Yes, that IS a wolf in wolf's clothing: Part I

Well, they did it.

With the passing of the Health Care bill, America may have finally, officially passed into the twilight of our prosperity. If allowed to stand, this new piece of social welfare will be the coup de grace of a century-long effort to pacify and emasculate the American spirit of liberty and the value of the individual.

The economic reality of this bill, combined with the other entitlement bombs ticking away has provided the moment for us to face the prospects of our national mortality. The picture is grim, but you must fully and deeply understand it if America is to have a chance at surviving this altruistic onslaught. And yes, I have read the official 69-page summary of the bill which is probably 68 more pages than the average Congressman ;)

To be clear, this analysis is conducted on an economic premise, not a moral one. And why should it be otherwise? After all, the Democrats pushed this through precisely on the argument that this bill is an economic positive for America and will help cut the deficit. Well, the truth is not so kind.

Health insurance economics: Today
Insurance premiums have been rising steadily for decades for many reasons: general inflation, advanced care options which did not exist in years prior, fraud and waste, etc. But perhaps the largest single driver of rising costs is Medicare and Medicaid. These government programs do not reimburse physicians for the full cost of care provided. The formulas are too complex to go into here but roughly speaking, Medicaid reimburses providers 20-25 percent less than does the private sector. Naturally, doctors and hospitals must pass this loss onto patients with private insurance, thereby raising the cost of care. This is pretty simple economics. The metrics for Medicare are even worse.

The truth of the matter is that your health insurance rates have been climbing so astronomically NOT because of insurance companies themselves. Profit-wise, this industry is among the least profitable of any industry: about 3-4% profit margins. It's because the government has seen fit to underpay doctors and hospitals for the care of about 80 million people. The difference is made up through higher costs for those with private insurance. That my friends, is the simple and inescapable truth of the matter. Yet, the insurance industry makes the perfect bogeyman for the politicians. They certainly could not stand up and shame the doctors of America for having the nerve to pass these costs up the financial food chain. This would create the atmosphere for exposing the true thieves in the process: the government and its recipient class enablers. No, the insurance industry served its purpose just fine. By not fighting today's battle, they bought themselves perhaps another decade until their Saigon. And you can bet that all of today's insurance executives and big shareholders will be long gone by then.

Health insurance economics: Tomorrow
Here is the unavoidable truth. Are you ready? If you have private insurance today, your premiums will continue to rise and faster than before - the promises of D.C. Democrats notwithstanding. The policies unleashed by the newly passed health care bill virtually demand it. Consider the larger points (my comments in red):

1. Six months after enactment, insurance companies could no longer denying children coverage based on a preexisting condition. This is a nearly instant increase in the number of "expensive customers" in your insurance pool. This adds costs.

2. Starting in 2014, insurance companies cannot deny coverage to anyone with preexisting conditions. Clever of them to wait until after Obama faces re-election as this will pose a significant increase in "expensive patients" to be added to the health insurance rolls. What do you think your favorite Chinese buffet would cost if a team of Sumo wrestlers began eating there every night?

3. Insurance companies must allow children to stay on their parent's insurance plans until their 26th birthday. Again, adding further costs. While people this age are typically very profitable customers for the insurance company, a 25-year old still on his parent's family plan is not nearly so. Additional members are always less profitable than individual policies.

4. Expands Medicaid to include 133 percent of federal poverty level which is $29,327 for a family of four. This will mean higher costs coming from the care providers as the previously mentioned problem with short-paying for services will be amplified. This too will be reflected in your health insurance premium.

5. Requires states to expand Medicaid to include childless adults starting in 2014. Ditto.

6. Federal Government pays 100 percent of costs for covering newly eligible individuals through 2016. Remember, the government's version of "paying all of the costs" means about 80%. Again, that 20% balance is to be passed onto you and I who have our own health insurance.

What the future will hold

There are many more provisions that will add to the cumulative effect of those above. There is only one result possible: provider costs and in turn, insurance costs will go up, up and away. For Democrats, this is the perfect, planned result of this bill. As for any liberals who right now are shouting: " yeah, but what about the CBO numbers and the fact that this bill will lower the deficit!?" Well, you've been fed and have swallowed a lie of epic proportions. If you can not acknowledge the simple truths of economic behavior combined with basics of supply and demand explained above, you are not being intellectually honest. If that was not enough, I present you with this. At what point do you cast political loyalty aside in favor of basic, human decency and truth? Yes, I realize you consider health care a right and that by achieving this, you are doing a "good". But if the means to achieve this include outright deception, what then of your moral high ground? Morality of course is another topic for another day which I will address. But strictly economically speaking, the depth and scope of this deception is not only staggering... it is fatal.

For it will create such economic havoc that enough people will clamor for the government's help once again. Yes, it sounds counterintuitive given that it will be the government responsible for the mess in the first place. But such has been the history of much of our collectivist policies. But you must remember two things.

One, they have already shown a complete disregard for public opinion this time around. Now that they've succeeded, the next time will only be easier.

Two, the narrative will be the same: the evil insurance industry is to blame! But this time, healthcare providers themselves will be added to the crosshairs. Why? Because between now and then, let's call it 5-10 years, the average quality of care in America will decline. It must, based on the most basic laws of supply and demand. There are not enough doctors (supply) to go around in many parts of the country today yet we are adding millions of new patients (demand). Add to this the declining incentive to enter the field of medicine because of cost controls that result in lower wages and you will either get fewer doctors OR less qualified doctors to make up the difference. Those fortunate enough to maintain their own private insurance plans will likely continue to have the very best doctors (an increasing number of which are no longer accepting new Medicare or Medicaid patients). These doctors will be vilified as the rich and the greedy. And we know what happens to those labeled as such in modern-day America.

However, there will be many more patients on government-subsidized programs of one name or another who will have to stand in line to be waited on by second-tier doctors and in second-tier facilities. Either way, this new scapegoat will soon enter the barn along with the insurance devils in tow.

Systemically, the writing is on the wall: as costs go up for private insurance plans (which is unavoidable) and individuals and employers get priced out, the government picks these people up into their "Exchange". This dumps more burden onto the private-insurance system in the process (due to the government short-paying for services and the reduction in the size of the private insurance pool) until such time that private insurance ceases to become a business worth pursuing or the government simply nationalizes it.

This bill is not the first step toward a single-payer, Western European model of health care... it is the final step!

5 Point Health Care Reform Plan

Prelude
I'm not in favor of government-run healthcare, let me make that clear. America unequivocally has the best care in the world because of innovation born in the private healthcare industry. If we MUST make reforms to appease the political elite and their constituency, here is a plan that would address most of the pressing issues and fairly give everyone a stake in their own healthcare and the systems that provide it. This plan isn't perfect but as Voltaire suggested, "don't let perfect become the enemy of the good."


1. Ensure the viability of the private insurance industry
The worst thing that could happen would be for the existing private insurance industry to wither away. That would ensure a government monopoly and that, as evidenced by history, is not a good thing. This is probably the most contentious issue dividing health care reform advocates and opposition. To bridge this divide, create a set of rules that would explicitly protect the private insurance industry from unfair competition from the government option.

• Prohibit the government from enacting any new taxes on private healthcare plans, their recipients or the groups (employers) who provide them. The goal would be to ensure that the system is not set-up for the purpose of eventual government takeover.

• Give private citizens full tax deductability for individual health care plans and savings accounts.

• Allow inter-state purchase of health insurance. Why in the world is this not allowed? Simple: it is designed to INCREASE insurance costs to help create the "crisis" which, naturally, can only be solved by government. Here's how: the smaller the insurance pool, the generally higher the rates for members of that group.

• Require any new rules or laws to have equal economic impact on the private insurance industry as they would the government run versions. This would reduce the appeal for the government to rewrite the rules to benefit their system at the expense of the private industry.


2. GovCare
Combine Medicare (seniors) and Medicaid (poor) with this new healthcare program (Gapcare?) and call it all GovCare. Streamline the bureacracy and administration of these programs for starters. This should be able to save billions annually.

• Gapcare would cover anyone who meats basic means testing (above Medcaid) and would require them to pay a portion of their monthly premium, perhaps 10-50%. Premium should be fairly low since the government has promised its ability to lower rates by having such a large pool of 30-50 million Americans. Yet a premium must be collected in order for these people to have "skin in the game".

• The rest of the funding for the Gapcare should not come from the general revenue fund nor borrowing. It should come from a combination of savings acheived by putting all the federal healthcare programs under the GovCare roof. It should also come from taxing the foods directly related to a good deal of the nation's health problems. Add a few cents for every high-fructose or liquor beverage along with a few cents for every packaged or prepared food item that derives XX% of its calories from fat or sugar. I'm generally not in favor of any new tax but if you must pay for GovCare, I'd rather it be funded by some of the consumption responsible for our generally lousy state of health. Road work is largely funded by the people who use the roads (fuel taxes and surcharges), why not health care?

• Make all government healthcare options, just that... options. This means allowing seniors to opt-out of the Medicare and allows young adults to go without coverage if they so desire. Just because some politicians deem healthcare a "right" does not mean individuals must be compelled by force of law to accept.


3. Require responsibility
I'm not sure how (legally) this could be legislated but employer-provided health insurance plans should require recipients to pay half of the monthly premium. By creating a larger financial stake in their own health care costs, people are likely to live more healthy (filling another goal of reform) and reduce their individual "health care footprint" on society. It also reduces the cost to many large employers (that currently pay 100%) who may improve the level of plan their group participates in or extend benefits to more employees. This rule would extend to all union and civil service employee insurance programs, regardless of collective bargaining agreements.


4. Let the FDA draw a line in the sand on drugs
One of the big reasons America spends so much of its GDP (about 16%) on health care is that we are taking too many drugs (the legal ones ;) We have truly become a medicated society. Over the last two decades, there has been an explosion of drugs that appeal to the "sniffly nose" crowd. Let the FDA create two drug designations on all new and existing drugs: Life Quality (LQ) and Life Necessity (LN). These would be legitimate medical determinations, not political ones. No insurance program would be permitted to pay for LQ drugs -- not even GovCare. If you want to pay out of pocket for them, fine. The reality is, the drug companies will probably spend less money on R&D for LQ drugs and put more time and effort into real medical breakthroughs.

While they're at it, the FDA should also limit direct-consumer advertising. This might sounds blasphemous coming from someone in the media industry ;) Drug companies currently spend about 30% of their annual revenues on marketing and advertising. This is largely responsible for the huge rise in the use of LQ drugs. The government already regulates advertising for cigarettes and alcohol so this one is no stretch. Limit drug companies to a 10% cap on advertising : revenue.


5. Tort Reform
There simply cannot be health care reform without tort reform. If the democrats are sincere about seeing a better system, they must drop their opposition to this. This is a huge contributing factor in escalating health care costs -- the enormous cost of liability insurance to health care professionals. The culprit is the high costs of litigation and compensation payouts for medical tort claims. There is no debate over the cost impact this has on the system. Most tort claims are paid from the pockets of insurance, and because the public pays into insurance, the public is footing the bill for these claims. There should be caps on punitive damages and non-economic awards. While the Democrats have been quick to vilify the insurance and drug companies, they have been breathtakingly silent on this aspect of cost control. Isn't it time to put the health of the country first, President Obama?