Sunday, January 8, 2017

Precisely Speaking

For much of my career, I lived by the saying that if you ask the wrong question you'll get the wrong answer.  By that I mean that it won't be the answer you're really looking for.  More often than not, the difference between the right and the wrong questions was describing precisely what you wanted to know and defining the terms.  Systems engineers (which I wasn't) are famous for looking at long paragraphs of technical specifications and asking, "just what does that mean?"

Where am I going with this?  In the building noise pile surrounding "repeal and replace Obamacare", I keep hearing terms thrown around that are being used incorrectly.  If they keep asking the wrong questions, they'll never get it right.

Shall we begin?

Medical insurance is not medical care.  This is the simplest one.  How many times have you heard these terms used interchangeably?  I heard Chuckie Schumer doing it this week.  Getting someone insurance is not the same thing as getting them health care.  As a thought experiment, imagine having insurance and there are no doctors at all.  Insurance doesn't get you much care, does it?  In much of America, if you have Medicare (insurance) and need a new doctor, you might well be in that situation right now.  If the diminishing returns of Obamacare push doctors into alternative careers or specialty practices, that situation will worsen.   

Medical insurance for routine care.  Shall we think about how insurance works?  The original purpose of insurance was risk mitigation.  An easy example is fire insurance.  If your home or business were to burn down, it would be a tremendous financial (as well as personal!) catastrophe.  Insurance companies realized that they could sell a policy to a population based on the statistical chances of fires and the statistical average amounts they would have to pay out.  Pulling some numbers from the air, let's assume that there's one fire per year per thousand households, and that would require paying out $500,000.  That means they could charge each of the 1000 households $500 per year, and have enough money in reserve to pay $500,000 once per year.  Add some margin onto the $500,000 required to cover statistical uncertainty and a few percent of profit and that $500/year goes up.  It's important to note that if you had the money saved up to pay for your damages, you would save what you contribute to their profit and to paying for their uncertainty.  It might take you a lifetime or two to save up enough to recover from a fire, though, and if you have the fire next year you're completely wiped out, so you buy insurance against the risk of that fire. 

This is where routine care comes in.  People want their annual exams to be paid for.  They could put that money in savings (HSA) and pay out of that, but seem to prefer to pay the insurance company's overhead so they can say "they paid for my visit", or "my checkup was free".  No, you payed for your visit, and you paid 20 or 30% overhead to the insurance company.  A significant issue here is obvious to anyone who has ever read an Explanation of Benefits statement.  The medical sector is so screwed up about prices that everything has a billed price and a price the health insurance company and doctor agreed to.  The insurance company pays some percentage of that agreed upon price (often 80%).  If we had a functioning free market, it could be better.

Insurance for a preexisting condition.  The same argument holds for an existing condition (sorry, preexisting is horrific English).  If you know you have to pay for something, that's not insurance.  That's not risk management.  If you have an existing condition that requires 5 to $10,000 a year to treat and you're not paying that 5 or $10,000 plus your regular risk reduction insurance, you're "diluting" your expense in the general population.  Now, if you have a group insurance plan at work and they allow you to spread that risk over everyone they cover; fine.  If your employer is a private company that elects to subsidize that care as a benefit to you, no problems.  But it wouldn't surprise me if the expenses of covering these conditions is at least partially what's driving the tremendous rate increases and insurance companies getting out of Obamacare

What Obamacare and the social engineers behind it are doing is redefining medical insurance to be a general fund that everyone puts money into for generalized redistribution.  This is because, since they've never thought about it, most people want "someone else" to pay for everything.  As with all income redistribution systems, it's doomed to fail.  Just this week, the British NHS, long held up as model for us, was declared to be in "humanitarian crisis" requiring help from the International Red Cross.

Rand Paul said this week that he was going to oppose the Republican budget that repeals Obamacare because it's a bad budget.  That got him onto Tucker Carlson's show Tonight for a great interview. 

Just about 5 minutes, and the smartest line belongs to Tucker, at about the 1:45 mark.  Worth watching, though.

One could write books about what's wrong with our healthcare system, but the vast majority of it is from destroying the free market and government intervention that was (allegedly) supposed to help.  Steps to make the medical markets more free only have to help.  After all, the free market works everywhere it's ever allowed to.  There's no reason to think that consumers who choose everything else in their lives aren't smart enough to choose health insurance policies.  

EDIT 01/08 1304 EST - video had gone missing. Replaced with another copy


  1. Regarding the British NHS - it is (and has been for a L O N G time) a ponzi scheme.

    Civitas has a section of free books about the NHS and as they are an independent UK based organisation, are non partisan. They are, interestingly largely written by ex-left wingers that have "seen the light" and are all the more relevant for that. Link here:

    IF (and it is a big "IF") the American health insurance providers were allowed to operate throughout the USA (rather than confined to their States - which I understand is the situation) then people could shop for the best deal and that would force rates down. But there again, health Insurance is a left wing imposition dating back to the 2nd World War as a benefit in kind.

    Phil B

    1. Thanks for that link. They're new to me.

      The easiest reforms to make would be to allow anyone to purchase insurance from anywhere, rather than the restraint of buying only in our states. Let people buy the best policy for their needs from anywhere. The next easiest would be to allow us to buy the coverage that fits, like we do for our cars. As it is, going through ACA or anybody, I have to buy maternity coverage so that they can put enough money in that pool to pay for maternity coverage. We're both over 60, we'll never need it. I have to pay for a bunch of risks I would never buy coverage for.

      I have good insurance; it's the same policy I had when I was working, available for retirees. At 5 or 6x the price when I was working, it's still cheaper than Obamacare.

      Nobody buys car insurance to pay for oil changes, but isn't that like expecting your health insurance to pay for a routine check up?

  2. As long as ALL of the left and much of the right view "health care" as a "right" the problem will NEVER be solved. It was this insanity that brought us EMTALA....the 1986 law that FORCES hospitals under penalty of law to provide care to EVERYONE that shows up in the ER regardless of ability or willingness to pay. That opened the floodgates....and costs have skyrocketed since then. The massive costs of malpractice haven't helped and when you throw in the billions that companies must charge to have the money to pay off the countless class action suits it just keeps piling up. But the number one reason why health care costs too much is we waste more than HALF of the Trillion plus we spend on it to keep dying people from dying. The sad thing being we can't actually prevent those deaths, all we do is postpone them by a few weeks or a couple of months at massive expense accompanied by great pain and suffering.
    HALF of the money we spend goes to 5% of the patient population....the population that is dying from extreme old age and
    terminal disease, diseases that are frequently self inflicted. Address this problem and health care becomes affordable OVERNIGHT.

    1. The trial lawyers are one of the biggest problems causing high health care costs. In the city I grew up in we had two hospitals. One of them was near the "bad" side of town. A few years back a gang banger was shot and his buddies put him in a car and dropped him at the front door to the hospital (not the emergency room door). But excessive costs and low budgets had forced the hospital to cut staff and there was no one at the locked front door and that is where they found the gang bangers body the next morning. They sued the hospital under the theory that they had a responsibility to "man" the front door. They won! Big! In fact big enough that it bankrupted the hospital. Now the city has one hospital and some gang bangers parents got millions to piss away on drugs and some law firm got millions for BMWs. But the citizens got the shaft.

  3. Healthcare will get better at precisely the moment people start treating it like gun registration in Connecticut in 2013. The power transmission mechanism of government, the bicycle chain linking ruler to ruled, is not happiness, is not currency, it is obedience. The easiest reform to make is to stop obeying the whole hierarchy of bad laws. Government is a religion, and "hier-archy" means sacred laws.

    In the US, the boxcar law-abiding conservatives get into may be the ambulance. What the rate of infections and medical mistakes in hospitals? Yet we know how to make factories so free of bacteria and mechanical errors we can build integrated circuits in them?

    The Trail of Tears worked because the cover story was accepted and the optics were not recognized as the runup to genocide. Thankfully, humans have now learned than gun registration and ghettos are the runup to genocide. Soon, the survivors may realize that nationalized healthcare is the runup to genocide. In Britain, the Liverpool Care Pathway means the ambulance actually is the boxcar for the 'useless eaters'.

    The employer "contribution" paid to the insurance company is not a gift, it is compensation earned by work. The COBRA amount is the actual amount of compensation you're receiving, not the fraction shown on the paycheck stub.

  4. Karl Denninger has been railing about this for quite some time, using real numbers to support his thesis.

    We're paying the price for the circumvention of the wage and price controls established in WWII which made it attractive for employers to use an untaxed benefits structure in place of wage competition to attract employees. That introduced a distortion into the employer-employee marketplace that has metastasized into the disaster we have now. Without that enforced distortion the Left would still fervently wish for Obamacare or Britain's NHS but there would be no mechanism to establish it, nor any desire to.

    The solution is to return to an unrestricted free market for providing health care. Easy to say, probably impossible to accomplish without an economic cataclism of some kind that severely impacts all aspects of economic life. As you point out too many people want "someone else to pay for it", no matter what "it" is, and that includes the so-called movers and shakers upon whom we depend for leadership; they are just as, probably more, delusional than Joe and Jane who have been trained to think that way because "leaders" actually believe fantasy can be transformed into reality.

    Unfortunately, it can, if one has enough of other people's money to do it with and one does not expect it to last forever.

    The crash will indeed be interesting; too bad we'll have to live through it rather than spectating from a safe distance.

  5. Many in the public would gladly pay for their own healthcare, myself included, but the insurance companies know this. I once went to the ER, was admitted for 24 hours, and later received a bill in the mail for $14,000. When I went in to the billing office show that I had insurance, I was given a revised bill for $2100, with $1850 covered by insurance, me owing $250 and the remainder written off to "negotiated insurance discount."

    A few thoughts came to mind:
    The hospital can bill $2100 for a procedure covered by insurance and make money.
    I understand that there are some economies of scale and such, but I can't imagine how that results in a markup of 660%.
    Therefore, the higher fees charged to people without insurance are there to scare people into "needing" insurance. If this were not so, many of us would pay for ER visits as needed, instead of the $500 a month in premiums.

  6. Too much common sense. This is a political problem intentionally. Obama and the Democrats created a huge poison pill. That was their intent. It was supposed to destroy the health insurance industry and create the need to replace it all with government health care. That didn't happen, yet. But the poison permeates the entire arguement and that is the problem.

    I say do two things immediately: Declare the mandatory feature to be unconstitutional and rescind it. Declare the subsidy feature to have been passed unconstitutionally (which it was) and suspend it. Don't "repeal" Obamacare but once these two provisions of it are gone it will collapse.

  7. Good comments, all. I just wanted to point out we have seven comments here that say, "the problem is" with no two agreeing.

    They are all right. That's how screwed up the system is.

    I've written on this for the entire nearly 7 years of this blog. Like I said in this piece, entire books could be written on this. I could write a book on this.

  8. Voters hired armed thugs to murder me if I don't live my healthcare lifestyle according to their church's rules. Just like the Spanish inquisition. The voters believe their rules will improve my life, but there is zero evidence to support that. Just like the Spanish inquisition.

    An honest liberal is rare. A night watchman small government requires a majority of a couple hundred million liberals to be honest, and therefore it's a statistical impossibility. There are so many teams of murderous religious cultists: nationalistic socialists, fundamentalists Christan and Muslim, etc. Why do you submit to them in the privacy of your own mind?

    1. Vague. What armed thugs? What church?

    2. What armed thugs?

      The executive branch of government.

      What church?

      The public schools are the neighborhood churches, holding services with mandatory attendance, supported by mandatory tithes. The legislative branch of government sets church policy. These churches indoctrinate children too young to intellectually defend themselves with the civic religion.

      The difference between a protection racket, like the Mafia, and a government, is that the fact government is a protection racket is hidden by an established state religion. The claim that government fundamentally exists to do self-defense at large scale is a lie.

  9. Years ago, I had a professor, in sociology of all places, who insisted upon painstakingly precise definitions. His reason? He said "fuzzy definitions produce fuzzy thinking." Confusing terms like "medical care" and "medical insurance" produces fuzzy thinking with disastrous policy decisions. Of course, my more suspicious nature might lead me to conclude the use of one term when the other is more appropriate is a deliberate attempt to produce fuzzy thinking in voters.

    Regarding those circumstances in which an HSA is arguably more appropriate than insurance, I offer the following: HSAs are an example of someone taking a great deal of responsibility for his life. Here's the problem. Freedom, real freedom, demands that I be responsible and accountable for my life. Me. No one else. That means I have no where to hide and no one but myself to blame for how things turn out. People don't like that. It's psychologically uncomfortable, and people will go to great lengths to avoid psychological discomfort (thus, a person in an abusive relationship leaves, but then returns to his or her abuser - or exchanges that abuser for another one). So, I offer the following observations. 1)People will do anything they can to avoid being free 2)If you can convince a man he is free when he is not, he will allow you to do anything you want to him.