Misleading Headline Of The Day

I stared at this yesterday when it first hit my screen in disbelief.  They actually ran this crap?

While the most sweeping provisions of the health care overhaul have not yet gone into effect, plenty of Americans will still be paying higher insurance premiums this year -- as insurance companies try to preemptively cover the cost of a tax increase included in President Obama's Affordable Care Act.

That tax doesn't take effect until next year, when other major provisions like the so-called "individual mandate" and insurance subsidies also kick in. But that hasn't stopped insurance companies from charging higher premiums this year to cover the hike, as well as the cost of ObamaCare benefits such as free birth control and preventive care.

Premiums for individuals and small businesses are projected to increase due to the tax by roughly 2 percent this year and by as much as 3.7 percent in 2023, according to a widely cited analysis by the insurance industry.

2% and 3.7% eh?

Bah.

I have multiple reports of individual and small-group plan price hikes of 50, 60, 70, even 100% coming down this year and next.  Against that 2 or 3.7% is going to sound like a Girl Scout picnic.

The problem is that the "must-issue" and "community rating" provisions in the law are just more cost-shifting and promise to make everyone pay more, because they force everyone to buy -- including those who otherwise would not.  Since there is no restraint on the services one consumes enforced by the size of your wallet there is no price feedback mechanism on the medical industry.

Couple that with the medical industry's penchant to force the 330 million Americans to pay for the development of basically everything (because most of the rest of the world steals it, either directly or by threat and thus gets the technologies for reproduction cost) and you have an intractable problem.

Remember, Obama said that health insurance costs would go down with Obamacare. 

So who's have gone down?  Mine have gone up!  So has those of everyone who I know.  I have not found one person who, for like-for-like coverage, has seen costs go down, although I'm sure you will find some -- for example, someone with AIDS who currently cannot afford to buy at all!

Obamacare was sold to the American public as a means of "controlling" runaway health costs.  It has done nothing of the sort; it has instead advanced that runaway, and yet we haven't even felt the full brunt of the law yet.

This is where our budget problem comes from as well.  There are plenty of people in Washington who knows this, yet you should note that there is a stony silence when it comes to discussing the root of the problem or doing anything to fix it.

Once in a while you will hear someone holler that Health Insurance companies are "ripping people off."  But that's not true -- look at Tenet, with a 5.6% return on assets and a 7.6% operating margin (gross) and profit margin of 0.33%, or Cardinal with a 1.78% operating margin (!) and a 1% profit margin.  Raping the consumer?  Don't think so.

How about Merck?  Everyone hates Pharma, right?  Well, maybe you have a reason to -- 23.4% operating margin and 14% net.  Or you could look at Pfizer, 31% operating margin and 15.6% net.

That's pretty damned healthy.

But let's assume you zeroed Pfizer's net -- that is, you simply stole it (e.g. by taxation.)  How much difference would it make to the Federal Government's $850 billion in spending on health care last year?

Answer: About $6 billion, or well under 1%. 

In other words, nothing.

That's because the problem doesn't lie there.  It lies in the cost-shifting, especially international cost-shifting.  It lies in the production of goods and services for which there is no demand in the target markets at the market price, but there's plenty of demand (and thus supply) at a cross-subsidized price.

It is not so simple to say "we'll just tax the hell out of those Pharma folks!"  That will do nothing.  Likewise, you can't squeeze the provider side; there's nothing there to squeeze and blood does not flow from a stone.

So how do you get from here to where we need to go?

A couple of things have to happen -- and happen now:

Cross-border cost-shifting must end immediately.  The current rubric is that we "must" let Canada, for example, have Viagra for $2/pill or "they will break patents."  The answer is "tough cookies."  We must prevent the use of the guns of government to allow these firms to wildly distort pricing across boundaries, whether state or national. 

Were that to go away then anyone could buy Viagra for $2 and bring it here; the price in the US would collapse.  The makers of drugs and devices would argue that such will destroy the profit in these drugs and thus their development. 

That's only true if the price in the foreign nations remains artificially depressed!

What the drug and device companies argue is that these nations tell them that if they do not sell at "their" price then the nation will break their patents and the company will get nothing.  Rather than knuckle under to extortion our answer as a nation must be this:  You can do that, but if you do our development budget will go to zero, since we cannot recover our costs.  If you take this action anyway, knowing that to be the case, there will be nothing for you to steal since the products will not exist in the first place.

The same applies to cost-shifting within provision of services.  Juanita the illegal Mexican comes here 7 months pregnant, drug and alcohol addicted, and goes into labor.  She has no money and (of course) no insurance.  The hospital is required to treat her and her newborn in the NICU, running up a $2m bill which it has no means to collect. 

Then you come along with an inflamed appendix and it costs $20,000 to have it removed because $18,000 of that charge is your forced share of Juanita's care.  This is theft and it must stop right here and now -- because if it doesn't the entire damned system is going to collapse.

There is no other nation on the planet that allows this sort of financial rape of their citizens to take place.  We're the only nation where it happens and we're fools.  The Democrats demagogue this issue but so have the Republicans -- EMTALA, which is the law that forced this business model on hospitals, was a Reagan thing.

Without EMTALA a hospital would have rely on charitable donations for such procedures, because if it attempted to enforce such a cost-shift otherwise you would (and could!) choose to go across town to a hospital that refused to do so.  You'd pay for your procedure there instead, and rather quickly the hospital that tried to force you to buy Juanita's procedures would go out of business.

You would never accept a grocery store that charged you 10x as much as the next person in line because you looked like you had money but the person behind you did not.  This scam is performed every single day in our nation's hospitals and it, along with the above, is inflating the cost of care by a factor of five to ten over what your medical care would otherwise cost.

The bleating over how medical care is "unaffordable" and thus "requires" government help is self-inflicted. Were these distortions to be removed you could pay for your surgery with a credit card -- yeah, the financing costs would be high, but you could do it.  Or you could sell your fancy rims on your ride to cover the cost of your child's birth.

This, my friends, is the root of our fiscal and competitiveness problem in America. 

It is damn close to the entire budget issue that faces this nation at a Federal and State level.

We either fix it -- and fix it now -- or the rest of the debate about budgets and fiscal priorities simply will not make a damn bit of difference to the outcome.