The Redistribution of Wealth in Obamacare

Posted by PITHOCRATES - December 30th, 2013

Economics 101

“Wait a tic.  Blimey, this redistribution of wealth is trickier than I thought.”

Monty Python is a British comedy troupe.  Starting off with a television show in 1969.  And ending their run together with a movie in 1983.  With some other stuff along the way.  They became about the biggest stars ever in comedy.  They redefined comedy.  And have influenced some of the biggest names that followed them.  Part of the reason why Monty Python is so funny is that they are so serious when being silly.  And they are very well educated.   With some members having degrees from Oxford and Cambridge.   Which helps make their humor different.  Such as their take on Robin Hood with a character they called Dennis Moore.

Dennis Moore, Dennis Moore
Galloping through the sward
Dennis Moore, Dennis Moore
And his horse Concorde
He steals from the rich
And gives to the poor
Mr. Moore, Mr. Moore, Mr. Moore

This is the opening verse of a song in the sketch Dennis Moore.  The character steals from the rich who have more than they need.  And gives it to the poor who don’t have enough.  A classic example of redistribution of wealth.  Something the American left is all about.  Being Dennis Moore.  Or Robin Hood.  But in the sketch Dennis Moore takes it to the extreme.  Stealing so much from those who were originally rich that they have nothing left but their underclothes.  While those who were originally poor have everything the rich had.  And the formerly poor (now rich) get ever more demanding of Mr. Moore for better stuff.  As he rides off to please these formerly poor (now rich) we hear the following verse.

Dennis Moore, Dennis Moore
Riding through the land
Dennis Moore, Dennis Moore
Without a merry band
He steals from the poor
And gives to the rich
Stupid bitch

Dennis Moore halts his horse.  And asks the chorus to repeat themselves.  To make sure he heard what he thought he heard.  They do.  Mr. Moore then says, “Wait a tic.  Blimey, this redistribution of wealth is trickier than I thought.”  As he discovers some of the inherent flaws in the redistribution of wealth concept.  Excessive redistribution can take large sums of money away from some.  Which doesn’t help them.  It only punishes them.  And if you’re okay with punishing the rich to help the poor note what happens to the poor when they get the rich’s money.  They become exactly like them.

Buying Votes to Win Elections works as long as you Tax the Few to Spend on the Many

This sketch is funny.  Because it’s true.  You’ve heard the expression “beggars can’t be choosey?”  Well, when it comes to the redistribution of wealth, they can.  And are.  Choosey.  They can become very demanding.  And the more they get the more they want.  And the more like the people they hate and envy—the wealthy—they get.  Mr. Moore learned that.  Where the poor he was trying to help with a hand-up didn’t use it for a hand-up.  They just used the rich’s wealth to enjoy the good life without working and earning it over time.

People may look down on those born into money but that’s only because they weren’t.  This is why poor people buy lottery tickets.  To get rich quick.  Because they don’t want to wait to have money.  They’d like to have it when they’re young.  And not wait until they’re old.  After working 20 years or so.  Which is why selling the idea of wealth redistribution is so easy.  And helps politicians win elections.  Because there are more poor people than rich people.

President Obama said those who could afford it should pay a little more.  Taxes.  To balance the playing field.  To offer a ‘hand-up’ to the poor.  This is the message of the Democrats.  Tax and spend.  Tax the rich.  And give it to the poor.  And the young.  Such as free birth control, tuition assistance, Obamacare subsidies, etc.  Things they tax the rich for.  To get the poor to vote Democrat.  It’s a working formula.  Buying votes.  As long as you tax the few to spend on the many.  Because you need the many to win elections.

Obamacare won’t Work because the Welfare flows in the Wrong Direction

The welfare state taxes the few/rich/old to spend on the many/poor/young.  Which is why it worked.  You angered a smaller group of people than you pleased.  And if you can keep doing that you can keep winning elections.  As long as you keep playing Dennis Moore.  Without being a stupid bitch.  Which the Democrats did well.  Until Obamacare.  The Affordable Care Act.

Obamacare will fail because unlike other welfare programs Obamacare is unique.  For it does not tax the few/rich/old.  It actually taxes the many/poor/young.  To pay for the health care of those who have more money than they do.  The old and sick.  Leaving the young and healthy with less money to start their families.  As they help the old and sick who already had their families.  And something just isn’t right with this picture.  The old and sick are fine with it.  While the young and healthy are calling someone ‘stupid bitch’.  Figuratively, of course.

Young people don’t have a problem with tax and spend.  As long as they are the recipients of those welfare transfers.  So they vote Democrat.  And they also vote Democrat because they are the opposite of their parents.  Who never tell them they can’t do this or that.  But, instead, tell them they should do whatever they feel like doing.  Which they like.  A lot.  But the Affordable Care Act is a whole different animal.  Where Democrats are being like parents.  Telling the young Democrat voters that they can’t do everything they want to do.  Because they’re forcing them to buy something they don’t want.  Which isn’t their parents’ welfare program.  From the few/rich/old to the many/poor/young.  But more of a welfare program for their parents.  Making it more difficult for the young Democrat voters to embrace Obamacare.  Which is why they aren’t.  And why the math won’t work for Obamacare.  Because the welfare flows in the wrong direction.

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FUNDAMENTAL TRUTH #22: “The only problem with health care these days is that it’s approached from a cost basis more than a medical basis.” -Old Pithy

Posted by PITHOCRATES - July 13th, 2010

THE PROBLEM WITH cost cutters is their vision.  They see costs.  Not the big picture.  Rockefeller was a notorious cost cutter.  Even determined he could save money by using a few less welds on his oil barrels.  But he saw the big picture, too.  He grew sales.  Something that cost cutters have trouble doing.  He didn’t.  In fact, he was so good that it took the government to stop his sales growth.

Roger Smith was a numbers man.  He managed costs.  Starting in the accounting department of GM, he reorganized GM to make better sense.  On paper.  To make nice, neat, bookkeeping-like ordered sense.  Things tend to work better on paper, though, than in reality.  Suffice it to say that few laud Smith as the greatest CEO of GM.

Robert McNamara was also a numbers man.  And he ran the Vietnam War by the numbers.  He carefully determined what U.S. forces could NOT attack.  (Any place outside South Vietnam was basically a sanctuary for the enemy.)  And he introduced the body count.  There was no strategy to win.  Just a policy to verify you were killing more of theirs than they were killing of yours.  Wars of attrition, though, take years.  And lives.  On both sides.  Americans don’t like sitting back and waiting for enough of their sons to die to declare victory.  McNamara failed to see the big picture.  Strategy.  He just tried to make the combat efficient.  Which did little to inhibit the enemy from making war. 

Managing costs is important.  It can improve profits.  But it can’t grow sales.  And if you can grow sales, you’ll be able to pay your costs.  Even if they are high and inefficient.  Few companies fail because they have a cost problem.  They file because they have a revenue problem.  They lack sales.  Cost cutting cannot fix this problem.  It can temporarily help reduce operating losses.  But if you don’t increase sales, you’ll probably fail in the long run.

There are detail people.  And people with vision.  Rarely are people both.  Rockefeller was.  Smith and McNamara were detail men.  They could not see the forest for the trees.  And this is the problem in health care.  We’re not looking at the big picture of medical care.  We’re looking at the details of cost. 

YOU WOULD THINK that doctors would oppose the government taking over health care.  Because when governments do, they tend to put salary caps on doctors.  Kinda diminishes the return on all that costly medical training.  I talked to two recently who favor a national solution.  Why?  Because of costs.  They like Medicare.  Because it’s simple.  Most of their patients are seniors.  So the bulk of their billings are uniform.  Medicare reimbursements.  They like anything that simplifies their overhead costs.  Private insurance companies don’t do this.  They’re not all the same.  Different people to call.  Different procedures.  Different approved tests.  Different paperwork.  And more of it.  And a bigger staff to handle it.

Doctors hate paperwork.  No doctor ever went through medical school because they wanted to shuffle paper.  Or because they wanted to fend off malpractice lawsuits.  Doctors are under a bureaucratic assault.  They spend more time with paperwork than with patients.  And paperwork does have a cost.  As do frivolous lawsuits.  A government takeover would standardize the one.  And, hopefully, eliminate the other.

I understand these doctors’ concern.  But they can’t see the forest for the trees.  Government is not going to approach health care from a medical basis.  They’ll approach it from a cost basis.  They’ll use statistical analysis.  They will manage care to maximize cost efficiency.  They will approach health care like Smith did in GM and McNamara did in Vietnam.  They’ll crunch the numbers.  Then determine what health care is cost effective.

THEY PROBABLY NEED no introduction.  Most people are family with the British comedy troupe called Monty Python.  Funny, a bit naughty and rather bookish, they’ve appealed to the masses across generations.  They spent a lot of time researching before making some of their movies.  Reading books.  The realism it adds made some of the funniest scenes.  A Roman centurion gives a Jewish terrorist a Latin lesson at the point of a sword (Life of Brian).  Dennis the constitutional peasant arguing with King Arthur (Monty Python and the Holy Grail).  And this scene from The Meaning of Life during a live birth lampooning the British National Health Service:

Nurse:  The administrator’s here, doctor.

First Doctor:  Switch everything on!

[They scramble to do so.  Machines turn on with flashes and sounds.  The administrator enters.]

Administrator:  Morning, gentlemen.

First and Second Doctors:  Morning Mr. Pycroft.

Administrator:  Very impressive. Very impressive.  And what are you doing this morning?

First Doctor:  It’s a birth.

Administrator:  Ah, what sort of thing is that?

Second Doctor:  Well, that’s when we take a new baby out of a lady’s tummy.

Administrator:  Wonderful what we can do nowadays.  [A machine makes a ‘ping’ sound.]  Ah!  I see you have the machine that goes ‘ping’.  This is my favorite.  You see we leased this back from the company we sold it to.  That way it comes under the monthly current budget and not the capital account.  [They all applaud.]  Thank you, thank you.  We try to do our best.  Well, do carry on.

This is funny.  Because it’s true.  When we approach health care on a cost basis.  You must show you need and use every piece of expensive equipment you have so it stays in the budget.  And the administrators administrating health care don’t understand health care.  They understand and make their decisions based on numbers in columns.  And speaking of numbers in columns.

 ONE THING STANDS out more than everything else when looking at numbers in columns.  In one cost column in particular.  Of all the costs in columns, one dwarfs all others.  The costs in treating very sick and very old people.  You can cut and trim the budget everywhere else but you won’t make a dent in overall costs.  Unless you cut and trim this one column.  Manage these costs.  Do some statistical analysis on these costs.  For if you cut THESE costs, it will make a difference.  It could even stave off bankruptcy without having to further raise taxes.  Yes, we can make the system more financially sound if we just stop treating so many sick and old people.

But it’s a body count mentality.  You have to willingly accept a defined number of additional deaths.  The Soviets were willing to trade 10 lives for one against the Nazis.   A steep price to pay.  But it did wear the Nazis down and lead to victory.  There was a similar ratio in Vietnam with America on the better side of that ratio.  But it was still too high a price for Americans.  It goes against our nature to think in terms of ‘acceptable’ losses.

But there will have to be a line that health care will approach but does not cross.  Where there are ‘acceptable’ losses.  Statistical analysis will take into account probable remaining years of life in a potential patient.  If few, the system will assign an appropriate value of care to match the health care expenditure with the expected return on the medical treatment.  People with more probable years of life left will receive more health care treatment.  People with fewer years left will receive less.  We’ll help manage their pain until they no longer feel that pain.  For it would be inefficient to spend a lot of money on someone who is going to die ‘soon’.

Perhaps I can best summarize this in song.

When you were young and your heart was an open book
You used to say live and let live
(you know you did, you know you did you know you did)
But in this ever changing world in which we live in
Makes you give in and cry
Say live and let die
Live and let die
Live and let die
Live and let die

(Live and Let Die, Paul McCarthy)

And that’s what bureaucrats will use all that statistical analysis for.  To determine who to let die.  You can sugarcoat it anyway you’d like, but it comes down to this.  A bureaucrat, not a doctor, will have the power of life and death as they decide what health care is appropriate and prudent.  As it must be under a system where bureaucrats distribute limited resources on a cost basis.  They will have no choice but to deny care that is not in the budget.

ONE PUZZLING THING about health care is that it is perfectly acceptable to approach it from a cost basis but not on a revenue basis.  For it is immoral to profit on health care.  Pity, because introducing market forces is one sure way to bring down costs.  People are willing to pay for medical services.  They pay for abortions.  And abortion clinics are readily available.  The free market laws of supply and demand work for abortions.  And so they would for other outpatient medical services. 

Instead of running a battery of tests because an insurance company requires this incremental approach of the cheap stuff first, you could go to an MRI (or some other expensive procedure) clinic and pay out of pocket.  Because they do nothing but MRIs, they achieve economies of scale.  The clinic makes money by offering low cost, high quality MRI scans that result in a high sales volume.  You benefit because you miss less work.  The doctor benefits because he gets your MRI scan results without additional paperwork to process.  I’m sure a market is there just waiting for an entrepreneur to come along.  I mean, if you can make money by performing abortions, you should be able to make money with some non-invasive, high-tech machines.

HEALTH CARE SERVICES will not become more affordable and more readily available by cutting costs.  If the bean counters try, they’ll damage the quality of health care.  Because the bean counters rarely look at the big picture.  You need someone with vision.  Because no cost cutter ever saved a business.  Or made the world better.

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FUNDAMENTAL TRUITH #17: “The raison d’être of federalism is to keep big government small.” -Old Pithy.

Posted by PITHOCRATES - June 8th, 2010

BONJOUR.  A LITTLE French there.  To go with the use of the French expression ‘raison d’être’.  Which means reason for being.  Sounds better in French, n’est-ce pas?

I like Canada.  Both parts.  The French and the English parts.  I’ve met and become friends with people in Toronto, Montreal, Fredericton and Corner Brook.  And elsewhere.  I like to talk to my Francophone friends about that day on the Plains of Abraham.  And I like to speak French to my Anglophone friends.  And they both like to point out to me what they believe to be America’s lack of tolerance and compassion.

The Canadians may be a tolerant and friendly people.  Everyone says that about them.  That they’re nice.  And they are.  But they have to work at it at times.  For there ain’t a whole lot of love between the French and English.  Not now.  Or then.  When French Canada became British.

Like it or not, that animosity has been at the van of Western Civilization.  And it would compete in the New World.  Colonize it.  Fight in it.  And give birth to a new nation.  One that would break from the ways of the past.

“WHO’S THAT, THEN?” one filthy peasant asked another.

“I don’t know.  Must be a king. ”

“Why?”

“He hasn’t got shit all over him.”

(From Monty Python and the Holy Grail – 1975.)

What is a king?  Besides someone who “hasn’t got shit all over him.”  A king is where sovereignty lies.  And sovereignty?  In a word, supremacy.  Supreme authority. 

The Sun King, Louis XIV of France, was an absolute monarch and his word was the absolute law of the land.  And he could do pretty much whatever the hell he wanted.  He built his gorgeous palace at Versailles.  Because he could.  Over in England, the king was sovereign, too, but Parliament checked his power.  So the British king wasn’t an absolute monarchy.  In England, the king could do whatever he wanted as long as Parliament agreed to pay for it.  For Parliament controlled the purse strings.  There would be no Versailles in England.

Now France and England were always at war.  Their fighting even spilled over into the New World.  The 7 Years War (as the Europeans called this world war) went by a different name in North America.  The French and Indian War.  The British won.  France lost Canada and other colonial possessions.  Their loss, though, was America’s gain.  The French and Indian attacks on the American Colonists ended, leaving them with peace and prosperity.  But it was costly.  As wars are wont to be.

Over in England, Parliament had to pay that cost.  But taxes were already pretty high at the time in England.  If they raised them further, it could cause trouble.  So what to do?  Well, there were some who pointed out that the American colonists really came out the clear winner in this latest contest.  They got peace and prosperity without really paying anything to get it.  Shouldn’t they pick up part of the tab?  I mean, fair is fair, right?

And they probably would have gladly contributed as good English subjects.  However, and this is a big however, they felt they weren’t treated as good English subjects.  In fact, they felt more like Parliament’s bitch than English subjects.  And to add insult to injury, they had no vote in Parliament.

Parliament passed a series of acts that the Americans would call the Intolerable Acts.  Both sides missed opportunities for compromise and peace.  Instead, tempers festered.  Parliament would bitch-slap the colonists.  And the colonists would bitch-slap Parliament.  Eventually throwing some British East Indian tea into the water.

Now Britain’s king, King George, had a bit of a problem on his hands.  The Americans were challenging his sovereign rule.  There was a name for this.  Kings call it treason.  And they kill people for it.  King George was the supreme authority.  Anyone challenging his authority was challenging his right to rule.  That’s why acts of treason are typically punishable by death.  You don’t stand up to kings.  You grovel.  And these uppity Americans surely weren’t groveling.

And just how does a king get this authority?  Well, you don’t vote for them.  They either inherit power.  Or they kill for it.  It’s a story as old as time.  Patricide.  Matricide.  Fratricide.  And sometimes the killing was by someone outside the family.  But that’s how sovereign power changed.  A king or queen died.  Naturally.  Or with a little help.  And when a new sovereign ascended the throne, he or she usually killed all other possible contenders.

If King George didn’t put down the American rebellion, it could spread.  To Canada.  To other English colonies.  Or give someone ideas back at home that the king was weak.  And challenge him for his throne.

These are things kings think about.  Power can be precarious.  Even when it’s absolute.  As King Louis XVI would learn in France.  During the French Revolution, the people, challenging the king’s sovereignty, sent him to the guillotine.  Chopped his head off.  His wife’s, too.  Marie Antoinette.

ENGLAND GAVE BIRTH to modern, representative government.  It was a balance of power between the many (the common people in the House of Commons), the few (the aristocratic rich in the House of Lords) and the one (the sovereign king).  Each provided a check on the others.  The king was the supreme power but he needed money to wage war and build things.  Parliament collected taxes and paid for things they approved of.  And the House of Lords was to keep that spending from getting out of control as they understood money and costs (that’s what rich people are good at).  They were to protect the nation from the evils of pure democracy where the people, once they realize they can, will vote themselves the treasury.

Most of the American colonists were transplanted Englishmen.  Or came from English stock.  They were English subjects (at least in name if not in practice).  They understood representative government.  Their colonial governments were in fact very British.  The Rule of Law was the rule of the land.  The governed consented to taxation.  And the government collected the taxes they consented to. 

You can probably see where this is going.

Taxation without representation was very un-English.  The fact that it was okay in the American colonies chafed the American English subjects.  I mean, it really frosted their shorts.  It wasn’t right.  By English law.  Or by precedent.  Anger at Parliament turned into anger at the king.  Questions of sovereignty arose.  Should the king be sovereign?  Or should the people?  In 1776, the American colonists stated their opinion in a very treasonous document.  The Declaration of Independence.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed….

The U.S. Constitution emphasized the sovereignty of the people in the preamble.

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

Kings were out.  The Rule of Law was in.  No aristocracy.  No hereditary offices.  In America, it would be different.  After the Battle of Gettysburg some 75 years later, Abraham Lincoln would reiterate this at the dedication of the Soldiers’ National Cemetery.

Four score and seven years ago our fathers brought forth on this continent a new nation, conceived in liberty, and dedicated to the proposition that all men are created equal…

…that we here highly resolve that these dead shall not have died in vain—that this nation, under God, shall have a new birth of freedom—and that government of the people, by the people, for the people, shall not perish from the earth.

THE AMERICAN COLONISTS rebelled and broke away from Great Britain because they were through with being her bitch.  In fact, they weren’t going to be anyone’s bitch.  That’s why there was a lot of opposition to the establishment of a strong, central government.  They didn’t want a national government taking up where Great Britain left off.  And they didn’t want an American president to be just another King George.  The people won their liberty.  And they intended to keep it.  So they could pursue that happiness Thomas Jefferson wrote about in the Declaration of Independence.

Federalism was the solution.  The states’ governments would retain most of their powers.  Only those things they could not do well (regulate ‘free-trade’ interstate commerce, negotiate trade agreements with other nations, wage war, etc.) would be done by the new national government.  The people would remain sovereign.  Strong state governments and a ‘weak’ central government would share power.  In effect, the new central government was to be the people’s bitch.  But you’d never know that by looking at things today.

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