JustinIdea

Controlling Rising Health Care Costs - Give the Power to the People

Right now, Democrats and Republicans in Washington, D.C. are fighting over what type of system the United States should use to control skyrocketing health care costs.  I thought I would do some digging to see which plan will actually reduce costs.

The Plans:
    Democrats - Government-insured (especially a push for single-payer) health care
    Republicans - Private insurance and government out of the picture

I went digging and using data from the Center for Medicare and Medicaid Services, I found that the plans put forward by both the Democrats and Republicans will fail at controlling costs.  Costs have been rising even though Medicare, Medicaid, and private health insurance have been insuring a larger proportion of American's medical care since 1960, when the Great Society programs and employer- based health insurance really started to take-off.  If the given plans would save money, then the domination by government and private insurance should have already started yielding cost savings.  Instead, costs have been skyrocketing.
 
So I kept digging to see if there was any granule of data that would show me anything about why health care costs have been rising.  The devil was in the details. 

What are both plans missing?  The power of the consumer.  Insurance, whether government or privately-run, fails to contain costs.  Food is more important than health care, yet we don't need to buy food insurance to ensure every American is fed.  Since World War II, Americans have been relying more heavily on insurance than ever before to pay for health care.  

Digging through the data, I found that as Out-of-Pocket payments for health care have decreased as people shifted to insurance (both private and public), while health care costs soared and the types of health care paid for have stayed relatively stable.
  
The system that we have that is based-on insurance is the problem.  In order to lower health care costs, we need to get insurance (except for catastrophic) out of the picture and have consumers pay for their own health care.  Then everyone will be able to afford their own health care, on their own.

In order to create the system, the Federal Government will need to:

1. Tax employer-sponsored health insurance (to stop distorting the market)
2. limit federally-financed health care to Medicare for the elderly (they deserve to be paid-back for the money they put-in).
3. give Medicare beneficiaries accounts with pre-determined amounts of money to spend on health care that they can then use to shop around for non-catastrophic health care use (and this is what they're limited to).  Then give them catastrohpic coverage to cover the balance.
4. Make sure direct primary care providers are not defined as insurance companies for Medicare patients
5. Make illegal the practice of insurance companies limiting their payments to doctors within their "network", which is anti-competitive and hurts consumers.

State Governments that are serious about controlling health care costs will also make sure direct primary care providers, such as Qliance, are not defined as insurance companies.

Instituting these programs will take the incentive away for people to get insurance and will give the power of their health care decisions back to the American people.

For more info, check out:
"How to Cure Health Care" by Milton Friedman

Related Articles:
If Food Doesn't Require Insurance, Health Care Doesn't Require Insurance

Utilitarianism is Slavery, Individualism is Freedom

I can get into some fairly intense debates with a few friends of mine that subscribe to the utilitarian ethic, since I am an ardent individualist.  So I've been thinking about how to best show the fundamental flaw of utilitarianism and why individualism is the view I subscribe to.

It all comes down to the fact that utilitarianism is slavery.  When you use a utilitarian philosophy, you work on creating the greatest good for the greatest number, which means that whoever is doing the deciding of what the greatest good is and who the greatest number are is in essence playing god by controlling what everyone else can do and everyone that they control is their slave.  This person doesn't need to be a big man either; it can be a small group or a majority of the people as well.

For example, let's say we have a group of people that want to go to war and another group of people that don't want to.  The reason those that want to go to war are for it is to get the other nation's resources and to expand.  Right now, the ones that want to go to war are in the majority, and since everyone that is part of the group needs to go to war (as in be enlisted in the military and see combat), then those in the minority are a slave to the opinion of the majority, and must go along with it, even if they object to it.  Under individualism, the majority would not be able to force the minority to go to war.  They would have to go to war by themselves and could not enslave the minority for their aims.

This is just one example, but anytime you use the utilitarian ethic, you are saying that the individual is a slave of the group's opinion, whether the group is a nation, a company, or a group of peers exerting pressure.  This is exactly why the United States is a republic and not a democracy.  Democracy is tyranny of the majority, while a republic protects the Rights of the minority. 

Since slavery was abolished in the United States with the Thirteenth Amendment, why are people in the United States still trying to enslave individuals by using the utilitarian ethic?  Only individualism provides true freedom.

Break-up Big Banks to Increase Shareholder Value and Reduce Systemic Risk

Since before the Federal Government decided to get in the game of bailing-out the banks last fall, I've been of the opinion that it would be better for the Federal Government to not let banks get too big to fail and to break them up into smaller pieces when they get too big, so they don't become a systemic risk, instead of bailing them out.  After Microsoft was being threatened with being broken-up, I saw the fallacy in trying to break-it-up into two or three monopolies instead of 5-10 competing companies, like when Standard Oil was broken-up.  While pondering this possibility for banks, I realized that breaking-up big banks into smaller banks might also have additional huge benefits to both the bank shareholders, the financial system, and taxpayers.

Rules of the System
Here are some general rules that would guide the benefits of this system:

1. Banks too big to fail, maybe $500billion+ in assets, will be broken into  banks with $100-200 billion in assets
2. The "Child" banks are not allowed to merge with nor acquire other child banks for 5-10 years (unless they are being liquidated), but they may merge with and acquire non-child banks (non-child banks do not include the children of other big banks that were broken-up, those are still child banks).
3. All child banks of a given parent bank, will each get the same systems, procedures, and technologies that their parent had, just like if the parent was a bacteria and duplicated itself into a bunch of children.  This way they all face a level playing field, with their siblings.
4. The shareholders in the parent bank, get equal shares in each of the child banks.

Benefits to Bank Shareholders
First to the bank shareholders, because any move should make sure the shareholders can see their return increased.  Big banks like any big company will come against the law of large numbers and have their growth stall once they become huge, since as they grow larger, the amount of revenue growth they need in order to increase their returns grows along with their new revenue levels.  Small banks don't face this limitation.  Therefore, the children of the best run big banks will be able to grow faster than their parent by acquiring, absorbing, and instituting their best practices into other banks.  Giving shareholders a stake in each will allow the shareholders to see their returns potentially increase at a much faster clip, while at the same time spreading their risk.  For example, JP Morgan and Wells Fargo shareholders could see huge gains in shareholder value by having this system adopted, because both banks are incredibly well-run. (Full disclosure, I've had family members work at Wells Fargo and I own stock in it through a family, stock partnership.  Also I have a good friend at JP Morgan. :)

Benefits to the Financial System
Second to the financial system, because we don't want the system to come crashing down around us.  The big banks that are not run well, when broken into smaller pieces, will have their bad pieces go under, because the smaller, bad banks won't be able to spread their risk over a larger bank and hide their troubles.  This will provide more room for the well-run banks to grow.  What then happens is the bad practices are destroyed faster and the good practices are able to grow faster, which leads to greater productivity growth and a more stable system overall, especially since the bad banks are reduced to banks that won't damage the overall system after they eventually fail.

Benefits to Taxpayers
Finally to the taxpayers, since the banks that are too big to fail will be broken-up, there will no longer be a need for bailouts, ever, which will save us hundreds of billions if not trillions of dollars in the future.  No more Citi's, Bank of America's, and AIG's will be sinkholes for our money. 

Turning-up the dial on creative destruction can be a great thing.

Is There a Constitutional Problem with Corporate Personhood?

I remember from my business, government, and society class (MGMT 320) at UW that we discussed how laws in the United States had evolved to count corporations as People, which also gave them the Rights that the Citizens of the United States have.  A thought just crossed my mind that made me wonder if the way corporate personhood is currently structured might violate The Constitution.

Amendment XIII

Section 1.

Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.

Section 2.

Congress shall have power to enforce this article by appropriate legislation.

Now corporations have "owners" that are its "shareholders", which is where the problem potentially exists.  If

1. corporations are People and have the same Rights as other People that are outlined in The Constitution,
2. "slavery" means that a person is owned by one or more other persons or entities, and
3. slavery is illegal in the United States, then...

isn't it illegal for corporations to have "owners" since most corporations haven't committed a crime to warrant being enslaved or put into involuntary servitude?

It would seem from this predicament that either corporations cannot have owners or that corporations should not be granted full personhood, because of this constitutional problem.  Here's the Wikipedia article for more history on corporate personhood and how it has specifically developed in the United States.