Thursday, February 25, 2010

Tort Reform and Health Care

Dick Durbin (D-Il) is correct in pointing out that the Republican version of tort reform will not dramatically reduce health care costs.

Republican politicians like to punish trial lawyers, who are mostly Democrats. It is not the inherent evilness of the lawyers that cause prices to go up. It is the poisonous relation between insurance and the law which corrupt medicine.

Pooled insurance sets people up in a three party gun fight. There are patients who need care and pay the premiums. There's the insurance company in the middle and the health care provider that provides care.

Insurance companies make their profit as a percentage on top of what the health care provider charges.

If a lawsuit increases the cost of health care, then both the health care provider and insurer will get more money.

The system creates an incentive for both the insurer and medical provider to unload onto the patient.

One of the reasons I became disillusioned with my job in insurance is that I noticed every time the company lost a high profile lawsuit, the company would write a sob newsletter about the terrible loss and everything done to prevent the loss. The insurance company would then raise its prices and make more profit.

I hate tort lawyers as much as the next guy, but I realize that it is the underlying structure of third party pooled insurance, and not the moral defects of lawyers that causes the problems.

If people paid their care directly, then one gets rid of the perverse incentive to lose lawsuits.

In a system of self-funded care, lawsuits would center on direct contract violations between doctors and patients. Doctors would get slammed for any real malpractice.

If the dynamics of the market changed, tort lawyers would play a positive role … despite the fact that tort lawyers are all morally defective slime.

Pre-Existing Conditions and the Medical Savings and Loan

I need to clarify position of the Medical Savings and Loan on pre-existing condition.

The goal of the MS&L is for people to self-finance their care. If a person has a pre-existing condition, and the cost of this condition falls within the person's ability to pay for the condition, then the MS&L simply helps with financial planning.

When a person has a pre-existing condition that falls outside that person's ability to pay, the system identifies that person as a person needing assistance. The health care advocates in the MS&L would then start pursuing additional funding from charitable or state agencies.

Americans are a generous people, when we have a need properly identified, we can usually find assistance for that need.

The experience of a policy holder with a pre-existing condition is that they would sit down with a health care advocate who would assess costs associated with the condition and compare that to the policy holder's resources (income, investments, etc.). They would work with doctors to determine prevention and treatment options and set up a lending and repayment schedule. If this falls short, the HCA would then begin pursuing additional funding.

With this in mind, we find that the medical savings & loan accepts folks with pre-existing conditions. The amount of care the program is able to give is limited by the patient's income and resources and the ability to find external assistance.

This method is actually superior to the pooled insurance model where premiums are based on experience of the group and accepting people with pre-existing conditions dramatically alters the performance of the group. In such a system, folks with pre-existing conditions get shuffled about like players on a chessboard and are not able to take charge of their care.

Monday, February 22, 2010

Emergency Room Abuse

In the health care debate, much is made of the abuse of emergency rooms.

Laws require that emergency rooms provide care to all comers. The claim is that people abuse emergency rooms by using them for primary care.

If this is the case, then the Medical Savings and Loan structure would reduce the problem. Public assistance would provide access to guaranteed loans for a slate of medical conditions. A person receiving a public loan would be put on a repayment/savings program.

Although one would expect a high default rate on public medical loans, there is sufficent expectation of repayment that many of the people using emergency rooms for primary care would opt for the lower cost alternative of a clinic.

The money for the loans would come from the pool of money currently used to provide emergency room care. Having even some of the money paid back would make this amount of charitable funds go further.

Imposing the Grid

I love hiking through the deep canyons of Southern Utah and experiencing the wide open spaces of the mountain west.

One thing that I've noticed on my outdoor excursions is that nature does not work in straight lines. Nature works in curves. Rivers dig their canyons in wide meanders. While there are some vertical cliffs caused by rocks sheering off rock walls, the majority of canyon walls have slopes with subtle curves.

In the rush to develop the West, our political leaders imposed a grid on the nation and parceled things up into regular tidy squares. This process of making things regular is called "regulation."

The grid allowed bankers on Wall Street to trade land that they had never seen. The real development of the land has always been at odds with this political grid.

For example, in the West one often find fences jutting up steep mountain slopes to fence in the artificial square printed on the map, and one will find roads or agricultural developments failing to make best use of the natural contours of the land.

If you look at backyards, you will find that all of the little square corners are usually poorly used. The square grid means people have great deal of wasted space.

While sitting on the rim of a deep desert canyon, I thought about the grid and the market. I had just been involved in an argument about the stupidity of the free market system and how the free market had caused a flawed development of the west. The person attacking the free market used the patchwork grid as a prime example.

As I stared at the patterns created the artificial grid imposed on the land by the political class in Washington DC, a thought burned to the forefront of my conscious: "Would a truly free people develop land in this artificial grid?"

I had traveled through the old world. During these international escapades, I could not help but notice that most old cities were developed in a much more organic fashion than American grid based cities. As builders optimized space, they would create buildings and walls in all sorts of bizarre curves and arches.

I finally decided that the grid system is not inherent to the free market. The grid was designed by the political class to facilitate political control of trade and taxation.

Yes, the free market latches onto the political reality. It is true that when regulators have divided the world into squares, the free market trades in squares.

However when one assesses the true value of a property, the overall topology and interconnections in the community are far more important than acreage. Realtors often repeat the observation that location is more important than acreage in determining the value of a parcel of land.

As a mathematician, I would be inclined to say that the way a piece of land fits in the topology of the community is more important than size. Location is simply a component of that topology.

The reason for this post is that many people point to the wasted land in our communities created by the imposition of the grid as an indication that the free market is inherently flawed and that we need regulation to overcome the faults of freedom.

I look at the grid and contend that the process of dividing everything into regular squares is regulation and note that it is the zoning laws that keep people from developing more organic communities.

Sunday, February 21, 2010

Taxes Scorching the Food Deserts

I applaud First Lady Michelle Obama for using the bully pulpit of the White House to raise awareness of childhood obesity. The web site Let's Move promotes physical education and a healthy diet.

The office of the First Lady has a long and notable tradition of raising awareness of issues. The history of First Ladies setting policy has not been as bright as the history of promoting causes.

The culture war about childhood obesity revolves around the role of government in fighting obesity with the left arguing that we should look toward government first, and the right wanting free market solutions.

A balanced approach would examine the faults of both the market and government.

For example, the Let's Move effort brings up the troubling problem of accessibility. The web site claims the follow:

More than 23 million Americans, including 6.5 million children, live in low-income urban and rural neighborhoods that are more than a mile from a supermarket.

Let's Move calls this accessibility problem "food deserts."

Clearly, there is something wrong in the market if the market fails to provide basic access to food for a large portion of the population.

This statistic seems odd. It is in human nature to seek food. It is highly unlikely that a free people would converge on places where there is nothing to eat!

I find this observation (that large numbers of people are doing something counter to human nature) to be a sign that we are not in a free market.

In examining this problem, we should start by searching for artificial things in the market that has people acting against their nature.

In Salt Lake County, I've noticed an odd trend. The strict zoning laws in Salt Lake City created a structure where large apartment were built in the unincorporated areas. That is our high density housing was built in areas without access to stores, parks or other infrastructure.

Driving around the valley, one finds many high density apartments that are cut off from the rest of the community like a pariah.

Zoning laws also prevent people from transforming single family houses into duplexes or adding extensions that they would rent out. In days of old, it was common for people to rent out the basement after the kids left. Basesement apartments are now illegal in some sections of town.

This creates a strange situation where the natural aging of a population leads to a drop in population density. This drop in population destroys the market for the local grocery store. So as homeowners unite to keep apartment dwellers away, they fail to realize that they signed the fate of their quaint neighborhood store.

There also appears to be forces that drive stores from inner city neighborhoods. Cities tend to sock local stores with an onerous tax base. I used to shop out of the city to buy groceries because the prices were higher and the taxes were higher.

NOTE, some big box stores appear to have a policy of locating their boxes outside city limits, or across county lines to get lower taxes.

My guess is that, if one were to calculate all of the payroll, property, and sales taxes, one would find the regressive situation where the taxes per calorie of food a neighborhood grocer to be substantially higher than the taxes collected on the same calories of food from a box on the edge of town.

In other words, I think one finds that the "food deserts" were created by zoning and tax policies.

People seek food. There must be something unnatural in the market to create food deserts.

A balanced approach to providing access to food would start by identifying all the forces cause food deserts. If there are unnatural forces such as strict zoning laws that force people to settle away from food, or regressive taxes that causes food to cost substantially more in poor areas, then government policy should work to address these inequities.

Sunday, February 14, 2010

Caucuses on the Horizon

Caucuses are on the horizon. Caucuses do more to define the parties and political discourse than any other political event on the political calendar.

The Right Huff put up a short Republican calendar for the Republicans in Colorado.

I fear the situation where moderates flee the Democratic Party and we are left with the Democrats toeing the Marxist line and Republicans behaving as reactionaries.

The left controls the media and schools. An even deeper political divide in our nation could be devastating to our nation.

My response to Republican efforts to recruit independents is that independents should join whatever party they detest least and be heard in the caucuses. Both parties have an internal pendulum. In the Bush years, both parties swung violently to the left. This leftward swing is destroying our nation.

Independents attending the caucuses could help both parties swing back toward an appreciation of limited government and liberty. Here is the reply I posted on The Right Huff:

Pundits concentrate on the swing between Republican and Democrats. The truth is that both parties have an internal pendulum that swings from liberalism to progressivism.

In the Bush years, both parties swung hard left ... leaving us a choice between Neocon progressivism in the republican party and Marxian style progressivism in the Democrats.

This election, both parties are likely to swing back toward the Democratic and Republican version of limited government.

So, regardless of which party an independent joins, independent voices supporting limited government, states rights and freedom can and will be heard this year.

Independents should swallow the vile tasting bile. Join the party that they despise least and be heard in the caucus.

Thursday, February 11, 2010

The Key to Economic Growth

Barack Obama is correct in the assertion that health care is the key to the return to prosperity.

The problem is that he is turning the key in the wrong direction.

Having the right key won't start your car if you keep turning it to the off position.

The goal of the health care bill is to make insurance mandatory.

Mandatory insurance has the exact same effect on the economy as a tax. Such insurance is simply a tax collected then redistributed through a private entity.

Employer based insurance destroys jobs because such insurance naturally devolves from a benefit to a tax as social engineers use the vehicle of insurance to advance political causes. Our insurance premiums keep going up, because the legal system formed around insurance uses insurance to mandate expenses.

If Barack Obama turned the health care key in the other direction (from government control to individual control) health care would transform into an engine of growth.

Group insurance has people putting their health care resources into a pool. People then withdraw funds for health care. This process of withdrawing funds is largely controlled by state laws and legal precedents.

Insurance companies keep some money on reserve, however, insurance works like a spending account with money coming in and going out at about the same rate. In this structure, health care reduces to an expense on the ledger.

If we transitioned from insurance to the Medical Savings and Loan there would be a tremendous influx of money into medical savings accounts. This money would be invested in positive job creating activities.

Don't you see? If we returned health care to the self-funding paradigm where people are saving for their health care expenses, then we will transform health care from behaving like a tax burden to a structure where health behaved liked an investment engine.

The health care plan before Congress impedes economic growth because as mandatory insurance has the same effect on the economy as taxes. The paradigm of self funded care would transform health care from a dead weight on the economy to an engine of growth.

Barack Obama is correct that health care is the key to economic growth. For the key to work, one needs to turn the key to the "on" position.

Tuesday, February 09, 2010

Progress in Science

I just watched an exciting program on CCTV called "The Cause of Dwarfism" on CCTV Nature and Science. CCTV is a cable channel produced by the Chinese Government. With the possible exceptions of North Korea and Cuba, China is the most progressive nation on earth.

The program was absolutely riveting. Two young women were pregnant. Their families suffered the affliction of dwarfism. The affliction of dwarfism means a person is short. Being short, I guess, is a terrible, terrible, terrible thing.

So, the brave scientists on the show raced against time to find the genetic marker for dwarfism. It was all touch and go as the scientists scanned international literature and did a series of tests on the members of the family.

Fortunately, in the last month of pregnancy, the scientists found a marker that might be related to dwarfism. One of the babies had the marker. The other didn't. So they aborted the baby that had the marker.

If they identified the right marker, the world was saved from having another short person in it.


Sadly during the "lost decade" of the "Bush Dark Ages," the United States wasn't able to pursue progressive genetic science. The result of the Bush Dark Ages is that the United States has to suffer an ongoing plight of short people. The iTunes button loads Randy Newman's "Short People."

Randy Newman - Little Criminals - Short People

PS: Being a reactionary drone. The show made me feel sick. I wish the baby had a chance to experierence its waist high view of the world. Quite frankly, if I were the one charged with engineering people, i would probably cull out the tall ones, reasoning that tall people produce more greenhouse gasses.

Sunday, February 07, 2010

Lending into Subservience

The Post World War development efforts entailed a large number of sizable loans to the central banks of third world nations. The corrupt governments used this money on projects that centralized economies and led to even worse living conditions for their people. The result of the "benevolent" lending of the banks was worse poverty and debilitating debt.

In the United States, we have massive lending programs to put people into houses. These lending policies jacked up housing prices and led to a situation where American consumers struggle under unbearable debt.

We are now being told that the answer to the current job crisis is a massive lending program to small businesses.

Our ruling class and big banking system keeps positioning benevolent lending as the solution to economic challenges, yet history keeps showing that the lending programs lead to economic centralization and debilitates large swathes of the economy under debt.

The path to sustainable prosperity is not built on loans but is built on the development of solid equity. Large lending programs flood the market with cheap money and undermine the substantive equity needed for sustained economic growth.

The $30billion in new loans for small business is not an investment in small business, but a margin play. The true path to prosperity isn't more lending and cheap money but the hard work that builds sustainable equity. Obama would do more for the economy if he simply paid back any outstanding loans in the TARP program and encouraged Ameicans to return to a structure where small business grew through the organic reinvestment of profit.

Thursday, February 04, 2010

A Margin Play in a Declining Market

A margin play in a declining market simply hastens the decline. The term "margin play" refers to a situation where one takes out a loan, invests it, and hopes the return on the investment is greater than the interest on the loan. It is a form of legalized gambling.

In all likelihood, the person making the margin play does not have better knowledge than the rest of the market. In a declining market, people making margin plays will need find some way to cover their margin.

Of course, in some cases a player might have insider knowledge. For example Tim Geitners' friends in Goldman Sachs had insider knowledge on undervalued equities in the economic collapse. The special loans by Paulson and Geithner to Goldman Sachs allowed the firm to leverage its insider knowledge and make out like bandits in the economic turmoil. However, these special deals did not produce any global benefit. It simply allowed those with insider connections to reap the benefits of economic chaos.

The idea that we will stop this declining market by extending billions in loans to small businesses runs the risk of being nothing more than a margin play in a declining market. There might be some transfer of wealth from the community at large to businesses with insider access. The result of the margin play is likely to be nothing more than an acceleration of the centralization of the economy with little benefit for society at large.

NOTE: Margin plays in a growing market appear, at first, to be a good idea. A margin play in a growing market has the effect of increasing the rate of incline. The problem is such leveraged positions end up creating market bubbles which inevitably burst.

If we wish to have long term stability, we need a system where people develop and build equity. We need a system like the one advocated by Adam Smith and we need to move away from the Marxian/Keynesian systems.

On Receiving Preventative Care

A primary reason that I turned against pool insurance was that I discovered that the gatekeepers of the pool were using intimidation to discourage policy holders from using care. For example, with employer based health insurance, one has to go to the HR clerk or union boss to request care. This entails confronting a person who has direct control over your personally well being in order to get care.

This intimidation has a big effect in preventing people from getting the basic care that could improve health and personal productivity, while reducing long term costs.

The HSA (a savings account and high deductible insurance) gives people a little more control over their care. One only needs to confront a gatekeeper for expensive medical concerns. However, the system really doesn't encourage people to seek preventative care. For that matter, the high deductible insurance creates a disincentive for seeking preventative care. People with high deductible insurance are likely to schedule their care in accordance with the calendar year of the policy and not their personal health needs.

The Medical Savings and Loan is the only system that directly confronts people with the long term consequences of their health spending and life style choices. When faced with a choice of spending now or spending more later, the person enrolled in the MSL will have the incentive to spend now.

This incentive for preventive care even applies to people whose health needs exceed their income as borrowing a little money now saves having to borrow even more money later.

As people own their whole health history, there are no gatekeepers to navigate nor are there perverse incentives to put off care.

Monday, February 01, 2010

Foundations for Good Health

The last post began touching on the role of charities.

There are many diseases that are beyond the means of the individuals. The list of such diseases includes juvenile diabetes, hemophilia, cancer, multipleschlero, multiple sclerosis, etc..

Conquering diseases requires a great deal of dedicated research and science. Looking at the landscape of the American Medical community, we find that the best work to end these ailments is done through foundations.

The "comprehensive health care reform" efforts that place all health care under a single regulatory authority is a less effecient way to handling the research undertaken by foundations.

It is far better to face the challenges of horrific diseases with private charitable groups dedicated to the cure of disease than through a socialized regulatory platform that rations research based on a politically driven basis.

The Health of a Nation

I want people to have quality care, but I dislike the goal of "comprehensive health care."

The goal of having one system that covers all people is too absolutist for my tastes. The obsession with having one political structure that covers the health care of all is the very heart of totalitarianism.

I believe that Adam Smith was on a better track. Smith made the observation that a free people, acting on their own accord, tend to maximize the Wealth of the Nation.

I contend that a free people with more direct control of their Health Care resources would improve the Health of the Nation.

Our system of big insurance and big HMOs has created a paradigm where a ruling elite define our care and effectively control access to care. We have reached the point where not paying onerous premiums into the system means a person effectively has no access to care.

If we had a system where people owned their own health care resources, we would see each individual working to maximize the impact of their health care dollars.

Doctors, seeking to attract these customers, would invest their resources in ways that maximized the impact of their care.

The Medical Savings and Loan is like insurance in that it assures people have health care resources in times of emergency. Instead of doing the accounting at a group level. It does the accounting at an individual level. Each person owns a savings account. They have access to interest free loans in cases where savings fall short. With the MS&L most people will be able to self-finance their care and will go about the business of optimizing their resources.

Not everyone can self finance care. The MS&L creates a structure that identifies those people needing assistance. Charitable assistance can use this information to maximize the impact of their giving.

This process of maximizing each element of the health care system ends up better quality of care for more people than the totalitarian vision of "comprehensive care" which injects inefficiencies as the ruling elite try to meter care based on their notion of social justice.

Smith's observations about the Wealth of the Nation are relevant to the Health of the Nation.