Hinchingbrooke Hospital breaks free from the NHS Bureaucracy and Improves Health Care

Posted by PITHOCRATES - October 13th, 2013

Week in Review

Britain has government-run national health care.  The National Health Service (NHS) provides free health care to all Britons.  And the medical tourists who travel to the country for free health care.  Straining the NHS budget.  At a time when Britain’s aging population is stretching their limited resources thin.  Leading to longer wait times.  Longer travel times as they close local hospitals to consolidate their resources in fewer locations.  And rationing.

Even with their longer wait times, travel times and rationing of services they are still running a deficit in the NHS.  To address these chronic cost overruns they are trying to find £20 billion ($30.54 billion) in efficiency savings over three years.  But there is a beacon of hope for the NHS.  At Hinchingbrooke Hospital (see Set doctors and nurses free to use their common sense – as Hinchingbrooke Hospital does by Charles Moore posted on The Telegraph).

Last month, I visited Hinchingbrooke Hospital, near Huntingdon, the only NHS Trust in the country operated by a private partner…

I spent half a day at Hinchingbrooke, talking to doctors, nurses, administrators and patients, and seeing several wards…

One can visit a large organisation without being aware of big problems. Indeed, one of the great difficulties of the NHS is that internal communications are so bad that people can work well in one area without being aware of utter disaster a few yards away. In the case of Hinchingbrooke, under previous management, maternity was very good while the colorectal unit was shameful. So what follows is not definitive; but I feel I learnt something.

Uniquely in the NHS, Hinchingbrooke’s executive board is dominated by clinical practitioners (doctors and nurses, to you and me). The chief executive is an obstetrician. Only three of the 14 board members have non-clinical backgrounds.

In the only trust that has a private partner doctors and nurses determine how best to treat patients.  Instead of the faceless bureaucracy in the rest of the NHS.  Or what the proponents of Obamacare hope to force onto the American people.

One of the key working methods, borrowed from Toyota, is “Stop the Line”. Anyone in the hospital can stop the line if he or she believes that there might be a “serious untoward incident” or danger to a patient…

A similar, lesser action is a “swarm”. If you are urgently worried about something, you can summon all the relevant people together immediately. Unlike “whistle-blowing”, which is inevitably retrospective and often involves grievance and disloyalty, these ways of acting are instant and preventative. You are encouraged to use them. Someone stops the line in Hinchingbrooke most days.

Nurses work differently from most parts of the NHS. They all wear uniform, even if in managerial roles, and they are encouraged to take part in management without abandoning clinical work…

But what struck me about Hinchingbrooke was not that it was brilliantly original – simply that it was free to act according to common sense. Involve staff in decisions. Make sure that doctors and nurses can run things. Learn from commercial examples of how to improve services. Let the right hand know what the left is doing. Encourage innovation. Don’t “benchmark to the middle”, but to the top. And little things: get A&E nurses to wear identifiable name-badges; get rid of hospital car-park fines. Most of this is simple, but, in the leviathan of the NHS, it is not easy. And at present there are about 2,300 NHS hospitals in the United Kingdom, and only one Hinchingbrooke…

This is far behind the public. As you understand better if you spend a morning in Hinchingbrooke Hospital, the public want health care free at the point of use, but have no ideological prejudice about who delivers it, or how. They rightly judge by results – are they, their spouses, parents, children, well or ill? Are the staff medically competent, efficient and kind? They are not sentimental about the most shocking producer interest ever to have gained power in this country.

The one hospital where things are greatly improving is the one hospital that is moving away from bureaucratic national health care and towards private health care.  Like it once was in the United States.  While President Obama and the Democrats want to move the American health care systems towards the bureaucratic national health care of the NHS.  Where there are longer wait times.  And service rationing.  Well, everywhere in the NHS but Hinchingbrooke Hospital.

Do President Obama and the Democrats care that they will destroy the American health care system?  No.  Because it’s not about health care.  It’s about creating the “most shocking producer interest ever to have gained power in this country.”  Yes, it’s about the power.  Social Security and Medicare made the elderly dependent on government.  Giving the government power over the elderly.  If they can’t raise taxes they just threaten to cut Social Security and Medicare benefits.  National health care, though, makes everyone dependent on government.  Giving the government power over everyone.

Until the day they can no longer maintain that power.  And that day has come in Britain.  Their aging population is breaking the system.  Which is in essence a Ponzi scheme.  The masses in the workforce pay in via taxes.  And the few sick consume health care services at the top of the pyramid.  While a bloated bureaucracy makes sure to take very good care of itself.  But the aging population is shrinking the workforce paying the taxes.  And swelling the number of sick consuming the health care services.  Inverting the pyramid of the Ponzi scheme.  As it will in America thanks to Obamacare.  Because the United States has an aging population, too.

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Patients in Britain’s NHS may soon start Paying more Out of Pocket for their Free Health Care

Posted by PITHOCRATES - April 21st, 2013

Week in Review

Obamacare will centralize health care.  Make it more top-down with bureaucrats in Washington issuing directives on how a doctor should treat his or her patient.  They say this is how Obamacare will cut costs.  By putting it on the path to national health care.  Just like they have in Britain (see Free NHS treatment could be axed if economy does not recover, warns health chief by James Lyons posted 4/16/2013 on the Daily Mirror).

Free NHS treatment could be axed if the economy does not recover, the boss of the service warned yesterday.

Professor Malcolm Grant admitted charges for NHS services were a possibility as demand is set to rise by between 4% and 5% as the population gets older.

Looks like that free health care must be pretty expensive.  They could raise taxes more.  But the economy is already suffering in a recession.  Or they could cut spending elsewhere and transfer it to the NHS.  But with the government already running a deficit it is unlikely that anyone will agree on what to cut.  For if it was that easy they wouldn’t be running a deficit.  Which leaves making patients pay for more of their health care out of their own pocket.

Not surprising, really.  An aging population is going to consume more health care resources while fewer people are entering the workforce to pay for those resources.  Can’t raise taxes anymore.  So they cut back on costly staff (they won’t work for free) leading to longer wait times.  They ration health care services.  And they hasten the death of their most costly of patients.  The elderly.  By placing them on the Liverpool Care Pathway for the Dying Patient.  Which basically pulls the plugs on these patients allowing them to die quicker.  And yet they continue to spend more than their budget.  Which leaves little choice but to start charging patients for their ‘free’ national health care.

And thanks to Obamacare, this will be our future, too.  For we also have an aging population.  So get used to paying more and getting less.  And being less healthy.  For this is national health care.

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If Obamacare will be anything like the NHS first there will be Higher Taxes then there will be Rationing

Posted by PITHOCRATES - April 7th, 2013

Week in Review

There is no such thing as a free lunch.  We’ve all heard this expression.  And we know what it means.  Vendors buy customers lunches to get more business.  And customers know whatever they get ‘free’ from a vendor is included in the price they pay for their products or services.  So nothing is free.  Just other people pay for things you get to enjoy.

A lot of people thought national health care was free health care.  Which is why they want it.  Because they can’t stand paying even the co-pays on the high cost of health care.  But by nationalizing health care those high costs don’t go away.  Because doctors and nurses just don’t start working for free.  No.  We pay for free health care by nickel and diming everyone everywhere we can (see Taxes heat up battle against ‘Obamacare’ by Tom Howell, Jr., posted 4/3/2013 on The Washington Times).

A tax on everything from X-ray machines to oxygen tanks took effect at the beginning of this year — one of about 20 taxes and fees included in President Obama’s health care law — and has emerged as the central battleground in the fight by the law’s opponents to repeal parts of the president’s overhaul…

The device tax is one of several that kicked in this year, along with higher taxes on investment income and an increase in the Medicare payroll tax among households making $250,000 per year. Taxes and restrictions on flexible savings accounts, health savings accounts and health reimbursement arrangements are also starting to bite.

The tax penalty imposed on those who refuse to obtain health coverage will kick in next year, with a minimum penalty for low-income individual taxpayers of $95 in 2014, rising to $325 in 2015 and $695 in 2016. Those with higher incomes will end up paying more because their penalty is based on a percentage of their income — 1 percent in 2014, 2 percent in 2015 and 2.5 percent in 2016 and beyond.

And still looming later this decade is a 40 percent excise tax on high-value “Cadillac” health insurance plans, which will not debut until 2018.

The health care law’s $1 trillion in revenue raisers also includes niche targets, such as a 10 percent assessment on indoor tanning services…

…the health insurance tax, an annual fee that taxes health insurance providers relative to the worth of the insurance premiums they collect each year.

They will tax us every chance they get.  Because ‘free’ health care is more costly than the kind you pay for out of pocket.  Because when it’s ‘free’ you will use it more often.  “If it’s free it’s for me.”  And because the consumption of health care resources will rise so will all of these new taxes as they scramble to find a way to pay for this ‘free’ health care.

A lot of people no doubt draw some comfort in the fact that the rich will pay the majority of these taxes. But all of these taxes will eventually filter down to the average American as businesses raise prices to cover these taxes.  And those “Cadillac” health insurance plans?  They’re just not for rich people.  Very sick people often spend a fortune on these plans to reduce their overall costs of their treatments.  Which means the 40% tax on these plans will make these plans unavailable to them.  Causing great upheaval in their lives as they transition from their private plan and doctors to the state plan and doctors.

Eventually the costs will grow greater than all this new tax revenue.  As it has in the United Kingdom.  Where they have had to turn to cost cutting, consolidation of health care clinics and hospitals, longer travel distances to see a health care provider, longer wait times, rationing and denials of health care treatment.  Because their ‘free’ health care grew so costly with their aging population that they just can’t treat everyone.  Patients sometimes have to wait an hour or more for an ambulance.  And wait another hour or more at the hospital before a bed opens up for them so they can be unloaded from the ambulance.

And then there’s the Liverpool Care Pathway for the Dying Patient.  A quasi death panel.  Basically unplugging a patient to let them die with dignity.  Sometimes without telling the patient’s family about this hospital decision.  Where critics say it’s more about freeing up limited health care resources than about dying with dignity.  Especially with a costly and aging population.

So this is our future with Obamacare.  As the government takes over health care taxes will rise further.  And quality will fall.  As they try and stretch those limited resources to cover more and more patients.  Especially with a costly and aging population.

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Obamacare will Bring the IRS into our Lives like Never Before

Posted by PITHOCRATES - July 14th, 2012

Week in Review

You wanted free health care?  You think you got free health care?  Think again (see Constitutionality of Healthcare Law Is Still in Question by Nina Owcharenko posted 7/10/2012 on U.S. News and World Report).

Not only is the IRS expected to enforce the employer mandate, it must also make a complex tax calculation including household incomes for each employee, and collect the individual mandate tax (based on each month a person is uninsured or otherwise fails to satisfy the HHS guidelines for coverage). At a time when lawmakers on both sides are advocating for making the tax code simpler, these provisions only make the code more complicated.

Health care isn’t free.  Obamacare just changes who pays for it.  Either by forcing people to buy health insurance policies.  Using the IRS to delve deep into the personal lives of everyone living in your household to see if you have health care.  If you or the other people in your household can afford your health care.  And if you or someone else in your household can afford it but didn’t buy it for you look out.  You will be paying the penalty.  If you can’t afford it then the government will force someone else to pay for it.  Really little different than the way things are now when you go to the emergency room without insurance.  The only difference being the IRS colonoscopy.  And that part about the federal government forcing you to buy something.

So what’s the incentive here?  To show you and everyone living in your household cannot afford to buy a health insurance policy.  That way you get around the federal government forcing you to buy something.  And all you have to endure is the IRS colonoscopy.  Which shouldn’t be too painful if you don’t work and only live on the kindness of government benefits.

Of course this may be the calculated plan all along.  When you factor in a lot of small business planning to drop their health insurance and pay the fine instead because it’s less costly you have a noticeable trend.  A decline in people buying private health insurance policies.  While the private health insurers have to pay more benefits (such as covering preexisting conditions for someone who never owned a health insurance policy before).  While they collect fewer premium dollars to pay for those benefits.  So what must they do?  Raise their premiums on the few people remaining who are still buying their policies.  Thus encouraging more people to drop their insurance coverage.  Because the penalty will be less costly.

Of course this can lead to but one end.  The end of private health insurance.  Forcing the government to do what they wanted to do all along with Obamacare.  Transform it into a full-blown, tax-funded national health care service.  Including the high taxes, the long wait-times and the rationing of services common to all national health care systems.  And the death panels.  Where some government bureaucrat decides whether a person is worth spending health care resources on.  And having that bureaucrat telling you “no” will be a rather unpleasant experience.  Even worse than that IRS colonoscopy.

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FT107: “Birth control pills prevent a natural biological function while ED pills restore one.” -Old Pithy

Posted by PITHOCRATES - March 2nd, 2012

Fundamental Truth

Women take Birth Control Pills to have Sex without it resulting in the Miracle of Life or a Real Inconvenience

The human body is a complex machine with one biological purpose.  To propagate the species.  That is, to make babies.  Humans may have other purposes.  Depending on your religion.  Or lack thereof.  But biologically speaking everything we do as humans is to sustain our lives so we can make babies.  Just like other animals on this planet.  And all organisms that lay eggs or give live birth.  At the most basic level we are just baby-making machines.  It’s the natural order of things.  Our biological purpose.  Which explains why we have a sex drive.  And why we spade and neuter stray cats.

The great George Michael explained this sex drive well in song (excerpted here):

It’s natural
It’s chemical
It’s logical
Habitual
It’s sensual
But most of all
Sex is something we should do
Sex is something for me and you
Sex is natural
Sex is good
Not everybody does it
But everybody should
Sex is natural
sex is fun
Sex is best when it’s one on one

(From George Michael’s I Want Your Sex.)

Not familiar with George Michael?  Am I dating myself?  Just ask your parents who George Michael is.  Chances are your mom will make a face or a sound you don’t want to see or hear as she recalls a primeval lust from yesteryear.  But this is sex.  And it’s all these things for one reason.  Biologically speaking, that is.  To start up that biological machine.  And to make it do what it was meant to do.  Make babies.

Now there are those who want to alter the natural order of things.  Who enjoy having sex.  Lots and lots of sex.  In fact, they can’t get enough of that sex.  But they don’t want the natural output of that biological machine.  So they practice birth control.  Men wear condoms.  Women take birth control pills.  Among other things.  To prevent all of that fun from resulting in the miracle of life.  Or a real inconvenience.  Depending on your religious views.  Or lack thereof.

Women who have Abortions have Higher Incidences of Breast Cancer than Women who take Birth Control Pills or who have Babies 

Cigarettes introduce unnatural chemicals into the human body.  Harming the human body.  So the government places great sin taxes on them to dissuade us from smoking.  They warn us of the dangers to scare us into not smoking.  And they sue the tobacco companies because they have lots of money.  And blame them for kids smoking.  Not their music, movie and television heroes.  (What guitar hero doesn’t have a cigarette dangling from their lips as they play?)  Eating poorly can harm the human body, too.  And government is now taking steps to protect people from bad food.  Not quite like they do with cigarettes.  Yet.  But they are working in that direction.

Obamacare is forcing people to buy health insurance.  Because, they say, many of us are harming ourselves through poor lifestyle choices.  Such as smoking.  Or eating poorly.  And it’s not fair that we go to the emergency room for free health care.  Because it just makes health insurance more expensive for those who do buy it.  To cover the costs for all of those uninsured emergency room visits.  So Obamacare wants to use the heavy hand of government to make people either make better lifestyle choices.  Or pay for the consequences of their poor lifestyle choices.

A recent study has shown links between rising incidences of breast cancer and the lack of using breasts for their biological purpose.  Feeding babies.  Women who bottle feed have higher incidences of breast cancer than women who breast feed.  Women who take birth control pills have higher incidences of breast cancer than women who have babies.  And women who have abortions have higher incidences of breast cancer than women who take birth control pills.  The study indicates that it’s the interruption of the natural biological process of converting the breast tissue to produce milk causing the increase in the incidences of breast cancer.  And stopping the conversion of tissue after the process starts (i.e., having an abortion) has the most harmful affect on the breast tissue.  Leaving mutated cells that become cancerous.

Any Political Candidate that Helps Young People have Sex is Sure to get their Vote

Obamacare includes provisions that require insurance providers to provide birth control and abortion.  They call these women’s health issues.  Because the ‘miracle of life’ or that ‘great inconvenience’ (depending on your religious views or lack thereof) can be very harmful if carried to term.  Thus fulfilling the natural order of things.  The biological purpose of our human machines.  So Obamacare discourages us from smoking and eating poorly because of the costly and harmful consequences of these lifestyle choices.  But they encourage another potentially harmful lifestyle choice.  Having sex without making babies.  Which may increase the incidences of breast cancer.  The very program that is supposed to make us choose healthier lifestyles and accept the consequences of poor lifestyle choices encourages women to choose an unhealthy lifestyle that may give them breast cancer.  Or a venereal disease.  Which may happen with all that sex with multiple partners.  Unless they’re following the advice of George Michael.  And keeping it one on one.

Of course, these are primeval views.  Much like that primeval sex drive.  Only we’re supposed to get over our primeval views on making babies.  So women are free to enjoy careers.  And have as much consequence-free sex as they desire.  Something that pleases a lot of men.  Probably more men than women.  Especially young men.  Who have one thing on their mind.  And couldn’t ask for anything more than free-spirited and empowered women with access to all the women’s health products and services she so desires.  And any political candidate that helps these young people to have as much sex as they want is sure to get their vote.  So it’s no surprise that the Democrats get the youth vote.  Because the Democrats are so unlike these kids’ parents.

So women demand their birth control.  For their health.  And demand that their health insurance plans pay for it.  Or the taxpayers.  Because it’s an issue of women’s health.  That we can address in no other way.  (Excluding abstinence, marriage, paying for your own birth control, etc.)  In fact they say it’s no different than men’s erectile dysfunction (ED) pills.  But there is a slight difference.  The ED pills try to restore a biological function.  Whereas birth control tries to prevent one.  ED pills tries to restore the human baby-making machine.  While birth control pills tries to shut that machine down.  Contrary to the natural order.  And our biological purpose. 

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LESSONS LEARNED #67: “Free health care is very expensive.” -Old Pithy

Posted by PITHOCRATES - May 26th, 2011

Romneycare

In 2007 Romneycare took effect in Massachusetts.  A precursor to Obamacare.  Though not by design.  The new health care requirement included an individual mandate.  You either bought health insurance or they penalized you.  Ditto for employers.  They either provided health care or they penalized them.  It included subsidies to help the less wealthy pay for their mandated insurance.  And added a new and powerful health care regulatory board.  Finally, an example of what compassionate Big Government could do.  And how successful has Massachusetts been in providing free/affordable health care to everyone?  Well, as of 2011, not a single state has followed their example.

It has failed to provide universal coverage.  It has failed to control health care costs.  It has cost more in taxes than originally projected.  Health care has become more bureaucratic.  There is less choice.  Medical bankruptcies went up.  And there’s talk about implementing price controls.  And, of course, rationing.  Everything the critics warned about in a universal health care program.  And everything the proponents poo pooed.  Because those things only happen when everyone else tries universal health care.  But everyone else isn’t them.  They know how to do it right.  And their plan will not only not have those problems.  It will provide universal, quality health care at affordable prices while reining in health care costs without new and higher taxation.  Of course they were wrong.  And the critics were right.

Sound familiar?  The proponents of Obamacare have said the same thing.  In fact, Obamacare is pretty much Romneycare at the national level.  Interestingly, Mitt Romney, the architect of Romneycare, opposes Obamacare.  As a Republican candidate for the 2012 election, he promised to repeal Obamacare.  Probably because if they do at the national level what he did at the state level it would ruin the U.S. economy.  Because nothing went as planned in Massachusetts.  So there is no reason to believe that Obamacare will not be the train wreck Romneycare was.  Even if the ‘right’ people finally take a crack at it.

Medicare

In the U.S., federal tax revenue (i.e., federal income taxes) averaged about 18% of GDP between 1970 and 2010.  So if the government’s budget was balanced, federal spending would also equal 18% of GDP.  When it’s not balanced and they spend more than this 18% of GDP it results in deficits.  Which the government has to finance either by raising taxes, borrowing money or printing money.

In 1970, Medicare outlays were about 0.7% of GDP.  By 1980, that number increased to 1.2% (a 71.4% increase over the decade).  By 1990, it increased to 1.9% (a 58.3% increase over the decade).  By 2000, it increased to 2.2% (an increase of 15.8% over the decade).  Or a total increase of 214% in only 30 years of the program.  And that’s the good news.  The projections are far worse.  By 2020, it will be 3.6% of GDP (a 414.3% increase from 1970).  By 2030, it will be 4.9% of GDP (a 600% increase from 1970).  By 2050, it will be 6.7% of GDP (an 857.1% increase from 1970).  By 2075, it will be 9.6% of GDP (a 1,271.4% increase from 1970).  At which time it will consume more than half of all tax receipts.  And equal the size of the 2010 federal deficit.  And this is for Medicare alone.  It doesn’t include Social Security.  Defense.  Or interest on the debt.

These numbers are huge.  Growing.  And out of control.  It’s the biggest piece of all entitlement spending.    And it’s the biggest single item of the federal budget.  It is without a doubt some of the worse number crunching the federal government ever did.  Not only did actual costs exceed their estimates, they were three times higher in only 30 years.  One thing is clear.  The federal government doesn’t know the first thing about running a health care system.  And yet here they are.  With Obamacare.  Which will be a lot like Medicare.  Only bigger.  Because Obamacare won’t just be for the seniors.  It’ll be for everyone.

Cubacare

To borrow a medical term, Medicare is circling the drain.  It won’t be around for the kids of today.  Unless they enjoy paying a flat tax of 100% of their earnings to continue to fund it and the rest of government.  Of course, that won’t leave anything for food, utilities, rent or the other necessities of life.  In other words, they will work.  But they won’t get paid.  Reduced to involuntary servitude.  Life will be pretty bleak.  But there will be health care for everyone.  But not in the utopian way the government planners are promising.  It will be more like in Cuba.  Where it’s illegal to criticize the government.  So most don’t.  And they abort babies when it looks like they may not live through infancy.  Thus giving them a low infant mortality rate.  A sign of a first class health care system.  But the hospitals are dirty.  And filled with out of date equipment.  Much of which doesn’t work.  And there is a wholesale lack of medicine.  Because they are just too impoverished to buy any.

We have to fix Medicare.  If we want to keep having Medicare.  It can’t stay as it is.  It’s just too costly.  As all universal/free health care tends to be.  And a declining birthrate compounds the problem.  Baby boomers are retiring.  And making the system top-heavy.  The consumers of health care are growing faster than the payers of health care.  What’s worse is that it borrows from one generation to pay for another.  As they tax the young more for today’s retirees the young will have less to save for their own retirement.  So not only will they not have Medicare when they retire, they will have saved less than today’s retirees.  Making their retirement truly a bleak and impoverished picture.  How bleak?  Cuba bleak.

And continually raising taxes isn’t the answer.  Because there’s a limit to how high you can raise taxes.  Massachusetts has apparently reached that limit.  For they are now considering price controls and rationing.  Which will make things worse.  Not better.  The UK and Canada are in earlier stages of price controls and rationing.  Cuba is in a much later stage.  And you can see the progression of quality.  Of these four countries, which would you choose for your health care needs?  Most probably would choose the United States.  Many, though, no doubt, would choose Canada or the UK.  But one thing for sure.  No one would choose Cuba over the other three.  Sadly, based on the numbers, that’s where Medicare is heading.  Of course, it probably won’t ever be like Cuba.  For it probably will cease to exist long before it gets that bad.

Costs will Continue to Rise

If we learn anything in life it needs to be these two things.  Nothing is free.  And government is horrible at running things.  Providing quality yet affordable health care to everyone are two conflicting goals.  You can provide high quality health care.  But not to everyone.  And you can provide health care to everyone.  But it can’t be high quality.  Universal health care, because of its cost, has to make limited resources cover more people.  That is to say, they will have to ration resources. 

When the government is picking up the tab for health care, there will be no more private rooms in hospitals.  Or semiprivate.  There will be crowded wards.  So doctors and nurses can carry higher patient loads.  To keep costs down.  And to allow fewer resources cover more people.  They will ration high-cost treatments.  Not everyone will get dialysis.  Or chemotherapy.  There will be fewer machines.  And less medicine.  Because of costs.  Only the few meeting the government’s criteria will get these treatments.  Or those with pull.

Even then the costs will continue to rise.  And the more the government takes over, the more health care costs will be transferred to the taxpayers.  Who will pay ever higher taxes.  And get ever less in return.  But they will have universal health care.  It will just be horrible.  As their lives will grow to be.

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FUNDAMENTAL TRUTH #67: “Free health care is very expensive.” -Old Pithy

Posted by PITHOCRATES - May 24th, 2011

No Such thing as a Free Lunch

Things cost.  In more ways than one.  A free lunch, for example, isn’t free.  If a client takes out a customer for lunch they’re hoping to get something in return.  A new contract.  A new sale.  Continued good will for a future contract or sale.  Even with the quintessential honest business person.  Who can’t be bought.  But can always be persuaded in the event of a tie.  Where all things being equal, the tie will likely go to the relationship that fosters the greater good will.  And there’s nothing wrong with that.  It’s one of the intangibles to consider.  And sometimes the intangibles can outweigh the tangibles.  Especially if there are tricky milestones to meet.  And a fastidious customer to please.

Then there’s the lunch itself.  It isn’t free.  Someone has to pay for it.  Because a restaurant is not just going to give their lunches away for free.  Because it costs them to make a lunch.  They have food to buy.  And people to pay.  From food prep to cooks to wait staff.  And food suppliers don’t give their food supplies away for free.  Because they have their own bills to pay.  And people don’t work for free.  Because they, too, have their own bills to pay.

Even though you’re not picking up your own tab, you are still paying for it.  Buying lunches is an entertainment expense.  Part of the larger marketing and sales budget.  Which is part of the larger overhead account.  Here’s how it works.  You have sales revenue.  And cost of sales (i.e., direct costs to make those sales).  You subtract cost of sales from Revenue and you have gross profit.  You subtract overhead from gross profit to get net profit.  Which is greater than zero in a healthy business.  To do this you need to make sure your sales prices include the costs of all of these free lunches.  In other words, sales prices include a markup to cover the costs of the free lunches.  So you end up paying for your free lunch.  Even though someone else is picking up the tab at the restaurant.

The Remarkable Mechanism of the Free Market

For those of you who enjoy the occasional free lunch, do you notice how often you get one?  It’s usually occasionally, right?  Maybe a free lunch once a month or so.  Maybe a nice spread at the holidays.  You may even get a nice Christmas gift.  Say a nice bottle of scotch.  Or a gift certificate where you can buy something nice.  The free lunches and gifts are nice.  And you probably wish you could get these freebies on a more regular basis.  Because free is nice.  But, of course, they’re not free.  You in fact pay for every last one.  Or your boss.  Because it adds to the cost of whatever your company buys.  And the more free stuff you get, the higher the prices your company pays.  To cover the costs of the free stuff.  But if the markups get too high, your company will have to stop buying that stuff.  And find someone else to buy from at more reasonable prices.

Some of you may not care what your boss pays for this stuff.  You figure he or she is rich.  He or she can afford it.  But he or she is not as rich as you think.  Because running a business is not as easy as it seems.  You see, wherever you work, they sell stuff, too.  And they compete with other people selling similar stuff.  This competition keeps sales prices down.  So to be profitable, you have to keep your own costs down.  And if you buy things at highly inflated prices that include a lot of free lunches and gifts, your costs will be greater than your revenue.  Your company will lose money.  And look for ways to cut costs.  Like laying a person or two off.  And if you’re one of those people, then you’ll start caring about what your boss pays for this stuff.

This is the remarkable mechanism of the free market.  Competition keeps sales prices down.  And costs down.  Because someone’s sales are someone else’s costs.  That’s why people simply can’t charge what they want.  There’s a limit to the amount of markup you can place on any sale.  And a limit to the amount of free lunches and gifts that can be buried in sales prices.

Health Care Insurance became Expensive after it became a Benefit

Now let’s look at health care.  The ultimate free lunch.  Before World War II we used to pay for our own health care.  But when the government implemented price controls on wages, employers couldn’t entice the best and brightest anymore with higher wages.  So they came up with a new idea.  Benefits.  Can’t pay you more money?  Not a problem.  We’ll pay for your health care instead.  Let’s you keep more of your money.  So it’s just like getting a raise.  It started with GM.  And spread to the other automotive companies.  Soon, everyone was providing health care insurance as a benefit. 

Eventually, health care insurance began to pay for everything.  You went to the doctor’s office and paid only a small co-pay out of pocket.  Everything else was free.  Someone else paid.  Just like getting a free lunch.  Only problem was that these free lunches added up.  And there was no free market mechanism to keep prices down.  Someone else paid.  Who wasn’t even at the lunch.  They weren’t there to say, “Hey, I can’t turn in an expense report with a $200 bar tab on it.  It’ll come out of my pocket.  Then my boss will fire me.  Have a Coke instead.  They give free refills.”  Nothing like this happens in health care.  So the costs of health care went up.  And the sales price for health insurance sky rocketed.  It was breaking the back of businesses.  It was becoming the largest single expenditure they had.  And it kept going up.  And never came down.  Soon, employees started paying a portion of these costs through a payroll deduction.  And that deduction kept going up.  As did co-pays.  But these were just a drop in the bucket compared to what the employer was paying.  It got so bad that they had to choose between staying in business.  Going to a cheaper and less comprehensive health care plan.  Or dropping insurance altogether.

Worse, as these employee deductions went up, young, healthy people cancelled their health insurance.  This left only heavy uses of health care with health care insurance.  Older and less healthy people.  And families.  The young and healthy didn’t go to the doctor.  So most of their premiums helped to pay for those who did.  When they started to leave the system the insurance rates on those remaining went up to pick up their lost contribution.  Soon, health insurance wasn’t health insurance anymore.  A fortune was paid in premiums.  And a fortune was spent on health care costs.  It just took money from those not sick today to pay those who were sick today.  It’s now little more than a transfer payment.  And has more in common with Medicare than insurance.

Some of the most Expensive Free Health Care in the World

Medicare has the same problem.  Only worse.  Because it’s a program for the elderly.  Who are big consumers of health care services.  Who are also retired.  And living longer thanks to the good health care they’re getting.  Of course, Medicare isn’t insurance.  The government reimburses health care provides with money collected through payroll taxes.  When they set up Medicare, there was still an expanding birth rate.  So taxpayers then outnumbered retirees on Medicare.  But that changed soon.  The birth rate declined radically.  We went from having big families to having small families.  So retirees on Medicare now outnumber current taxpayers.  So fewer taxpayers must pay more in taxes.  Which is an even bigger problem than the private health insurers are facing.

This means that the free health care we get is some of the most expensive free health care in the world.  And it’s like this because the consumer of the health care isn’t paying the bill.  When a private insurer or the government pays, there is no free market mechanism keeping costs down.  Like in private business.  Who know the full cost of a free lunch.  And they don’t give so many away that they have to raise their prices so much that it makes their goods and/or services unaffordable.

There is no lunch crisis (free or otherwise).  But there is a health care cost crisis.  And the big difference between the two is the free market mechanism.  Health care needs more of it.  For it is the most effective thing in keeping costs down.  It would be so effective that it may even make health care insurance what it once was.  Insurance.  Where a lot of people pay a little bit in to protect their financial assets.  To pay for the few with an unexpected catastrophic expense.

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The High Cost of Health Care and Beer

Posted by PITHOCRATES - May 22nd, 2011

The Rising Cost of Beer

Economics can be confusing.  And boring.  A lot of it sounds Greek.  And wonkish.  Worse, there are those who like to sound wonkish.  They like to show charts with curves.  And explain why beer is more expensive these days by moving a curve on their graph.  Yeah, I know.  Yawn.  But they feel smart.  And they think it impresses the ladies.

But beer prices are real.  For some, it’s part of the weekly routine.  Get paid.  Buy a case of beer.  Those who do know this commodity price very well.  And it’s been tracking higher.  Why?  Because of the laws of supply and demand.  You see, the stuff that goes into making beer is getting scarcer.  And, therefore, more costly.  Hence the rise in beer prices (see The economic forces behind the rising cost of beer by Loren Berlin posted 5/22/2011 on msnbc).

Three years ago, Bavaria, the largest state in Germany, suffered a bad hops harvest. These green, pine cone-shaped flowers are the essential ingredient in brewing beer, and because Germany alone provides roughly 35 percent of the world’s supply of hops, the crop shortage created an immediate and significant problem for beermakers who found themselves suddenly scrabbling to locate this key ingredient. And as we all know, when supply decreases and demand doesn’t, prices rise. To cover those new higher costs, brewing companies added a few cents to the price of our beer.

But it’s not just one ingredient.

…a heat wave in the Ukraine can directly add to the cost of beer — and is doing so right now. Global grain production is down, thanks in large part to unusually brutal heat in the former Soviet Union and droughts in China. See the previous discussion of supply and demand, but in this case, the effects are wider, because unlike hops, which is mostly used in beer, we’ve got a few other uses for grains. Between people food, animal food, biofuels and of course, our beer — along with a steadily growing world population that wants to consume them — yes, another few pennies are getting added onto the cost of every beer.

But it’s not just these two ingredients.

Then there’s transportation. All those raw materials have to be shipped to the brewers, and the finished products shipped to the retailers who sell it to us, all of which requires fuel. Fuel, that, until very recently, had been getting steadily more expensive this year. Yet another addition to the price we pay for our beer.

Yes, the cost of fuel, too.  These are all input costs to making beer.  When they go up beer is more costly to make.  And brewers being in the business to make a profit, have to increase the price of beer to cover these higher input costs.  While still being able to make a profit.  For if they couldn’t make a profit, they’d have no incentive to make beer.  And wouldn’t.  And we wouldn’t want that, would we?

Free Health Care is very Expensive

Understanding health care is a little more difficult.  Because we don’t pay health care costs like we pay for beer.  We know the price of beer.  There’s a price tag stuck to the beer so we can see the full price to make an informed purchasing decision.  The vast majority of people, though, don’t pay the full price of their health care costs.  So they haven’t the foggiest clue of what they are.  Other than the cost of co-pays.  So they keep demanding more.  Don’t want to hear anything about reforms to Medicare.  And are all for free health care for everyone.  Problem is, free health care is very expensive (see Republicans suggest deal possible on taxes, health by Andy Sullivan posted 5/22/2011 on Reuters).

On healthcare, the two sides are separated by a gulf of trillions of dollars. The Republican-controlled House has passed a budget, authored by Ryan, that would save $2.2 trillion by scaling back Medicaid and Medicare, the government-run health plans for the poor and elderly, and repeal President Barack Obama’s signature health reform program, the 2010 Affordable Care Act.

Obama, in turn, has proposed saving $480 billion by accelerating reforms in the program — a nonstarter for Republicans who insist it must be repealed.

The nation’s debt is $14.3 trillion dollars.  And President Obama’s 2010 budget added the last $1.4 trillion of that number.  $480 billion in health care reform savings is less than his last deficit.  This will still result in deficits.  And add to the debt.  The problem is the federal government is giving away too much stuff.  And stuff costs.  Medicare and Medicaid are about 40% of the federal budget.  And the baby boomers are just starting to retire.  Which will break Medicare.  Unless it’s reformed.  And it is amidst all of this that they passed Obamacare.  It’s too much.  Something has got to go.  Like it or not.

Democratic Representative Chris Van Hollen, a participant in the Biden talks who is also the top Democrat on the House Budget Committee, said the Democrats had proposed savings in the Obama’s healthcare program and could find more by lowering the price the government pays for prescription drugs, rather than scaling back benefits for patients.

Van Hollen repeated Democrats’ contention that any debt-reduction plan requires higher taxes, saying Republicans’ reluctance to them forced Ryan to push his unpopular cuts to Medicare and Medicaid.

If it’s that simple, why don’t the beer-makers just lower the price they pay for hops?  And get the price of beer down?  Because it’s not that simple.  With less hops to sell, they have to sell what they can at a higher price to cover their costs.  If they sell at lower prices, and with a smaller harvest to sell, they will lose money.  And possibly their farms.

If the government tells a drug company to lower their prices, what will happen?  With less revenue they won’t be able to spend as much.  They may have to cut research and development, that costly process that brought so many of their wonder drugs to market.  Or they may just say the new law makes it impossible to make a profit and shutter the business.  Either way, there will be fewer drugs to go around than before.  Just as the government wants more drugs to pass around.  And, with medications more difficult to find, people will take less.  And perhaps get sicker.  Possibly requiring hospitalization.  Which will increase costs.  Kind of the opposite of what they would hope for by lowering drug prices.

We’ve hit our head on the debt ceiling.  The White House wants to raise the ceiling.  But don’t you think $14.3 trillion dollars should be enough?  It is.  We’re spending too much.  And raising taxes does nothing to rein in spending.  Quite the contrary.  It encourages more spending.  Ronald Reagan agreed to higher taxes in exchange for future spending cuts.  The spending cuts never came.  They never do.  If you can’t cut the spending now because there’s too much opposition, that opposition will still be there in the future.  And they’re not going to let you cut spending then either.  It’s the oldest trick in the book.  Make a promise that you know you can’t keep.  You lose nothing.  And gain everything.

It’s Simple Supply and Demand

It’s simple supply and demand.  If you buy more you pay more.  If supply goes down prices go up.  And if you have no idea of the full price of what you’re buying you can’t make an informed decision.  Which the politicians count on to keep increasing the debt limit.  So they can keep on spending.

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LESSONS LEARNED #32: “America is great but it can’t make bad ideology good.” -Old Pithy

Posted by PITHOCRATES - September 23rd, 2010

Hamilton vs. Jefferson

So what was the deal with these two Founding Fathers?  Why did they hate each other so?  They were exceptionally bright, among the best read of the founders.  They each had impeccable revolutionary credentials.  And, prior to 1787, they had similar visions for their new country.  So what happened?

Despite their similarities, they were two very different men.  Hamilton was a bastard child whose father left him at a young age.  His life was hard.  He had a job while still a child.  Anything he had he had to earn.  Jefferson, on the other hand, was born into the planter elite of Virginia.  His life was not quite so hard. 

A bit shy, Jefferson buried himself in books.  He loved to read.  And to think.  To ponder the great questions of life.  While Hamilton worked in and learned the import/export business in the Caribbean.  As Jefferson pondered about what might be, Hamilton mastered commerce.  Understood capitalism.  Pondered what was.  And could be.  If he ever got off of that godforsaken island.

Eventually, he did.  He came to the colonies and went to college.  And gave Jefferson a run for his money in the smarts department.  And in one area, he simply left Jefferson in the dust.  Hamilton could understand things if you put dollar signs in front of them.  Jefferson could not.  For all his genius, Jefferson couldn’t make a buck.  He was forever in debt.  Because he struggled in these areas, he distrusted banking and commerce.  And the big cities that they corrupt.  Hamilton, though, understood banking and commerce.  He understood capitalism.  And what it could do.

Thus the divide between these two men.  Hamilton, a champion of capitalism.  And Jefferson, a champion of the yeoman farmer (a farmer who owns and works his own land.).  Of course, Jefferson was anything but a yeoman farmer.  He had others (i.e., slaves) work his land.  Here he was like the contemporary liberal.  Do as I say.  Not as I do.  For wealth and luxury obtained from the labors of others is okay for me and my fellow planter elite.  But not for you.  Especially when the ‘black arts’ of commerce and banking are concerned.

London, Paris/ Versailles and Madrid

The old world capitals had many things in common.  They were the homes of powerful monarchies.  They were the financial capitals of their countries.  And they caused a lot of mischief in the world.  Jefferson saw the connection between money and power.  More money, more power.  More power, more mischief.  Another good reason to hate commerce and banking in Jefferson’s book.

Of course, Hamilton saw it differently.  He saw one empire in ascent.  And two in descent.  And it was no coincidence that the better practitioner of capitalism was also the empire in ascent.  Great Britain.  He may have fought against her in the Revolutionary War, but he still admired her.  Where Jefferson feared the combination of money and power, Hamilton saw the Royal Navy.  Great wooden walls (as John Adams called them) that had protected the empire since she became an empire.  Grew her empire.  Increased her wealth.  And her power.  In fact, losing her British colonies was the only real defeat this empire had suffered.

When the Founding Fathers looked west they saw great potential.  Jefferson saw farms.  Hamilton saw empire.  One greater than Great Britain.  For after all, the Americans did what no other European nation could.  They defeated her in war and took huge chunks of her empire.  (Of course, our Revolutionary War was but one theater in a world war Great Britain was fighting at that time.)  Hamilton saw great potential for his new nation.  If only business and government partnered to harness that great potential.

Money + Power = Corruption

When business partners with government we don’t get capitalism.  We get mercantilism.  Or crony capitalism.  But you have to understand things were different in Hamilton’s day.  A good politician then went to great lengths NOT to profit from his time in public service.  It was expected.  Selfless disinterest.  In fact, it was unseemly to even campaign for public office.  That was just something a gentleman of the Enlightenment wouldn’t do.  And if anything was important in those days, it was showing how much a gentleman of the Enlightenment you were.

That said, business partnering with government would NOT lead to corruption.  At least, in Hamilton’s eyes.  With the right men in power, only good would result.  Though Jefferson, too, was a gentleman of the Enlightenment, he had no such faith in government.  To him, it was simple arithmetic (as long as there were no dollar signs involved):

                Money + Power = Corruption

So the new American capital wouldn’t be in a big American city.  Not in New York City.  Not in Philadelphia.  It would be in a swamp.  On the Potomac.  In Virginia’s backyard.  So Jefferson and his planter elite brethren could make sure the new American government would speak with a southern accent.  So much for that enlightened disinterest. 

Both Right.  Both Wrong.

No man is perfect.  Not even me.  No, really.  It’s true.  I’m not.  And neither were Hamilton nor Jefferson.  Hamilton may have wanted to conquer the world.  And Jefferson may have been such a good liar that he even fooled himself.  But the Hamilton treasury department gave this nation international respectability and allowed her to service her debt.  Which allowed her to borrow.  Which allowed her to survive.  And Jefferson fully understood what Lord Acton would say a century later:  Power corrupts.  Absolute power corrupts absolutely.

However benign a government may be, however it may look out after the people’s interests, government is still a body of men.  Jefferson understood this.  The Founding Generation was special.  They knew it.  They knew they were making history.  But were they unique?  Would this moment of selfless disinterest in time prove to be fleeting?  (As it turned out, yes.)  And, if so, what would happen to later generations?  When men of lesser character assume offices of sweeping powers?  What then?  Well, they would abuse their power.  So what to do?

Simple.  You prevent such a scenario from happening.  By not giving government sweeping powers.  And by not letting them accumulate great wealth.  Because bad things happen when you do.

The French Revolution

France was the cradle of the Enlightenment.  In the 18th century, anyone who mattered spoke French.  France was the dominate European power.  And some in France lived very well.  Most did not.  The majority were still feudal peasants.  Or poor laborers, artisans and craftsmen.  And they were hungry.  Poor.  And without breeches (those fancy knee-length pants the rich people wore).

While the sans-culottes (those without breeches) went without, the king, nobles and clergy were living large.  All the wealth of the largest European country was concentrated in their few hands.  As was the power.  And, of course, you add money and power and what do you get?  That’s right.  Corruption.  Add to that some crop failures and you get a very unhappy population.  Who overthrow the monarchy.  Execute their king.  And his queen.  And quite a few others before they stopped the bloodletting. 

Note that France’s troubles were the result of the money combining with the power.  The French monarchy incurred a huge debt fighting their perpetual war (it seemed) with Great Britain.  At the end of the world war that included the American Revolution, both saw those great debts grow larger.  Great Britain, an advanced capitalist nation, was able to service her debt and get on with the business of empire.  France, still fundamentally feudal, could not.  This great nation that had sparked the modern age could not even feed her own people.  She had taken all her people could give.  And her people could give no more.

Beware the Do-Gooder

The downfall of most nations results from this combination of money and state power.  This is an ideology that history has proven a failure.  The more money the state accumulates, the more it can do.  And the less you can do.  You go with less.  And the state causes greater hardships for everyone.  It can go to war.  Which it can lose.  Or prolong.  Hitler started out strong but the German people paid a steep price in the long run.  The allied bombers destroyed their homes.  And killed their families and neighbors.  While the allied armies killed their husbands, fathers, brothers and sons.  And those Germans who unfortunately fell within Soviet controlled territory after the war faced possible retribution for the crimes their husbands, fathers, brothers and sons committed against the soviet people.  In that hell on earth know as the Eastern Front.

But war is not the only mischief a state can do.  They can build opulent palaces (like at Versailles).  Or they can create a welfare state.  Where they get as many people as possible dependent on the state.  And the more they do, the more wealth the state transfers from the private sector to the public sector.  The state does well.  Especially the inner-party members.  The few who control the wealth.  And what happens in the long run?  The state gets richer and the people get poorer.  Just like they did in pre-revolutionary France.  In pre-revolutionary Tsarist Russia.  And, ironically, the state that replaced Tsarist Russia; the Soviet Union.  Communist China.  Cuba.  North Korea.  Peron’s Argentina.  Idi Amin’s Uganda.  Saddam Hussein’s Iraq.  Etc.

Whenever the government has large amounts of money and power, they rarely do good things.  What typically happens is that the ruling elite live well while the masses suffer.  And they use fear, intimidation, torture and execution to maintain their power.  What a nation chooses depends on how much they care what the free world thinks of them.  The Communists cared little so they used more brutal force.  Social democracies do care.  So theirs is a much softer tyranny.  These people don’t use force.  They seduce with promises of free stuff and a better life.  Which they never deliver.  Well, not to the people.  They do deliver it to those who hold power.

You Get What You Pay For

It’s bad when we don’t learn from world history.  It’s especially sad when we don’t learn from our own history.  We know what works.  And what hasn’t.  Wilson’s progressivism didn’t work.  FDR’s New Deal didn’t work.  LBJ’s Great Society didn’t work.  These administrations just transferred more money from the private sector to the public sector.  Money plus power equals corruption.  And these administrations were rife with corruption.  When we suffered the stagflation of the 1970s, those in power were still living large. But we never learn, do we?

The Obama administration is transferring more money from the private sector to the public sector than any other previous administration.  Our national debt will exceed our gross national product (GDP).  For all intents and purposes, it will be permanent.  All subsequent generations will work more and more just to service this massive debt.  And pay for all that ‘free stuff’ we were promised.  Sure, we’ll have free health care.  It just won’t be any good.  Nothing free is.  The free toy in a box of cereal is never as good as the toy you pay for.  Because you get what you pay for.  And if the government is going to give everyone free health care, it will have to be ‘free toy inside a cereal box’ quality health care.  For the same reason they don’t put expensive toys in cereal boxes.  If you give something to everyone, you have to give everyone less.  It’s the only way you can afford to give something to everyone.  You have to give everyone crap.

These things have never worked.  Nor will they.  Ever.  Even if the United States does them.  Because bad ideology is just bad ideology.  No matter how great the nation is that tries it. 

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FUNDAMENTAL TRUTH #21: “The reason why health insurance is so expensive is because it is not insurance.” -Old Pithy

Posted by PITHOCRATES - July 6th, 2010

YOU CAME IN with a grand ‘to lose’ but have been riding a hot streak.  You’re up 5 grand.  And feeling luckier still.  You came in with a grand, you think, so you can just as well leave with a grand.  So you bet 5 grand.  Cause those cards have been so good to you tonight.  And there it is.  Blackjack!  And just as you’re about to shout to the heavens you see the dealer throw an ace on his down card.  The dealer asks, “Insurance?”   

You don’t want to but you just KNOW what’s under that ace.  All of a sudden you’re not so cavalier about losing 5 grand.  Too many friends have told you the same story.  “I was up 5 grand until that last hand.”   You could cry.  You don’t buy insurance.  Only suckers buy insurance.  That’s what you’ve always said.  But when you’ve got 5 grand on the table, the dealer can’t have anything but blackjack.  You know it.  He knows it.  And your wife knows it even though she’s off playing the slots somewhere.  You pull out $2,500 from your ‘do not touch’ money and buy the insurance.  (Let’s end this on a happy note.  The down card was a queen.  You walk away as if that last hand never happened, $5,000 richer.  Less taxes, of course.)

LIFE’S BEEN GOOD.  You’re making good money.  You have a beautiful wife and 3 great kids.  You just sold that small house and moved into that big house you always wanted for the holidays.  Cost a pretty penny.  But you had $75,000 in equity in the old home.  And cashed in a CD to furnish the new one with some nice new toys.  After all, life has been good.

The mortgage stings a little, but not too much.  You’ll get by.  You got all the big things you’ve wanted.  Now you can settle in and live modestly in your new home.  And you bought insurance up the wazoo.  If there is fire, flood, theft or death, no worries.  Well, there’ll be some worry, but you won’t financially ruin your family.  They’ll keep the house.  And there will be college for the kids.  Because you were responsible.  You protected the greatest investment of your life.  Yes, things have been good.  But not good enough to pay for everything twice.

TRADE EXPLODED IN the 17th century as little wooden ships crossed the oceans.  Storms and rough seas, though, toss around little wooden ships.  A lot of them sank.  With their cargoes.  But they didn’t all sink.  So owners insured their ships and cargoes.  For a nominal fee, they protected their investment.  For those that didn’t sink, the insurance wasn’t much of an added expense.  For those that did sink, it paid to replace the lost ship and cargo. 

YOU’VE ALWAYS WANTED to open a restaurant.  And your dream finally came true.  You saved for years.  You scrimped on vacations.  Didn’t by a new car.  Expensive toys.  No.  Your years of denying yourself the little pleasures in life saved up enough money to buy that restaurant.  To put enough money down to borrow to fit out the kitchen and dining area.  To stock your fridge, freezer and pantry.  You maxed out your credit and sunk your life savings into your dream.  And you’re loving it.  But you don’t want to lose it.  So you have all the insurances.  Fire.  Property.  Workers’ comp.  Liability.  So in case of fire, celebrating students (who trash the town after winning the championship), a strained employee back or an E. coli outbreak (because an employee didn’t wash his hands after using the toilet), you’re protected.  Your business may suffer, as they are wont to do after an E. coli outbreak, but the lawsuits won’t leave you destitute.

BEING IN THE NFL is a dream come true to many athletes.  But it can be a brutal occupation.  Compared to other professional sports, it has a short season.  Why?  Attrition.  Concussions, broken bones, torn ligaments and contusions take their toll.  The short season allows a longer healing period.  And time for surgeries.

Players can make obscene amounts of money.  But they can also suffer a career-ending injury in the first year of a multi-year contract. Great playing potential means great earning potential.  If you stay healthy and play.  Of course, if injured, all gone.  Some players insure against a career-ending injury.  Lloyd’s of London will insure an athlete.  For a price.  It ain’t cheap.  But if it keeps you from losing, say, 20 million in earnings, it could turn out to be quite the bargain.  If you’ve got huge potential.

THE MOST PRECIOUS gift we all have is our life.  So we take care of it.  We watch what we eat, don’t drink, don’t smoke, don’t take drugs, don’t speed in our cars or while on our motorcycles, don’t drink and drive, don’t drive around flashing railroad crossing barriers, don’t binge drink, don’t have unprotected sex, don’t play with matches or run with scissors and don’t do that thing where you jump up on a railing with a skateboard and fall, crushing your testicles on the railing and hitting your head on the concrete step.  No, we exercise, go to bed early and eat a lot of bran. 

All right, we probably don’t eat as much bran as we should.  And maybe we do a risky thing or two.  But we understand that those risky things we DO do can cost us.  Could wipe us out financially.  So we buy insurance to protect our life savings in the event of a catastrophic event that could be medically very expensive.

Or do we?

EVERYONE THAT HAS ever bought blackjack insurance didn’t get a winning blackjack hand.  Everyone that has ever bought homeowner’s insurance didn’t get a new home with their policy.  Everyone that has ever bought mariner’s insurance didn’t get a ship and a cargo of goodies with their premium payment.  Everyone that has ever bought business insurance didn’t get a business with their payment.  And an NFL player doesn’t get a dime from Lloyd’s of London until something pretty horrible happens first.  No.  These purchases were ‘just in case’.  Most people will never get anything for their payments (other than peace of mind).  Only those who suffer a loss will.  And those that do will have mitigated their financial losses with the insurance they so wisely purchased.  And they will get on with their lives.

This is insurance.   We use it to protect our wealth.  It takes a lot of time to accrue it.  So when we have it, we tend to protect it.  We do risky things.  And insurance manages that risk.  So we don’t lose everything we have because of a catastrophic event. 

We don’t think like this when it comes to health insurance, though.  We don’t think of health insurance as a way to manage our risk.  We look at it as a free ride.  If we have it, we expect free health care.  We want everything.  But we don’t want to pay for anything.  Free mammograms.  Those blue pills for the old johnson.  Heart valves.  Prenatal care.  Child vaccination.  Etc.

The problem is, these things cost.  A lot.  And if anybody can have them, those who actually pay for insurance have to pay for them.  And they’ll be paying for things they aren’t using.  All those things listed above mean nothing to a young single male.  But he’s helping to pay for that stuff.  Either by his premium contribution.  Or in lost wages.  Because an employer can’t afford such quality health insurance AND high wages.

Health insurance has become nothing more than a wealth transfer.  It’s like a Ponzi scheme.  A large and ‘growing’ group of healthy young people pay into the system and collect few benefits.  The ‘fewer’, older, sicker people pay little into the system but consume the lion’s share of the benefits.  At least in theory.  But like social security, and all Ponzi schemes, the theory doesn’t work in practice.

AMERICA HAS THE best health care in the world.  If you judge by where the affluent go for their health care.  They go to America.  And the best is never cheap.  You get what you pay for.  And if you want the best, expect to pay.  A lot.

All right, we have the best and some of the most expensive health care in the world.  Add to that an aging population.  What do you get?  A shrinking group of people (the young and healthy) paying for a growing group of people (the old and sick).  That means the burden on those paying into the system has to what?  It has to keep getting bigger.

But it can’t.  The young and healthy will just opt out.  Eventually.  When it gets to the point that it’s a car payment or a health insurance payment, what do you think they’ll choose?  Their annual health care expenses for an entire year may not equal one premium payment.  So they’ll say screw that.  And do.  A lot of young do not have health insurance because they choose not.  It’s just too fricking expensive.  And this just shrinks the shrinking group more.  Which increases the amount those with insurance pay.  And so it goes.

AND YOU DON’T fix this problem by nationalizing health care.  That doesn’t address the problem.  You have to tie the cost to the benefit.  People only chose to pay for things they get.  Those receiving the benefit, then, need to pay its cost.  Like we do with every other thing in our lives.  You want a TV you pay for a TV.  You don’t pay for one so your neighbor can have one.  TV prices are very reasonable, too.  They keep coming down.  The quality is fantastic.  And so it would be in health care.

Single payer health care insurance ain’t the answer either.  Because it’s not insurance.  It’s a wealth transfer.  That means it’s political.  It will serve political ends.  Not make good health care.  First of all, they’ll force the young and healthy to pay for insurance under penalty of law.  Or they’ll raise taxes until it hurts.  Then they’ll cut costs.  First by limiting what doctors can earn.  Then they’ll limit the profits the pharmaceuticals can make.  Then the medical device makers will have their turn.  Soon, people won’t want to be doctors any more.  Or make new and life saving drugs.  Or make medical devices.  So when the supply of these things falls, rationing must follow.  And if you really want to cut costs, there’s really only one place to do it.  The really sick and the really old.  These people, after all, consume the lion’s share of health care services. 

We don’t have a health care problem.  People are living longer than ever.  We have a dependency problem.  The current system has made us dependent on others for our health care.  And dependency kills.  It cowers a people.  Takes away their dignity.  Makes them subservient.  People live in fear.  Of what they may lose.  Nationalizing health care will only make us more dependent.  It’s not the answer.  Unless you want to conquer and subjugate a people.  I mean, how many of you have stayed at job you absolutely hated because of the health insurance?  If that ain’t subjugated, I don’t know what is.  As bad as that was, at least you got something for it.  Good health care.  If you think you’re going to get that under a national system, think again.  Or ask those people with a national system that come to this country for better care.

www.PITHOCRATES.com

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