Community For Affordable Health Care

Vol VIII, No 4, January, 2010

Utilizing the $1.8 Trillion Information Technology Industry

To Transform the $2.4 Trillion HealthCare Industry into Affordable HealthCare

Through innovation by moving from a vertical to a horizontal industry

In This Issue:            

1.         Featured Article: The Prisoner's Dilemma of Health Insurance

2.         In the News: Health care costs to grow under proposed reform

3.         International Healthcare: Sweden's Health System

4.         US Government Healthcare: Are we even talking about the issues?

5.         Lean HealthCare: Health Care's 'Radical Improver'

6.         Misdirection in Healthcare: The Health Bill is Scary

7.         Overheard on Capital Hill: A better stimulus plan than a tax on private health insurance

8.         Innovations in Healthcare: What Washington Doesn't Get about Health Care

9.         The Health Plan for the USA: What went wrong and why Obama can't fix it

10.       Restoring Accountability in Medical Practice by Non-Participation in Government Programs

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Have a Happy, Healthy, and Prosperous New Year 2010
On this New Year's Day, we wish each and every one of you a Happy, Healthy and Prosperous New Year in 2010, as we seek to restore the Medical MarketPlace.


The Annual World Health Care Congress, a market of ideas, co-sponsored by The Wall Street Journal, is the most prestigious meeting of chief and senior executives from all sectors of health care. Renowned authorities and practitioners assemble to present recent results and to develop innovative strategies that foster the creation of a cost-effective and accountable U.S. health-care system. The extraordinary conference agenda includes compelling keynote panel discussions, authoritative industry speakers, international best practices, and recently released case-study data. The 7th Annual World Health Care Congress will be held April 12-14, 2010 in Washington D.C. For more information, visit The future is occurring NOW.

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1.   Feature Article: The Prisoner's Dilemma of Health Insurance

Criminals, Victims and Innocent Bystanders - The Prisoner's Dilemma of Health Insurance
by Gerry Smedinghoff

An Address given to the Association of American Physicians and Surgeons

The primary reason you are all assembled at this conference today is that you desperately yearn to return to the era of a free market for health care that existed prior to the founding of AAPS back in 1943. And you are willing to do just about anything to make this happen.

Yet, without realizing it, since the meeting began this morning, all of you in this room have just witnessed and participated in an event that illustrates how this dream can become a reality.  This event is so special, that economists call it a miracle.  Yet it's so trivial, that none of you even bothered to notice it.

I don't expect anyone to be perceptive enough to identify the details of what just happened.  But I will give you a hint: I have performed this experiment — and no doubt you have all participated in it — many times in the past.  However, this incredible successful triumph represents only half of the story I want to tell you today.

Before I reveal the details of our collective unique accomplishment of the past hour, let me provide you with some background.  For the past six decades, the level of freedom in health care in the United States has been declining dramatically.  For this generation of health care, those with medical training who come in contact with patients — i.e. doctors and nurses — are financially and professionally worse off.  While most of those in the health care industry who do not interact with patients — i.e. actuaries, accountants and attorneys — are financially and professionally better off.

This simple observation sums up the three fundamental problems of health care in the United States.

The first problem is that the wrong people are making the decisions.  What should be a two-party transaction, between patient and physician, unfortunately is a four party transaction, complicated by health plans, employers and the government.  Health care should be purchased by patients, and managed by physicians.  Instead it's purchased by third party payers, and managed by health plans.  The people with the most knowledge, and in the best position to affect the outcome, are taking orders from faceless entities — who will never meet the patient or physician — and who aren't responsible for the result.

The most disastrous manifestation of this occurred back in the 1990s, with the creation of Physician Hospital Organizations, or PHOs, which were extensions of HMOs, and which were founded on the idea that actuaries — who have no medical training — would tell doctors how to practice medicine.  While physicians — with no actuarial training — would manage health insurance risk.  PHOs no longer exist today, and HMOs are dying out.  Like so many dot-com start-ups, they had a short-lived meteoric rise and crash, leaving a scorched-earth trail of bankruptcies among the physicians and hospitals who invested in them.

A few years ago, I attended a conference where the featured speaker was an actuary who made his fortune designing PHOs, who appeared to be under the age of fifty, and comfortably retired.  Reflecting on the failure of the capitated PHO model, he placed the blame solely on the doctors.  Because, as he said in exasperation, "Doctors don't understand insurance."  At the reception following the conference, I tried to explain to him that actuaries don't understand medicine. And that a better division of labor would be for actuaries to manage insurance risk, and to let doctors practice medicine.

He resolutely held to his position.  In retrospect, it's easy to understand why.  The capitated PHO models he designed made him rich beyond his wildest dreams.  It would be much easier to have a dialogue with him, had he lost his life savings, and been driven into bankruptcy.  Impoverished doctors I've discussed this topic with, have no trouble identifying the fundamental flaw with the PHO model, because they have paid an enormous price to learn this painful lesson.

The second problem is that the health care system is purposely designed to do the wrong things.  It makes it harder, not easier, to obtain health care.  And it adds waste and cost into the process — what the world-renown Toyota production engineer, Taiichi Ohno, referred to as muda — which is any activity that adds cost, but does not add value.

There are seven categories of health care muda or waste:

·         Delay: Idle time spent waiting for something, such as pre-certification approval, utilization review (UR), or payment from an insurer.

·         Movement: Unnecessary movement of products, people, or information, such as requiring patients to see a primary care physician, before being referred to the specialist they knew they wanted to see in the first place.

·         Oversight: Having one worker, such as a case manager, watch another worker do his job. If a worker can't be trusted to do a job, an efficient enterprise either retrains or replaces the worker, or redesigns the task.

·         Inspection: Having one worker inspect the work of another after it has been completed, as in retrospective reviews.  The goal of worker autonomy is self-control and self-inspection.  If someone is unable to determine whether his work is acceptable, then he is not competent to do the job, and should be replaced.

·         Rework: Performing the same task a second time, such as giving a needless second surgical opinion, or re-filing a claim.

·         Overproduction: Manufacturing of products that aren't needed, such as defensive medical tests, or processing of unnecessary claims information.

Defective Design: Design of goods that do not meet customer needs, such as CPT, DRG and ICD-9 coding schemes, which were designed for the convenience of third party payers, not for the treatment of sick patients. . .

There is a priceless story about Taiichi Ohno that is recounted in the forward to the 1988 edition of Henry Ford's classic book on manufacturing titled, Today and Tomorrow, originally published six decades earlier in 1926.  In 1980 — when the quality of American cars was at its worst, and when America's Big Three automakers humbly made the pilgrimage to Japan, cap-in-hand, to learn the "secret" of their methods — a group of engineers from Ford Motor Company bombarded Taiichi Ohno with questions about what inspired his thinking on manufacturing and quality.  Ohno just laughed and told them that he learned it all from Henry Ford's book, Today and Tomorrow.

The lesson to take away from this story is that, like the auto industry, the medical profession is a classic case study of the Chinese business proverb, "shirtsleeves to shirtsleeves in three generations."  Just as it took three generations to bring the once mighty U. S. auto industry to its knees, in the span of three generations, we have brought the U. S. health care system to its knees as well.

The third problem with the U. S. health care system is that — believe it or not — all four participants: patients, physicians, third party payers, and health plans are logically and rationally acting in their own best interest.

How can this be?  If everyone hates managed care, how can everyone be acting in their own best interest?

The answer is that our health care system represents the natural evolution of the muda of a defective design of employer-sponsored health care, driven by the Internal Revenue Code (IRC).  Why have patients, physicians, payers, and insurers logically and rationally added all this muda — this waste and cost — into the health care delivery process?  It's because information, responsibility, accountability and trust, are improperly assigned or missing entirely.

Because employers and the government have been paying for the vast majority of health care, patients logically and rationally have not been responsible for their health, and have not been held accountable for the health care they use.  Because they have little or no information about cost or treatment options, their view of health care is roughly equivalent to a six-year old sitting on the lap of Santa Claus: offering nothing, while asking for everything.

Economists call this "acting from a state of rational ignorance."  Rational ignorance is defined by the phrase, "I don't know; and I don't care."  And you cannot achieve an efficient allocation of resources with rationally ignorant participants.  If you could, there would be lots of six year-old corporate CEOs.

Because physicians have little information about what the buyers of their services are willing to pay, they logically and rationally have charged prices and delivered services, designed to grow their practices, and to advance the medical profession.  Like military defense contractors during the Cold War, cost was not a primary consideration.  They were trying to design and build weapons to fight and defeat an enemy — in their case disease — more than stay on a budget.  Cost overruns were not only acceptable, they were almost considered desirable.

Because employers and the government were paying the bill for all this health care, they were logically and rationally forced to take dramatic measures to control costs.  All employers could hope to accomplish, was to deter and prevent patients from seeking medical care, and to deter and prevent physicians from providing it. In fact, the U. S. steel industry's failure to comprehend and account for the seriousness of this flawed health care design, has been one of the major factors in its demise.

Because health plans were the intermediaries of nearly every health care transaction, and because neither patients or physicians were responsible and accountable for costs, their logical and rational response, in the messed-up world of employer-sponsored, government controlled, third-party, pre-paid health care, was to micromanage patients and physicians by adding muda — Delay, Movement, Inspection, Oversight, Rework, Overproduction and Poor Design — into every step of the health care delivery process.

So the result is that we have four participants — patients, physicians, payers and health plans — all of whom hate their situation, but all of whom are logically and rationally acting out of their best interests.  It's a classic example of the natural product of defective design: Gresham's Law of media, where the bad practices, as prescribed by law, dominate the market and drive out the good practices.

Do patients enjoy having no choice of health plans or doctors?  Do physicians enjoy asking permission from a Utilization Review manager to treat a patient?  Do insurers enjoy foregoing profits to hire case managers to monitor physicians?  Do employers and the government enjoy paying for all this muda, all this waste?  Obviously, the answer is "No."  But not so obviously, they all do it, not because they enjoy it; they do it out of self-defense.

If patients don't follow all the rules of their prepaid health plans, they have to pay for their health care a second time, on their own, with their after-tax earnings, at double the price.  If physicians don't join HMO and PPO networks, and follow the protocols, their patient base evaporates.  If health plans don't micromanage patients and physicians, costs rise dramatically.  And if employers don't offer health benefits, they risk losing their workforce.

This endless cycle of futility brings to mind the famous poem about the absurd reality of the ideal socialist utopian dream:

·         There is no unemployment; but no one works.

·         No one works; but everyone gets paid.

·         Everyone gets paid; but there is nothing to buy.

·         There is nothing to buy; but everyone owns everything.

·         Everyone owns everything; but no one is satisfied.

·         No one is satisfied; but 99% of the people voted for the system.

Well, if you hated your personal situation, you would try to change it.  And if many people hated their collective situation, they would logically and rationally vote to change it.  So what's the problem?

We all know how difficult it can be to quit smoking or lose weight.  It's tough enough making the personal decision to throw away the cigarettes, or stick to a diet.  Yet, while we all know many people who have done so, it's an obvious fact of life that the vast majority of smokers refuse to quit, and the vast majority of obese refuse to lose weight.

What if we changed the rules of life, such that for someone to quit smoking, he had to get a majority of smokers to agree to quit with him, and to stay true to their promise?  And if most smokers refused to quit — or reverted back to their bad habit of smoking — he would be forced to smoke for the rest of his life.

Or what if the laws of society were changed such that a local restaurant, grocery store, or ice cream parlor, could sue an obese person who goes on a diet for lost revenue. What if an obese person's legal liability for food consumption, was interpreted by the courts to be as large as a doctor's liability for surgical malpractice?  How many people would have the courage to go on a diet, if all it took were one groundless lawsuit by a disgruntled grocer, to wipe out his life savings, and force him into bankruptcy?

This brings me back to the unique event I alluded to at the beginning of my speech, in which you all witnessed and participated.  I logically and rationally did a simple and trivial thing at this conference that I would never do in the U. S. health care system, because the consequences would be severe and potentially disastrous.

The trivial and simple thing I did was to leave my computer on this table in a room full of people I have never met, while I left the room and went to the bathroom.  Now I don't normally do this.  I would never do this in an airport, coffee shop or bookstore.  I logically and rationally did it here this morning, because I had an enormous amount of advance information: that you are all members of the same organization — AAPS — and I had an enormous amount of trust in what this organization represents.

I also knew that there exists an unwritten, unspoken, bond among you which holds you accountable to each other.  Anyone of you could have stolen this computer while I was gone.  However, there would have been a hundred witnesses to the theft who would have identified you as the culprit.

Now don't take this complement about your integrity too seriously — for two reasons.  First, I have even left my computer out in the open, when I've spoken to a group of actuaries — and remember that actuaries are the profession responsible for the financial integrity of Social Security and Medicare.  Second, while I, as a generic actuary, trust you collectively here today as a physician to hear me speak, I, as a generic actuary, don't trust you individually tomorrow, when you return to your offices and practice on rationally ignorant patients, that I am financially responsible for.

The reason why I trust you collectively here today, but don't trust you individually tomorrow, is explained by two economic principles of game theory:

·         The first principle is known as the Prisoner's Dilemma, which grew out of the nuclear arms race of the Cold War.

·         The second, and closely related principle, is known as the Nash Equilibrium, which was introduced into the popular culture a few years ago by the book and movie, A Beautiful Mind.

The Prisoner's Dilemma defines the rules of the game, or the environment in which you operate, while the Nash Equilibrium tells you how to play the game.  The three basic categories of Prisoner's Dilemma economics are: win-win, win-lose, and lose-lose scenarios:

·         Win-win scenarios are the domain of free-market economic exchanges, where you get what you want, in exchange for giving me what I want.

·         Win-lose scenarios are the domain of sports and games, where there has to be one winner and one loser.

·         Lose-Lose scenarios are defined by the domain of undesirable choices that we sometimes face: For example, should the United States risk bankrupting its economy to build a military-industrial complex to neutralize the threat from the Soviet Union?  Or should the United States unilaterally disarm, and risk handing Western Europe to the Soviets?

It goes without saying that you entered the medical profession with the idea that your career would be a win-win scenario.  And that many of you now find yourselves in win-lose, or lose-lose scenarios.  The authority that controls the game sets the rules that determine the scenario.  The Prisoners' Dilemma problem we must face, is the fact that none of the four participants in the U. S. health care system — patients, physicians, payers and health plans — are able to control the game or set the rules, which are defined by the Internal Revenue Code and state insurance departments.  They are all stuck in the same canoe headed straight for a waterfall, without a paddle to steer, change course, or slow down.

The Nash Equilibrium holds that, in a scenario involving many people, you and I will change our behavior to maximize our wealth, when we have knowledge of the strategies of the other participants.  This is why employers offer health benefits for their workforce instead of paying higher wages.  It's why patients purchase health care through their employer instead of on their own.  It's why physicians join health plans and accept Medicare assignment, And it's why health plans micromanage patients and physicians.

All these participants didn't spontaneously decide on a whim, or a roll of the dice, to engage in all this muda of managed care.  They did so because that's the way our health care system has evolved, based on everyone logically and rationally acting in their own best interest over time, given the rules of the tax law, and the knowledge of how the others will respond.  The Nash Equilibrium problem we must face, is that the U. S. health care system has evolved as an irreversible one-way process, similar to baking a cake.  You can bake a cake starting with an egg and two cups of flour.  But you can't start with a cake and recreate the separate egg and dry flour.

The Nash Equilibrium also represents the two extremes that further explain the lose-lose game of managed care muda that we're all forced to play:

At one extreme of the Nash Equilibrium is the "tyranny of the majority."  It is sometimes called the herd mentality, where everyone is coerced into following the crowd, or going along to get along.  Because standing-out alone — opposed to everyone else — is too costly.  Common business examples of this are restaurants and car dealers, which are usually grouped together geographically, to allow for easy comparison shopping.  If you want to open a new restaurant or car dealership, you're better-off doing so in the same locale as your competitors.  Otherwise no one will bother to travel to the other end of town, just to sample your wares.

The herd mentality is why physicians join health plans, why health plans micro-manage physicians, why employers offer health benefits, and why employees submit to the restrictive rules of their employers' health plans.  The do so, not because they want to, but because everyone else does.  If they try to buck the prevailing trend, they are left out in the cold to starve.

At the other extreme of the Nash Equilibrium, is the tyranny of the minority.  It is sometimes referred to as the lone wolf or mad bomber scenario, where there is the one-in-a-million chance that there exists a madman, with an explosive device, who can destroy everything.  The obvious example here is airport security. Only one-in-a-million passengers wants to hijack or blow-up a plane.  But because this risk exists, we are all forced to endure intrusive searches at airports.  In fact, we actually prefer to have these searches.  And most of us would refuse to fly without them, because they assure us that the other passengers — or participants — are legitimate customers who don't represent a threat to us.

You may recall that a similar scenario occurred back in 1980, when seven people were murdered by Tylenol laced with cyanide.  The pharmaceutical industry reacted by demanding that Congress pass legislation requiring all over-the-counter medications to package their products in tamper-proof containers.

The lone wolf threat is why health plans require patients to be routed though physician gatekeepers, and why they try to micromanage the treatment of every patient.  For all but the largest employers, all it takes is a few unsupervised patients, seeking unlimited care, or a few unsupervised physicians, providing unlimited care, to bust the annual budget for the company's health benefits.

So how do we dislodge ourselves from this mess of the Prisoners Dilemma and Nash Equilibrium that patients, physicians, payers and health plans have all backed themselves into?  Let's look at two examples in other sectors of the economy where muda has been eliminated.

Airlines and public utilities provide a solution to the herd mentality dilemma of excess muda or waste.  For more than a decade, there has been no reason for your telephone, electric or gas utility to send you a bill.  And there has been no reason for you to waste your time writing a check and mailing it in.  This can all be handled electronically and automatically — without any paper or human intervention.  Most utilities now process payments this way.  But there is still some resistance and fear among customers: resistance to changing old habits, and fear of the unknown of electronic payment.

Utilities are fighting this resistance by offering the convenience of automated paperless payment, along with the assurance that payment will be made on the due date — so customers will not lose any interest on their funds.  The next logical step is to either add a surcharge to customers who pay by manual check, or to offer a discount to customers who pay electrically.  Airlines are doing both: adding surcharges to tickets sold through travel agents, while simultaneously offering discounts for tickets purchased over the Internet.  Once the herd grows large enough, and achieves a critical mass, the lagging minority is faced with the choice of adopting the new standard, or paying ever-larger surcharges.

Private schools and bottled water point the way to a lone wolf solution.  Why would anyone pay a second time to educate their children, when they have already paid for public schools?  And why would anyone pay for bottled water, when they can drink from a public fountain for free?  The reason is that, while Gresham's Law holds that the bad drives out the good, it doesn't eliminate the good.  It only makes the good a little more expensive, and a little harder to find.

In fact, a necessary requirement for Gresham's Law, is an absence of discriminating prices, or a law requiring that two different goods have the same price, such as a one dollar silver coin and a paper one dollar bill.  If the government decrees both of these to be of equal value, people will horde the silver coins and circulate the worthless paper currency.  Similarly, there would be no market for bottled water, if there was a law requiring it to be priced the same as water from a public fountain.  When the superior good can command a higher price, the destructive phenomenon of Gresham's Law is averted.

Twenty years ago, Perrier was the only brand of bottled water available.  Today bottled water represents a huge segment of the soft drink market, occupying an entire section of grocers' shelf space.  Twenty years ago, home schooling was so rare that it was illegal in some states.  Today it is an established nationwide movement, more than a million strong. . .

The most significant positive trend today, is that employers are now moving away from a first-dollar HMO benefit structure — where they tried to micromanage and pay for every health care service — to higher deductibles, and personal health care spending accounts (HSAs).  In the bull market of the 1990s, when employees were defecting by the busload to join dot-com startups, the standard response of employers was to expand their health benefits in any way possible.

In today's bear market climate, however, employers are looking to cut health care costs any way they can.  And they have little fear of resistance from their employees.  As patients move into higher deductible plans, with more discretionary personal health care spending accounts, three things will happen: one is that there will be increased pressure on Congress to expand discretionary personal health care spending accounts such as HSAs and FSAs.  Second, as patients take greater control over the health care they purchase, the more cost effective this health care will become.   And third, the less health plans and employers will feel the need to micromanage it.

Of course, except for home schooling, the examples I gave of the airline, public utility and bottled water markets, are dominated by large established conglomerates, with huge advertising budgets, fully staffed with Washington lobbyists.  You're just one physician trying to manage a solo practice.  How can these scenarios apply to you?

This brings me to the other half of the story I've come to tell you today, which is the saga of the three pivotal kingpins of the PC technology revolution: Bill Gates of Microsoft, Steve Jobs of Apple, and Gary Kildall of Digital Research.  Everyone has heard of Gates and Jobs, but only a few select computer geeks remember Gary Kildall.

But in the early 1980s, these three were equals, and they all shared an intense fanatical hatred for their common enemy: IBM, or Big Blue.  Gates owned the Quick BASIC programming language, Jobs controlled Apple Computer, and Kildall owned the DR-DOS operating system.  Today, Gates has 97% of the PC software market, and is worth hundreds of billions.  Jobs has 3% of the PC market, and is worth hundreds of millions.  While Kildall died in a bar fight in 1994, and his DR-DOS operating system is extinct.

How did these three men, locked neck-and-neck halfway into a three-way horserace for the future of the 21st century, finish with 97%, 3% and 0% of the ultimate prize?  The answer for Bill Gates, is his good bedside manner.  The answer for Steve Jobs, is greed.   And the answer for Gary Kildall, is arrogance.

Allow me to explain, starting with Steve Jobs, who could have had Bill Gates 97% market share, or at least a 30% - 50% market share, except his greed got in the way.  Jobs simply couldn't contain his childish impulses, and demanded that he have it all.  He chose to adopt the HMO model for Apple Computer.  Just as the HMO is supposed to be all health care, to all patients, at all times, in all places … on the HMO's terms (of course), Jobs wanted to control the customer by owning every piece of the personal computer: the hardware, the monitor, the disk drive, the operating system, the software, and the printer.  Everyone who purchased a PC from Apple would have to buy everything from Apple.  They wouldn't be able to go outside the Apple network of products.  They would become captive slaves to Apple Computer's 1984 vision of the PC market.

Well, if "greed is good," and "selfishness is a virtue," Apple computer is a classic case study of too much of a good thing.  Because PC consumers are no different than health care consumers.  They bitterly resent being treated like cattle, to be milked dry of their assets, and ultimately led to a slaughterhouse.  They may tolerate some indignities for a short period, but they will soon wise up, discover their freedom, and defect, by storming the Berlin Wall that imprisons them.

The story of Gary Kildall and Bill Gates can be summed up by Woody Allen's classic observation, that 85% of life is just showing up.  The reason Gates is the world's richest man, and Kildall only lives on as an answer to a trivia question, is that IBM — in need of an operating system for its new PC — called on Bill Gates.  Gates told IBM that Microsoft didn't have an operating system, and that they should talk to Gary Kildall, who did.

IBM wanted to use Digital Research's DR-DOS operating system.  However, Kildall would not sign IBM's outrageously restrictive non-disclosure agreement, and refused to even meet with them.  So IBM called Bill Gates again, who immediately recognized the opportunity, purchased the Q-DOS operating system for $50,000 (the Q stands for quick-and-dirty), renamed it MS-DOS, signed IBM's non-disclosure agreement, licensed MS-DOS to IBM, and everyone knows the rest of the story.

There are three important lessons to take away from this tale:

[1] IBM failed to understand that what they thought was most valuable — the hardware — would actually become the least valuable; and what was least valuable — the software — would actually become the most valuable.

[2] Gary Kildall allowed his emotional hatred of the enemy — the evil empire of Big Blue IBM— to overwhelm his rational business senses, which cost him the ultimate prize.

[3] Bill Gates had the common sense to meet with the devil, IBM, on its terms, recognize and seize the opportunity by switching his focus from programming languages to operating systems — and most important of all — he showed-up.

The last great hope for the patient, and the physicians who serve him, is for the fate of the U. S. health care system to follow the fate of computing technology.  Back in 1980, when the world was dominated by mainframe computers built by IBM, nearly everyone was resigned to the inevitable fact that the power of technology would be increasingly centralized in the hands of governments, and a few select multi-national corporations … just as many people today have resigned themselves to the idea that the U. S. is on the irreversible path towards a single-payer health care system, dominated by governmental agencies, and a few conglomerate hospital systems and third party payers.

However, the history of computing technology did not follow its inevitable path in 1980.  A little more than a decade later, the Berlin Wall fell.  The Soviet Union disintegrated.  And IBM found itself in a crisis for survival, and fired its CEO.  Not only had it given away the ultimate prize of software, it was driven out of the hardware business by a college student who started assembling PCs from off-the-shelf parts in his dorm room.

While I'm not so bold to predict that health care will follow the same path as computing technology, reversing its course from centralization to individual patient autonomy, I can easily envision scenarios of how this can happen, one of which, high-deductible Consumer-Driven Health Plans (CDHP), is growing and evolving at this moment.  And what's exciting about this, is the fact that today, many employers are actively promoting these CDHPs to their workforce, when this was unthinkable a decade ago.  So unthinkable, that one well-known U. S. corporation felt compelled to fire the executive responsible for suggesting that its employees should make their own health care decisions.

What's promising about the growing employer movement towards high-deductible CDHP and HSAs, is that it's reminiscent of IBM's meeting with Bill Gates a quarter of a century ago.  Just as IBM asked Gates help them out because they weren't interested in operating systems, and besides, they weren't very good at them … employers and health plans today are finally forced to admit that they aren't interested in micromanaging the health care of their employees … and besides, they aren't very good at it either. . .

But, perhaps the best news I can offer is seven years-old.  In the 1999 book, Unleashing the Killer App, two technology consultants describe how executives at the U. S. Postal Service candidly revealed that they have developed a contingency plan that anticipates a complete shutdown of operations.  And the average person can easily understand why.  Virtually everything that arrives in your mailbox, is either a bill you don't want to pay, or is junk mail advertising you don't want to read.  Any message of value arrives to you via e-mail.  And any package of value is delivered to you by Fed-Ex or UPS.  In other words, the post office can no longer rely on Gresham's Law of media for its survival, and its fate is determined by the Nash Equilibrium.

What's both truly amazing, and enormously reassuring, is that the U. S. Postal Service is being driven out of business, despite the fact that it has a monopoly chartered in the U. S. Constitution.  Although it's politically impossible to collectively amend the Constitution to break-up the postal monopoly, we are all individually helping to drive the post office out of business by using e-mail, UPS and Federal Express.  If the post office is being wiped-out, despite the charter of the 219 year-old Constitution, the future of Medicare — born in 1967 — and HMOs — born in 1973, neither of which require a Constitutional Amendment to repeal, look like terminally ill patients on life-support waiting for someone to pull the plug.

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2.   In the News:  Health care costs to grow under proposed reform

Boston Globe Analysis also sees dangers to Medicare

WASHINGTON - Democrats trying to push President Obama's health care overhaul plan through the Senate got a sober warning yesterday that costs will keep going up and proposed Medicare savings may harm the program.

A new report from government economic analysts at the Health and Human Services Department found that the nation's $2.5 trillion annual health care tab won't shrink under the Democratic blueprint that senators are debating. Instead, it would grow somewhat more rapidly than if Congress does nothing.

More troubling was the report's assessment that the Democrats' plan to squeeze Medicare for $493 billion over 10 years in savings relies on specific policy changes that "may be unrealistic'' and could lead to cuts in services. The Medicare savings are expected to cover about half the nearly $1 trillion, 10-year cost of expanding coverage to the uninsured.

In still more bad news, the report starkly warned that a new long-term care insurance plan included in the legislation could "face a significant risk of failure'' because it would attract people in poor health, leading to higher and higher premiums, and eventually triggering an "insurance death spiral.'' . . .

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3.   International Healthcare:  Sweden's Health System

Sweden's Single-Payer Health System Provides a Warning to Other Nations

by David Hogberg, Ph.D.

Sweden is a country of about 9.1 million people on the Scandinavian Peninsula of Northern Europe. Geographically, it is slightly larger than California.  It is by any measure a first world country, with a labor force working primarily in industry or the service area, a GDP per capita of about $31,600 and an unemployment rate of 5.6 percent.1

For much of the 20th century, Sweden had a single-payer system of health care in which the government paid almost all health care costs.  Like other nations with a single-payer system, Sweden has had to deal with the problem of ever-growing health care expenses causing a strain on government budgets.  It has dealt with this problem by rationing health care - instituting waiting lists for medical appointments and surgery.

Sweden stands not merely as a warning about single-payer systems, but also as an example of what happens when market-based reform of such systems do not go far enough. 

In the 1990s, Sweden set about reforming its health care system by introducing aspects of privatization.  These reforms were limited, however, and the old problems with waiting lists and rising costs had re-emerged by the beginning of this decade. . .


For much of the last fifty years Sweden has had a heavily socialized health care system.  Almost all of the funding comes from government revenue, and most aspects of the health care system, such as hospitals, primary care centers and prescription drugs, are controlled by the government.  Doctors could still have a private practice, although by the 1960s about 80 percent of doctors worked in government-run hospitals.2

The Swedish Parliament first tried to provide comprehensive national health insurance in 1946 with the passage of the National Health Insurance Act.  Because of financial restraints, it was not actually implemented until 1955.  Since that time, that national government has given increasing authority and responsibility for the health care system over to county governments (commonly known in Sweden as "county councils") to the point where they now have more power over the health care system than either the national or municipal governments.  Nevertheless, the national government still plays an important role.

At the national level, the agency with the most authority over the health care system is the Ministry of Health and Social Affairs.  It is responsible for ensuring that the health care system runs efficiently and supervises the health care activities of county councils.  It also provides research and advice to the Swedish parliament on legislation and policy matters regarding health care.  National legislation sets the goals and ground rules for the provision of health care in Sweden. . .

Also at the national level is a state monopoly known as the National Corporation of Swedish Pharmacies.  It owns all of the pharmacies in Sweden, which enables it to maintain a countrywide distribution system.  It runs both community and hospital pharmacies.  It is responsible for supplying drugs at uniform prices throughout Sweden.

The next level of government in Sweden is the county councils, which are run by elected members.3  County councils are responsible for operating most of the health care delivery system, from primary care to hospital care.

County councils have complete authority over hospital structure in Sweden.  Either an executive board or an elected hospital board at the county level determines the management structure of hospitals within its county.  County councils have similar authority over primary health care centers, which differ from hospitals in that they are responsible for providing most outpatient care.

While physicians can practice privately in Sweden, county councils heavily regulate the establishments of new private physicians.  They regulate the number of patients that private providers can see in a year.  Private physicians must also have an agreement with the county council in order to get reimbursed by the government.  If a physician does not have an agreement, then the patients will have to pay the full charge of the physician. . .


In 2004, Sweden spent about 9.1 percent of its gross domestic product (GDP) on health care, which is slightly above the average for nations that belong to the Organization of Economic Cooperation and Development.4  The largest share of funding for the Swedish health care system comes from taxes.  Both county and municipal governments have broad authority to levy income taxes.  Since 90 percent of county revenues are expended on health care, a breakdown of the sources of county revenue give a roughly accurate picture of the revenue sources for health care provided by county councils.5  In 2003, 72 percent of the revenues for county councils came from taxes, while 18 percent came from grants from the national government, three percent came from user-fees, and the remaining seven percent came from other sources.6  Municipal government generated about 69 percent of their revenues from local taxes in 2003, and 20 percent of their revenues are spent on health care.7 

Patients in Sweden pay user fees (similar to co-payments in the United States) that are set by county councils.  The fee for seeing a primary care physician varies from 11 to 17 kronas (the Swedish unit of currency; $1 U.S. equals about 6.90 kronas), while the fee for seeing a specialist ranges from 22 to 33 kronas.  While county councils have discretion in setting user fees, the national government limits the amount of total user fees paid per patient at 100 kronas annually for physician and specialist visits.  The maximum user fee for hospital care is nine kronas per day. . . .

Private funding, beyond user fees, plays a small role in Swedish health care.  Only about 2.3 percent of the population has supplementary health insurance, and the primary benefit of it is the ability to avoid waiting lists for treatment.9


During the 1990s, many county councils adopted market-oriented reforms of the health care system.  This reform wave had its roots in an attempt in the 1980s to control the burgeoning cost of the Swedish health care system.

By the early 1980s, with an aging population and increasingly expensive health care technology, the system had become unsustainable.  In a ten-year period from 1972-1982, the health care portion of Sweden's GDP grew from 7.2 percent to 9.3 percent (see Figure 1).10  Until 1985, the national government reimbursed county councils for health care expenses on a fee-for-service basis.  The Dagmar Reform of 1985 changed the reimbursement formula to one of "capitation," in which counties were reimbursed for the number of patients served.  This led to "global budgets" - a fixed amount that each county could spend annually on health care services.

One of the underpinnings of any successful market is that entities that do not adequately satisfy consumers eventually go out off business.  The greatest failing of the market- oriented reform of the Swedish health care system is that they did not permit private providers to, in essence, "fail."  As a result, one of the hallmarks of single-payer systems, waiting lists, are again plaguing the Swedish patients.

Waiting Lists

Görann Persson had to wait eight months during 2003 and 2004 for a hip replacement operation.  Persson was not considered to be a very pleasant person to begin with, and he became even grumpier due to the pain he endured while waiting for his operation.  As a result, Persson walked with a limp, reportedly used strong pain medication and had to reduce his workload.20

What made Persson unique was not his wait for hip surgery.  Despite the government promise that no one should have to wait more than three months for surgery, 60 percent of hip replacement patients waited longer than three months in 2003 (see Figure 2).21  Rather, Persson stood out because he was Prime Minister of Sweden at the time.  Persson could surely have used his position in the government to gain access to private care, essentially jumping the waiting list.  Yet Persson stated that he planned on waiting for his surgery like everyone else.

Whether Prime Minister Persson did this out of benevolent motives is an open question.  His party, the Social Democrats, have used the phrase "equal access to health care" to attack the center-right parties on the issue of health care for many years.  Persson would have greatly undermined the effectiveness of that attack had he jumped the waiting list.

In practice, the political notion of "equal access" actually means "restricted access."  Swedes who do not have private insurance must wait, often for months, for treatment.  For all Swedes who needed an operation in 2003, slightly more than half waited more than three months (see Figure 2).22  The situation continues.  Moreover, patients often wait in great pain and distress.

Researchers studying Swedes waiting for hip or knee replacement concluded that "almost every aspect of daily life is affected by the indeterminate wait for surgery and the related experiences of pain and disability.  The respondents express a deep sense of lost dignity, powerlessness and frustration."23  One patient complained that the pain had gotten so bad that she "had no quality of life."  "I can't participate in anything," she said. "I can't go for a walk, I can't do anything, so why on earth do I need to wake up in the morning!"24  Depression and hopelessness were other common symptoms.  Another patient complained, "I feel as though I've lost my human dignity. You get depressed and fed up with the pain.  Still I try to be patient.  But you lose the desire (to live)."  She further complained of her treatment by the clinic where her surgery was to take place.  "I felt so neglected, you get treated, yes, worse than an animal because you can take an animal to the veterinary... I feel so powerless."25

Pain and anxiety are also common problems for Swedish heart patients waiting for surgery.  One study found that more than half of patients waiting for heart surgery experience chest pain daily, and longer wait times were associated with increased nervousness.26  Another study found that 88 percent of patients waiting for heart surgery reported chest pains that limited their daily activities.  It also found symptoms of anxiety and depression to be strongly associated with the pain.27 . . .

Sweden is one of several nations whose practices offer proof that single-payer health care systems lead to the proliferation of waiting lists.  It also shows that waiting lists have adverse and sometimes tragic consequences for patients.


While Sweden is a first world country, its health care system - at least in regards to access - is closer to the third world.  Because the health care system is heavily-funded and operated by the government, the system is plagued with waiting lists for surgery.  Those waiting lists increase patients' anxiety, pain and risk of death.

Sweden's health care system offers two lessons for the policymakers of the United States.  The first is that a single-payer system is not the answer to the problems faced as Americans.  Sweden's system does not hold down costs and results in rationing of care.  The second lesson is that market-oriented reforms must permit the market to work.  Specifically, government should not protect health care providers that fail to provide patients with a quality service from going out of business.

When the United States chooses to reform its health care system, reform should lead to improvement.  Reforming along the lines of Sweden would only make our system worse.

David Hogberg is a senior policy analyst at the National Center for Public Policy Research

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Government medicine does not give timely access to healthcare, it only gives access to a waiting list.

In America, everyone has access to HealthCare at all times. No one can be refused by any hospital.

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4.   US Government Healthcare: Are we even talking about the issues?

The Right Proposition for the Health Care Debate

By David J. Gibson, MD and Jennifer Shaw Gibson

We are trying to make a 20th century analogue financing system work on a 21st century digital world.

THE FIRST LESSON LEARNED by any student matriculating into a debate class is the importance of the proposition. The proposition sets the parameters for the debate. The reason health care reform debate is faltering can be directly attributable to our not selecting the proposition more carefully.

The proposition under debate is: "Be it resolved, the United States should guarantee health insurance coverage for all of its citizens." The resulting debate has become progressively non-productive while generating misplaced acrimony. As a result, the Schwarzenegger/Nunez health care plan's demise in California two years ago has now become a harbinger of events unfolding in Washington.

In reality, we are trying to make a 20th century analogue financing system work on a 21st century digital world. Health insurance was designed to meet the needs of World War II era beneficiaries. Little has changed in the design of this product over the ensuing 70-years. This financing system has outlived its usefulness and no longer meets the needs of Americans today.

The fundamentals of this analogue system can be summarized as follows.

With near universal agreement on the need to restructure the current health care financing system, how can we get the debate back on track?

The answer, change the proposition. The proposition we should be debating is as follows: "Be it resolved that the current system for financing health care in the United States should be replaced by a digital system that will meet the needs of society in the 21st century."

By changing the proposition, America's system for financing health care would join the rest of our economy in leveraging the benefits of currently deployed information technology. The following represents but a few of the characteristics such a system would incorporate.

This digital product is being introduced in Houston Texas. It will be priced 40 percent below similarly comprehensive existing product in the market.

The reality, thus far not appreciated in the current debate, is that an informed consumer is the only force in the market than can rationalize pricing and discipline runaway cost trends. Informed consumers have driven dislocating restructuring within every other industry within our economy over the past two decades. We have the technology to arm the consumer. It is now time to recruit these consumers and harness the market force they represent.

We need to stop using typewriters and incorporate digital management of data to finance health care going forward.


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Government is not the solution to our problems, government is the problem.

- Ronald Reagan

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5.   Lean HealthCare: Health Care's 'Radical Improver' by Joseph Rago, WSJ   Watertown, Mass.

'It's a little bit like talking to a young prince," says Jonathan Bush, chairman and CEO of Athenahealth, a major player in information technology services for physicians, of his recent visits to Capitol Hill. "'So—tell me about this market thing that your people use,'" he says, mimicking the political royalty with a grin and extending his forearm. "'Wait: I must catch my falcon!'"

Athenahealth's headquarters, on the banks of the Charles River outside Boston, is a world away from D.C., and it's clear, as he continues his metaphor, that Mr. Bush enjoys the distance: "And these princes, they mean well and they're lovely," he says, "but they're living in this alternate universe where there's no such thing as a market in health care and they don't understand why one might be remotely useful."

He pauses. "That's weird to me."

Mr. Bush is an outlier in the generally buttoned-down world of the health industry. He's exuberant, hyperactive, speaking in frenetic running monologues; it's not hard to see why the political class might be taken aback: "I still have to keep going to Washington and sucking up," he says, switching metaphors. "Because the problem is when you have a baby with an Uzi, right, they might accidentally mow you down. But here's the thing . . . they're brilliant people. It's just that the idea of a market in health care never occurred to them."

As Mr. Bush sees it, the profound problem with U.S. health care is that there's "no landscape of choices, or choosers." Due to the complexity of America's third-party laundromat for health dollars—your doctor's clerical staff bills your treatment to an insurance company picked by your employer, and it pays him with your money via premiums or foregone wages—"few doctors in America know the actual value of the services they render."

Athena began as a San Diego birthing clinic and floundered because it couldn't cope with back-office volatility. All transactions were conducted on paper. No one understood how to navigate the dense and bewildering coding rules for dozens of different insurers or the fee schedules for government payers like Medicaid. Claims were denied with no explanation or vaporized in purgatory. The clinic went bankrupt in 18 months.

With Mr. Park (who has joined the Obama administration), Athena designed a program to digitize records and automate billing. It now colonizes the wilderness of paperwork and habitual financial chaos that defines running a doctors office, and it is also moving into clinical record-keeping for individual patients. Some 15,000 physicians in 43 states use Athena as a virtual office, a number that is growing at an annual 30% clip.

It is a massive logistical undertaking. Athena's main facility is housed in a decommissioned World War II arsenal on the Charles, where 30,000 pounds of paper is processed every month, most of the tonnage being paper checks. Incredibly, doctors also receive on average 1,185 faxes each month—mostly lab results—and those are handled too.

Athena's core business helps them manage their practices and get paid, but the larger purpose of the company, which he and board member Todd Park co-founded in 1997, is to try to shore up health care's resemblance to a normal market. It has grown into one of the country's most innovative health IT firms. . .

State Medicaid programs, by the way, are easily the worst payers, according to Athena's annual ranking. In New York, for instance, claims must be tendered on a dead-tree form instead of electronically and in blue ink—black is grounds for rejection—and then go on to spend a full 161 days, or almost a half year, in accounts receivable.

While streamlining this disorder frees up time for the company's clients to treat patients, it also throws off vast data, which are fed in central servers, aggregated and analyzed. This "athenanet" system is among the few health-tech offerings based on "cloud computing"—in the sense that the applications are accessed on the Web, instead of a computer's hard drive, allowing constant updates and refinements. If a regulation changes or an insurer adjusts a payment policy, it is reflected on athenanet almost in real time; on the clinical side, the program can adapt at the same rapid pace as medicine itself. . .

In effect, as the network gets bigger, it gets smarter, while opening the space for innovations to feed off one another and spread. There really can be "radical improvement" in health care, Mr. Bush says, but only if there are "radical improvers" able to set themselves apart and lead the forward advance. "No one ever says, 'Here's to the average,'" he declares pointedly.

The Athena model is superior to most electronic medical record systems, or EMRs, which are generally based on static software that are inflexible, can't link to other systems, and are sold by large corporate vendors like General Electric. One reason the digital revolution has so far passed over the health sector is sheer bad product. The adoption of EMR in health systems across the country has been dogged by cumbersome interfaces, error propagation and other drawbacks. In 2003, for instance, Cedars-Sinai in Los Angeles dumped a $34 million proprietary system after doctors staged a revolt.

Athena also stands in marked contrast to most of the wider health-care market, which Mr. Bush argues is homogenized and rigid, and getting more so. The problem is "easily fixed by releasing some power into the arms of consumers and cutting employers and certainly the government out of it," he says, turning to ObamaCare. . .

What Mr. Bush means is that the government imposes standardized rules and mandates with no concern for how much they will cost or who will bear the burden. Given the choice, consumers might decide on cheaper policies that cover some services but not others, or decide to run more risk. . .

Under ObamaCare, Mr. Bush says, "everyone is going to get health care according to the wise-men benefit panel, who will tell you exactly what it is, and then they'll run out of money, so every year the wise panel will just squish the benefit a little. People will start to say, well, that's not going to work for me." For this reason he doesn't think central health planning will have any longevity, and eventually people "will start leaking out into the [private] market once we run out of Obama energy."

His company, he thinks, will play an important role in such a world, where individuals would have more responsibility for weighing trade-offs—which, he believes, is the only lasting way to enforce discipline in health spending: "Today it's so complicated that the average consumer—and this is what the academics say—you can't put the average consumer in charge, it's too complicated. Yeah it's too complicated! So let's make it not complicated," he says. Athenanet generates "clean information," the basic price signals about health care that "a regular old consumer could look at and say, 'That's worth it' or 'I'd rather do this one on the other side of Route 128 that does it cheaper.'"

Mr. Bush is less sanguine about the White House cost-control approach of better living through technocracy and "Benthemite micromanagement." As an illustration he singles out the idea of dispensing bonus payments to hospitals that find ways to reduce Medicare spending. If the bonus is higher than what the hospital would have been paid under the status quo, then Medicare is worse off—but if the bonus is less than what the hospital would have earned otherwise, in what sense is it an incentive to change? In other words, "I'm going to give you a dollar bill for every 10-dollar bill you give me?" Mr. Bush asks incredulously.

The irony is that Athena will likely benefit from the Project Mayhem that is about to begin. "It's probably terrible that all this new bureaucracy is being created," Mr. Bush says. "But there's going to be 50 new Medicaid-type plans in these insurance exchanges, run by the same insurance commissioners, these same sort of glazed-over-looking state secretaries of health. You know, just not really the brightest bulbs in the chandeliers of the world. Medicaid, the worst payer in the country by a factor of four! Mother of pearl! So I feel a little bit like a robber baron. I am going to make oil money dealing with them."

The double irony is that Athena—while Mr. Bush might not put it in such an impolitic way, but then again, maybe he would—is also showing that the status quo for all its flaws is capable of organic change and real progress without the blunt-force trauma Congress is likely to inflict. Or in spite of it.

Take the nearly $47 billion in stimulus cash the White House has budgeted to prime the pump for health IT adoption. Mr. Bush says he's glad his industry is getting more attention from the bully pulpit, but that "It is kind of too bad that all these software companies that we're really close to putting out of business, these terrible legacy companies, with code that was written in the '70s, are going to get life support. That's why I call it the Sunny von Bülow bill. What it is, basically, is a federally sponsored sale on old-fashioned software."

"It's designed like a box-buying campaign," he continues. "You get this fixed chunk of money for a few years, you get to pay off your EMR, like its a thing. People in Washington think in terms of things that we'll buy and then they'll be there. Buildings. Roads. Tanks. What Lockheed Martin makes. Things.

"And this isn't that. This is a market: its a set of agreements, it's a language. What's needed is a way of exchanging value and making choices, that's ethical—and, you know, nobody, nobody, not nobody, has said a word about that."

—Mr. Rago is a senior editorial page writer at the Journal. Printed in The Wall Street Journal, page A17

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The Future of Health Care Has to Be Lean, Efficient and Personal.

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6.   Misdirection in Healthcare: The Health Bill is Scary By Senator TOM COBURN, MD

I recently suggested that seniors will die sooner if Congress actually implements the Medicare cuts in the health-care bill put forward by Senate Majority Leader Harry Reid. My colleagues who defend the bill—none of whom have practiced medicine—predictably dismissed my concern as a scare tactic. They are wrong. Every American, not just seniors, should know that the rationing provisions in the Reid bill will not only reduce their quality of life, but their life spans as well.

My 25 years as a practicing physician have shown me what happens when government attempts to practice medicine: Doctors respond to government coercion instead of patient cues, and patients die prematurely. Even if the public option is eliminated from the bill, these onerous rationing provisions will remain intact.

For instance, the Reid bill (in sections 3403 and 2021) explicitly empowers Medicare to deny treatment based on cost. An Independent Medicare Advisory Board created by the bill—composed of permanent, unelected and, therefore, unaccountable members—will greatly expand the rationing practices that already occur in the program. Medicare, for example, has limited cancer patients' access to Epogen, a costly but vital drug that stimulates red blood cell production. It has limited the use of virtual, and safer, colonoscopies due to cost concerns. And Medicare refuses medical claims at twice the rate of the largest private insurers.

Section 6301 of the Reid bill creates new comparative effectiveness research (CER) programs. CER panels have been used as rationing commissions in other countries such as the U.K., where 15,000 cancer patients die prematurely every year according to the National Cancer Intelligence Network. CER panels here could effectively dictate coverage options and ration care for plans that participate in the state insurance exchanges created by the bill.

Additionally, the Reid bill depends on the recommendations of the U.S. Preventive Services Task Force in no fewer than 14 places. This task force was responsible for advising women under 50 to not undergo annual mammograms. The administration claims the task force recommendations do not carry the force of law, but the Reid bill itself contradicts them in section 2713. The bill explicitly states, on page 17, that health insurance plans "shall provide coverage for" services approved by the task force. This chilling provision represents the government stepping between doctors and patients. When the government asserts the power to provide care, it also asserts the power to deny care. . .

Read more of Dr. Coburn's personal experience and predictions . . .

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Well Meaning Regulations Worsen Quality of Care.

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7.   Overheard on Capital Hill: Can you believe the Senate wants to tax private health insurance?

The economist: Nov 28, P 32. The senate plan raises money not by soaking the rich through income taxes, as the House bill envisions, but through excise taxes on the most expensive health policies. This approach as two advantages. . .

A third result is that it feeds the liberal desire that there is no tax and spend program they don't like.

A Better Stimulus Plan . . .

The WSJ reports that the November job gains were in services or government. If the stimulus has had any effect, it has been to preserve government jobs. Private hiring remains weak. After 28 weeks, the average duration of unemployment is now longer than it has ever been and overall employment is still down some 7.2 million from 2007. . . Congress seems ready read to waste more money on more government job creation . . . and jobless benefits.  In some states workers can now get paid for 18 months for not working.  This will give many of them an incentive to postpone a job search even as their hiring prospects improve.

. . . Have Congress adjourn until 2011.

Karl Rove

Barack Obama has won a place in history with the worst ratings of any president at the end of his first year: 49% approve and 46% disapprove of his job performance in the latest USA Today/Gallup Poll.

There are many factors that explain it, including weakness abroad, an unprecedented spending binge at home, and making a perfectly awful health-care plan his signature domestic initiative. But something else is happening.

Mr. Obama has not governed as the centrist, deficit-fighting, bipartisan consensus builder he promised to be. And his promise to embody a new kind of politics—free of finger-pointing, pettiness and spin—was a mirage. He has cheapened his office with needless attacks on his predecessor. . .

Read the rest of the story and the tragedy that awaits us in the WSJ . . .

Climate Change is Nature's Way-Bloom-WSJ

Climate change activists are right. We are in for walloping shifts in the planet's climate. Catastrophic shifts. But the activists are wrong about the reason. Very wrong. And the prescription for a solution—a $27 trillion solution—is likely to be even more wrong. Why?

Climate change is not the fault of man. It's Mother Nature's way. And sucking greenhouse gases from the atmosphere is too limited a solution. We have to be prepared for fire or ice, for fry or freeze. We have to be prepared for change. . .

It's our good luck one of the Earth's many ice ages ended 12,000 years ago. . .

Climategate - Henninger - WSJ

The East Anglians' mistreatment of scientists who challenged global warming's claims—plotting to shut them up and shut down their ability to publish—evokes the attempt to silence Galileo. The exchanges between Penn State's Michael Mann and East Anglia CRU director Phil Jones sound like Father Firenzuola, the Commissary-General of the Inquisition. . .

What is happening at East Anglia is an epochal event. As the hard sciences—physics, biology, chemistry, electrical engineering—came to dominate intellectual life in the last century, some academics in the humanities devised the theory of postmodernism, which liberated them from their colleagues in the sciences. Postmodernism, a self-consciously "unprovable" theory, replaced formal structures with subjectivity. With the revelations of East Anglia, this slippery and variable intellectual world has crossed into the hard sciences.

This has harsh implications for the credibility of science generally. Hard science, alongside medicine, was one of the few things left accorded automatic stature and respect by most untrained lay persons. But the average person reading accounts of the East Anglia emails will conclude that hard science has become just another faction, as politicized and "messy" as, say, gender studies. The New England Journal of Medicine has turned into a weird weekly amalgam of straight medical-research and propaganda for the Obama redesign of U.S. medicine. . .

If the new ethos is that "close-enough" science is now sufficient to achieve political goals, serious scientists should be under no illusion that politicians will press-gang them into service for future agendas. Everyone working in science, no matter their politics, has an stake in cleaning up the mess revealed by the East Anglia emails. Science is on the credibility bubble. If it pops, centuries of what we understand to be the role of science go with it.

Climategate: Science Is Dying

The Baucus Amendment

. . . the dollars are collected via a 40% tax on sales by insurers of "Cadillac" policies, fees on health insurers, drug companies and device manufacturers, and an assortment of odds and ends.

We should be reducing the taxing authority of Congress, not increasing it.

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What is Congress Really Saying?

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8.   Innovations in Healthcare: What Washington Doesn't Get about Health Care & How to Fix It

After the needless death of his father, the author, a business executive, began a personal exploration of a health-care industry that for years has delivered poor service and irregular quality at astonishingly high cost. It is a system, he argues, that is not worth preserving in anything like its current form. And the health-care reform now being contemplated will not fix it. Here's a radical solution to an agonizing problem.

by David Goldhill The Atlantic Monthly

How American Health Care Killed My Father

ALmost two years ago, my father was killed by a hospital-borne infection in the intensive-care unit of a well-regarded nonprofit hospital in New York City. Dad had just turned 83, and he had a variety of the ailments common to men of his age. But he was still working on the day he walked into the hospital with pneumonia. Within 36 hours, he had developed sepsis. Over the next five weeks in the ICU, a wave of secondary infections, also acquired in the hospital, overwhelmed his defenses. My dad became a statistic—merely one of the roughly 100,000 Americans whose deaths are caused or influenced by infections picked up in hospitals. One hundred thousand deaths: more than double the number of people killed in car crashes, five times the number killed in homicides, 20 times the total number of our armed forces killed in Iraq and Afghanistan. Another victim in a building American tragedy. . .

Ten days after my father's death, the hospital sent my mother a copy of the bill for his five-week stay: $636,687.75. He was charged $11,590 per night for his ICU room; $7,407 per night for a semiprivate room before he was moved to the ICU; $145,432 for drugs; $41,696 for respiratory services. Even the most casual effort to compare these prices to marginal costs or to the costs of off-the-shelf components demonstrates the absurdity of these numbers, but why should my mother care? Her share of the bill was only $992; the balance, undoubtedly at some huge discount, was paid by Medicare.

I'm a businessman, and in no sense a health-care expert. But the persistence of bad industry practices—from long lines at the doctor's office to ever-rising prices to astonishing numbers of preventable deaths—seems beyond all normal logic, and must have an underlying cause. There needs to be a business reason why an industry, year in and year out, would be able to get away with poor customer service, unaffordable prices, and uneven results—a reason my father and so many others are unnecessarily killed . . .

Indeed, I suspect that our collective search for villains—for someone to blame—has distracted us and our political leaders from addressing the fundamental causes of our nation's health-care crisis. All of the actors in health care—from doctors to insurers to pharmaceutical companies—work in a heavily regulated, massively subsidized industry full of structural distortions. They all want to serve patients well. But they also all behave rationally in response to the economic incentives those distortions create. Accidentally, but relentlessly, America has built a health-care system with incentives that inexorably generate terrible and perverse results. Incentives that emphasize health care over any other aspect of health and well-being. That emphasize treatment over prevention. That disguise true costs. That favor complexity, and discourage transparent competition based on price or quality. That result in a generational pyramid scheme rather than sustainable financing. And that—most important—remove consumers from our irreplaceable role as the ultimate ensurer of value . . .

I'm a Democrat, and have long been concerned about America's lack of a health safety net. But based on my own work experience, I also believe that unless we fix the problems at the foundation of our health system—largely problems of incentives—our reforms won't do much good, and may do harm. To achieve maximum coverage at acceptable cost with acceptable quality, health care will need to become subject to the same forces that have boosted efficiency and value throughout the economy. We will need to reduce, rather than expand, the role of insurance; focus the government's role exclusively on things that only government can do (protect the poor, cover us against true catastrophe, enforce safety standards, and ensure provider competition); overcome our addiction to Ponzi-scheme financing, hidden subsidies, manipulated prices, and undisclosed results; and rely more on ourselves, the consumers, as the ultimate guarantors of good service, reasonable prices, and sensible trade-offs between health-care spending and spending on all the other good things money can buy. . .

Health Care Isn't Health (Or Happiness)

"Money is honey," my grandmother used to tell me, "but health is wealth." She said "health," not "health care." Listening to debates over health-care reform, it is sometimes difficult to remember that there is a difference. . .

By what mechanism does society determine that an extra, say, $100 billion for health care will make us healthier than even $10 billion for cleaner air or water, or $25 billion for better nutrition, or $5 billion for parks, or $10 billion for recreation, or $50 billion in additional vacation time—or all of those alternatives combined?

The answer is, no mechanism at all. Health care simply keeps gobbling up national resources, seemingly without regard to other societal needs; it's treated as an island that doesn't touch or affect the rest of the economy. As new tests and treatments are developed, they are, for the most part, added to our Medicare or commercial insurance policies, no matter what they cost. But of course the money must come from somewhere. If the amount we spend on care had grown only at the general rate of inflation since 1970, annual health-care costs now would be roughly $5,000 less per American—that's about 10 percent of today's median income, to invest for the future or to spend on all the other things that contribute to our well-being. To be sure, our society has become wealthier over the years, and we'd naturally want to spend some of this new wealth on more and better health care; but how did we choose to spend this much?  . . .

Health Insurance Isn't Health Care

How often have you heard a politician say that millions of Americans "have no health care," when he or she meant they have no health insurance? How has a method of financing health care become synonymous with care itself?

The reason for financing at least some of our health care with an insurance system is obvious. We all worry that a serious illness or an accident might one day require urgent, extensive care, imposing an extreme financial burden on us. In this sense, health-care insurance is just like all other forms of insurance—life, property, liability—where the many who face a risk share the cost incurred by the few who actually suffer a loss.

But health insurance is different from every other type of insurance. Health insurance is the primary payment mechanism not just for expenses that are unexpected and large, but for nearly all health-care expenses. We've become so used to health insurance that we don't realize how absurd that is. We can't imagine paying for gas with our auto-insurance policy, or for our electric bills with our homeowners insurance, but we all assume that our regular checkups and dental cleanings will be covered at least partially by insurance. Most pregnancies are planned, and deliveries are predictable many months in advance, yet they're financed the same way we finance fixing a car after a wreck—through an insurance claim. . .

Insurance is probably the most complex, costly, and distortional method of financing any activity; that's why it is otherwise used to fund only rare, unexpected, and large costs. Imagine sending your weekly grocery bill to an insurance clerk for review, and having the grocer reimbursed by the insurer to whom you've paid your share. An expensive and wasteful absurdity, no?

Is this really a big problem for our health-care system? Well, for every two doctors in the U.S., there is now one health-insurance employee—more than 470,000 in total. In 2006, it cost almost $500 per person just to administer health insurance. Much of this enormous cost would simply disappear if we paid routine and predictable health-care expenditures the way we pay for everything else—by ourselves.

The Moral-Hazard Economy

Society's excess cost from health insurance's administrative expense pales next to the damage caused by "moral hazard"—the tendency we all have to change our behavior, becoming spendthrifts and otherwise taking less care with our decisions, when someone else is covering the costs. Needless to say, much medical care is unavoidable; we don't choose to become sick, nor do we seek more treatment than we think we need. Still, hospitals, drug companies, health insurers, and medical-device manufacturers now spend roughly $6 billion a year on advertising. If the demand for health care is purely a response to unavoidable medical need, why do these companies do so much advertising?

Medical ads on TV typically inform the viewer that a specific treatment—a drug, device, surgical procedure—is available for a chronic condition. Many also note that the product or treatment is eligible for Medicare or private-insurance reimbursement. In some cases, the advertiser will offer to help the patient obtain that reimbursement. The key message: you can benefit from this product and pass the bill on to someone else. . .

Want further evidence of moral hazard? The average insured American and the average uninsured American spend very similar amounts of their own money on health care each year—$654 and $583, respectively. But they spend wildly different amounts of other people's money—$3,809 and $1,103, respectively. . .

The unfortunate fact is, health-care demand has no natural limit. Our society will always keep creating new treatments to cure previously incurable problems. Some of these will save lives or add productive years to them; many will simply make us more comfortable. . . For almost all our health-care needs, the current system allows us as consumers to ask providers, "What's my share?" instead of "How much does this cost?"—a question we ask before buying any other good or service. And the subtle difference between those two questions is costing us all a fortune.

There's No One Else to Pay the Bill

Perhaps the greatest problem posed by our health-insurance-driven regime is the sense it creates that someone else is actually paying for most of our health care—and that the costs of new benefits can also be borne by someone else. Unfortunately, there is no one else.

For fun, let's imagine confiscating all the profits of all the famously greedy health-insurance companies. That would pay for four days of health care for all Americans. Let's add in the profits of the 10 biggest rapacious U.S. drug companies. Another 7 days. Indeed, confiscating all the profits of all American companies, in every industry, wouldn't cover even five months of our health-care expenses.

Somebody else always seems to be paying for at least part of our health care. But that's just an illusion. At $2.4 trillion and growing, our nation's health-care bill is too big to be paid by anyone other than all of us.  . .

The Government Is Not Good at Cost Reduction

Every proposal for health-care reform has featured some element of cost control to "balance" the inflationary impact of expanding access. Yet it goes without saying that in the big picture, all government efforts to control costs have failed.

Why? One reason is a fixation on prices rather than costs. The government regularly tries to cap costs by limiting the reimbursement rates paid to providers by Medicare and Medicaid, and generally pays much less for each service than private insurers. But as we've seen, that can lead providers to perform more services, and to steer patients toward higher-priced, more lightly regulated treatments. The government's efforts to expand "access" to care while limiting costs are like blowing up a balloon while simultaneously squeezing it. The balloon continues to inflate, but in misshapen form.

Cost control is a feature of decentralized, competitive markets, not of centralized bureaucracy—a matter of incentives, not mandates. What's more, cost control is dynamic. Even the simplest business faces constant variation in its costs for labor, facilities, and capital; to compete, management must react quickly, efficiently, and, most often, prospectively. By contrast, government bureaucracies set regulations and reimbursement rates through carefully evaluated and broadly applied rules. These bureaucracies first must notice market changes and resource misallocations, and then (sometimes subject to political considerations) issue additional regulations or change reimbursement rates to address each problem retrospectively. . .

Many reformers believe if we could only adopt a single-payer system, we could deliver health care more cheaply than we do today. The experience of other developed countries suggests that's true: the government as single payer would have lower administrative costs than private insurers, as well as enormous market clout and the ability to bring down prices, although at the cost of explicitly rationing care.

But even leaving aside the effects of price controls on innovation and customer service, today's Medicare system should leave us skeptical about the long-term viability of that approach. From 2000 to 2007, despite its market power, Medicare's hospital and physician reimbursements per enrollee rose by 5.4 percent and 8.5 percent, respectively, per year. As currently structured, Medicare is a Ponzi scheme . . .


In 2007, health companies in the Fortune 1,000 earned $71 billion. Of the 52 industries represented on Fortune's list, pharmaceuticals and medical equipment ranked third and fourth, respectively, in terms of profits as a share of revenue. From 2000 to 2007, the annual profits of America's top 15 health-insurance companies increased from $3.5 billion to $15 billion.

In competitive markets, high profits serve an important social purpose: encouraging capital to flow to the production of a service not adequately supplied. But as long as our government shovels ever-greater resources into health care with one hand, while with the other restricting competition that would ensure those resources are used efficiently, sustained high profits will be the rule.

Health care is an exceptionally heavily regulated industry. Health-insurance companies are regulated by states, which limits interstate competition. And many of the materials, machines, and even software programs used by health-care facilities must be licensed by state or federal authorities, or approved for use by Medicare; these requirements form large barriers to entry for both new facilities and new vendors that could equip and supply them.

Many health-care regulations are justified as safety precautions. But many also result from attempts to redress the distortions that our system of financing health care has created. And whatever their purpose, almost all of these regulations can be shaped over time by the powerful institutions that dominate the health-care landscape, and that are often looking to protect themselves from competition.

Take the ongoing battle between large integrated hospitals and specialty clinics (for cardiac surgery, orthopedics, maternity, etc.). The economic threat posed by these facilities is well illustrated by a recent battle in Loma Linda, California. When a group of doctors proposed a 28-bed private specialty facility, the local hospitals protested to the city council that it was unnecessary, and launched a publicity campaign to try to block it; the council backed the facility anyway. So the nonprofit Loma Linda University Medical Center simply bought the new facility for $80 million in 2008. Traditional hospitals got Congress to include an 18-month moratorium on new specialty hospitals in the 2003 Medicare law, and a second six-month ban in 2005. . . .

Our Favored Hospitals

In 1751, Benjamin Franklin and Dr. Thomas Bond founded Pennsylvania Hospital, the first in America, "to care for the sick-poor and insane who were wandering the streets of Philadelphia." Since then, hospitals have come to dominate the American medical landscape. Yet in recent decades, the rationale for concentrating so much care under one roof has diminished steadily. Many hospitals still exist in their current form largely because they are protected by regulation and favored by government payment policies, which effectively maintain the existing industrial structure, rather than encouraging innovation.

Between 1970 and 2006, annual Medicare payments to hospitals grew by roughly 3,800 percent, from $5 billion to $192 billion. Total annual hospital-care costs for all patients grew from $28 billion to almost $650 billion during that same period. Since 1975, hospitals' enormous revenue growth has occurred despite a 35 percent decline in the number of hospital beds, no meaningful increase in total admissions, and an almost 50 percent decline in the average length of stay. High-tech equipment has been dispersed to medical practices, recovery periods after major procedures have shrunk, and pharmaceutical therapies have grown in importance, yet over the past 40 years, hospitals have managed to retain the same share (roughly one-third) of our nation's health-care bill. . .

You Are Not the Customer

What amazed me most during five weeks in the ICU with my dad was the survival of paper and pen for medical instructions and histories. In that time, Dad was twice taken for surgical procedures intended for other patients (fortunately interrupted both times by our intervention). My dry cleaner uses a more elaborate system to track shirts than this hospital used to track treatment.

Not every hospital relies on paper-based orders and charts, but most still do. Why has adoption of clinical information technology been so slow? Companies invest in IT to reduce their costs, reduce mistakes (itself a form of cost-saving), and improve customer service. Better information technology would have improved my father's experience in the ICU—and possibly his chances of survival.

But my father was not the customer; Medicare was. And although Medicare has experimented with new reimbursement approaches to drive better results, no centralized reimbursement system can be supple enough to address the many variables affecting the patient experience. Certainly, Medicare wasn't paying for the quality of service during my dad's hospital stay. And it wasn't really paying for the quality of his care, either; indeed, because my dad got sepsis in the hospital, and had to spend weeks there before his death, the hospital was able to charge a lot more for his care than if it had successfully treated his pneumonia and sent him home in days . . .

Keeping prices opaque is one way medical institutions seek to avoid competition and thereby keep prices up. And they get away with it in part because so few consumers pay directly for their own care—insurers, Medicare, and Medicaid are basically the whole game. But without transparency on prices—and the related data on measurable outcomes—efforts to give the consumer more control over health care have failed, and always will. . .

It's astonishingly difficult for consumers to find any health-care information that would enable them to make informed choices—based not just on price, but on quality of care or the rate of preventable medical errors. Here's one place where legal requirements might help. But only a few states require institutions to make this sort of information public in a usable form for consumers. So while every city has numerous guidebooks with reviews of schools, restaurants, and spas, the public is frequently deprived of the necessary data to choose hospitals and other providers.

The Strange Beast of Health-Care Technology

One of the most widely held pieces of conventional wisdom about health care is that new technology is relentlessly driving up costs. Yet over the past 20 years, I've bought several generations of microwave ovens, personal computers, DVD players, GPS devices, mobile phones, and flat-screen TVs. I bank mostly at ATMs, check out my own goods at self-serve supermarket scanners, and attend company meetings by video­conference. Technology has transformed much of our daily lives, in almost all cases by adding quantity, speed, and quality while lowering costs. So why is health care different?

Well, for the most part, it isn't. Whether it's new drugs to control previously untreatable conditions, diagnostic equipment that enhances physician productivity, or minimally invasive techniques that speed patient recovery, technology-driven innovation has been transforming care at least as greatly as it has transformed the rest of our lives.

But most health-care technologies don't exist in the same world as other technologies. . .

The history of LASIK fits well with the pattern of all capital-intensive services outside the health-insurance economy. If you're one of the first ophthalmologists in your community to perform the procedure, you can charge a high price. But once you've acquired the machine, the actual cost of performing a single procedure (the marginal cost) is relatively low. So, as additional ophthalmologists in the neighborhood invest in LASIK equipment, the first provider can meet new competition by cutting price. In a fully competitive marketplace, the procedure's price will tend toward that low marginal cost, and ophthalmologists looking to buy new machines will exert downward pressure on both equipment and procedure prices. . .

But Certificates of Need are just another Scotch-tape reform, an effort to maintain the current system by treating a symptom rather than the underlying disease. Technology is driving up the cost of health care for the same reason every other factor of care is driving up the cost—the absence of the forces that discipline and even drive down prices in the rest of our economy. Only in the bizarre parallel universe of health care could limiting supply be seen as a sensible approach to keeping prices down.

The Limits of "Comprehensive" Health-care Reform

A wasteful insurance system; distorted incentives; a bias toward treatment; moral hazard; hidden costs and a lack of transparency; curbed competition; service to the wrong customer. These are the problems at the foundation of our health-care system, resulting in a slow rot and requiring more and more money just to keep the system from collapsing.

How would the health-care reform that's now taking shape solve these core problems? The Obama administration and Congress are still working out the details, but it looks like this generation of "comprehensive" reform will not address the underlying issues, any more than previous efforts did. Instead it will put yet more patches on the walls of an edifice that is fundamentally unsound—and then build that edifice higher. . .

All of these initiatives have some theoretical appeal. And within the confines of the current system, all may do some good. But for the most part, they simply do not address the root causes of poor quality and runaway costs. . .

A Way Forward

The most important single step we can take toward truly reforming our system is to move away from comprehensive health insurance as the single model for financing care. And a guiding principle of any reform should be to put the consumer, not the insurer or the government, at the center of the system. I believe if the government took on the goal of better supporting consumers—by bringing greater transparency and competition to the health-care industry, and by directly subsidizing those who can't afford care—we'd find that consumers could buy much more of their care directly than we might initially think, and that over time we'd see better care and better service, at lower cost, as a result.

A more consumer-centered health-care system would not rely on a single form of financing for health-care purchases; it would make use of different sorts of financing for different elements of care—with routine care funded largely out of our incomes; major, predictable expenses (including much end-of-life care) funded by savings and credit; and massive, unpredictable expenses funded by insurance. . .

In fact, as a result of our fraying insurance system, you can already see some nascent features of a consumer-centered system. Since 2006, Wal-Mart has offered $4 prescriptions for a month's supply of common generic medications. It has also been slowly rolling out retail clinics for routine care such as physicals, blood work, and treatment for common ailments like strep throat. Prices for each service are easily obtained; most are in the neighborhood of $50 to $80. Likewise, "concierge care," or the "boutique" style of medical practice—in which physicians provide unlimited services and fast appointments in return for a fixed monthly or annual fee—is beginning to spread from the rich to the middle class. Qliance Medical Group, for instance, now operates clinics serving some 3,000 patients in the Seattle and Tacoma, Washington, areas, charging $49 to $79 a month for unlimited primary care, defined expansively. . .

All of the health-care interest groups—hospitals, insurance companies, professional groups, pharmaceuticals, device manufacturers, even advocates for the poor—have a major stake in the current system. Overturning it would favor only the 300 million of us who use the system and—whether we realize it or not—pay for it. Until we start asking the type of questions my father's death inspired me to ask, until we demand the same price and quality accountability in health care that we demand in everything else, each new health-care reform will cost us more and serve us less. . .

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9.   The Health Plan for the USA: What went wrong and why Obama can't fix it.

The socialized health plans of the various countries have evolved over cross-purposes in history. The radical left has always utilized societal problems to force their agenda. The agenda implemented seldom solves the problem and frequently makes the situation worse. But unfortunately, this changes the course of freedom and history and reverts us backward to a more oppressive government, which has been the history of government throughout all ages. The main exception was when our grandparents left such an oppressive government and while memory still served them, embarked on a new course in history. After several failed attempts at the formation and open debate of charting the course of the new nation, with their oppression still in memory, our forbearers were able to establish the Constitution of the United States of America that has served us well for 150 years.

The first severe manipulation of the status quo came in the 1930s when the "powers that be" felt people weren't able to save for their retirement and families shouldn't have to be concerned about disabilities. Although our families were quite capable of doing so, there were always many that were unable to plan. Rather than letting their own inaction be the lesson that changes their course of thinking, planning, and continuation of the march of freedom, the government of FDR felt there were some people so inferior and incapable of learning or planning, that the government had to do this for them. And thus Social [In]Security was born. No more could there be an objective appraisal of our history gone awry, but instead only anxiety prevailed, less anyone might bring some common sense into it. The people were so panicky over what might happen, they effectively inserted a third and fatal rail in the Social [In]Security program. No president could even think of a rational discussion of this topic and get elected by losing those thirty million plus of non-objective votes. Also, no country has ever been able to re-implement the freedom that our grandparents accomplished in these United States of America.

In the US, in order to avoid the liability of hospital care, most of our families purchased Blue Cross. They purchased Blue Shield to pay the surgical fees should we require expensive surgery. All other health care charges were paid for in cash or checks. However, LBJ, a very pro-government, ambitious president in the 1960s, leaning on the program of the previous assassinated president, utilized the fact that some Americans couldn't plan their health care. He used the subterfuge that many people would not have the decade-old item called Blue Cross and believed he could force everyone to have government provide and pay for health care. With a receptive Congress, he was able to obtain his agenda for the aged. He knew that socialism would spread incrementally and would never be reversed. Thus Medicare was born and grew phenomenally, exceeding all cost projections. It required new laws to fulfill the promises made. Most of our parents thought this was an anomaly that would disappear and kept paying their BC-BS premiums. I was in medical school and my student policy cost $25 a quarter, but my father said it was important insurance to have and helped me pay for it. My family also had White Cross, a competitor in those days, since health care was so important to our extended family that we didn't want any gaps in coverage.

Most of our parents, after several years of paying for private insurance, finally decided this monstrosity called Medicare would not disappear and eventually stopped paying their BC-BS premiums and became slaves to the will and whims of Congress. Freedoms lost are seldom regained.

The poor people always had good health care coverage in the various city, county and community hospitals across our nation. The best University Medical School doctors and their interns and residents staffed these hospitals and provided excellent care to all the poor and indigent. Every day and evening it was a regular camaraderie in the large waiting rooms, as the poor gathered round and waited for us to see them. They were the most appreciative patients I had ever seen. Many tried to slip money into our pockets which we, of course, always declined telling them it was a privilege to be able to help them. 

In the small town where I grew up, there were several poor families. The two family doctors in town always saw them without charge. Many wanted to give a small token of appreciation and the doctors felt this made the poor feel as true participants. As I recalled, not only did these two doctors see them in the hospital should they need such care, the hospitals provided their care without significant cost to the patient. Charity can make everyone feel good about themselves and others.

One of the main arguments has always been that there are people uncovered by health insurance and thus don't have health care. These are not synonymous. But the same argument of the 1960s and the argument today refer to a totally different population of people. If you'll refer to the graph below you will see the fallacy in the arguments used by the Obama administration.

Since the 1960s, we have covered all the seniors over age 65. Hence, the net is complete and no one can fall through it. We have covered poor people and the net is secure and no one can fall through it. If we define the poor as the unfortunate 12 to 15 percent of society, they are all covered. Many states have redefined the poor to provide ammunition for increased social spending and control. In some states, the poor may be a family of four with $88,000 of income. This is over $7,000 per month. Most of us would think that if we made $7,000 a month, we should be able to use ten percent and afford a basic hospital and surgery plan for $700 a month. The problem is that many no longer can think in terms of health insurance as insurance but rather as a prepayment plan for the small items and that is why it’s $1200 a month on average. This would be tantamount to buying car insurance and expecting it to pay for gas, lube, headlamps, batteries, tires and brakes. If we purchased such a policy, it would be at least four or five times as expensive as our current car insurance. Thus, a health insurance policy to cover strokes, heart attacks, cancer, and other types of surgery will be only a fraction of what most Americans have come to think of as health insurance - anything with a medical aspect. Remember when people clamored that their pharmacy plan should cover vitamins, minerals, ear drops, eye drops and pain pills? Or that their medical plan should cover their knee brace, hernia belts, trimming their toenails or paying for the "W" compound to remove warts, papillomata and other small lesions that grandma used to take care of for us? Remember the folks that tried to say, "If you don't pay for the liposuction or breast job or face lift, my self image will be damaged and I might go into a depression?" There is no end to these extensions of health care if we just let our imaginations go into free association.

The current US Health Programs





































































































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Age >65








































































































































































Text Box: Covered by VA:  Disability -- Retirement







































Text Box: Covered by Medicare Disability -- Any Age




















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The current health care debate is focused on the Red Zone of working people who have or could afford health insurance, and still are not covered. Many stories are given of the people making $50,000 or $75,000 a year and can't afford health insurance. In the last few months, many Americans making $100,000 a year have surfaced as being without health insurance. One story in our local paper presented a doctor's son as being without health insurance because he couldn't afford to purchase any. Forcing them to have health insurance probably may well be ruled unconstitutional.

The whole Obama, Pelosi, and Reid debate this year has not focused on the real health care issues. It's time to go from a vertical industry to a horizontal industry, just like the transition from the Main Frame computers to the Personal Computer. If Reagan would have done to the people who lost their jobs at the main frame factories what Obama did with the auto industry factory workers spending $150,000 per job saved, we would never have had the computer revolution. Obama may have obstructed the car revolution from the Big Three and moved to a horizontal electric car industry that would have solved our transportation problems, dependence on oil from the Mid East, global warming, emission control and may have made cars more affordable.

We will continue the discussion in this section of how Obama may have eliminated true reform by preventing the transformation of the health care industry from a vertical hospital-based system to a horizontal outpatient system with 800,000 individual private practices, diagnostic facilities and laboratories competing to give us the lowest cost in health care, far exceeding the political forces now being implemented.

Don't miss the continuation of this series in the next issue. Enter your email address and be sure to get the next issue  . . .

[Why the Health-Care Bills are Unconstitutional by Orrin Hatch, Kenneth Blackwell and Kenneth A. Klukowski - WSJ]  

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10.  Restoring Accountability in Medical Practice by Non-Participation in Government Programs and Understanding the Unintended Consequences of Government

·                     The Writings and Speeches of Gerry Smedinghoff: Gerry Smedinghoff is an actuary, whose writings have appeared in a wide variety of newspapers, business and professional publications. He appeared on the nationally syndicated PBS television program Health Week, and speaks frequently to professional and general interest audiences. His skydiving career resulted in the first actuarial analysis of skydiving safety, including several newspaper editorials that helped defeat a bill in the Nevada state legislature to regulate the sport in 1999. Gerry has also run marathons in 17 states and four countries. Be sure to sample some of his health care messages, such as Why All Health Care Reform Measures Are Doomed To Fail or The Future of Employer-Sponsored Health Care.

·                     MediBid - The Medical MarketPlace.  MediBid meets the needs of both patients and doctors. Patients can find a doctor in their area or around the world for their elective surgery and for routine health maintenance. Doctors on MediBid are able to set their own prices based on the needs of a patient. No third-party payer system here. MediBid helps you find new patients and enhance your practice at the same time. You name the terms of your medical rates and the patient pays you directly. If the opaque 'insurance transparency' system is ruining your budget, give MediBid a try. Your bid can be your standard rate or custom tailored to meet the medical needs of the patient. You can offer a medical travel program and include transportation from the airport, or simply include labs and anesthesia. MediBid is much more than a directory or medical tourism facilitator. Your medical practice marketing dollars go toward direct contact. MediBid is the solution to everything you don't like about healthcare.

·                     Medicine and Liberty - Network of Liberty Oriented Doctors,, Alphonse Crespo, MD, Executive Director and Founder
Medicine & Liberty (MedLib) is an independent physician network founded in 2007, dedicated to the study and advocacy of liberty, ethics & market in medical services.
  - We support professional autonomy for doctors and liberty of choice for patients
  - We uphold the Hippocratic covenant that forbids action harmful to the patient
  - We defend responsible medical practice and access to therapeutic innovation free from
      bureaucratic obstruction
  - We work towards a deeper understanding of the role and importance of liberty & market in
      medical services
MedLib is part of a wide movement of ideas that defends
   - the self-ownership principle & the property rights of individuals on the products of their
      physical and intellectual work
   - free markets, free enterprise and strict limits to the role of the State

·                     Entrepreneur Country. Julie Meyer, CEO of Ariadne Capital, recently launched Entrepreneur Country. Read their manifesto for information:  3. The bigger the State grows, the weaker the people become - big government creates dependency . . .  5. No real, sustainable wealth creation through entrepreneurship ever owed its success to government . . .  11. The triple play of the internet, entrepreneurship, and individual capitalism is an unstoppable force around the world, and that Individual Capitalism is the force that will shape the 21st Century . . .  Read the entire  manifesto . . .

·                     Americans for Tax Reform,, Grover Norquist, President, keeps us apprised of the Cost of Government Day® Report, Cost of Government Day (COGD) is the date of the calendar year on which the average American worker has earned enough gross income to pay off his or her share of spending and regulatory burdens imposed by government on the federal, state and local levels. Cost of Government Day for 2009 was August 12th, a full 26 days longer than last year. Working people must toil on average 224 days out of the year just to meet all costs imposed by government - a full 26 days longer than last year. In other words, the cost of government consumes 61.34 percent of national income. If we were to put health care into the public trough, the additional 18 percent would allow the government to control 80 percent, or a little more than three-fourths, of our productivity and destroy our health care in the process. We would have almost no discretionary income. Read the full report.

·                     National Taxpayer's Union,, Duane Parde, President, keeps us apprised of all the taxation challenges our elected officials are trying to foist on us throughout the United States. To find the organization in your state that's trying to keep sanity in our taxation system, click on your state at

·                     Evolving Excellence - Lean Enterprise Leadership. Kevin Meyer, CEO of Superfactory, has started a newsletter that impacts health care in many aspects. Join his evolving excellence blog . . .  Excellence is every physician's middle name and thus a natural affiliation for all of us.  This month read his The Customer is the Boss at FAVI "I came in the day after I became CEO, and gathered the people. I told them tomorrow when you come to work, you do not work for me or for a boss. You work for your customer. I don't pay you. They do. . . . You do what is needed for the customer." And with that single stroke, he eliminated the central control: personnel, product development, purchasing…all gone. Looks like something we should import into our hospitals. I believe every RN, given the opportunity, could manage her ward of patients or customers in similar lean and efficient fashion.

·                     FIRM: Freedom and Individual Rights in Medicine,, Lin Zinser, JD, Founder, researches and studies the work of scholars and policy experts in the areas of health care, law, philosophy, and economics to inform and to foster public debate on the causes and potential solutions of rising costs of health care and health insurance.

·                     Ayn Rand, a Philosophy for Living on Earth,, is a veritable storehouse of common sense economics to help us live on earth. To review the current series of Op-Ed articles, some of which you and I may disagree on, go to

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Words of Wisdom

Government is the great fiction, through which everybody endeavors to live at the expense of everybody else. -Frederic Bastiat, French Economist (1801-1850)

Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it. -Ronald Reagan (1986)

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January in History

Henry Ford announced a $5 minimum wage for an eight-hour day. Two revolutionary concepts in one day: an 8-hour working day and a $5 minimum wage for eight hours of work. Please note that industry has the worker's welfare at heart. A similar action by government is simply purchasing votes.

Wilhelm Roentgen discovered the x-ray. A diagnostic miracle we now take for granted that has reduced invasive surgery dramatically to only that which is necessary.

The twelfth night ends the 12 days of the Christmas Season and the beginning of the Gentile Christmas.