self-employed persons pay the entire premium, providing they can find an insurer to cover them.

The end effect is that the same medical services are paid for at vastly different rates causing issues for both the providers trying to do the billing and the patients trying to pay the bills. Everyone from individuals, to employers, to insurers, to providers has incentive to shift the cost to the other parties in the process. This is the reason some people fear that companies would drop insurance coverage if the government offered an open-ended program. Unless maintaining insurance provides a competitive benefit by attracting better workers or retaining healthier ones, firms will transfer the cost of healthcare to the government, and thus the taxpayers. Cost and coverage still serve as incentives for employees to switch from smaller to larger employers.

So, who really pays what for healthcare?

Individuals pay some or all direct costs and premiums depending upon their employment and insurance status.
Employers pay a varying amount of premium charges.
Taxpayers pay for those covered under government programs (Medicare, Medicaid).
Contributors to charity pay for the indigent.
Healthcare providers who donate services pay for the indigent.
Healthcare providers who are not paid for billed services in effect make a charitable contribution to the non-payers.
Users of healthcare providers pay "extra" to make up for those who do not pay at all (just like paying shoppers pay for shoplifters).

The government acts a charitable intermediary on behalf of society to provide care for those unable to pay. Ultimately we pay directly as individuals for our own care, or indirectly through taxation, charitable giving, or "upcharging." for the care of others. Only people who pay no medical bills, pay no taxes, and give nothing to charities get truly free healthcare. Everyone else pays. The questions are:

"Who should get charitable support?"
"How much should they get?"
"What is the fairest way to do so?"

Healthcare Installment #7. Please start with post of 08/25/09.

2009-08-31T11:28:00.003-04:00

The Need for Healthcare Workers

As the population increases in size and simultaneously expands its portion of elderly members, the demand for medical staff climbs. Only increased efficiencies and automation can offset the need for more personnel. Healthcare, by its nature however, is nurturing and caring aid that is done by one human being for another. Star Wars aside, we are not likely to see robotic nurses on duty.

The costs to enter the medical profession in terms of both time and money are at odds with the need for more staff. In addition, doctors are specializing instead of generalizing because the pay is far more rewarding. This runs opposite to the need for more primary care physicians. If the government wanted a more active role in healthcare, it might be to subsidize the training of the next generation of medical staff. Any shortage in the supply of staff will lead to less total care or higher costs as people compete for access to scarce resources. In such a scenario, there could be an effort to cap payments to providers. The government can do this arbitrarily (Medicare does) while private insurers negotiate these caps. If the caps become oppressive where the reward is not worth the effort, providers will opt out of being part of the plan if they can. Patients in such a plan will then have less choice and fewer resources to serve them, driving up wait times. The whole dynamic of price control is fraught with potentially unintended consequences.

Arguing over who gets care and who pays for it will be meaningless without enough providers to deliver the service. This fact seems to be overlooked in today’s debate.
　
The Healthcare Marketplace

The market for healthcare is chaotic. Unlike shopping for many consumer products where prices are easily known and quality can be determined with moderate effort, information on healthcare prices and quality is not easily available to the recipient. In the case of persons covered by health insurance (85% of the population), the "consumer" is not one party, but two. The first party is the patient who typically pays some portion of the bill. The other consumer is the insurance firm who pays the balance. It is the insurer who bargains on behalf of the patient to get the best price from a network of providers. As long as the patient stays in the "network," the price is fixed. The patient "shops" by staying in the network for services where the price is fixed. However, for uninsured patients who could price shop, access to this information would only be available by calling various providers and asking for their fees, assuming they would cooperate. Hospitals run
ads touting their awards and care, but when have you seen an ad promoting discounted prices? In general, individual consumers lack leverage on prices.

Finding information about the quality of physician and hospital services, a concern to every patient regardless of insurance, is only available after intensive research on the internet. Even that data is sketchy. More generally, people have relied on anecdotal stories from friends, or the recommendations of their current healthcare providers. In many cases, the choice of a hospital is not based on its outcome quality, but on whether the patient’s physician has the privilege to practice there. Choosing a better hospital may mean changing to a new doctor – an uneasy trade off. Consumers lack leverage on quality.

Because consumers lack leverage on prices and quality due to poor information, normal market forces cannot apply pressures to achieve efficiencies, cost reductions, and quality improvements. This job falls on the insurers and various accrediting councils and professional boards. As a result, suppliers are more insulated from pressures from the consumer than in a normal market. Until the dynamics of the market can be fully activated, the normal forces of private enterprise will not be sufficient to bring about major change. Until healthcare prices and outcomes are much more transparent and the information easily accessible (like prices in the supermarket and ingredients on a food label), market-driven improvements in healthcare may only be a dream. When patients and insurers can take their business to successful healthcare providers and stay away from error-prone ones, then the pressure will build to improve results. Better results mean fewer errors, and fewer errors mean lower costs.

Add to this mix the confusing constellation of policies with thousands of variations in what is covered, under what conditions, and for how much and the entire marketplace is awash in chaos. The use of insurance as a buffer against the uncertainty of future personal medical costs leads to individuals paying vastly different amounts for essentially the same final services. There is nothing inherently wrong with an array of competitive insurance offerings in a free-market, but it does appear to contribute to additional administrative costs. The New England Journal of Medicine reported that in 1999, the cost of administration was 31% of U.S. healthcare cost Compare that to Canada's nationalized system where it was 16%. This demonstrates the advantage of single payer systems is in reduced administrative costs. A simpler system is less expensive to operate.

Healthcare Installment #6. Please read prior posts staring 08/25/09.

2009-08-30T22:19:00.005-04:00

Healthcare and an Aging Population

Healthcare increases with age. The aging process naturally brings a need for more care as the body begins to wear out. With an aging baby boomer population about to enter the "Medicare years," the government will face a demand of unprecedented proportions in paying for this care (as it will retirement income for Social Security). The nation will be forced into a debate about the use of its national monetary resources to care for the elderly versus maintain the health of its younger productive working citizens. Compassion will collide with necessity. With the largest expenditures for healthcare typically coming shortly before death, cost control will force the nation to consider end-of-life treatment limits. This is the true "death panel" debate. Is the horrifyingly real "elephant in the room."

A sad irony to the success of helping people live longer is that it increases their lifetime need for healthcare. Dying younger means spending less for healthcare. Sad, but true. Success in extending life increases total costs. Unless the elderly have saved for those expenses, the costs are transferred to the younger workforce. This is exactly what Medicare does. As the ratio of retired citizens to working citizens rises, taxes on the workforce climb unless the cost and/or amount of services to the elderly are held in check. The first "generation" of Medicare saw the existing workforce paying for existing retirees. The boomer generation supported the one before it. As the boomers retire, the following generation ("Gen X") cannot support them completely. The result is the use of debt to make up the difference. This passes the payment load back to the generation following the "X‘ers" – "Gen Y." These dynamics are enough to spur the action of groups like the AARP to protect existing retirees and the boomers. It appears that Gens X &Y have yet to wake up to what is about to happen to them. "Us versus them" may turn out to be one generation versus another.

Healthcare Costs Climb with Advances in Medicine

Healthcare costs continue climbing because of advances in medicine and treatment. Compared to 50 years ago, diagnostic services, treatment procedures, and prescription drug availability add significantly to the practice of medicine and also to its cost. In the same way a modern car has more standard features at a higher price, so does modern medical care. It is no surprise that we spend more for healthcare. We also get more.

While medical advances are a wonderful benefit, the existence of advanced diagnostic and treatment options does not mean they are truly available. In a free-market economy, these things are rationed based upon the ability of the consumer to pay for them. Some things are available, but not affordable. For example, a trip to outer space on a Russian spacecraft is really available, but only to a limited few with the money to pay for it.

Rationing Healthcare

Healthcare today is allocated largely on a patient’s ability to pay – either directly or through his insurer. Pay the price, get the treatment. When price is not used to allocate/ration services, then rationing is done by another method. In the case of "free" healthcare, that may be the time spent waiting for care. A patient at a free clinic will necessarily wait longer for free care than will a paying patient at a for-profit practice. People waited for days at the Los Angeles Coliseum in August 2009 to get free care from the Remote Area Medical group who was there instead of a third world country. Waiting is a common complaint in nationalized care countries. In Canada, the average wait time for a non-urgent procedure is 17 weeks (4+ months). The Canadian government committed $4.5 billion dollars in 2004 for a six-year program aimed solely ate improving wait times. In less "civilized" countries, corruption and bribery become companions to the bureaucratic rationing process.

The easiest way to avoid the question of rationing healthcare is to pay for unlimited care with borrowed money. Because there is no immediate taxation, it appears temporarily to be "free" healthcare. This is political slight of hand and an economic illusion. It is behind the idea of improving coverage while increasing the government deficit. It is a healthcare house of cards that will ultimately collapse in the form of higher taxes and less care when the system reaches its breaking point and returns to a true economic equilibrium.

Is Prevention the Cure?

The use of prevention to drive down healthcare costs is desirable on its face. The means of prevention is, however, crucial to it cost-effectiveness. Personal preventive measures such as good diet and exercise are low-cost means for prevention. So are steps such as vaccinations. What is less cost effective are large scale screenings for possible problems across the entire population. While the benefit to the individual in finding a potential illness is quite high, the total cost of examining many healthy people to find the one sick person can be cost-prohibitive. The cost to find the one sick person is not the $200 for his test, it is the cost for the 100 other healthy people who were also tested ($20,000). If treatment costs only $10,000, then some diseases may be cheaper to cure than to screen for – when viewed from a societal perspective.

This was highlighted in a report from the Congressional Budget Office in August 2009 that cited a study showing only about 20% of traditional preventive care services saved more than they cost to provide to the broader population. It also noted, somewhat less convincingly, that about 60% of preventive services provided clinical benefits that were felt to be cost-effective. While the individual may enjoy the peace of mind screening provides, the role of preventive healthcare as a cost containment strategy on a large scale basis remains uncertain.

Healthcare Installment #5. Please read posts starting from 08/25/09.

2009-08-29T10:31:00.004-04:00

The Need for Health Insurance

Given the unpredictable nature of health and its associated costs, we protect our personal finances by buying health insurance. It is simply too risky to bear all the potential costs ourselves. As a result, discussions of healthcare include not only the cost of service, but also the cost of insurance to pay for that service.

Insurance spreads the risk over a pool of people. In exchange for paying a fixed premium amount, we get the assurance that we will not be forced to pay exceptionally high amounts – the amounts being set by the policy we purchase. The more risk we are willing to take on ourselves in the form of higher deductibles, the lower the premium. Private firms send us a bill. If we have employer-sponsored insurance, then our portion of the premium is paid through payroll deduction. The amount paid by the company is usually invisible to us. The government collects premiums for Medicare in the form of the Medicare payroll tax (1.65% on the employee and also the employer). Check your year end pay stub to see how much you contributed to Medicare last year.

When we participate in insurance, we are partners with all the other people in the plan. The insurance company brings us together and administers the provisions of the policy. As a result, we now have more parties with a stake in our health and healthcare expenses because they are helping pay for them. This creates one of the most intractable aspects of managing healthcare. How do we preserve decision making at the doctor-patient level when those decisions affect other insured parties and the shareholders who own the insurance company itself? The short answer is that we sacrifice some personal freedom in other to get the protection offered by the group. Unless we are willing to pay unlimited premiums to provide unlimited care, there is no other approach. Finding the proper way to balance decision making is one of the major issues to be resolved in the healthcare debate. It is the sensitive spot that flared into prominence with Sarah’s Palin’s remarks about "death panels." That ill-conceived and inaccurate comment did however, touch on this underlying issue. Unfortunately, it inflamed passions rather than led to useful discussion.

It is helpful to look briefly at other forms of insurance to see issues hidden in healthcare insurance. Homeowner’s insurance protects against many perils, but not against floods. If you live on a flood plain, you need special flood insurance because you are in a special risk group. This gives individuals some incentive not to live on flood plains. The higher the cost for flood insurance, the greater the incentive (the same could be true for hurricanes and wildfires). Persons wishing to live high-risk lives pay more for the privilege. In a similar fashion, people with higher risks for illness are charged higher premiums by health insurance firms. This is not meanness. It is practical economics. In the same way a bad driving record increases car insurance, a poor medical history can increase healthcare insurance premiums.

To expect private insurers to lower premiums to high risk persons is to fail to understand the nature of insurance. High risk people will always cost more to insure and when the cost of insurance is unaffordable to them, only charitable or government assistance can close the gap. When government closes the gap, it forces the taxpayer instead of the insurer to fund the coverage. Mandating that private insurers cover high risk people either raises the premiums for all the policyholders or bankrupts the insurer when claims exceed premiums. We cannot legislate away basic economics.

Why Do We Provide Healthcare?

Healthcare is required to maintain good health, restore poor health, and to treat chronic and end-of-life conditions. We seek healthcare as individuals because without it we either have a diminished quality of life, or no life at all. We provide healthcare as a nation so that we have a population capable of competing in the global marketplace. That’s the economic side. We also provide healthcare out of a concern for our fellow man. We are compassionate. The cost of healthcare, whether for competitive or compassionate reasons, must be balanced with the cost of other national activities: education, transportation, defense, sanitation, etc. Just as a family must prioritize spending for food, shelter, clothing, and healthcare, so must a nation prioritize its expenditures.

The difficulty with healthcare is the total cost to extend full coverage to every citizen for every treatment for every ailment. If that is not economically feasible, then "Where do we draw the line?" and "Who draws that line?" become major questions. These are behind some of the vitriolic attacks against government intervention in health care. People do not want a third party intervening in the health care decisions between a patient and a physician. However, when the patient is part of any insurance plan, government or private, the insurer and all other policy holders have an economic stake in that decision. Those who pay, decide. Therein lies the rub of money against morality.

Healthcare Installment #4. Please start with post of 08/25/09.

2009-08-28T09:08:00.001-04:00

What Makes Us Sick?

To understand healthcare requires understanding the sources of illness that lead to the need for healthcare. If you have been sick, the cause of your illness could affect your perception of how to handle healhcare. Never being seriously ill would also affect your perception. Some general reasons for illness include:

Birth defects
Genetic diseases with early, mid, or late onsets
Spontaneous illness (you just get sick, e.g., cancer)
Aging
Accidents (car, sports)
Contagious illness (tuberculosis, flu)
Unhealthy habits (eating, exercise, smoking)
　
When we examine the list, it is apparent that some causes of illness are beyond our personal control while others are under our influence if not total control. Avoiding dangerous activities (driving drunk), getting vaccinations, and eating properly are all things we can do to positively influence our health and the costs of our health care. On the other hand, being born prematurely is not a personal decision. Nonetheless, a premature infant is likely to have higher than normal health issues throughout life. Likewise, the body deteriorates with age. Things break down. We can moderate but not reverse this process.

Some of the things that interfere with good health are caused by poor lifestyle choices. Sixty percent of all American are overweight. Of that 60%, half of those qualify as obese. About 10% of all Medicare funds are paid due to obesity-related problems. With limited exceptions for diseases, this situation is one of a person’s own making. It leads to increased health problems (e.g., diabetes) and increased healthcare costs. Smoking is a similar issue, although nicotine deserves special treatment as an addictive substance. Despite continued warnings for decades that "smoking bad for your health" and its links to heart disease and cancer, people still smoke. Even the threat of death is not enough to convince 43 million Americans to stop. The good news? The percentage of smokers is half of what it was 50 years ago. This is evidence that we can become a nation of properly proportioned, nonsmokers. It is costing us too much not to be.

The cheapest way to reduce healthcare costs is to eliminate the need for the care itself through healthier living. There are no secrets here, simply better diet and exercise and decreased nicotine and illegal drug usage. This is not something the government can do for us. We must do it for ourselves. We want the freedom to choose what we eat and do. That is fine, but along with it comes the responsibility to make wise choices. Any "right" to healthcare brings with it the responsibility for personal health management. This is not to suggest that every aspect of our personal health is directly controllable since genetics, accidents, and contagious diseases all are beyond our control. Even with an emphasis on personal health responsibility, monitoring individual efforts in that regard would be highly impractical. This gives rise to the call for taxing alcohol, tobacco, and now "junk food." There is nothing wrong with creating disincentives for bad behavior, but rewards for good behavior have a stronger influence. Once again, the tax code is being highjacked to promote social policy. The use of a "Twinkie® Tax" as a systemic attempt to promote self-control will generate another interesting debate.

Compassionate Care

Really sick people don’t work and without free care, they have no care. Then there are the poor who, due to limited abilities, accidents, disease, poor choices, or other reasons have barely enough income to buy food and housing. Food and shelter come before healthcare. If the income is very limited, healthcare is missing. "The poor will always be with us" and the question becomes "How much healthcare is a nation willing and able to give to them?"

Given that health issues are both controllable and uncontrollable, it hardly seems fair to deny care to someone who is unable to provide for himself when the cause is outside his control. That is compassion. On the other hand, should people who manage their health be paying for people who do not? Probably not.

Unfortunately, there seems to be little good way to separate the deserving from the undeserving. The fit pay for the unfit. Perhaps if each person had an allowance of "healthcare credits" then those who stayed fit would build a surplus they could use for other purposes and those who went over their allowances would have to cough up the payment difference themselves (assuming they could.) Fit people might be able to sell their "healthcare credits" to those needing them and thereby profit from a healthy lifestyle. This is an idea not unlike trading pollution control credits in industry.

Persons advocating universal coverage may do so out of compassion, because they lack any affordable coverage themselves, because of personal beliefs in healthcare equality, or for other reasons. Persons resisting universal coverage probably do so because of a reluctance to pay more to provide it or because of a belief that each person should earn what he or she receives. To some extent, a lack of healthcare is an incentive to improve lifestyle and develop skills that lead to employment with better benefits. On the other hand, disease is no respector of effort and "deserving" people suffer through no fault of their own. Compassion and economics intersect badly in healthcare.

Healthcare Installment #3. Please begin with post of 08/25/09

2009-08-27T11:37:00.000-04:00

Is Healthcare a Right?

Further complicating the issue is the question of whether healthcare is a "right." The Declaration of Independence lists the rights to "life, liberty, and the pursuit of happiness." It is doubtful that healthcare was debated in 1776, so it leaves us with a contemporary question unique to our times.

Rights, however, are always balanced with responsibilities. Our rights to liberty and voting are balanced with our responsibility to be law-abiding citizens. Shirk the responsibility, lose the rights. Those who advocate a "right" to healthcare will also need to enumerate the responsibilities required to enjoy it and not abuse it.

Symptoms are Camouflaging Causes

The healthcare debate is badly off course because it has dealt with symptoms and has failed to address the causes. The current debate is about how to get healthcare insurance coverage (and thus care) for everyone with some question about how to pay for it. This addresses the appearance of the problem, not its causes.

Because there are many causes behind the healthcare dilemma the country faces, it makes finding solutions especially problematic. Here are some of the contributing causes:

1. There is no healthcare "system."
2. The focus is misplaced on health care instead of healthy living.
3. The possible costs for healthcare technology and services for everyone exceed a realistic share of personal income from those able to pay.
4. The marketplace is distorted so the usual consumer-driven dynamics do not work to promote improvement and cost reduction.
5. Who pays for healthcare and how they pay is convoluted and hidden.
6. In the absence of significant personal wealth, the unpredictability of health makes risk-sharing through medical insurance a necessity.
7. An aging population naturally increases healthcare needs and costs.
8. Entry to the healthcare profession is expensive and the field is understaffed.
　
No Healthcare "System"

There is no healthcare "system" in the United States. A system is, by definition, "a regularly interacting or interdependent group of items forming a unified whole." There is nothing unified or whole about the U.S. medical system. It consists of a multitude of diverse providers in every locale, a multitude of insurers including the government, and a vast array of policies and procedures through which they do business – much of which is not standardized across groups. It does not rise to the level of a unified system and it is therefore incredibly difficult to increase its productivity and cost effectiveness.

Improvements to individual elements like hospitals are necessary, but not sufficient to improve the "system" as a whole. Any attempt to improve healthcare must begin with improved standardization, communication, and coordination through shared policies, procedures, practices, and information networks across the nation.

Healthcare may require a paradoxical solution – mass customization. That is, "producing goods and services to meet individual customer's needs with near mass production efficiency." In healthcare, it is standardizing operations while adapting them to the unique needs of each patient. Health services are distinctly different from industrial systems in that the incoming raw material (the patients) is subject to wide variations. (No intent here to dehumanize patients, just trying to draw a comparison.) Most processes require a consistent input to run correctly. Variations in human beings require health service providers to adapt their processes across a wide range of inputs. This complicates standardizing processes to achieve efficiencies. Healthcare providers can borrow from industry, but probably not replicate it.

As an example of changing the entire system, imagine for a moment, a USB thumb drive medical "card" that contains all pertinent patient information required when registering at a doctor’s office or hospital. It eliminates all paperwork for registration across all providers. That standard card contains the customized data for each patient. Patients, or staff when authorized, could update certain data on the drive. The drive would trigger an automatic notification to the provider regarding insurance coverage whenever the drive was used for patient registration. That would eliminate the questions about whether insurance coverage was current. The magnetic strip on a credit card works in a fashion like this. This is not intended as a flawless example, just a way to see a systemic change.

Healthcare Installment #2. Please read prior post.

2009-08-26T11:06:00.000-04:00

Generosity Underlies "Free" Care

In times of surplus, the American people are especially generous. In times of financial adversity, it is difficult to be as generous. Thus, presenting costly healthcare reform in today’s economic climate could not come at a worse moment. It hugs the heels of huge deficits by both the Bush and Obama administrations. The first to fund wars, the second to fund a stimulus program filled with benefits (nice or necessary?) for which we must pay later. It is no surprise that reform requiring more government spending (borrowing) is virtually dead on arrival today as far as fiscal conservatives are concerned. The government has been selling the country’s collective financial soul to the devil of debt for too many years and some tax payers can see the bill coming due.

The Responsibility Dichotomy Creates Friction

We are being confronted by an emerging dichotomy in the population. There are those citizens who exert self discipline and live responsibly as evidenced by healthy lifestyles and solid personal finances. Then, there are the citizens who eat poorly and exercise little and those who are unable or unwilling to manage their personal finances properly. The epidemic of obesity and the housing market collapse due to bad borrowing are two examples. The responsible citizens are growing tired of a government that seems bent on protecting irresponsible persons from enjoying the consequences of their poor decisions. They realize their prudence and hard work are being used to pay for the ignorance and sloth of the irresponsible group. This is not sitting well with members of the electorate who are asking "Where is my bailout?" When individuals, or nations, fail to exercise self-control, it opens the gate to external forces in the form of disease, marketplace corrections, or actions by other nations to fill the gap. As examples, we have diabetes, the housing market collapse, and interest by other countries in moving off of the dollar as the world currency. If we don’t get our acts together, some other force will do it for us. Too many citizens appear to be coasting on what made America great. They need to start pedaling.

Philosophical Differences Drive a Divide

There are also those citizens who are engaged and enraged by the prospect of more government, simply because they do not believe in big government. They see life as a personal challenge to be met by individual effort where success is rewarded and failure is an unpleasant fact of life that contributes to self-motivation. On the other side are those who believe government has a responsibility to the less fortunate, who through no fault of their own, are dealt a bad hand by life. When it comes to healthcare, this could be persons born with medical problems, those incapacitated by accident or disease. Since they are unable to help themselves, as human beings they are deserving of compassionate help from their fellow man. When private charity is insufficient to help this group, then government should step in. Medicare (for the elderly and disabled) and Medicaid (for the impoverished) are programs representing that philosophy. It may be impossible to reconcile the beliefs of these two groups and the final triumph may belong to the group that musters the largest political muscle in the form of votes and contributions. If the Democrats push a bill through Congress by totally bypassing Republicans, it will be this dynamic at work. In a win-lose scenario like this, the losers will not forget and resistance will continue in other ways.

Analyzing Healthcare - Installment #1

2009-08-25T14:29:00.000-04:00

This is the first in a series of posts looking at healthcare and healthcare reform in the USA. This material is not a proposed solution to the healthcare situation. It is an effort to clarify some of the factors and dynamics driving the situation in order to enrich the dialogue about improving the current state of affairs. Hopefully, it gets at some of the "why" behind the many divergent points of view. It does have opinions imbedded in it as well as plain facts and observations. Whether you agree or not, if this expands your thinking, it has served its purpose. Some of the points are self-evident but are included to provide a fuller framework for the discussion.

Frames of Reference

Failure to see others points of view leads to dead end dialogue. In the debate on healthcare, it is easy to see the situation and seek a solution from a purely personal frame of reference. That reference is influenced by our own personal health experiences and expenses.
If a person has enjoyed good health and lived responsibly, it is probable he believes individuals are responsible for their own health care and should not be propped up by taxpayer programs. An individual who has suffered poor health brought on by forces beyond his control may see the benefits of having care provided through government programs because there is no other affordable alternative available.

Seeing the situation from various perspectives can open up territory for exploring mutually acceptable solutions. From shared values can come common goals. From common goals can come common strategies and tactics. To find common ground means sharing the same frames of reference. Each topic that follows is an attempt to help increase our personal frame of reference. The central points that emerge repeatedly deal with: economics (cost), who gets free healthcare (compassion), how much do they get (content), who makes medical decisions (control), and who pays for it all (contribution). These five "Cs" can define a frame of reference.

Health is Priceless

Health is unique among all aspects of life since it affects life itself. Without good health, little else matters. Thus, the price we will pay for it is high and the market reflects this. In addition, it becomes difficult to view it from a strictly rational point of view when confronted with very personal circumstances.

The two objectives of affordable and universal healthcare are grand and difficult for anyone to deny. The crux of the problem is whether or not such goals are truly attainable. The devil is in the details and the current debate mixes grand visions with pragmatic problems without highlighting the difference. It appears that the people with the vision cannot complete the details to achieve it. The people who know the details see no way to achieve the vision. Debate teeter totters back and forth on this impasse. Because healthcare is not free, it becomes an economic decision as well as a medical and moral one.

More posts to follow each day.