Seeking Alpha
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.
-
Instablogged Stocks
Stocks that instabloggers have most recently written about -
Latest Instablog Posts
-
1
Has the U.S. reached the point of no return?
-
2
SMILE
-
3
The Burden of Unemployment
-
4
Dubai faces capitulation and bottom in 2010 ...
-
5
Dubai faces capitulation and bottom in 2010 ...
-
1
-
Top Instabloggers
-
1
David Fry
-
2
TraderMark
-
3
Don Dion
-
4
Cliff Wachtel
-
5
Mike Havrilla
-
1
Murphy's Law of Economics and Health Care 19 comments
The fact that most economists agree that the current tax free status of employer provided "Cadillac" health plans is not good for the economy puts this right in the cross hairs of Murphy's Law, Binder version.
These plans remove the patient from economic awareness of health care consumption and is a contributor to runaway costs. If these Cadillac plans could be eliminated and phased over to plans more like Health Savings Accounts combined with catastrophic medical insurance, the patient could become more aware of cost/benefit relationships and participate in controlling costs. These arrangements could still be structured to have the same tax benefits as the current widely used employer plans.
Of course, low income people, the unemployed and those in poverty would not have the income necessary to participate in these plans and some basic level of coverage would require public assistance. However, these subsidized plans would require the same emphasis on patient involvement in responsibility for cost in order to bend the cost curve down. Prof. Feldstein of Harvard has proposed that everyone should have a government credit card for health care (http://seekingalpha.com/article/165606-feldstein-empower-patients-to-make-health-care-cost-decisions). If used, the balance would become an attachment to future earnings through the normal W-2 process. The extent of such expense would limited by the use of catastrophic insurance, which would be mandatory in the same way that automobile liability insurance has been for years.
I have written about the need for patients to have some personal responsibility for controlling their own health care expenses previously (here, here and here). If patients do not find a way to start to participate in controlling health care costs, it will be done for them. Either insurance premiums will become more than they can afford or the coverage they receive will be reduced. It's the old challenge: take care of the problem or the problem will take care of you.
Whatever the outcome of the current legislative debate, the insurance companies appear to be painted into a corner from which they can only escape with reduced profitability. (See this Instablog - http://seekingalpha.com/instablog/98115-john-lounsbury/32905-insurers-are-promoting-a-public-option - which describes how the actions of the insurers are making a public option more likely in the pending legislation.) For investors, now is the time to avoid the comprehensive medical plan insurers. This list includes United Health Care (UNH), Aetna (AET), Well Point (WLP) and Cigna (CI).
Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.
This post has 19 comments:
Love the Murphy's Law that economists agreeing on everything that they all are most knowledgable about reduces their influence. Sounds to me like it's a buss load of dandruffed-haired, too smart to bathe, heads in the clouds people, pontificating and positing into the sunset, when action is necessary.
That's the image I retain of my college-days economics professors. Only a couple were really inspiring.
When going to the hospital bring your own asprin, because if you take it there it will run you $100-200. Medical insurers mistake medical need with any price goes. We call those that do such things as opportunists and it's a crime in most cases.
As far as education goes has ANYONE ever seen the price go down on education. ALWAYS up MORE than inflation. We are getting ripped off by the education system worse than anywhere else in our economy.
Many of our lawyers and doctors come from Indian, Pakistan etc.... where they spend minimal dollars per student per year and they are eating our lunch. Obviously money is not the solution to education problems. It is attitude to education. It is the student.
But the student attitude, as I pointed out earlier, is only one of the problems. Another is the "system." Schools, teachers, politicians all agreed a few years back that teaching methods then in use favored more boys so they decided to change the methods so that girls would not be disadvantaged. The result is that now more boys are disadvantaged. There are really three basic teaching/learning methods. Then there are the special needs kids, which don't fit neatly into any of those three groups. Most kids fit into two primary learning groups. In other words, they would thrive under one or the other method of teaching/learning, but have difficulty under another method. Our schools either try to force all kids into one method, or they try to teach both methods. The first system alienates one group (or nearly half of the school population) and allows them to fall behind and/or fail. The second system tends to confuse many from both groups and keeps them from focusing on the method from which they would best benefit. Again it fails many of our kids.
The third teaching/learning method (sorry, but explanations of each method would be too lengthy and probably boring) is very specialized and benefits only a small number of students (i.e., probably less than 5%). But for those students, who would do poorly in either of the other two methods, the method can allow them to blossom and unlock true genius.
Unfortunately, our governments and school systems have not figured out that the only way to provide a good education to all is to teach each student under the method within which they will learn best. It would be necessary to monitor and test children in the early elementary grades to determine the best fit for each child and then slot them into a class that uses the appropriate teaching methodology for them.
The other problem is that we all mature and develop at different rates, both physically and mentally. Our society only recognizes the physical aspect of development in children and places a huge taboo on holding kids back when they are not ready to move on. Again, it would be necessary to create another track for kids that are developing mentally at a slower pace. This would require schools to accommodate the differences in children instead of forcing them all to fit into one universal, one-size-fits-all system that easier to manage.
The current system doesn't produce the desired results; nor does it provide equal benefits for all or equal access to a good education. It only provides equal access to a failed system. Yes. It would cost more to run schools in a way that would benefit a larger percentage of our children. But the costs to society of a failed educational system are far greater. We need a skilled work force so we encourage more immigration rather than fix the system. Kids who aren't learning get frustrated and drop out. They have a difficult time fitting into society and living productive lives. Many turn to crime or government assistance and end up a burden on society. They cost the taxpayers far more than the necessary changes to the educational system would. And their numbers continue to increase every year that we ignore the problem.
Sorry for the rant. It's just one of my pet peeves.
Thanks for the post about one of my favorite subjects. I endorse much of what you said. Better yet, I endorse everything of importance that you said. Even better yet, it was all good.
Through personal experience, I had a double cartilage knee transplant, afterwhich I had to do some therapy, some six years ago. In the after-you-work-out rip-off therapy center that the doctor who performed my surgery owned, an ice bag was placed on my knee for ten minutes. Cost: $25.00.
Computing out that figure gives forth 6 times $25.00, arriving to the figure that is near and outperforming what a decent accountant charges charges on an hourly basis, back then. (Again, this happened six years ago). Bet the damn ice bag has had a raise.
Think about it. An ice bag makes more than an accountant, a teacher, a janitor, and way more than the hourly wages of unionized America.
That, to me, is what's effed up about American health care, present day status.
Someday I hope we can meet face to face.
Flamboyant is as such a synonym. That sounds like pink pelicans and rotating plastic front yard daisies, to me. Wait a minute, a new wind-blown disguise for creating electricity! Save the world with rotating daisies.
But I get it. To future clanging glasses together, buddy.
Good points, but what mystifies me is why we were able to produce relatively decent school results back in the 60's and 70's, yet we seem to produce less good overall results today.
As an aside, recall seeing a recent post somewhere by a PhD science guy outlining his struggle and issues with the employment sector in the US today. His basic contention was that essentially there was zero available in his areas except academia, and those were very low paying and numerous applicants. But we have been hearing for years about the lack of and need for top trained talent in engineering, science, mathematics, etc. There is just some disconnect here somewhere, because it's just not that easy to get a PhD in the hard sciences and it takes talent, a long time, and is expensive.
On Oct 25 11:47 PM Mark Bern wrote:
> Guns - The problem with education is manifold. Student attitude is
> a derivative. It's source is also manifold: peer pressure, time-clocking
> teachers (not all, of course, but it only takes a few teachers with
> bad attitudes to ruin many students), parents who don't value education,
> administrators who force kids through the system whether they've
> learned anything or not, etc.
>
> But the student attitude, as I pointed out earlier, is only one of
> the problems. Another is the "system." Schools, teachers, politicians
> all agreed a few years back that teaching methods then in use favored
> more boys so they decided to change the methods so that girls would
> not be disadvantaged. The result is that now more boys are disadvantaged.
> There are really three basic teaching/learning methods. Then there
> are the special needs kids, which don't fit neatly into any of those
> three groups. Most kids fit into two primary learning groups. In
> other words, they would thrive under one or the other method of teaching/learning,
> but have difficulty under another method. Our schools either try
> to force all kids into one method, or they try to teach both methods.
> The first system alienates one group (or nearly half of the school
> population) and allows them to fall behind and/or fail. The second
> system tends to confuse many from both groups and keeps them from
> focusing on the method from which they would best benefit. Again
> it fails many of our kids.
>
> The third teaching/learning method (sorry, but explanations of each
> method would be too lengthy and probably boring) is very specialized
> and benefits only a small number of students (i.e., probably less
> than 5%). But for those students, who would do poorly in either of
> the other two methods, the method can allow them to blossom and unlock
> true genius.
>
> Unfortunately, our governments and school systems have not figured
> out that the only way to provide a good education to all is to teach
> each student under the method within which they will learn best.
> It would be necessary to monitor and test children in the early elementary
> grades to determine the best fit for each child and then slot them
> into a class that uses the appropriate teaching methodology for them.
>
>
> The other problem is that we all mature and develop at different
> rates, both physically and mentally. Our society only recognizes
> the physical aspect of development in children and places a huge
> taboo on holding kids back when they are not ready to move on. Again,
> it would be necessary to create another track for kids that are developing
> mentally at a slower pace. This would require schools to accommodate
> the differences in children instead of forcing them all to fit into
> one universal, one-size-fits-all system that easier to manage. <br/>
>
> The current system doesn't produce the desired results; nor does
> it provide equal benefits for all or equal access to a good education.
> It only provides equal access to a failed system. Yes. It would cost
> more to run schools in a way that would benefit a larger percentage
> of our children. But the costs to society of a failed educational
> system are far greater. We need a skilled work force so we encourage
> more immigration rather than fix the system. Kids who aren't learning
> get frustrated and drop out. They have a difficult time fitting into
> society and living productive lives. Many turn to crime or government
> assistance and end up a burden on society. They cost the taxpayers
> far more than the necessary changes to the educational system would.
> And their numbers continue to increase every year that we ignore
> the problem.
>
> Sorry for the rant. It's just one of my pet peeves.
I am grateful that my wife and I have good health. I always said that MOST Americans, if given a chance at a health rebate at the end of the year, would not be so inclined to have to go see their doctor every two weeks.
Unspent money from a health-fund goes back 50-50 to the insured person and to the insurance fund (government?). You'd probably be amazed at how healthy Americans would keep themselves if it meant money back at the end of the year.
The REAL reason our health-care system is broken is because we've INFLATED prices out of reach. If we deflate prices back to a reasonable level, then this issue becomes muted. The Inflationists (Greenspan-Bernanke) feel it is their duty to push up prices to the breaking point, so they can take credit for a booming GDP. Prices can't keep going up for ever. We need to discredit the Neo-Classical economics that have been suffocating us now for two decades.
The best health-care reform would be a couple decades of real price deflation.
There are other problems that drive health care costs higher in the U.S. One of them is the need to spread all of the emergency care cost over the insured client base. Illegal aliens and the very poor don't go to the doctor in the same way that most of us do. They don't enter through the front door and sit in the waiting room. They go directly to the emergency room for everything. Then they don't pay for the services. The rest of us pay for those services through rising health care and insurance costs. The more illegals we let come into the country the higher this "unfunded liability" becomes. The more people that lose their jobs and insurance coverage, the more upward pressure we get on the costs to manage emergency services and, as a result, the higher our health care and insurance costs rise. I expect that one of the results of the current economic recession and jobless recovery will be another spike in health care and insurance costs. It is a lagging effect that will kick in as newly disenfranchised jobless figure out how to game the system, too.
You touched on something that I was thinking about last night.
You mentioned how to deal with unused funds in the "HSA". I was thinking along the same lines as you - return some of the money to the owner each year it is not spent. But I came up with the following idea. I'll use a hypothetical. (I bet some readers are getting tired of my hypotheticals.)
Let's take an individual with an AGI of $50,000 per year. If his "self insured" deductible is 10% of AGI, then his HSA contribution would be $5,000 per year (pre-tax dollars, reducing his taxable income). Assume year 1 he has $2,000 in medical expenses paid out of his HSA. At the end of the year, there is $3,000 in the HSA. The individual then has the following options:
* Leave the money in the HSA and reduce the following year contribution to $2,000.
* Leave the money in the HSA and increase the deductible the next year to $8,000. This will reduce the catastrophic coverage premium.
* Transfer the $3,000 to a traditional IRA.
I agree that this creates a great motivation for the individual to evaluate cost/benefit relationships regarding health care. He's got skin in the game and will put more effort into becoming informed. Once the patient is informed and has a financial stake, you will see dramatic improvement in healthcare cost control.
On Oct 26 02:16 AM Michael Clark wrote:
> I had health-care insurance for thirty years at my workplace. I saw
> a doctor three times in thirty years. My wife's asthma medication
> was covered -- her medication, Pulmacort, costs $10 in Vietnam, and
> costs $160 in America. $160 x 12 = $1920/year. My understanding as
> to why I could not longer get a pay raise at work was that health
> insurance ran about $15,000 a year for my wife and I. Clearly, my
> wife and I would have been better off taking the pay raise and paying
> for our own insurance.
>
> I am grateful that my wife and I have good health. I always said
> that MOST Americans, if given a chance at a health rebate at the
> end of the year, would not be so inclined to have to go see their
> doctor every two weeks.
>
> Unspent money from a health-fund goes back 50-50 to the insured person
> and to the insurance fund (government?). You'd probably be amazed
> at how healthy Americans would keep themselves if it meant money
> back at the end of the year.
>
> The REAL reason our health-care system is broken is because we've
> INFLATED prices out of reach. If we deflate prices back to a reasonable
> level, then this issue becomes muted. The Inflationists (Greenspan-Bernanke)
> feel it is their duty to push up prices to the breaking point, so
> they can take credit for a booming GDP. Prices can't keep going up
> for ever. We need to discredit the Neo-Classical economics that have
> been suffocating us now for two decades.
>
> The best health-care reform would be a couple decades of real price
> deflation.
I like your idea. I especially like creative thinking as to ways to 'save' more money toward a catastrophic premium. The catastrophic illness is what drives a family into bankruptcy. This is where savings need to be built up from year to year.
Perhaps there would be a part of the refund that would automatically go to the catastrophic fund each year no matter what.
On Oct 26 10:26 AM John Lounsbury wrote:
> Michael - - -
>
> You touched on something that I was thinking about last night.<br/>
>
> You mentioned how to deal with unused funds in the "HSA". I was thinking
> along the same lines as you - return some of the money to the owner
> each year it is not spent. But I came up with the following idea.
> I'll use a hypothetical. (I bet some readers are getting tired of
> my hypotheticals.)
>
> Let's take an individual with an AGI of $50,000 per year. If his
> "self insured" deductible is 10% of AGI, then his HSA contribution
> would be $5,000 per year (pre-tax dollars, reducing his taxable income).
> Assume year 1 he has $2,000 in medical expenses paid out of his HSA.
> At the end of the year, there is $3,000 in the HSA. The individual
> then has the following options:
>
> * Leave the money in the HSA and reduce the following year contribution
> to $2,000.
>
> * Leave the money in the HSA and increase the deductible the next
> year to $8,000. This will reduce the catastrophic coverage premium.
>
>
> * Transfer the $3,000 to a traditional IRA.
>
> I agree that this creates a great motivation for the individual to
> evaluate cost/benefit relationships regarding health care. He's got
> skin in the game and will put more effort into becoming informed.
> Once the patient is informed and has a financial stake, you will
> see dramatic improvement in healthcare cost control.
The people of Vietnam I find to be her greatest asset. Everyone is so human here. We know all our neighbors. They go out of their way to talk to us, to get to know us; they go shopping for us if we need something and are short on time. In America it feels like you're always on your own -- and this is a much different kind of lifestyle because of this human connection....families have babies and teenagers and parents and uncles and aunts and grandparents all living together (for better AND for worse).
I agree that costs are affected by uninsured emergencies and uninsured non-emergencies using emergency medical services. I think that's one of the reasons we need universal coverage. But I think we've also just went through two decades of every facet of our business community raising prices on everything, to INCREASE profit. How do you enhance shareholder value? Bottom line. How do you enhance personal wealth; you charge more for your services. And as long as people keep paying, then you keep raising costs.
This isn't such a problem if we have a respect for both expanding business and prices AND deflating prices sequentially. But the current Fed leadership believes only in ever-increasing prices; they believe only in the inflationary spiral. They would rather bankrupt our future generations with useless borrowing to try to support the principle of inflation than to allow prices to fall, businesses to fail, creative destruction to happen in the society, and the strongest to survive and carry on. There is no economic evolution happening when the government tries to make sure that no businesses fail. We need failing businesses to figure out where we are going. And we need relief from inflationary prices, so we can begin to dig ourselves out of debt.
There's a LOT of greed in the medical game in America, as there is in all the other sectors of the economy. We should lose our pride a bit...American ISN'T always Number One. We aren't Number One in health-care. We pay too much and get too little back. In my mind health-care is just another bubble that needs to be broken.
We can learn from other countries about health-care. But our pride as a nation seems to insist that no one can do it better. We need to open up and really see how other countries do it, and which of them do it best.
On Oct 26 09:50 AM Mark Bern wrote:
> Michael - I've always wanted to go back to Vietnam, at least for
> an extended visit. There are some very beautiful landscapes, especially
> the beaches. I'd like to see how things have changed over the years.
> But back to the subject.
>
> There are other problems that drive health care costs higher in the
> U.S. One of them is the need to spread all of the emergency care
> cost over the insured client base. Illegal aliens and the very poor
> don't go to the doctor in the same way that most of us do. They
> don't enter through the front door and sit in the waiting room.
> They go directly to the emergency room for everything. Then they
> don't pay for the services. The rest of us pay for those services
> through rising health care and insurance costs. The more illegals
> we let come into the country the higher this "unfunded liability"
> becomes. The more people that lose their jobs and insurance coverage,
> the more upward pressure we get on the costs to manage emergency
> services and, as a result, the higher our health care and insurance
> costs rise. I expect that one of the results of the current economic
> recession and jobless recovery will be another spike in health care
> and insurance costs. It is a lagging effect that will kick in as
> newly disenfranchised jobless figure out how to game the system,
> too.
BTW, what took you to Vietnam? (if you don't mind my asking)
On Oct 26 12:37 PM Mark Bern wrote:
> Michael - I absolutely agree with you on the concept of best practices.
> Unfortunately, that isn't how our political system works. We are
> driven by agendas instead of common sense and good example.
>
> BTW, what took you to Vietnam? (if you don't mind my asking)
Latest Followers
Posts by Ticker
Latest Comments
Most Commented
Posts by Themes