Corporate Politics, Bureaucracy and Obamacare

Posted by PITHOCRATES - September 5th, 2013

Politics 101

(Originally published April 4th, 2013)

You won’t find many Union Workers filling out TPS Reports

In the movie Office Space we see how frustrating it is to work in a big corporation.  The office politics.  The bureaucracy.  The policies and procedures.  The frustration of having to answer to 8 different bosses after making a mistake.   Bumping heads with management at all levels.  And the mind-numbing frustration of getting your paperwork right.

Anyone who has ever worked in an office no doubt had their own TPS report moments.  And dealt with their own Bill Lumbergh.  So we laugh at poor Peter.  For we’ve been there.  And know his frustration.  For there is nothing worse than trying to work through a company’s bureaucracy.  Or dealing with layers of management that often appeared to be working at cross purposes.  And suffering under bad bosses.

Which is the whole purpose of labor unions.  To protect their workers from a business’ management.  And bad bosses.  Because unions say if they don’t management will just abuse their workers.  So unions shield workers from these unfeeling and inefficient bureaucracies.  Who are always introducing new policies and procedures to improve business efficiencies.  Things like TPS reports.  Which unions say only makes things worse for the worker.  So you won’t find many union workers filling out TPS reports.  Just the non-union office workers.

Dealing with a Bureaucrat is like a Grizzled Sergeant with 20 Years Experience reporting to a Junior Officer

Junior officers get no respect.  Comedian George Carlin served in the Air Force.  And said a common joke was to say when someone broke wind, “Captain who?”  They get no respect because they are bureaucrats.  They come out of their officer training with only book-learning.  While enlisted people have been gaining experience and learning how to do things on the job.  Then these junior officers come in with their book-learning.  And start telling these enlisted people how to do their jobs.  Despite these junior officers having never done their jobs.  Or understanding how to do their jobs.  But they will tell these people how to do their jobs better.

This is less of a problem in combat.  As junior officers typically have a short lifespan in combat.  For all the book-learning cannot replace the experience gained in actual combat.  Which is why lieutenants may command units but it is the grizzled sergeants with the combat experience that lead men into battle.  And a smart junior officer will learn everything he can from his senior sergeants.

Small business owners feel the same way about government.  For a lot of small business owners often go into business after working for someone else.  They’re like those grizzled sergeants in the military.  They’ve learned and done pretty much everything in a business.  Then decided to quit and start their own business.  And one of the first things they have to deal with is the mind-numbing bureaucracy of government at all levels.  City, county, state and federal.  A bunch of bureaucrats who never ran a business.  Who have no experience in their field.  And here they are.  Telling them how to run their businesses.  Like a junior officer out of the academy trying to tell a grizzled sergeant with 20 years experience how to do his job.

Under Obamacare Professional Bureaucrats will tell our Doctors how to administer our Health Care

In these complicated times if there is one thing everyone can agree on it’s this.  Bad managers, bosses, and officers are insufferable.  No one likes putting together ‘TPS reports’.  Or being told by 8 different bosses that they did something wrong.  And they sure don’t like people who don’t understand the first thing about their job or business telling them how they should do their job or run their business.  They especially hate people that can cite rules and regulations by chapter and verse who mete out some penalty or fine because they can’t cite those same rules and regulations by chapter and verse.

This will be the world of Obamacare.  And as much as EVERYONE hates these things at their workplace there are some who still want these same clueless bureaucrats and politicians to take over health care.  As if somehow these people who don’t know the first thing about treating sick people can do a better job than the grizzled veterans working in the health care industry.  Who spend more and more time filling out paperwork these days than actually seeing patients.  And the last thing they want is an even more bureaucratic system where they will have to report to 8 different people and agencies to treat a patient.  Where bureaucrats at the Department of Health and Human Services as well as the IRS will have their own coversheets for their ‘TPS reports’.

In the movie The Usual Suspects the character played by Kevin Spacey said, “The greatest trick the devil ever pulled was convincing the world he didn’t exist.”  For if you don’t fear the devil you may live a life more in line with the devil’s wishes.  Making it easier for the devil to get your soul.  Government is a little like that.  For it has a horrible track record of doing anything right.  Even in the finest military in the world the bureaucrat side of the military pays $100 for a $15.00 toilet seat.  And yet the government has tricked so many people into believing they want more government in their lives.  Even though government is nothing but the managers and bosses people hate where they work.  Bureaucrats who tell others how they should do their job by citing rules and regulations by chapter and verse.  But who really don’t know what you do.  Or how you do it.  Now these professional bureaucrats will tell our doctors how to administer our health care.  And God help you if you get sick and put the wrong coversheet on your Obamacare health care services requisition form.  Or leave an important income tax field blank.

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Cost-Benefit Analysis and Health Insurance

Posted by PITHOCRATES - August 19th, 2013

Economics 101

We do a Cost-Benefit Analysis before making a Buying Decision

We make decisions everyday comparing costs to benefits.  Any time we go to a store.  Any time we make a buying decision.  We ask ourselves how much are we willing to pay to enjoy the benefit of the thing we’re thinking about buying.

For example, people love boats.  For there is nothing like being on a boat on a beautiful summer’s day.  Especially if you’re a guy.  Because bikini-clad women love sunning themselves on boats.  You could even say that a boat is a magnet for beautiful, bikini-clad women.  But how much are you willing to spend to enjoy that benefit?  Being around beautiful, bikini-clad women?  For owning a boat is very costly.  Especially if you live in a northern clime with a short boating season.

First of all, buying a boat is very costly.  It could determine the size of your house or where you live if you’re making a boat payment.  Then there’s insurance.  Fuel costs.  Transportation costs.  And inconvenience.  Of the time, effort and wear & tear on your vehicle to haul your boat to and from the water.  Or you can spend even more money to dock your boat at a marina.  And dry-store it over the winter.

Young, Healthy People do not buy Health Insurance because it has no Immediate Benefit for the High Cost

It takes a pretty healthy income to enjoy the benefit of boat ownership.  Something business owners can afford.  Because they earn a decent income.  But they earn that income because they put in a lot of hours.  So many that their boat may sit in their yard for most of the summer.  Or in storage.  So while a boat owner continues to pay the costs for the benefits of boat ownership he or she rarely enjoys those benefits.  Especially if they get married.  And the spouse gets seasick.

In an honest cost-benefit analysis few would buy a boat other than a business that needs a boat to do their business.  Like a fishing boat.  Or a harbor tug.  For these people there is a financial benefit that comes from boat ownership.  Income.  Unlike earning enough money to be able to afford a boat these people use their boat to provide an income.  Making the cost-benefit analysis completely different.  Instead of rationalizing the value of having fun they look at the revenue their boat will be able to provide.  And if it’s greater than the costs of owning that boat they will go ahead and buy that boat.

Sometimes we make these decisions based on impulse or desire instead of objective analysis.  Buying a more costly car when a less costly one would do.  But there are times when some go too far in the other direction.  Deciding not to buy something because they can’t see or enjoy the benefit.  Such as car insurance.  Or health insurance.  Things that have no benefit unless something bad happens.  And a lot of those going happily through life see no reason to spend a lot of money for something that brings them nothing good now.

Obamacare and the Individual Mandate make Generational Theft Law

This is why health insurance is so expensive.  Because FDR broke the health care system.  At least, the money-side of it.  When the FDR administration put in wage caps General Motors started offering a health insurance benefit.  This got around FDR’s wage cap and allowed them to offer more to the best workers to get them to come and work at General Motors.  And ever since we looked at health insurance as an employer benefit now instead of another cost in our everyday life.  Like food and housing.

After this our employment decisions changed.  People chose a job not based on what they would enjoy doing in life but by the size of their health care benefit.  The owner-provided health insurance.  At first the sky was the limit.  Because the U.S. automotive industry could charge whatever they wanted for a car.  And the price of cars began to climb to cover those very generous benefit packages.  Undoing what Henry Ford had done.  As the benefits pushed the cost of a car higher and higher it soon was not available to the average working man.  As they could only be afforded by the upper middle class and above.  Until competition entered and provided a lower-cost car that the less wealthy could afford.  As the U.S. automotive industry lost market share their sales declined.  So a smaller revenue had to pay for a growing number of pension and health care expenses of retired GM workers agreed to during the glory years.  Who were living longer into retirement than originally assumed.  And consuming a lot of medical services in those later years.  All paid for by the health insurance companies.  Causing health insurance costs to soar.

Young people are healthy people.  They rarely go to the doctor.  So when it comes to buying very expensive health insurance (to pay for the older generation consuming the bulk of health care services) they choose not to.  Because of an objective cost-benefit analysis.  Young, healthy people, today, are getting little benefit from paying an enormous amount of money for a health insurance policy.  Their parent’s generation (or their grandparent’s) is getting the benefit.  So they make a rational decision and NOT buy health insurance.  Which raises the cost of health insurance for those who do.  For today health insurance is not insurance.  It’s generational theft.  Stealing from the young to pay for the old because of FDR’s decision that made health care an employee benefit.  And an aging population makes it worse.  Enter Obamacare and the individual mandate.  Which made this generational theft law.  Forcing the young to pay for the old against their will.  Leaving little for them on their meager incomes to support or start a family of their own.  Preventing them from buying a new car.  While the thought of owning a boat is now a distant dream.

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Detroit may mark the Beginning of the End of Generational Theft by Public Sector Unions

Posted by PITHOCRATES - August 4th, 2013

Week in Review

So who’s to blame for Detroit?  The greedy.  The greed of the public sector.  Who stole as much as they thought possible from future generations.  Laughing all the way to the bank.  But never did they think that their greed would eclipse the paying-ability of those they were stealing from.  Future taxpayers.  Which is what happened in Detroit.  And will probably happen elsewhere throughout the nation (see The Unsteady States of America posted 7/27/2013 on the Economist).

Nearly half of Detroit’s liabilities stem from promises of pensions and health care to its workers when they retire. American states and cities typically offer their employees defined-benefit pensions based on years of service and final salary. These are supposed to be covered by funds set aside for the purpose. By the states’ own estimates, their pension pots are only 73% funded. That is bad enough, but nearly all states apply an optimistic discount rate to their obligations, making the liabilities seem smaller than they are. If a more sober one is applied, the true ratio is a terrifying 48% (see article). And many states are much worse. The hole in Illinois’s pension pot is equivalent to 241% of its annual tax revenues: for Connecticut, the figure is 190%; for Kentucky, 141%; for New Jersey, 137%.

By one recent estimate, the total pension gap for the states is $2.7 trillion, or 17% of GDP. That understates the mess, because it omits both the unfunded pension figure for cities and the health-care promises made to retired government workers of all sorts. In Detroit’s case, the bill for their medical benefits ($5.7 billion) was even larger than its pension hole ($3.5 billion).

Some of this is the unfortunate side-effect of a happy trend: Americans are living longer, even in Detroit, so promises to pensioners are costlier to keep. But the problem is also political. Governors and mayors have long offered fat pensions to public servants, thus buying votes today and sending the bill to future taxpayers. They have also allowed some startling abuses. Some bureaucrats are promoted just before retirement or allowed to rack up lots of overtime, raising their final-salary pension for the rest of their lives. Or their unions win annual cost-of-living adjustments far above inflation. A watchdog in Rhode Island calculated that a retired local fire chief would be pulling in $800,000 a year if he lived to 100, for example. More than 20,000 retired public servants in California receive pensions of over $100,000.

This is an important point.  People say that we must honor these lavish pension and retiree health care benefits because they made a deal.  A contract with the city.  Or the state.  But did they?  No.  The public sector unions and the cities and states colluded together to steal money from future generations.  Who were not a party to those agreements.  This amounts to generational theft.  And the generous size of those benefits just makes that theft worse.  Transforming the public sector into an aristocracy.  That cares little for the future taxpayers that they will be bled dry to pay for their long and comfortable retirements.

Detroit is just the first domino to fall.  This generational theft is just unsustainable.  Something has to be done.  But what?

Public employees should retire later. States should accelerate the shift to defined-contribution pension schemes, where what you get out depends on what you put in. (These are the norm in the private sector.) Benefits already accrued should be honoured, but future accruals should be curtailed, where legally possible. The earlier you grapple with the problem, the easier it will be to fix. Nebraska, which stopped offering final-salary pensions to new hires in 1967, is sitting pretty.

In other words our public servants should not live a better life than their masters.  Those people paying the bill.  There should be no aristocracy in the United States.  People in the public sector shouldn’t be able to retire young and live a long life in retirement while someone else is paying the bill.  The taxpayer.  People who have to work until they drop dead to save for their own retirement.  That just isn’t right.  If our servants in the public sector want that long and comfortable retirement then they must do what people in the private sector do.  Save for it.  Make sacrifices.  And live more frugally.  Because there shouldn’t be two Americas.  Where one enslaves the other.  While setting up a string of municipal and state bankruptcies because of their greed that threatens the financial wellbeing of the nation.

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Aging Populations and Replacement Birthrate

Posted by PITHOCRATES - July 8th, 2013

Economics 101

Trying to follow a Baby Boom with a Baby Bust creates Problems in Advanced Economies with Large Welfare States

In the late 1960s began a movement for zero population growth.  It called for women to have only enough babies to replace the current population.  Not to have too many babies that would increase the population.  Nor have too few babies that the population declines.  Something that women could easily do because of birth control.  And, later, abortion.  The drive behind this was to save the planet.  By keeping large populations becoming like a plague of locusts that devour the earth’s resources and food until the planet can no longer sustain life.

China did these zero population growth people better.  By promoting a negative population growth rate.  Limiting parents to one child.  They did this because during the days of Mao’s China the country set some world records for famine.  Their communist state simply couldn’t provide for her people.  So to help their communist system avoid future famines they tried to limit the number of mouths they had to feed.  Of course, trying to follow a baby boom with a baby bust creates other problems.  Especially in advanced economies with large welfare states.

China’s one-child policy and the preference for boys have led to a shortage of women to marry.  Some Chinese men are even looking at ‘mail-order’ brides from surrounding countries.  But China is going to have an even greater problem caring for her elderly.  Just like Japan.  Japanese couples are having less than 1.5 babies per couple.  Meaning that each successive generation will be smaller than the preceding generation.  As couples aren’t even having enough children to replace themselves when they die.  Leaving the eldest generation the largest percentage of the overall population.  Being paid and cared for by the smallest percentage of the overall population.  The younger generation.

States with Aging Populations are Suffering Debt Crises because they Spend More than their Tax Revenue can Cover

As nations develop advanced economies people develop careers.  Moving from one well-paid job to another.  As they advance in their career.  Creating a lot of income to tax.  Allowing a large welfare state.  Which is similar to a Ponzi scheme.  Or pyramid scheme.  As long as more people are entering the workforce than leaving it their income taxes can pay for the small group at the top of the pyramid that leaves the workforce and begins consuming pension and health care benefits in their retirement.  And there is but one requirement of a successful pyramid scheme.  The base of the pyramid must expand greater than the tip of the pyramid.  The wider the base is relative to the top the more successive the pyramid scheme.  As we can see here.

Babies per Generation - Constant Replacement Birthrate

Generation 1 is at the top of the pyramid.  It is the oldest generation.  Which we approximate as a period of 20 years.  In our example Generation 1 are people aged 78-98.  They’re retired and collecting pension, health care and other benefits.  Some combination of Social Security, Medicare, Medicaid, food stamps, heating assistance, etc.  All paid for by Generation 2 (58-78), Generation 3 (38-58) and Generation 4 (18-38).  Each generation is assumed to bring 6 children into the world.  So these couples are not only replacing themselves but adding an additional 4 children to further increase the size of the population.  Which really makes running a pyramid scheme easy.  For if we assume each member in Generation 1 on average consumes $35,000 annually in benefits that Generations 2 through 4 pay for that comes to $555.56 per person annually.  Or $46.30 per person monthly.  Or $10.68 per person weekly.  Or $1.53 per person daily.  Amounts so small that Generations 2 through 4 can easily pay for Generation 1’s retirement.  Now let’s look at the impact of a declining birthrate with each successive generation.

Babies per Generation - Declining Replacement Birthrate

When all couples in each generation were having on average 6 children this added 1.9 billion new taxpayers.  Which greatly reduced each taxpayer’s share of Generation 1’s retirement costs.  But thanks to birth control, abortion and the growing cost of living each successive generation has fewer babies.  Generation 2 only has 3 children.  Enough to replace themselves.  And add one new taxpayer.  Generation 3 has only 2 children.  Only enough to replace the parents.  Providing that zero population growth that was all the rage during the late 1960s and the 1970s.  While Generation 4 only has 1 child.  Not even enough to replace the parents when they die.  Causing a negative population growth rate.  Which is a big problem in an advanced economy with a large welfare state.  For instead of adding 1.9 billion new taxpayers they only add 217.5 million new taxpayers.  Greatly increasing each taxpayer’s share of Generation 1’s retirement costs.  Instead of paying $555.56 per taxpayer they each have to pay $5,384.62 annually.  Or $448.72 per taxpayer monthly.  Or $103.55 per taxpayer weekly.  Or $14.79 per taxpayer daily.  Numbers that prove to be unsustainable.  The state simply cannot tax people this much for Generation 1’s retirement.  For if they did this and added it to the rest of government’s spending they’re taxing us to fund it would take away all of our income.  This is why advanced economies with aging populations are suffering debt crises.  Because their spending has grown so far beyond their ability to pay for it with tax revenue that they borrow massive amounts of money to finance it.

If you want a Generous Welfare State you need Parents to have More Children

If you carry this out two more generations so every generation only has one child the per taxpayer amount tops out at $14,736.84 annually.  Or $1,228.07 per taxpayer monthly.  Or $283.40 per taxpayer weekly.  Or $40.49 per taxpayer daily.  Amounts far too great for most taxpayers to pay.  This is what an aging population does in a country with a large welfare state.  It makes the population top-heavy in elderly people who no longer work (i.e., pay taxes) but consume the lion’s share of state benefits.  When couples were having 6 children each across the generations there was a ratio of 84 taxpayers per retiree.  When there was a declining replacement birthrate that ratio fell to 15 taxpayers per retiree.  If we look at this graphically we can see the pyramid shape of this generational population.

Generational Population - Constant Replacement Birthrate

With 84 taxpayers per retiree we can see a nice and wide base to the pyramid.  While the tip of the pyramid is only a small sliver of the base (Generation 4).  Making for a successful Ponzi scheme.  Far more people pay into the scheme.  While only a tiny few take money out of the scheme.  This is why Social Security and Medicare didn’t have any solvency problems until after birth control and abortion.  For these gave us a declining replacement birthrate over time.  Greatly shrinking the base of the pyramid.  Which made the tip no longer a small sliver of the base.  But much closer in size to the base.  That if it was an actual pyramid sitting on the ground it wouldn’t take much to push it over.  Unlike the above pyramid.  That we could never push over.  Which is why the above Ponzi scheme would probably never fail.  While the one below will definitely fail.

Generational Population - Declining Replacement Birthrate

If you want a generous welfare state where the state provides pensions, health care, housing and food allowances, etc., you need parents to have more children.  For the more children they have the more future taxpayers there will be.  Or you at least need a constant replacement birthrate.  But if that rate is below the rate of a prior baby boom the welfare state will be unsustainable UNLESS they slash spending.  The United States has a replacement birthrate below the rate of a prior baby boom.  While the Obama administration has exploded the size of welfare state.  Especially with the addition of Obamacare.  Making our Ponzi scheme more like the second chart.  As we currently have approximately 1.75 taxpayers supporting each social security recipient.  Meaning that it won’t take much pushing to topple our pyramid. We’re at the point where a slight breeze may do the trick.  For it will topple.  It’s just a matter of time.

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Aging Populations and State-Provided Health Care will Stress State Systems to Collapse

Posted by PITHOCRATES - June 16th, 2013

Week in Review

When people provided their own health care and retirement nest eggs it didn’t matter if the population was aging or getting younger.  For each person planned to take care of him or herself.  But when the government took over health care and retirement nest eggs the age of the population began to matter.  For when the state provides these benefits they have to pay for them via taxes.  And if the population is aging that is a big problem.  Because more people are leaving the workforce and consuming health care and pension benefits than there are entering the workforce to pay for them.

Which means the government has to increase tax rates on those paying for these benefits.  And when people are living longer into retirement it really throws a wrench into the state’s plans.  For it is requiring a level of taxation that simply isn’t possible.  And this is exactly what the baby boom generation is doing to advanced welfare states throughout the world.  It’s causing greater governmental expenditures.  Resulting in larger budget deficits.  And financial crises (see Our aging population set to put a heavy toll on our systems, and we’re not ready by Simon Kent and Shawn Jeffords posted 6/14/2013 on the Toronto Sun).

The first baby boomers began turning 65 in 2012, and by 2036, one out of every four of our neighbours will be elderly…

“We don’t have a health care system in Canada, we have an acute care system,” [Sharon] Carstairs [former senator and was the first woman to lead an opposition party in Canada] after becoming Manitoba’s Liberal leader in the ’80stold QMI Agency.

The very sick are cared for well but we don’t do a good job of keeping others at home and out hospitals and high-cost facilities.

“We’re using acute care hospital beds to hold thousands of Canadians who should be in long-term care or home care,” she says…

Canada has a “little bit of breathing space” for preparations to cope with aging boomers, but not much, suggests University of Toronto professor emeritus David Foot, one of the country’s most respected demographers.

“We need to get this right to prepare for that boomer onslaught,” Foot says. “We can have an excellent system if we choose to.”

Zero hour is 2027.

“The first boomer born in 1947 reaches 80 in 2027,” Foot says.

That’s when the critical mass, the largest bulge of the baby boom, approaches 80 and will require the most care of their lives…

Canada needs to train gerontologists, therapists, psychiatrists, palliative care nurses and specialists, replace the workforce of aging nurses and the army of some 3 million volunteers who currently provide the bulk of in-home care to seniors, say experts…

“The sheer number of baby boomers that will be drawing on the system will magnify and put pressures on the systems that has not been felt before,” he says.

Both the United States and Canada have aging populations.  And a baby boomer bulge coming down the pike.  It will make it very difficult in Canada.  And far worse in the United States.  For they have about 9-times the population of Canada.  And will have 9-times the baby boomer bulge.  Making it a very poor time for the state to take over more pension and health care spending obligations.  Which is exactly what the Americans did by passing Obamacare into law.

The United States is already suffering record trillion dollar deficits.  By the time Obamacare pays to train gerontologists, therapists, psychiatrists, palliative care nurses, specialists, etc., and builds nursing homes to handle the baby boomer bulge the deficit will soar even higher.  Unless there really are death panels in Obamacare.  Which may be the only way not to break the fiscal back of the nation.  Well, there’s that.  Or they could let people provide their own health care and retirement nest eggs like they once did.  And then the age of the population would be irrelevant.  For it basically comes down to these two options.  Either we pay for our own health care and retirement.  Or the government will have to figure out how to cut costs.  And how do you do that when the largest cost is caring for the very old and the very sick?  In a word, death panels.  Well, two words, actually.

Welcome to the brave new world of Obamacare.

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Medieval Barbers, Supplemental Insurance, the Baylor Plan and Blue Cross Blue Shield

Posted by PITHOCRATES - May 28th, 2013

History 101

Barbers once Dressed our Wounds and Bled us when we were Sick

Awhile back one of our most beloved public figures suffered a serious accident.  The injuries required significant rehabilitation.  So he missed a lot of work.  People worried how he was going to pay his bills if he couldn’t work.  Groceries.  Rent.  Child care.  Etc.  Health insurance would pay his medical bills.  But what about that lost income?  What would replace that to allow his life to go on as before during his convalescence?  Thankfully he had Aflac supplemental insurance.  Which would pay his bills until his wings and beak healed.  Allowing the Aflac duck to continue on with his life.  Until he was able to return to work.

For a small insurance premium anyone can buy supplemental insurance.  This will allow them to pay their bills should there be an interruption in their earnings due to an illness or accident.  The Aflac duck probably did not pay for this coverage.  One of the perks of being the face of the company.  And the Aflac duck is fictional.  And fictional entities don’t have bills to worry about during any interruption in their fictional earnings.  But the duck is cute.  And it illustrates what the first health insurance policies actually did.  Replaced lost income.

Health insurance hasn’t been around for long.  For costly hospital stays haven’t been around for long.  Once upon a time you visited the local barber to have a wound dressed after an accident.  Or for a bloodletting when you were sick.  And if you had a toothache.  So he could yank your tooth out of your mouth.  As well as give you a shave and a haircut.  Things that weren’t really that costly.  But if you were a black smith with a lame hand you could go for awhile without being able to earn any income.  And this is what the first use of health insurance did for us.  Like that Aflac duck.  It paid our bills until we were ready and able to return to work.

Early Health Insurance didn’t pay for Hospital Stays or Medical Procedures but replaced Lost Income

Early hospitals bore little resemblance to what we have today.  In fact, most people preferred to stay out of them.  Choosing to recuperate at home.  The American Civil War killed over 600,000 Americans.  More than half of those were from disease.  Those wounded in battle feared the hospital.  Where you went to die.  Often by infection as surgeons went from one amputation to another without changing their bloody aprons or washing their hands.  This was in the 1860s.  Which isn’t that long ago.  There are people alive today whose grandfathers were born during the American Civil War.  Who were born into a world where surgeons still did not know that they should wash their hands before sticking them into someone’s body.

Medical care may not have been that good in the 1860s but we already had health insurance.  Introduced around 1850.  Thanks to the rise in rail and river transportation.  Which in their early days weren’t all that safe.  Hurting a great many people.  Brakemen fell off of moving cars.  And lost hands coupling cars together.  While steam boilers had a tendency to explode.  In fact, the greatest maritime disaster in U.S. history happened when a steam boiler exploded in the bowels of the S.S. Sultana in 1865 on the Mississippi River.  The American Civil War had just ended.  And the Sultana was carrying emaciated and frail Union POWs home after their release from Confederate prison camps.  Happy to be free.  And anxious to go home.  How sad that after all they had gone through that they would die not on the battlefield.  But on the voyage home.  The explosion killed 1600-2000.  A greater death toll than when the Titanic sank.

As the Industrial Revolution modernized the United States people got hurt in the machines of the Industrial Revolution.  Like brakemen losing hands.  And people getting hurt in boiler explosions.  Causing people to miss work as they healed.  Where they were unable to earn a living to support their families.  This is what our early health insurance did.  It didn’t pay for hospital stays or medical procedures.  You paid for that.  The health insurance replaced your lost income until you were able to return to work.

The Baylor Plan was a Prepaid Health Care Plan that gave School Teachers 21 Days of Hospital Services

But health care soon rose above the level of medieval barbers/surgeons yanking out our teeth.  And draining blood from sick people.  By the early 1900s medical skills and knowledge greatly improved.  We learned the importance of washing our hands before putting them into someone’s body by the late 1800s.  Making hospitals no longer the infectious deathtraps they once were.  We started taking x-rays.  Monitoring blood pressure.  Used newly developed medicines.  Medical training improved.  We developed standardized treatments for disease.  And procedures for emergency medical care.  People stopped fearing hospitals and stopped trying to avoid them.  They now sought them out when they were afraid of dying.  Not seeing them as houses of death.

All of this reduced supply as it took more training and equipment and licensing to become a doctor or to open a hospital.  And increased demand as people wanted to get better from what ailed them.  Low supply and high demand made health care, of course, expensive.  People were enjoying getting better.  But they sometimes had trouble paying their bills.  Something Dr. Justin Ford Kimball noticed.  School teachers having trouble paying their hospital bills.  So he developed the Baylor plan in 1929.  At the Baylor University Hospital in Dallas, Texas.  Participating teachers paid 50 cents a month.  In exchange they received up to 21 days of hospital services per year.  This brought in a steady stream of income to the hospital throughout the year.  And provided piece of mind for the teachers knowing that for a small manageable fee (i.e., a premium) they could go to a hospital when they needed to.

The Baylor plan was successful.  Other hospitals followed suit.  Health insurance spread.  Hospitals gained a steady source of income.  And people insured themselves from large financial losses by paying a little every month so they wouldn’t have to pay a large hospital bill at one time.  The system worked well.  For everyone using a given hospital didn’t get sick or injured and consume health care services at one time.  While the small premium everyone paid could pay for the few who did.  Hospitals then worked together to produce health insurance plans that could be used at more than one hospital.  In 1939 the American Hospital Association set the standard for these plans.  Plans that met the standard were called Blue Cross plans.  These separate plans merged in 1960 and became Blue Cross.  Physicians and surgeons also sold prepaid plans.  These plans merged into Blue Shield in 1946.  And in 1982 Blue Cross and Blue Shield merged into what it is today.  Blue Cross Blue Shield.  One of the largest providers of health insurance today.

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The Swedes reintroduce the Profit Incentive into the Health Care Equation to fix their National Health Care

Posted by PITHOCRATES - May 19th, 2013

Week in Review

Obamacare will transform American health care into a more top-down national health care system.  Because the American left always wanted national health care.  For the power over the economy it will give them.  Not so much for the quality of health care.  For the quality of national health care has not been historically as good as the quality of private health care.  But the left doesn’t care.  Because it’s not about the quality of health care.  It’s about having power over one-sixth of the U.S. economy.

But they tell us it’s about providing high-quality health care to everyone.  Not just for the rich people who can afford it.  Which they can do if they take out the profit incentive from the health care equation.  For that’s what is driving up health care costs.  Greedy doctors and hospitals.  Who are profiting on sick people.  Which is just immoral to those on the left.  No.  The only way to fix health care is by removing the profit incentive from the health care equation.  Like they’ve done in Sweden.  The model of socialism the left so wants to see in the United States (see A hospital case posted 5/18/2013 on The Economist).

SAINT GORAN’S hospital is one of the glories of the Swedish welfare state. It is also a laboratory for applying business principles to the public sector. The hospital is run by a private company, Capio, which in turn is run by a consortium of private-equity funds, including Nordic Capital and Apax Partners. The doctors and nurses are Capio employees, answerable to a boss and a board…

Welcome to health care in post-ideological Sweden. From the patient’s point of view, St Goran’s is no different from any other public hospital. Treatment is free, after a nominal charge which is universal in Sweden…

Staff used to waste precious time looking for defibrillator machines and the like. Then someone suggested marking a spot on the floor with yellow tape and insisting that the machines were always kept there…

St Goran’s is the medical equivalent of a budget airline. There are four to six patients to a room. The decor is institutional. Everything is done to “maximise throughput”. The aim is to give taxpayers value for money. Hospitals should not be in the hotel business, the argument goes…

Spreading efficiency will not be easy, however. Europeans instinctively recoil from private companies making money from health care. British placards protest against modest reforms with pictures of fat cats helping the health minister to disembowel a patient labelled “NHS” (National Health Service). Even in Sweden, the mood has grown more hostile since some private-equity companies were embroiled in scandals at nursing homes…

Private health-care companies have several advantages over public organisations. They have more incentive to make services more efficient, since they typically keep some of the savings. They are better at persuading their employees to adopt new ideas. And they are better at spreading new ideas across borders. Europe should be proud of its public-health services. But if it wants them still to be affordable in the future, it should allow more private companies into the mix.

Hmmm.  The model socialism that the left so admires is using the profit incentive to fix their national health care.  Which means it must have been broken.  Just to show the differences in the way bureaucrats and ‘for profit’ people think consider the tape ‘X’ on the floor to mark the spot where a defibrillator should be stored.  The centralized authority couldn’t make that happen.  The top-down bureaucracy couldn’t figure a way to make people spend less time looking for a defibrillator.  Just something else to look forward to as Obamacare begins to reorganize American health care from the top down.

Maximizing throughput?  That’s a business term.  An alien concept to those in government.  And to their friends in labor unions.  Which will descend on the health care system under Obamacare.  Who will represent health care workers.  Not patients.  And their answer to everything will be more people working fewer hours.  Which will increase the cost of health care.  Just as it increased costs in American manufacturing.  Chasing it out of the country.  So there will be no maximizing throughput under a government/union controlled health care system.  Just more of what the Swedes are trying to get away from by reintroducing the profit incentive into the health care equation.

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The Quality of your Health Care in the NHS Depends on Where you Live

Posted by PITHOCRATES - May 12th, 2013

Week in Review

Obamacare was about providing affordable health care to everyone.  Not just to those who could afford it.  So the quality of your health care does not depend on the size of your paycheck.  Or the size of your trust.  A noble goal.  But will it work?  The odds are not good.  For the UK has the National Health Service (NHS).  Where the NHS just doesn’t make health care affordable.  It gives it away to each and every citizen.  But even the NHS can’t ensure the quality of everyone’s health care does not depend on the size of their paycheck.  Or the size of their trust (see Asthma hospital admission rates vary ‘alarmingly’ posted 5/6/2013 on BBC News Health).

There are “alarming variations” in the number of people with asthma admitted to hospital in an emergency, depending on where they live, says Asthma UK…

The figures, from the NHS Atlas of Variation: Respiratory Disease, show that the highest rate of adult emergency hospital admissions for the disease in England – 193 per 100,000 of population – was found in the London borough of Newham.

That rate was over six times higher than in Bromley, in London, at 30 per 100,000 people.

In children, aged up to 17 years, the disparity between a rate of 732.6 in Liverpool and 38.7 in Tower Hamlets was even greater…

“Quality of asthma care is of paramount importance – we estimate that 75% of hospital admissions could be prevented with the right care and management.

And to put this more into human terms.

Shannon Batt-Hilliard was diagnosed with asthma when she was a young child, living in Kent.

When she was five, the family moved to Northampton – and that’s when her mother Glynnis realised how sub-standard her daughter’s care had been.

“The difference was unbelievable. Until that point Shannon had never been given an inhaler and we’d received no care or support following her asthma attacks.

“Once we were in Northampton, she was put on nebulisers, given an inhaler and referred to an asthma nurse.

“The doctors were far more attentive and were keen to help improve and manage her asthma.

“For us as a family, relocating was the best thing we could have done health wise.”

Not exactly what one would expect under a national health service.  One would expect they would have what the Democrats in the United States say Obamacare will deliver.  The same quality of health care no matter one’s economic station.  But it’s not the case in the UK.  For the NHS can NOT deliver the same quality of health care to all its citizens.  Clearly if you live in a better part of town you get a better quality of health care.  The way it was in the U.S. before Obamacare.  And based on the experience of the NHS, the way it will be under Obamacare.  Only we’ll be paying more to get the same level of health care we once got.  That is if we’re lucky enough to keep the same level of quality we once had.

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Political Promises, Lies and the Advancement of an Political Agenda

Posted by PITHOCRATES - April 11th, 2013

Politics 101

Government Helps the Poor by Keeping them Poor so they Remain Dependent on Government

Politicians lie.  Everyone knows this.  It’s a running joke in comedy movies and television programs.  And a common plotline in dramas.  Because politicians will say and promise anything to get elected.  Which is their primary and only objective.  Winning an election.  And the needs and wants of the people are secondary.  Things they can easily brush aside once ascending to elected office.  Because they don’t really care about the people.  At least, they don’t care for them as much as they care for themselves.

And once they’re in office the promises keep coming.  To help them win the next election.  And to keep the size of government growing.  As well as the amount of taxes they collect.  Which gives them wealth.  And power.  The ultimate goal in running for elected office.  That’s why they sneer at the concept of limited government.  And tax cuts.  Because the less government we have the less wealth and power they enjoy.  For if we really are the self-reliant people of the Founding what need do we have for an expanding government?

Of course the answer to that question is we would have little need for an expanding government.  For we can earn our pay and take care of ourselves.  And our families.  The way Americans did before Woodrow Wilson, FDR, LBJ and Barack Obama.  Men who do not like that independent spirit.  And will use a host of arguments to condemn it.  It’s not fair being their favorite.  Because who can argue against being fair?  So everything they do is about leveling the playing field.  To make sure the rich pay their fair share.  And to help the little guy.  By making him dependent on government.  And perpetually poor.  So they will remain dependent on government.  So they can keep taking care of these poor.

Government rarely chooses Tax-Cutting for Stimulus as Cutting Taxes doesn’t Increase the Size of Government

LBJ declared a War on Poverty.  Justifying a huge increase in federal spending starting the Sixties.  And after spending untold billions to eradicate poverty what did we get?  Not much.  We still have poverty.  And the government spends more with each passing year to alleviate the suffering of the impoverished.  But it never goes away.  Poverty.  And the government nurtures it.  Protects it.  By making it more attractive to stay on a meager government assistance instead of going to work.  And building a career.  Doing something you love.  While leaving your mark on the world.  Instead we get ever increasing federal spending.  And a permanent underclass the government can be savior to.  You see they don’t want to win the War on Poverty.  Because if they win it then we won’t need them anymore.

The greatest killer of poverty is a job.  People gainfully employed can provide themselves food, shelter, etc.  They can have clean drinking water.  And heat in the winter.  It’s only the unemployed who look at food, shelter and heat as sought after luxuries.  For people with jobs are those self-reliant people.  Who provide tax dollars instead of consuming them.  This is no secret.  So it would follow that the best thing to do during a recession is to make it as easy as possible to create jobs.  You do that by lowering taxes.  And cutting regulations.  Not by raising taxes.  Or adding regulatory costs.  And you sure don’t pass a quasi national health care plan like Obamacare.

Also, history has shown that Keynesian stimulus spending does not pull economies out of recession.  If it did Ronald Reagan would not have won in a landslide against Jimmy Carter.  And Europe would not be in a sovereign debt crisis.  Keynesians know this.  But they can’t pass up the opportunity to increase federal spending.  So they promise lower unemployment rates and higher GDP numbers if only Congress does the right thing and “pass this stimulus bill.”  And when it doesn’t work they have two predictable explanations.  They didn’t spend enough.  And that even they didn’t realize how bad their predecessor destroyed the economy.  Calling the recession du jour the worst since the Great Depression.  Covering their lies about ending the recession with statements like “things would have been worse if we didn’t act.”  And though they didn’t reduce unemployment they’ll make incredulous claims like “we saved 800,000 jobs with this bold action.”  Predictable.  For their primary objective isn’t to end any recession.  It is to exploit the crisis to advance their agenda.  Basically, increasing the size of government.  And we know this because there are two ways to put more money into people’s pockets to stimulate the economy.  You can cut taxes so they have more money to spend.  Or you can tax, borrow and print money so the government can spend more.  Very rarely do they ever choose the tax-cutting route.  Because the tax-cutting way works against their agenda of increasing the size of government.

Politicians Promise and Lie to the Young and Naïve to Advance a Political Agenda

And speaking of Obamacare President Obama promised the American people that if you liked your private health insurance plan you could keep it.  And the cost of that health care plan would go down.  Because they had a massive convoluted health care plan that was going to give health care to everyone.  Increase the quality of health care from what it is now.  And it was going to be less expensive.  Which was a lie.  Because you can’t have more of anything for less money.  Life just doesn’t work that way.  As they implement Obamacare its taxes and regulations are forcing business owners to push people from full-time to part-time.  So they aren’t forced into providing mandated health insurance plans.  Some even have no choice but to drop their health care coverage for all of their employees.  Because their health care costs went up.  Not down.  And they’re predicting doctor shortages.  Because the only cost savings they can get is by forcing people to work for less in the health care industry.  So they’re leaving.  Under Obamacare there will be higher costs, longer wait times, rationing, denial of services and lower quality.  Everything they promised wouldn’t happen.  And everything critics said would happen.  So are the proponents of Obamacare just so utterly ignorant?  Or were they lying through their teeth because they just wanted to take over one-sixth of the U.S. economy?  With an agenda to increase the size of government one has to go with lying through their teeth.

President Obama blamed George W. Bush for the world hating America.  When he became president he no longer projected American power.  Instead he wanted to talk to our enemies.  To negotiate with them.  He even dropped words from official usage.  Like the War on Terror.  To make our enemies like us.  Because people like people who aren’t bullies.  And that was what George W. Bush was.  A bully.  So President Obama warmed up to the Islamic world.  So the Islamic world would warm up to us.  Even announcing withdrawals from Iraq and Afghanistan early in his administration.  Ending the war on you-know-what.  So he could use that money for Obamacare.  Promising the American people the world would be a safer place.  Even passing on an opportunity to help overthrow the government in Iran.  America’s greatest enemy.  Instead, he helped people overthrow a couple of our allies.  Hosni Mubarak in Egypt.  And Muammar Gaddafi in Libya.  Who since the Iraq war had been an ally in the War on Terror.  And the thanks for this new Islam-friendly American policy?  They killed our ambassador in Benghazi along with three other Americans.  Al Qaeda is now in Libya.  And the Muslim Brotherhood is in Egypt.  And it looks like al Qaeda is now in Syria.  Another enemy of the United States the people were trying to overthrow that President Obama chose not to help.  The Middle East may burn now.  Making the world a more dangerous place.  But the president got what he wanted.  All that money we were spending overseas they can now spend at home.  Rewarding friends and campaign contributors.  As well as buying votes.

And now they are calling for tighter gun control measures.  Greater background checks.  And a national gun register.  To protect the kids they say.  So another Newtown massacre doesn’t happen.  Even though they themselves will admit that every measure they proposed thus far would not have stopped the shooter at Newton.  Aurora.  Tucson.  Virginia Tech.  Or any other shooting where some mentally unsound person killed random strangers.  These people didn’t kill because guns made them kill.  They killed because they were sick.  And we didn’t protect society by institutionalizing these people.  The only thing we could have done to stop them once they started shooting we didn’t do.  Having someone armed in these ‘gun-free’ zones.  For these sick people shoot unarmed innocents until someone with a gun arrives on the scene to shoot back.  So arming teachers may save children from another Newtown.  While everything they proposed thus far will do absolutely nothing to prevent a future Newton.  Yet they press for further restrictions on gun ownership.  And if it won’t make children safer one wonders why they want to exploit these shootings to advance their anti-gun-ownership agenda.  As they are interested in acquiring greater wealth and power one would have to assume it’s the power.  Perhaps making them feel more all-powerful if they can actually nullify the Second Amendment.

So politicians promise and lie to advance an agenda.  Which is why the young typically vote for those who promise and lie so much.  The liberal Democrats.  As the young are naïve and easy to lie to.  While older people tend to vote Republican.  For they are older.  They have heard all of the promises and lies before.  And they’re wiser.  Which comes with age.  Which is why the liberal Democrats get them while they’re young. For it’s hard to keep them once they gain knowledge and experience.

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Corporate Politics, Bureaucracy and Obamacare

Posted by PITHOCRATES - April 4th, 2013

Politics 101

You won’t find many Union Workers filling out TPS Reports

In the movie Office Space we see how frustrating it is to work in a big corporation.  The office politics.  The bureaucracy.  The policies and procedures.  The frustration of having to answer to 8 different bosses after making a mistake.   Bumping heads with management at all levels.  And the mind-numbing frustration of getting your paperwork right.

Anyone who has ever worked in an office no doubt had their own TPS report moments.  And dealt with their own Bill Lumbergh.  So we laugh at poor Peter.  For we’ve been there.  And know his frustration.  For there is nothing worse than trying to work through a company’s bureaucracy.  Or dealing with layers of management that often appeared to be working at cross purposes.  And suffering under bad bosses.

Which is the whole purpose of labor unions.  To protect their workers from a business’ management.  And bad bosses.  Because unions say if they don’t management will just abuse their workers.  So unions shield workers from these unfeeling and inefficient bureaucracies.  Who are always introducing new policies and procedures to improve business efficiencies.  Things like TPS reports.  Which unions say only makes things worse for the worker.  So you won’t find many union workers filling out TPS reports.  Just the non-union office workers.

Dealing with a Bureaucrat is like a Grizzled Sergeant with 20 Years Experience reporting to a Junior Officer

Junior officers get no respect.  Comedian George Carlin served in the Air Force.  And said a common joke was to say when someone broke wind, “Captain who?”  They get no respect because they are bureaucrats.  They come out of their officer training with only book-learning.  While enlisted people have been gaining experience and learning how to do things on the job.  Then these junior officers come in with their book-learning.  And start telling these enlisted people how to do their jobs.  Despite these junior officers having never done their jobs.  Or understanding how to do their jobs.  But they will tell these people how to do their jobs better.

This is less of a problem in combat.  As junior officers typically have a short lifespan in combat.  For all the book-learning cannot replace the experience gained in actual combat.  Which is why lieutenants may command units but it is the grizzled sergeants with the combat experience that lead men into battle.  And a smart junior officer will learn everything he can from his senior sergeants.

Small business owners feel the same way about government.  For a lot of small business owners often go into business after working for someone else.  They’re like those grizzled sergeants in the military.  They’ve learned and done pretty much everything in a business.  Then decided to quit and start their own business.  And one of the first things they have to deal with is the mind-numbing bureaucracy of government at all levels.  City, county, state and federal.  A bunch of bureaucrats who never ran a business.  Who have no experience in their field.  And here they are.  Telling them how to run their businesses.  Like a junior officer out of the academy trying to tell a grizzled sergeant with 20 years experience how to do his job.

Under Obamacare Professional Bureaucrats will tell our Doctors how to administer our Health Care

In these complicated times if there is one thing everyone can agree on it’s this.  Bad managers, bosses, and officers are insufferable.  No one likes putting together ‘TPS reports’.  Or being told by 8 different bosses that they did something wrong.  And they sure don’t like people who don’t understand the first thing about their job or business telling them how they should do their job or run their business.  They especially hate people that can cite rules and regulations by chapter and verse who mete out some penalty or fine because they can’t cite those same rules and regulations by chapter and verse.

This will be the world of Obamacare.  And as much as EVERYONE hates these things at their workplace there are some who still want these same clueless bureaucrats and politicians to take over health care.  As if somehow these people who don’t know the first thing about treating sick people can do a better job than the grizzled veterans working in the health care industry.  Who spend more and more time filling out paperwork these days than actually seeing patients.  And the last thing they want is an even more bureaucratic system where they will have to report to 8 different people and agencies to treat a patient.  Where bureaucrats at the Department of Health and Human Services as well as the IRS will have their own coversheets for their ‘TPS reports’.

In the movie The Usual Suspects the character played by Kevin Spacey said, “The greatest trick the devil ever pulled was convincing the world he didn’t exist.”  For if you don’t fear the devil you may live a life more in line with the devil’s wishes.  Making it easier for the devil to get your soul.  Government is a little like that.  For it has a horrible track record of doing anything right.  Even in the finest military in the world the bureaucrat side of the military pays $100 for a $15.00 toilet seat.  And yet the government has tricked so many people into believing they want more government in their lives.  Even though government is nothing but the managers and bosses people hate where they work.  Bureaucrats who tell others how they should do their job by citing rules and regulations by chapter and verse.  But who really don’t know what you do.  Or how you do it.  Now these professional bureaucrats will tell our doctors how to administer our health care.  And God help you if you get sick and put the wrong coversheet on your Obamacare health care services requisition form.  Or leave an important income tax field blank.

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