Thursday, March 31, 2011

Savings Paradigm

The last post noted that the Medical Savings and Loan was a mathematical model I developed by analyzing real claim and premium data.

Insurance looks at the health care of a group for a year. The Medical Savings and Loan looks at each person as a whole entity and analyzes their lifetime medical expenses.

The first thing I discovered was that all but a fraction of people have reasonable health costs in relation to their income.

The second thing I realized is that if one followed the whole life approach to funding health care, a large number of people would have a sizeable amount of savings during their lives. A large number of people would have accounts well over a hundred grand in their 40s and 50s.

The figures are not unreasonable. I do not have accurate actuarial data at hand.

However, my observation is that, in the status quo, insurance companies and government takes well over a half million dollar ($500,000) from each worker for medical expenses.

My educated guess is that all but a tiny fraction of people will have under $300,000 in life time expenses.

The amount of money that the system takes from people is substantially higher than actual costs because so much of it is spirited away in the form of fraud, profit or just waste.

The goal of the Medical Savings and Loan is to give people direct control over that first $300,000 dollars.

The hardest part in structuring the program is finding a way to convince Americans, who've been trained to be consumers, that having a hundred grand in savings is par for the course.

The idea that people should have several hundred grand in savings looks absurd until one starts looking at the way the economy works.

It takes a great deal of capital for a society to provide quality jobs.

Most jobs that pay well require a great deal of capital. Walking through the mall, we find that a well stocked store will have several hundred grand in inventory per employee. Construction crews on the roadside drive rigs that cost several hundred thousand dollars. Our public school teachers work in buildings work in builds that cost millions to build on extremely valuable land.

Most high paying jobs require a half million dollars or more in capital.

Increasing the amount that each American save would create jobs.

As people are likely to get some interest on savings, increasing the amount of savings should help increase the overall income of American workers.

Of course, the inverse of the above statement is true.

The expectation that insurance would pay medical expenses decreases savings.

Since the appearance of insurance last century, there has been a steady increase in the gap between rich and poor. This is due primarily to decreased savings as Americans developed the attitude that the state or their insurance companies would care for them.

Switching from an insurance paradigm to the Medical Savings and Loan would reverse the growing gap between rich and poor.

Taking the savings of the people and putting it in insurance concentrates wealth.

It is this insurance paradigm that is systematically turning our nation from a free nation to a class nation with a distinctive owner class and vast slave population.

Reviving the savings paradigm would reverse this trend.

The money is there. The Medical Savings and Loan takes the money that goes into insurance and gives it back to the people.

Oddly, the biggest challenge to the program is convincing a people who've been trained in progressive schools to be consumers to be savers. It is difficult to convince people who expect to be cared for that having a hundred grand in a savings account for medical expenses is normal.

Insurance currently takes about $500,000 from each worker. The MS&L would let workers keep the first $300,000, and put $200,000 per worker in a grant program.

The challenge is to keep people from wasting their stash of cash.

The Medical Savings and Loan hinges on a new position called Health Care Advocate. This advocate is really a financial advisor whose primary job is to convince people trained to be caudled that having a few hundred grand is savings is normal.

If the plan worked, we would fully fund health care and counter some of the forces which have been artificially concentrating wealth.

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Tuesday, March 29, 2011

The Whole Life Model

The real difference between insurance and the Medical Savings and Loan is the mathematical model used to examine health care data.

Insurance examines the experience of a group for a year. The ruling class (state bureaucrats, underwriters, and insurance companies) allocate, plan and speculate on the group's health care needs for the year.

The Medical Savings and Loan sees each person as a whole being. This structure then works to provide individual people with the resources they need for the health concerns of themselves and their immediate family.

These different mathematical models lead to profoundly different conclusions. A society engaged in group analysis of medical expenses approaches health care with questions about the tools they need to give to the ruling class to provide for the health of the people.

A person engaged in whole life analysis asks questions about what we need to do to empower each person in making health care decisions.

ObamaCare is a three thousand page document in which every single word is about the needs of the bureaucracy. These horrid health care exchanges are all about an elite speculating on the care of the group.

I say that this model where we pretend that the ruling elite treat the health of a group is an absurdity.

The Medical Savings and Loan says that health is an attribute of a person. Health care refers to the actions taken throughout one's life to improve and maintain one's health.

Starting with the notion that each person is a real breathing individual, what do we need to do as a society to help assure that each person has the resources to maintain their health?

The Medical Savings and Loan is all about creating financial tools directly around the individual.

In all of these insurance companies, health exchanges and socialized medicine, elitists site around and talk about the tools they need to control the health of others.

The Medical Savings and Loan creates a new position called health care advocate. The advocate sits in a room with each member of the program to help build a savings and spending plan for that individual. The advocates work to secure grants for those with inadequate resources.

Everything becomes centered around the individual and the individual's health needs.

All the questions about pre-existing conditions and portability vanish. Pre-existing conditions and portability are questions about what to do when a person moves from one group to another.

The questions are nonsense in a program based on whole life analysis. People do not move out of one life into another. Every person has a whole life with a distinct start and end.

Starting a discussion about the Medical Savings and Loan is difficult because the discussion ultimate revolves around people being able to understand the distinctions between the group model and the whole life model.

Although we live in an age permeated by mathematical thought, it is surprisingly difficult to find people willing to discuss different mathematical models and how they affect our perspective of vital concerns like health care.

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Monday, March 28, 2011


A Health Savings Account (HSA) plus high deductible insurance is still an insurance product and is subject to all of the problems inherent in insurance.

The Medical Savings and Loan combines a Health Savings Account with a combination of loans and grants to create a completely different product.

The MS&L uses a completely different mathematical model from pooled insurance. Pooled insurance looks at health care expenses for a group in year increments.

The MS&L compares life time earnings with life time medical expenses on an individual basis.

The MS&L uses a completely different mathematical model than the HSA.

Using a different mathematical model creates a system where all but a few people are able to fully self-fund their care.

The HSA has several glaring flaws. The primary flaw is that people will make their health decisions based on the deductible, and not their needs. For example, people with an HSA are likely to skip preventative care because they have to pay for it out of pocket. Even worse, when a person has paid the deductible for the year, the patient might get unneeded care simply because it is free.

Care providers are keenly aware of the source of payment. A care provider in the HSA model might undercharge when the person is paying in cash, then overcharge when the patient is paying on insurance.

The HSA program is often used by low wage employers seeking to cut health care expenses. This program creates serious problems for low paid workers who simply do not have the money to pay the insurance deductible. Such people end up paying for care, but are completely cut out of the health care system.

The MS&L model uses a full life cyle analysis that compares life time medical expenses with life time income.

A system that looks at health expenses of an individual as whole gives people an incentive to invest in preventative care. Preventative care, by definition, decreases life time expenses and is a good investment.

The system removes the perverse incentives to over-consume health care when the insurance company is picking up the bill. Such waste increases life time expenses without benefit.

The MS&L program does include subsidies. However, the MS&L structure does so by comparing life time income to life time medical expenses.

This creates profound effects in the implementation of care. A person who is obscenely rich (like Bill Gates or Warren Buffet) would never see a subsidy for care (as happens with insurance).

One of the perversities of insurance is that the uber-rich (who expect premium care) end up subsidizing their premium care with the insurance dollars of the working class. The Medical Savings and Loan makes Warren Buffet pay every penny of his care.

Conversely, since the system compares life time earnings to life time medical expenses, people with abnormally low income would start getting subsidies at an earlier stage than people with similar conditions earning an average life time wage.

Imagine two people who have a $50,000 catastrophe. The first recovers and goes on to earn a healthy wage for the rest of his career. The second does not. The Medical Savings and Loan would pay for both patients with a loan. The person who recovers would pay back more of the loan than the person who did not recover. So the subsidy effectively factors in both the effects on earnings and cost of the procedure.

Imagine one person having a catastrophe that costs $20,000. Another has a catastrophe that costs an initial $5,000 and creates a chronic condition that costs $2,000 for the next ten years.

The HSA with a $5,000 deductible would supplement the first patient with a $15,000 check. The second person would have to pay the full $5,000 for the catastrophe, the $2,000 a year for the next ten years ($25,000). To add insult to injury the insurance company is likely to raise insurance premiums because the policy holder has a pre-existing condition.

The HSA makes life worse for the person with the more expensive medical condition.

The Medical Savings and Loan looks at the life time earning of the policyholder. When it comes time to dishing out supplements, it would see that the person with a catastrophic condition followed by a chronic condition had higher medical expenses than the person who just had a catastrophic condition and recovered.

The Medical Savings and Loan uses a different mathematical model than pooled insurance.

Using a mathematical model that considers each person as a complete whole, the Medical Savings and Loan creates a paradigm where the majority of people self fund their health care and the supplements are given only to those with abnormally high medical costs or abnormally low income.

This is a completely different approach to funding health care that deserves exploration.

The HSA + high deductible insurance is still insurance. It is still ruled by the flawed thought process behind insurance. The Medical Savings and Loan is a complete break from insurance. It creates a viable structure in which people can fully self fund their care.

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Friday, March 25, 2011

Manipulating the Capital of the Nation

The non-news of the week is that some high up Union muckety-muck named Stephen Lerner was recorded planning the collapse of banks.

I filed this report under non-news as I have been to numerous events where lefties spouted off on different plans to manipulate the capital system to creah the market with hopes of establishing a socialized utopia in the rubble.

Manipulating the market for power has been a primary theme of the left for as long as I remember. In 1992, the liberal media praised Soros for breaking the Bank of England in a currency manipulation scheme.

Joseph Kennedy got the money to buy his son the presidency through stock manipulations.

A century before that, a madman named Karl Marx penned an enormous tome called "Das Kapital" which is about market manipulation. Marx's "Das Kapital" laid the intellectual foundation for the system we call "Capitalism"

Marx was not an original thinker. Political rogues have known how to gain power by debasing currencies since antiquity.

While Lerner's silly scheme to break banks with a "mortgage strike" is non-news, it is worth while to point out many people in the ruling class think like Lerner. Progressives spend their days in the nattering little groups scheming on ways to undermine their neighbors for power.

Thursday, March 17, 2011

Good v Bad Business Practices

Libertarians and conservatives have a nasty happy of assuming that all business is good and all government is bad.

The founders of this nation discovered that a limited government focused on protecting property and overall security of the people is a good government. A classical liberal recognizes that there is an area in which government is good.

When government moves beyond its limited confines, the government tends to become a source of oppression.

I contend that this same dialog needs to take place in regards to business. I contend that some business models are good and others are bad.

For example, if I created a business model in which I stole or extorted from others, I would prosper, but my business model would diminish society.

It seems to me that, if we wanted to preserve our freedom, we need to engage in a discussion about good versus bad business models.

Libertarians tend to shy away from discussions about good and bad business models fearing that such discussions would lead to demand for more government regulations.

I contend that the exact opposite is true.

It is our unwillingness to engage in a fundamental debate about the differences between good and bad business models that lead to the call for regulation.

Good business models that enhance freedom and produce wealth do not require regulation. If one has a society filled with freedom centric businesses, there is not a call for regulation.

It is the proliferation of companies using negative business models that lead to the call for regulation.

Rephrasing the comment: if there is a business model that begs government regulation; in all likelihood, the business model itself is anti-market.

Health insurance is a great example of this principle. Attempts to pay for individual consumption with a pooled resource depends upon regulation and micro management of the health care industry.

The fact that the business model demands regulation is a blaring signal that the industry is anti-market.

A fundamental debate about business practices would lead to a discussion about alternative business models.

The Medical Savings and Loan is a business model in which financial institutions provide tools to help individuals self-fund their care. The Medical Savings and Loan does not require the regulation or micromanagement needed by the insurance industry.

If we engaged in the fundamental of good v. bad business practices, we would remove the demand for regulation.

The libertarian assumption that all businesses are equal creates a market where there is a loud demand for every greater regulation.

Engaging in the fundamental question about good v. bad business models does not lead to regulation. If we engaged in the discussion of building affirmative business models, we would effectively remove the calls for regulation.

(END NOTE: My experience is that the left actively encourages the development of bad business models, as such business models lead to the call for regulation. This process has been going on since Marx penned "Das Kapital" which laid the foundation for modern capitalism.)

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Sunday, March 13, 2011

Debt Ceiling

I just sent the following letter to my representative:

I am deeply concerned about our nation's debt.

Looking at the national debt clock, it appears that the source of our problems is the unfunded liabilities.

The debt ceiling debate is about the amount of money that we are currently borrowing. Our nation is forced to automatically up the debt ceiling as the unfunded liabilities come due.

It seems to me that, to control the debt, we must begin by placing a cap on the unfunded liabilities.

We would do more to get our financial house in order if we used the 2011 budget battle to place a hard cap on unfunded liabilities opposed to spending all of our political capital on a one time decrease in the debt ceiling.

I propose that the Senate replace the debt ceiling with a dual program that included an aggressive cap on unfunded liabilities with a modest increase in the debt ceiling.

Kevin Delaney

Wednesday, March 09, 2011

An Unfunded Liability Ceiling

The Debt Clock reports that our national debt is $14 Trillion. A scarier part of the report shows unfunded liabilities is $112.8 Trillion.

The national debt is the amount of money we borrowed in the past. The unfunded liabilities is money that the US must pay out in the future.

The debt ceiling is a limit on the first figure ... the amount we are currently borrowing. Attempts to control our debt with a debt ceiling fails because the unfunded liabilities keep come due forcing Congress to raise the debt ceiling.

Now, the United States must find a way to control its debt. My suggestion is that we need to start this process by creating an agressive cap on unfunded liabilities.

Cutting unfunded liabilities first will present politician from spending the resources of our children for today's political gains. A cap on unfunded liabilities also makes it easier for future congresses to pass sane budgets.

I believe it prudent that we demand both a debt ceiling and an unfunded liability ceiling.

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Kollective v. Individual Rights

Classical liberal arguments might have the form: Man was a creation of God. Our fundamental rights flow from God through man.

A collective is a creation of man. Men can surrender powers to a collective, but the collective does not have rights.

When on tries to argue that the powers given to a collective are fundamental rights on par with fundamental human rights, one creates a system with conflicting rights (see peril of derived rights).

Unfortunately, Conservatives are prone to claim collective rights whenever the arguments support their cause. For example, conservatives started yelling slogans for State's Rights after passage of ObamaCare.

The Constitution reserves powers, not rights, to the States. Slave holders used the slogan of state's rights to deny fundamental rights to slaves. Democrats later used the cause of state's rights to pass Jim Crow laws. Claims for states rights leads directly to conflicts between states and individuals.

In the health care debate, we see that Utah used the call for states rights to pass their own state level version of ObamaCare. The call for states rights (a collective right) accelerated the adoption of a health care exchange and stifled the call for health care freedom.

Conservatives also have an unfortunate tendency to claim fundamental or other special rights for corporations, churches or other collectives they admire ... when they should presenting the arguments as powers and not rights.

Tuesday, March 08, 2011

Political Blocks and Immigration

Utah is passing a bizarre law that gives the state aggressive tools to chase away those illegal immigrants that the state does not like with a state level worker permit program to reward immigrants the state likes.

This strange law does not seem to follow normal conservative/liberal lines. However, it can easily be explained by a state that is controlled by a political machine. In this case, the political machine is a church.

The founders of the LDS Church were politically ambitious. Notably, Joseph Smith declared himself a Lieutenant General. Church President Smith ran for US President and even made the habit of marching around with a militia while wearing a Napoleon outfit.

The politically ambitious leaders of this political machine sought to create a political block. To do this, they sent Missionaries abroad to recruit adherents. They would fund transport to the United States then expect political patronage along with a 10% tythe from the recruits. (This migration is well documented. Here is a study at BYU.)

The ambitious missionary program gave the LDS Church a solid voting block which assured the church's hegemony in local politicals for almost two centuries. Historically, Mormons held 90% plus of the legislative seats in Utah. It fell to over 80% in the 2008 elections.

In Early LDS history, the church focused on creating a political block in the US. In recent years, the Church developed an international strategy:

Since the early 1990s, the Mormon Church has surpassed 13,000,000 members worldwide. Much of this growth occurs in South America and Africa as well as in the countries of the former Soviet Union, especially Russia. More Mormons live outside the United States than inside it by the late 1990s.

Why Mormonism

Currently, South America is seen as the primary growth market for the LDS Church.

The laws passed by Utah gives a state controlled by a political hegemony the ability to define desirable and undesirable immigrants. The law will be administered by a political machine that is very much interested in maintaining its rock solid voting block.

As an outsider in Utah, I see the law as a negative development.

This game of trying to influence population by immigration is not unique to Mormonism. The history of Cyprus shows a conflict in which Greek and Turkish groups vied for control of a Mediterranean island.

When I lived in the Bay Area, progressive professors lectured on plans to use immigration to maintain progressive hegemony in California.

IMHO, the worst possible outcome of the immigration debate is to create a system of local controlled immigration as local groups seeking political influence will manipulate immigration for political power.

Utah is not showing a positive path forward in the immigration debate. Creating a system that allows local authorities to deport those who they find undesirable rewarding those that follow the lead of the local political block will end up creating an oppressive society.


Tuesday, March 01, 2011

The Peril of Derived Rights

Freedom of association along with the freedom to bargain and enter contracts are fundamental rights.

From these fundamental rights, one can derive the theorem that people are free to form associations that bargain for contracts.

I used the mathematical term "theorem" rather than "derived right" as using the same term for the fundamental pricinples and the ideas derived from them leads to confusion.

Treating the derived ideas as if they were fundamental rights can lead to unstable and contradictory systems, which is what we see in the debate about collective bargaining debate taking place in Wisconsin.

During this debate, I've heard many declaring collective bargaining to be a fundamental human right. Such a right is in direct conflict with the other fundamental rights mentioned at the beginning of this post. When the collective bargains, it denies the rights of individuals to bargain. Even worse, those engaged in collective bargaining have a long history of forcing people into associations.

In the classical system of fundamental human rights, people are able to form associations and negotiate. In the modern system of collective bargaining, the collective ends up denying people other fundamental rights.

In mathematics, physics, and classical sciences, thinkers took great care in distinguishing between fundamental principles and derived. In math, one uses terms such as "axioms" and "theorems."

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