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“… the laws of mathematics are not suggestions. You can’t get rid of a cost by making someone else pay it”

2017/03/23

It’s Socialized Medicine, so?

Go Ahead — You Own It

[Byline Karl Denninger, via  The Burning Platform]
22 March 2017

I had an “interesting” debate on Twitter last night with someone who is involved in the health insurance game in some way and apparently has cancer patients as clients.  He is a strong shill for the “Obamacare Repeal/Replace” process.

The debate was plenty fun and decent right up until I pointed out that on the math the Federal Government spent $1,417 billion last fiscal year on Medicare and Medicaid, up from $380 billion in 1998, which incidentally was 37% of all federal spending — and it’s accelerating at ~9% a year as it has been for the last several decades.

At this rate it will cross $2,000 billion, or more than half (by a good margin) of the current federal budget within 5 years.  That will blow a $600 billion additional annual deficit hole in the budget into a rising rate environment which the government will not be able to finance.

That’s math, not politics.

For this I was told I was a conspiracy nut and belonged on Infowars.  Never mind that every one of my figures came from the Treasury itself in the form of its official published balance sheet.  If that’s tinfoil…..

 Yeah.

Following my assertion that the AHCA does zero to address cost, which he admitted is correct, and that if we do not address cost and thus drop that $1,417 billion precipitously the government’s budget will be destroyed and thus collapse on the clear evidence and trends published by our government’s own Treasury Department he declared that he was storming off and blocking me — and did exactly that.

So what do we have here?  When I bring up arithmetic and facts that are published by our own government along with the published growth rates and what that will inevitably lead to, pointing out that there is exactly one way to stop what is otherwise inevitable predicated on the laws of mathematics I get called a conspiracy nut?

30 year trends in data published by our own government is a conspiracy?  A statement that we cannot finance another $600 billion a year rising to somewhere around $2.5 trillion a year within five more in a rising rate environment is open to question?

REALLY?

Or is the truth that the light came on in his head — he is shilling for a bill that is an outrageous and open fraud upon the public since it will not address cost (which he admits) but will further advance the collapse of our federal government’s ability to fund itself, and thus operate!

It’s a hell of a lot easier to just slam the door than take on the math and either find an error in it (in which case you win) or admit you’re wrong and change your position, especially after you’ve been lobbying lawmakers, eh?

If you’re wondering why despite my repeated public statements (including right here, again) that I’m willing to show up in DC (or anywhere else for that matter) and have this debate in public, under oath if the body sponsoring same would like it that way and hash it all out there have been no takers among the political class you now know why.  Most of those in the political class do know what the math shows — they’re simply intentionally sticking their fingers in their ears and repeating “na-na-na-na-na-na” because the minute they stop the entire charade they’ve been running on health care comes crashing down around them.

It’s damn hard to continue supporting stupid once you admit it’s stupid and won’t work – so the entire game is to refuse to have the debate at all in an effort to prevent being tagged with the label “financial rapist” by everyone around you.

Here’s a bit of history — all fact, not conjecture.  The insurance and medical industry was in the beginning stages of collapse in 2008.  Annuities are funny things; you promise to pay X, you take in Y, you invest it with a return of Z in a bond ladder and the books balance.  You hope.

You get in a lot of trouble when the promise to pay X ends up as X+ and the return Z doesn’t materialize.  You can get in lethal trouble that way, in fact, and quite easily.  This is how the pension systems in our states, cities and private instances have blown up, and most of it has come from health care.

Then there are all the pigs at the trough in health care itself.  See, while health care counts toward GDP, and is nearly 20% of it today (up from about 3% 30ish years ago) most of it doesn’t produce anything.  Not one car, one house, one television set.  Oh sure, it might allow someone to keep making those things — maybe — but at what cost?  Yes, there are exceptions, but most of those exceptions (e.g. childbirth) are actually quite cheap in percentage terms.

The ugly part is that much medical care is actually negative to GDP.  Why?  Consider the drug addict who mainlines opiates and destroys his heart valves. “Fixing” it costs upward of $500,000, all said and done. Will that person ever produce more value than that with their remaining life?  Definitely not if they keep using drugs; they’ll die.  The sad reality is that most of them do exactly that.

How about the Type II diabetic that winds up running through a quarter-million bucks in drugs, amputations, dialysis, blindness and death because they won’t change their food intake and stop eating carbohydrates?  How far does he or she go before the ability to produce is destroyed, at which point they’re on disability and go from producing something to a net consumer of everyone else’s production?  By the way that specific instance when you add it all up nets out to somewhere around $400 billion a year for Medicare and Medicaid now!  That’s crazy on any objective basis; you could literally give everyone in the country — man, woman and child $1,000 a year instead with money left over — or adequately feed everyone who is hungry in sub-Saharan Africa (all ~230 million of them!) with a lot of money left over.

I’m not going to talk ethics in this regard in this post because that’s a thorny discussion indeed!  But you can’t escape the math.  There are plenty of people in the lower and middle economic strata — in fact, most — who can easily wind up being a net negative to GDP and the problem becomes much worse when medical costs ramp by a factor of six compared against GDP.

Eventually you run out of people who can and will pay when exponential cost growth happens like this, especially when at the same time you ramp cost the income base you rely on to pay taxes to fund same is being destroyed one drug addict or Type II diabetes sufferer at a time.

Always.

It was starting in the 1990s and early 2000s and everyone in the industry, never mind anyone running a company (like me) knew it.  The so-called “High Risk Pools” were collapsing.  That’s a fact, and it was cited as one of the reasons we had to pass the PPACA – to put a stop to their collapse by forcing everyone into paying for those who were very sick or nearly dead!  The stories of people who were unable to get into those pools at all due to lack of funding were well-circulated and the crimp put on treatments paid for by them were both well-documented and publicized — again, due to lack of funds.

I wrote article after article on this in the 2009 timeframe with the facts and figures from our own government and those making similar claims.  The PPACA was basically a bailout of the medical industry engineered to force a more-level slam of the cost on everyone in the country.

But… it failed.  It failed because nothing was done about the actual problem and costs continued to ramp.  The negative GDP problem got worse rather than better and moved even further up the income scale.  The government tried to finance that through even more deficit spending but doing so just destroyed productivity and tax receipts.

The funny thing about cost-shifting is that it can never solve a cost problem.  It just moves the problem somewhere else.  Where it moved it was on the back of productivity and tax receipts, both of which have been horrifyingly bad since the 2008 crash.  Last fiscal year tax receipts rose by less than 1% despite all the new taxes in the PPACA and higher rates generally while productivity improvements have all but disappeared.

The AHCA cannot resolve this problem because it intentionally refuses to address the driver of the problem in the first instance.  Returning to “High Risk Pools” is idiotic because those very pools were on the verge of collapse prior to the PPACA and were a big part of why Obamacare was written and passed!  The insurance and medical lobbies wrote the PPACA to get rid of those problems and pools, or so they thought.

They tried denying math but failed because the laws of mathematics are not suggestions. You can’t get rid of a cost by making someone else pay it; you simply move it and eventually it comes back and bites you.

The answer to the problem cannot lie in “more insurance” or “restructuring” health insurance and let me remind you that my debate “partner” admitted the AHCA will do nothing to address the total cost of health care.  It just moves money around, something I noted back when it was first released (and much to the detriment of state budgets.)

The answer to the problem is, and can only be, a return of the medical industry to its historical 3-4% of GDP.

How?

Enforce the damn law — specifically, 15 USC and State Consumer Protection laws.  Enforce them in a simple fashion: Everyone must post a price and everyone pays the same price; any sort of hiding, collusion, cost-shifting or similar is met with indictments, prosecution and prison for consumer fraud, racketeering along with violations of the Sherman, Clayton and Robinson-Patman acts.

What your insurance covers is between you and the insurance company; the provider of service has nothing to do with it.

Doing that will force competition into the market immediately.

Costs will drop like a stone.

We need no legislation to do any of that — just enforcement.

We do, however, need some legislation as well.  Specifically, we need to repeal the reimportation ban on pharmaceuticals, and we need to add to Robinson-Patman inclusion of international sales.  That will force “best price” everywhere and pharmaceutical costs will fall like a rock here in the United States.  Oh, those other nations?  They’ll get to pay their ratable share of the development of drugs — and it’ll be about damn time.

In terms of legislation it’s pretty easy — you can see some ideas here and here.

Note the dates.

If we fail to address cost in this manner then it matters not whether the AHCA passes.  I hope it doesn’t, simply because bad laws are worse than no laws, and I’m not vindictive.

You see, if they pass it they own it — and everything that comes after it as a result.

Reposted from The Burning Platform

Related

How The Government Ruined U.S. Healthcare (And What We Can Actually Do About It)

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