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Cheaper Does not Mean more efficient

Doctor Leo Spaceman

from The New Yorker, a review on the book America’s Bitter Pill by Steven Brill.  The review is by Malcolm Gladwell.


It is useful to read “America’s Bitter Pill” alongside David Goldhill’s “Catastrophic Care.” Goldhill covers much of the same ground. But for him the philosophical question—is health care different, or is it ultimately like any other resource?—is central. The Medicare program, for example, has a spectacularly high loss ratio: it pays out something like ninety-seven cents in benefits for every dollar it takes in. For Brill, that’s evidence of how well it works. He thinks Medicare is the most functional part of the health-care system. Goldhill is more skeptical. Perhaps the reason Medicare’s loss ratio is so high, he says, is that Medicare never says no to anything. The program’s annual spending has risen, in the past forty years, from eight billion to five hundred and eighty-five billion dollars. Maybe it ought to spend more money on administration so that it can promote competition among its suppliers and make disciplined decisions about what is and isn’t worth covering. Goldhill writes:

Medicare is cheaper to run than private insurance. So what? Cheaper doesn’t mean more efficient. It may be cheaper to run banks without security guards, hotels without housekeepers, and manufacturers without accountants, but that wouldn’t make those businesses more efficient.

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Just Buy Them Insurance

Doctor Leo Spaceman

The ACA (Obamacare) was based on very distorted numbers about the number of uninsured, myopic predictions of its costs, outright deceptions in its presentations (Gruber), and a delusional faith in the competence of the resources to execute it.  It would make a Rube Goldberg plan look like a Nobel Prize winning physics model of engineering elegance.

My hiding the true costs in tax increases, mandates, and penalties- not including the actual government costs of the program- the administration hid the real cost of the problem even from itself.  This would not even include the social cost of health care that is delayed by higher costs for many.

Yes some doctors have reported that because of the higher deductibles many are experiencing, patients are forgoing needed procedures.

If the central planning junkies had used more honest data perhaps a much more cost efficient method would have been considered. What if the government had just gone our into the existing market and just purchased health care policies for those who needed it?

According to a new study by the CBO it may have been the same. The Daily Mail looked at the  CBO January 2015 Outlook on Obamacare and found the cost per insured to be $50,000 over ten years.  And that assumes 27 million newly insured, a best case scenario that is not being realized.

And this would have accomplished the same goal without the huge distortions in the market caused by the ACA mess.

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Relative Progress


Robert Graboyes writes Why We Need to Liberate America’s Health Care


Step into a time machine and travel back to 1989. Gather a group of people and tell them of the advances that medical science has made in 25 years — statins, new vaccines, face transplants, and so forth. The audience will be pleased and gratified by the news, but there is little that will shock them.

Now tell them the following story (from my paper):

While camping high in the Rockies, Efram signed and deposited his paycheck in his bank account. Then he purchased The Complete Works of Shakespeare and read Macbeth. A bit later, on YouTube, he watched the Beatles sing “Yellow Submarine.” Using Google Translate, he converted the lyrics into Hindi and then Skyped his friend Arjun, who is working at McMurdo Station, Antarctica. Efram sang his translation to Arjun, who grimaced, but then commented on the beauty of the towering mountain behind Efram. After hanging up, Arjun emailed a restaurant in Denver (a city he has never visited), and an hour later a drone delivered Indian food to Efram’s campsite—all paid for with bitcoins. While eating his tikka masala, Efram toured McMurdo Station via Street View and asked Siri for the current temperature there. “Brrrr. It’s 10 degrees below zero Fahrenheit, Efram,” she answered. Then he accessed Netflix and watched Seven Samurai before dozing off to a selection of Malian jazz, courtesy of iTunes Radio. The entire cost of this sequence of events was $34.77 — $0.99 for the Kindle edition of Shakespeare, $2.00 for the film, $26.78 for the food, and $5.00 for the drone delivery service. And the whole set of interactions required only Efram’s iPad and Arjun’s cell phone — the two devices together costing less than $1,000.

Now, your audience will assume you are lying or delusional. And yet to our 2014 eyes, every step of this story is mundane and familiar — except for the drone delivering dinner to the mountain. And drone deliveries are perfectly feasible; it’s just that drones are the only part of the story that remain in the Fortress.


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Health Insurance Disincentive

Doctor Leo Spaceman

from the Wall Street Journal, Shunning Obamacare by Andy Puzder


 After two constitutionally dubious delays, ObamaCare’s employer mandate took effect on Jan. 1 for employers with 100 or more full-time employees. The last open-enrollment date for our company, CKE Restaurant Holdings, Inc., was Dec. 4, 2014. As of that date, our company had approximately 20,000 employees, 6,900 of whom worked 30 or more hours a week and were eligible for ObamaCare-compliant health insurance. We elected to offer them coverage rather than pay the employer penalty, which would have sent workers to ObamaCare’s health-insurance exchanges, where those who qualified could receive federal subsidies to help pay for insurance.

Of the 6,900 eligible employees, 1,447 already had ObamaCare-compliant insurance through our pre-existing company plans. That left 5,453 employees eligible to sign up. A grand total of 420 actually enrolled. That’s a mere 2% of total employees, or 6% of eligible employees.

ObamaCare will penalize the 5,033 eligible employees who elected not to enroll, unless they have compliant health insurance from another source. For 2015, the penalty is the higher of $325 or 2% of annual household income above about $10,000. The 5,033 employees who declined insurance make $24,663 a year on average. As a result, the employees without insurance generally will pay the $325 penalty, as it takes $26,250 before the 2% penalty is higher.

The employee portion of the annual premium for our least-expensive “bronze plan” is $1,104. If you don’t believe you need health insurance, $325 beats $1,104. But employees compelled to pay the penalty still won’t have compliant insurance. For those who want insurance, then, we offer all our employees—full and part time—access to inexpensive group health-care coverage that is not ObamaCare compliant.

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Fortress vs Frontier


Robert Graboyes writes Why We Need to Liberate America’s Health Care


Since World War II, the health care debate has been a struggle of left versus right. The left has tended to favor federal solutions, plus increased public provision of care and coverage. The right has favored state-level solutions, plus private provision of care and coverage. The left employs more pro-regulation rhetoric, while the right professes to favor freer markets. (The latter distinction is largely illusory. Both sides favor powerful regulation and merely disagree on who regulates what and through which means.) A more meaningful distinction is between worldviews we can call the Fortress and the Frontier.

The Fortress has two goals. The first is to imagine every terrible thing that might happen to someone receiving health care and then to focus public policy on preventing any of those things from happening. The second is to protect health care insiders — doctors, hospitals, insurers, drug and device manufacturers — from outside competitors who might threaten their turf.

The Frontier focuses on innovation. It understands that we cannot obtain great quality improvements and massively reduced costs without allowing consumers and producers to take calculated risks. The Frontier also understands that innovation requires constant, uninvited input from unknown dreamers. The IT revolution did not emerge from credentialed insiders anointed by public officials or titans of industry. It came from obscure figures in garages who were allowed to challenge and defeat multinationals in skyscrapers.

From his garage, Steve Jobs challenged IBM. Jeff Bezos sold books from his garage and his business — — changed the way the world purchases just about everything. Smartphones did not originate with telephone industry giants like Western Electric; the BlackBerry came from a couple of engineering students with some venture capital.

In less than a generation, home computers and smartphones went from dreams to toys of the rich to everyday possessions of Third World village children. America’s population now has near-universal access to information technology that is blindingly more powerful than anything the Central Intelligence Agency owned a generation ago. To get there, we accepted costs and risks, and we allowed serendipitous genius to arise in the unlikeliest of places.

We didn’t need vicious Congressional debates, invasive mandates, or a massive bureaucracy to oversee the diffusion of the new technologies. No one had to beg innovators to innovate. And innovators didn’t have to beg bureaucrats for permission to create.

Just the opposite. The IT revolution really began around 1989, when the federal government stepped away from ARPAnet — the embryonic Internet — and announced that the world was free to use it with few restrictions and little oversight.

One of the stunning questions for future political scientists to ponder is, “Why did we develop a bipartisan consensus that health care should be locked in the Fortress while information technology would be free to roam the Frontier?”

One traditional Fortress approach — federal grants for innovation — is likely to push innovation in less-than-ideal directions. In the early 1970s, an innovation grant would probably have gone to IBM to build a bigger mainframe, not to Steve Jobs to produce a tiny desktop computer. And enough innovation grants to IBM might have made it impossible for Steve Jobs to compete.

Shifting health care to the Frontier opens the possibility of real progress — of better health for more people at lower cost, year after year. This approach also offers alternatives to the all-encompassing ACA and its earth-shattering repeal-and-replace alternatives. My paper suggests a few dozen small initiatives to begin the transition. There are hundreds more waiting just behind. If we so choose.