Show Me the Money

Misinformation Everywhere. There are very few willing to defend health insurance companies as part of the health care reform debate. It is fair to critique their treatment of "insureds" when most vulnerable and their ineffective role as an integral part of health care financing. But, we must hold our fire for the right issues. Unfortunately, the demogogues in Washington have mis-portrayed the real money issues. Let's clean that up here.

1 . Insurance profits are not a big deal. Insurance company profits are under ten percent of the premiums collected. In many cases, their profits are two to four percent of health insurance premiums. If, as a matter of popularist policy, we confiscated all of their profits, we would a.) have no more insurance companies, and, b.) the total decrease in health insurance premium costs would only be their margin of profits. The "proverbial" drop-in-the-bucket.

2. Many Americans with health care are not "covered" by insurance companies at all. In fact, many Americans with health care protection are covered by "self-insured" plans paid for by employers. In all of these cases, the three primary costs are the cost of i.) health services paid to doctors and hospitals, ii.) reinsurance costs of large and unexpected claims, and, iii.) adminstrative costs paid to a third party administrator which may be an administrator or insurance company providing administrative services.

3. Most health costs go to doctors and hospitals, not insurance companies. The Washington rhetoric would have Americans believe that the bill for health insurance goes entirely to insurance companies. It does not. Most of the payments for health insurance, whether paid to employee insurance funds of corporations, insurance companies or even medicare, goes to doctors and hospitals. Accordingly, if we want to dramatically reduce/impact the cost of health care in America, we must reduce the utilization, and the unit costs of health care services.

The Simple Truth is that current legislation largely ignores this reality.

Its the Cost Stupid (Health Care Cost)

There are many objectionable issues with the various health care proposals floating around between the White House and Congress. However, none of them have as a central tenet, the REDUCTION of health care costs. Most would agree that health care costs seem too high. Health care costs are not what your deductible is; are not what your insurance costs, or even what you pay for COBRA between jobs. Health care costs are things like the costs of: x-rays, doctor check-ups, MRI's, emergency room visits, lab tests and surgical procedures.

The way to lower the costs of anything is simple if you return to the basics of economics:

Supply and Demand

Reducing demand by improving health outcomes needs to be the focus of "genuine" reform. Policy also needs to focus on increasing the supply of medical services, which reduces cost. Of course, regulatory elements increase the cost of providing services. We expect well-regulated health care (i.e. safedrugs, licensed doctors, safe hospital practices), but ineffective regulation and litigation increases the burden of providing health care services. Increased burden raises the price point that suppliers are willing to provide a service.

An important way to reduce "ineffective regulation" is to reform malpractice laws and framework. Patients deserve to be protected. But, our health care system should not be "held-up" by less than scrupulous lawyers and over zealous juries. Responding to these cases, reduces the supply of health care services, increases costs due to insurance and settlement costs, and, signficantly increases the use of defensive medicine to protect from possible lawsuits. Real "cost" reform cannot occur without better malpractice policy.

Dear Congressman/Senator: Not THIS Health Care Reform

If passed, the various health care reform bills in Congress may be the worst legislative events in the history of the United States. This legislation may single-handedly undermine the financial integrity of our government and country.

While there are numerous legitimate goals for health care and health-finance reform, the legislative efforts so far indicate that the real purpose of the Democrats is to initiate the take over the entire US health care system. Of the many short-comings of proposed legislation, the more significant criticisms include:

1 - The high cost (which Congress has obscured), increased premiums and taxes,
2 - The lack of interstate competition
3 - The failure to rein in malpractive lawsuits and related costs
4 - The failure to provide effective incentives to draw more people into the system (current proposals leave more than 15-20 million uninsured.)
5 - The failure to equalize tax effects of buying insurance between individuals and corporations.

The current proposals will greatly increase the cost of private health insurance, discourage people from having health insurance, and increase the incentives for people to depend on the Federal/State government for the costs of health care. Your continued support of the this legislation is a significant mistake for the citizens of your state and the entire country.

America is Exceptional

America is the greatest country in the world. Most Americans understand this and believe in it. Many previous adminstrations and leaders have talked openly about American "exceptionalism". The Wall Street Journal captured the essence of my concern (and I suspect many others) with the award of the Noble Peace Prize to President Obama. I remember how proud many were every time an American won the Noble Prize for anything.

But this time, the lack of accomplishment of President Obama reveals a hidden bias of the Nobel Prize committee (which are appointed by the Norwegian Government). This bias is in favor of an "unexceptional America". That why I am less than excited with this year's award.

Ten Best Reasons to Oppose Health Care Reform

Most of us are not opposed to health care reform (See this Washington Post link for an excellent primer on health insurnace in the US.) and most of us agree on objectives. My concern is that the leaders driving the reform bus (President Obama and Congressional Democrats) are not genuine in their real purpose. Accordingly, their legislative prosposals seem inconsistent with their goals.

For example, there is little in the bills to reduce or control costs. The current Senate Finance plan does not have any limitations on medical malpractice lawsuits. Too many Americans will remain uncovered (25 million). And, two essential elements of reform i.) tax equalization, and ii.) interstate competition of insurance companies are nowhere in sight. For those that prefer shorthand, here are the ten best reasons to oppose the current health care reform proposals:

1. Key and critical provisions are missing. a) Malpractice reform, b) tax equalization and c) interstate competition of health care insurance companies.
2. Costs are excessive. CBO estimates are based on many flawed assumptions. If medicare savings could be easily realized, why hasn't Washington done it before now.
3. Massive implicit tax increases. The Finance Committee proposal has $400 billion in tax increases. While proposed to be levied on insurance companies, if enacted at all as described, they will be pass throughs to beneficiaries.
   

Simple Campaign Finance Reform in Illinois

There is a fun suggestion going around the internet about how to reform politics in Illinois. It involves establishing a two term limit in Illinois. One in office and one in jail. Being serious for a moment, there is a quite simple solution that would dramatically reduce corruption. When all else fails, stay simple.

NO one may contribute to an Illinois election campaign more than $2,500 per campaign cycle. Only legal residents of the state of Illinois may make such contributions. No contributions to any IL political campaign, whether in-kind, or in cash, may be made by any party, committee, business or any other organization. Any organization may organize and encourage individual contributions of its members.

Now, every current politician and lobbyist in Illinois will suggest dozens of reasons why the simple formula above can't possibly work. But, ask the citizens if it works. Ask actual voters what is wrong with the above? Then listen carefully what voters say and who says it.

Cash for Clunkers and Simple Math

A vehicle at 15 mpg and 12,000 miles per year uses 800 gallons a year of gasoline.
A vehicle at 25 mpg and 12,000 miles per year uses 480 gallons a year.
So, the average clunker transaction will reduce US gasoline consumption by 320 gallons per year.
They claim 700,000 vehicles – so that's 224 million gallons / year.
That equates to a bit over 5 million barrels of oil.
5 million barrels of oil is about ¼ of one day's US consumption.
And, 5 million barrels of oil costs about $350 million dollars at $75/bbl.
So we all contributed to spending $3 billion to save $350 million.

How good a deal was that ???

And these are the same guys wanting to take over health care. Better check their numbers.

Health Care Reform on One Page

With all the debate about health care reform, it really can be quite simple. Here is my one page plan. Tell me your thoughts and don't hesitate to share it with your favorite Congressperson or President.

The Secretary of Health and Human Services shall develop regulations to enact the intentions of Congress to reform the United States health care industry as described below:

1 - Interstate marketing of health insurance plans. Insurance companies shall be permitted to offer and sell health insurance plans across state lines so long as they otherwise conform to insurance regulatory requirements of the individual states.

2 - Requirement for Medical Doctor Counseling. All insurance plans and programs marketed and offered in the United States shall provide for once per year for each person covered by such plan one hour of medical doctor counseling as to health risks, treatment plans and health practices to reduce risks and treatment costs.

At Last - Health Care

If there has ever been an issue crying our for national debate it is health care. But, first we need to see that there are multiple issues involved. While they may be inter-dependant, they are not all the same issue. Lets first take up the distinct issues:

1. Cost - Is the cost of health care to high in the US? Is it affordable and is it a good value?
2. Access - Do all citizens and residents have access to health care? And, do they have access in a way to encourages a reasonable or high quality of life?
3. Who pays - Does the current financing method for health care provide for the appropriate balance between access to health care, affordability and excess use?
4. Quality - Are Americans receiving reasonable quality health care?

Over the next few weeks many will be commenting on proposed changes to our health care system. Clearly, the US system as it exists is not optimal but it is not terrible. Changes in policy are long over due. In general terms, we must consider "fixes." Answers to all of the above issues are "we an do better."