WCShort.com

Been awhile...but I have been busy

2008-09-16T12:14:00.000-07:00

Here is a link to my latest article...
http://www.morningsun.net/community_opinions/x2090110471/Oil-Housing-and-Health-Care

Updated Post...more goodness

2008-07-21T13:40:00.000-07:00

There is a little dark secret that is sitting in the background behind the rise of the price of oil, the falling dollar and its inflationary consequences.

When the dollar falls against other currencies, it literally costs more dollars to purchase goods from other countries. That means that if you are looking to buy a BMW, for example, it will cost more dollars if the dollar falls against the euro and it will cost less if the dollar rises against the euro. The same is true of all foreign goods, including oil.

Why is the dollar falling? A very big reason for this is the housing credit crunch that we are currently going through. The Federal Reserve’s response to this is an effort to prevent a 'financial meltdown' by lowering interest rates and increasing the amount of dollars in the system. The problem with this approach is twofold. First, the Fed’s manipulation of interest rates is the source of flawed market signals in the first place. Lowering them further will only result in additional loans to those who could not afford them under normal circumstances, and therefore potentially more defaults. On top of that, more dollars always equals higher inflation.

A huge part of the credit crisis in this country is because of the incentives created by exactly such tinkering with the market. The individuals that were issuing the loans had very little incentive, if any, to ensure that the borrowers were actually credit worthy. Instead, they had the incentive to ‘churn and burn’ as many loans as possible. The buyers of these loans were eager to get as many loans as possible because a large pooled loan market existed. Once the markets stopped buying these ‘sub-prime’ loans and the originator of the loans started closing shop, however, a situation developed where a lot of credit was issued on assets that were not retaining their value on the open market. A credit crisis, in other words.

As is too often the case, the government’s response to a crisis created by market intervention is more intervention. Instead of letting the markets run the Fed has stepped in and lowered rates in order to 'soften the blow' of the imploding housing market it fostered.

This involvement by the Fed has serious consequences. One of these is the rise of oil prices. Granted, the rise of oil prices is not to be completely blamed on a weak dollar because other factors such as growing demand and limited supply play significant roles in our current situation.

The market has no emotion and action taken to off-set a market correction of government manipulation will be amplified in a different sector. If the market’s attempts to rectify previous errors is prevented from following its course, then the problem will only grow worse. In the case of the Fed’s response to the housing crisis, the supposed “solution” will further hamper growth and productivity across the market.

Health care is another example of where the government’s efforts to give us something for nothing will only backfire. As in the housing market, if the incentives in the health care industry are not aligned toward what market signals indicate, the results will be catastrophic. In the case of universal coverage, for instance, the perverse side effect will likely be that while coverage may exist for all, it will be at the expense of both the quality of and access to care. Just as the market could not support individuals that made $80,000 a year purchasing a million dollar home, the market will not be able to support free health care for all.

Many will comment that the rising price of oil, the housing credit crunch, and health care are independent of each other in terms of scope. However, it is my opinion that they all represent the same common flaw that is creeping into our society; a theme that resonates a tune of everyone is the victim and the only entity that can save us is the government. The cries for justice scream out when individuals feel victimized at the gas pump because their SUV manages a measly 8 miles to the gallon. Mobs rally demanding justice when their interest only non-conforming mortgages begins to rebound from historic lows believing that evil men in suits are putting the screws on their over leveraged self indulging lives. Those very faceless individuals suffering from type II diabetes that they propagated with each piece of candy or bowl of ice cream that they have convinced themselves they had earned have developed an entitlement that access to the wonders of modern medicine as their right.

All three of these examples exist in today’s society because the incentives of individuals are not aligned for a long-term efficient solution leaving a violent market correction and its rippling effects land soundly on the shoulders of the tax paying worker bee in the form of government instead of leaving it in the hands of the individual. The market if allowed to run its course will always find the most efficient solution over time. In the short-term markets may behave irrational and violently with great opportunities for tremendous gain and gigantic loss but in the long run the market with be a smooth slope that at a distance masks any dramatic changes. Unfortunately, we as a society have decided that we only want markets to run efficiently when tremendous gain is to be made and when the ‘bottom begins to fall out’ we look at the government to save us; creating a solution where benefits of long term market solutions are squeezed.

Healthcare unlike my other two examples provides and even more dramatic situation because of the fear stigma associated with individuals ‘going with out’ care could end up dead and as a civilized society we have decided we cannot allow for that to happen. Therefore, it is even more important that as a society we create an environment where individuals have the incentive to not only to take an interest, may it purely be a financial interest, in their health and well-being as well as cater to those individuals who are advancing the achievements of modern medicine. For example, American medicine has reached such a point of achievement because of a mentality of ‘doing well by doing good’ that huge medical crisis engulfs this country because individuals are obese (only in America where as a society we have so much wealth that the lower classes have a higher percentage of obesity which is tribute to our countries success and excess) and require a tremendous amount of resource from the medical system to maintain a life that allows for them to continue to over eat with little to none acceptance of personal responsibility for their current situation. Our duly elected officials present this infection of victimization as a problem that can only be addressed by more government interference that requires price controls and what will become rationing in a socialized system. One just has to look to our neighbors to the north and south to see what ill effects a socialized healthcare system will mean for the very ‘public’ is was initially installed to serve and ‘protect.’ For better or worse all living creatures require incentive to do anything; for example, a squirrel is incentives to bury acorns for the coming winter to survive for humans we have evolved to value pieces of paper with dead leaders printed on the front to embody our motivation. Individuals that enter the healthcare industry may they be nurses, doctors, chemists, and/or large entities filled with individuals that spend their lives developing medical solutions with the goal of ‘doing well by doing good,’ should be given the proper incentives through market forces to compete to deliver new and more efficient solutions to the marketplace that will improve the quality of life not just in this country but on this planet and be financial rewarded as determined by the market for what they produce. However, we are constantly being told that it isn’t ‘fair’ the cost of a life saving drug and it isn’t fair that a physician who went to school well into their thirties and have dedicated their lives to saving others earns a six figure salary yet we are quick to accept that actors and professional athletes who exist to entertain command seven, eight, and even nine figure pay days. I enjoy watching baseball and has a believer in the wisdom of markets relish in the fact that a man can make hundreds of millions of dollars to play a game, which I accept as an individual because that ball player can command such a payday because he has a skill the market has deemed to be worthy of such financial reward but we are quick to put a cheap value on life when we cry out that a ER doctor’s pay should be regulated by an independent third party; I would love to see that doctor try to hit a change-up but I would hate to witness that ballplayer scramble to save an eight year old child suffering from multiply gun shot wounds; we claim we should not put a value on life but we as a society we constantly discount it through inefficient third party intervention.

In a free society choices need to be directed by the choices made by the individual and with those choices consequences must be allowed to run there coarse. The role of government should remain as the great referrer only to protect the integrity of the markets but never deciding the out come of the ‘game’ being played.

“Those that are quick to sign away their freedoms for a since of security…loose both” ~Cato the Elder

The housing crunch and possibly the oil crisis should serve as a sobering reminder of what we may yet see in the health care sector should plans for universal coverage move forward. The American Dream may be everyone owning their own home, but the American nightmare could easily be foreclosures to access to needed care.

Oil, housing credit crunch, and health care same story...

2008-05-26T19:00:00.000-07:00

There is a little dark secret that is sitting in the background behind the rise of the price of oil, the falling dollar and its inflationary consequences. For example, when the dollar falls against other currencies it literally costs 'more' dollars to purchase goods from other countries. Therefore, if you are looking to buy a BMW it will literally cost more dollars to purchase if the dollar falls against the euro and it will cost 'less' dollars if the dollar rises against the euro. The first step in our discussion revolves around the dollar falling against other currencies creating a situation where foreign goods, including foreign oil, requires 'more' dollars to purchase. Why is the dollar falling? A very big reason for this is the housing/ credit crunch that we are currently going through and the attempt by the Fed to curtail a 'financial meltdown' by lower rates and increasing the amount of dollars in the system; more dollars equals inflation.

A huge part of the credit crisis in this country is because the incentives of those issuing loans and those that were buying the loans, packaging the loans, and then selling them off to investors were not in line. The individuals that were issuing the loans had very little incentive, if any, to actually ensure that the borrowers were actually credit worthy but rather they had the incentive to ‘churn and burn’ as many loans as possible. The buyers of these loans were eager to get as many loans as possible because a large pooled loan market existed; however, once the markets stopped buy these ‘sub-prime’ loans, and the originator of the loans started closing shop a situation was created where a lot of credit was issued on assets that were not retaining their value on the open market aka a credit crisis. Instead of letting the markets run and those ‘that got caught with their hands in the cookie jar’ pay a price the fed has stepped in andlowered rates in order to 'soften the blow' of the housing market imploding. This involvement by the Fed does have consequences, which is being highlighted by the rise of oil. Granted the rise of oil is not to be completely blamed on a weak dollar because other factors, like growing demand, supply not being able to keep up, and the fact that a new refinery has not been built in this country for 20 years all have played vital roles in our current situation.

The market has no emotion and action that is taken to off-set a market correction will be amplified in a different sector. People need to take responsibility for their choices because the alternative will be a solution that will prove to be managed by a select few (in our example the fed) creating a situation where a supposed solution will only hamper growth and productivity (the effects of a central planning authority). Health care is another example of what people have come to believe should be a free indemnity but many fail to realize that if the incentives are not aligned for all involved parties coverage may exist for all at the expense of quality of care/ access to care. The market could not support individuals that made $80k a year in a million dollar house and the market will not be able to support universal free health care for all. The housing crunch and how everyone has reacted to it may only be the preamble to a larger crisis that has the potential of bankrupting this country and creating such a bureaucracy that basic freedoms will be lost in order to the support this system of socialized medicine.

McCain looks to the market for Healthcare help, a WSJ article

2008-04-29T11:06:00.000-07:00

http://online.wsj.com/article/SB120947891869752797.html?mod=hpp_us_whats_news

A nice break down of the basic plans that are being debated...

2008-04-27T22:12:00.001-07:00

http://online.wsj.com/article/SB120934133175548483.html?mod=hpp_us_whats_news

Excellent Comments on the recent run at HSAs

2008-04-27T21:32:00.000-07:00

http://online.wsj.com/article/SB120909058044243989.html?mod=googlenews_wsj

Becareful what you wish for

2008-04-11T06:00:00.000-07:00

Recently, I heard Elizabeth Edwards (Sen. John Edward’s wife) speak on a radio program about her new healthcare blog that she is running that will appear on a website sponsored by the Center for American Progress. Mrs. Edwards is a breast cancer survivor. She has also endorsed Sen. Clinton’s universal health plan on the grounds that Sen. Clinton’s plan will give access to individuals who otherwise would not be able to receive the potentially life saving care.

In theory, socialized medicine or rather a socialized system of government really sounds like a great idea; “everybody will live in harmony and work not for themselves but will work for the greater good.” However, what socialists always seem to forget is that people need incentive to perform. Incentive can take on many forms and does not always have to been tied to a monetary reward; however, money is a great way to package a financially incentive into nice little crisp pieces of paper. The very basis of socialism says that a central planning authority will have the best interests of the collective because the individual only thinks of what is best for the individual; therefore, a socialistic system is more ‘fair.’ The word ‘fair’ is a superficial word that means a lot in terms compromise but very little in practice. For example, in professional sports we are willing to pay athletes based on their skill in a particular sport and by the very nature of randomness, or natural selection, some people are better suited for say basketball then others. An individual that is 6’10 is undoubtedly going to have an advantage over a 5’10 individual, holding everything else equal, in terms of being closer to the 10 foot rim and on average having a greater chance at being successful at the game. Therefore, is it fair that the 6’10 individual happens to be 6’10 and the 5’10 individual is a foot shorter in a game where height can prove to pay huge dividends? Yes, it is not ‘fair’ a central planning society could make this situation 'fair' by requiring the 6’10 individual to play on his knees but would anyone want to pay money to come see two guys play basketball with one guy playing on his knees? Of course, when it comes to professional sports the market is willing to pay copious amounts of money for individuals to play a game, which I am all for as long as the market will allow for such pay checks. Since the paying public wants to see a competitive product the professional sports world is extremely competitive and only the best make it with no regard to what is’ fair.’ A ‘fair’ solution would be extremely boring to watch because you would have to obviously create a situation where anybody and everybody had the opportunity to play leaving very little incentive for individuals to dedicate their lives to the athletic endeavor beyond just a love for the game. In conclusion, life is not ‘fair.’ As a society we need to create an environment where the drive of the individual has only the limits that the individual places on him/herself. The 5’10 individual might not be as tall as the 6’10 individual but through hard work and potential sacrifice he might be able to be more successful then the 6’10 individual in the game of basketball. Individuals need incentive to excel, to improve, and to produce.

An analogy between professional sports and healthcare in the United States may seem like far distant subjects; however, they both share a universal truth: incentive drives behavior. I am happy that Elizabeth Edwards was able to win her battle with breast cancer but I am afraid she is very shortsighted in her endorsement of the HilaryCare Universal Healthcare. Why is it that the United States is the undisputed leader when comes to cancer treatment including the treatment of breast cancer? Why have advancements in medicine predominately evolved out of this country? The answer lies in the very framework of this country’s affiliation with capitalism. The inherit beauty of capitalism is that it aligns the incentives of the individual to produce and when more goods and services are produced more can be distributed. Therefore, Mrs. Edwards was able to win her battle against cancer because thousand of individuals over the years had the incentive to devote their lives to help find treatments for an otherwise deadly disease. The universal coverage that she speaks of may deliver coverage for all but will only produce limiting care, and certainly not the level of care she received, because the same incentives do not exist in socialized systems as they do in capitalistic settings where the individuals not an ‘all knowing’ central planning authority can make decisions based on behavioral stimulation stemming from the motivations/ incentives that drive them. For example, a very good friend of mine grew up in Israeli where they have a socialized national healthcare plan. My friend’s mother even thou she was ‘covered’ under the national plan was not able to receive the needed care and died from the very same disease that Mrs. Edwards defeated and it was not because treatment options were not available at the time of her death but rather the system could not deliver to his mother the needed timeframes/ resources required to save her life.

Healthcare is a touchy subject to discuss because you cannot discuss healthcare without talking about people’s lives but it is a fact that the great advancements that this country has spearheaded is correlated to the work of countless individuals that dedicated their lives to discovering new medical advancements. The individuals dedicated their lives to medicine because they wanted to make a difference but assuming that they would do it gratis is a huge miscalculation; these individuals, as would anyone, should be able ‘to do well by doing good.’ Modern Medicine is very expense. The resources required to become a doctor or nurse are staggering. The R&D for a new drug is tremendous. However, to address the healthcare ‘crisis’ in this country we need to step back and look to the individual and ask the questions of how we can establish as system that aligns the incentives/ motivation for all parties involved. This alignment will also require the involvement from the individual patient to shed the concept that healthcare is an indemnity and be freed of the concept that the government or some other third party planning authority knows what is best for them and their families, which may require that planning for healthcare expenditures become part of the financial planning process. We are told that nobody should pay for healthcare because it is a right as told by the propaganda coming from the left but the inefficiencies associated with a central planning authority will create a situation through increased taxation where we will all pay for it ten fold and receive very little if anything in return.

www.doctorpricing.com
www.wcshort.com

A great article on the differences between the Dems and Reps Healthcare plans

2008-03-12T18:17:00.000-07:00

http://money.cnn.com/2008/03/10/news/economy/tully_healthcare.fortune/index.htm?postversion=2008031109

drug companies at it again...or the market is at it again?

2008-02-23T11:56:00.000-08:00

The WSJ reported on 2.21.2008 that a number of drug companies were raising their prices on many of their name brand drugs because their drug patents were nearing expiration. The WSJ highlighted two strategies to why a drug company would raise the drug price prior to the patent expiring and consequently opening the door to alternative generic drugs flooding the market eroding their profit margins: a) maximize their financial gain with what remains in their patent safe heaven and b) influence their consumers to move to drugs that they also produce but are slightly different in chemical makeup, deliver similar results, are currently cheaper, and have longer time horizons on their patents. The development of life saving/ life changing drugs is a complex process and requires literally rocket scientist types to complete; therefore, the delicate balance of providing the incentives for the private sector to continue to develop new drugs (doing well by doing good, patent protection etc) and allowing market forces to bring the most efficient price to the consumer is a difficult proposition. Government price controls are not the answer; unless, you only want access to drugs that do not fall under these programs ie erection and hair pills. Never ending patent time horizons would potentially create drug monopolies, which would create their own unique problems. The question I would like to propose is how does a system allow private companies to do financial well by doing good and still have competitive pricing forces in the formula? This question might be one of the harder questions to wrestle with when it comes to our health care climate in this country due to the fact that drug development is not a marketplace that lends itself to a commodity marketplace like some politicians would like for you to believe. In my next post I will try to present some solutions but in the mean time I would like to hear some ideas.

An Excellent Post a Must Read

2008-02-10T15:17:00.000-08:00

Bart recently created this post on his blog...

http://laissezfairehealthcare.com/2008/02/09/i-might-have-been-wrong-about-obesity/

www.wcshort.com
www.doctorpricing.com

“Raise the Minimum Wage so people can afford more stuff…or not”

2008-02-09T14:07:00.000-08:00

Recently, I overheard two individuals passionately discussing the need to once again raise the minimum wage at my favorite coffee spot. I was floored with the total disregard of basic economic and accounting understanding that these two individual showcased yet I was engaged when it came to their arguments on why it is ever so necessary during this ‘economic recession’ that the federal minimum wage be once again raised. I posed this question to them; “Why is raising the minimum wage a continually theme when it comes to political rhetoric…why can’t we just find a rate and stick to it?” The response I received was anything but inspiring: “It is because the corporations keep raising the costs of goods…how is someone supposed to cover rising expenses when their wages are not in lock step with the cross the broad price hikes.” I went on to explain that in is this current Fed Rate predicament raising the minimal wage would only height the inflationary concerns that is becoming a growing specter on the horizon and went on to explain how raising the minimum wage correlates perfectly with a rise in the COGS (cost of goods sold) of a business leading to a potential rise in the (drum roll please) price of goods.

These two individuals responded with an in stereo response of: “I never thought of it that way.” I concluded that this theme is a theme that is part of many that our politicians continually blast the American public with; “Vote for me and I will give you goodies.” We need to realize our government is not our keeper and we should not elect officials who make promises or enact policy that does nothing for the republic and are only designed to foster their individual goals of garnering votes to gaining more power for themselves.

“Ask not what your country can do for you but what you can do for your country” ~President Kennedy

www.doctorpricing.com

Pills for Hire

2008-01-27T16:55:00.000-08:00

The Wall Street Journal ran an article on Thursday (1/24/2008 "Doctors Paid to Prescribe Generic Pills") that described a new 'cost saving' measure that a few health plans are implementing to cut the cost of prescription drugs. The program pays doctors a bounty every time they are able to switch a patient over from a 'name brand' drug to a generic. The article describes how a few consumer advocate groups are outraged with such a program but not because a doctor is promoting a generic drug over a name brand but rather they are up in arms because a doctor in these programs has a financial incentive for moving patients to a generic. First, let me point out that generic drugs and name brand drugs do not perform at the same levels. For example, just because a name brand drug patent has expired and 'generic' versions have hit the market with the same chemical makeup does not mean that the 'delivery system' for the underlying chemicals, aka the drug itself, is the same. Without requiring everyone to have a PhD in Biochemistry let me provide the 20,000 foot cliff note version; the delivery system for a drug plays a critical role in its effectiveness and while a generic may prove to deliver 90% of what the name brand drug delivers in terms of it effectiveness, it is still not going to return the same results. Therefore, when a physician prescribes a generic over a name brand he/she has to conclude that the generic with its inferior delivery system will still move the process closer to the desired results. In conclusion, generic compared to their brand name drug counterparts do not maintain a '1 to 1' relationship they are not perfect substitutes. If a physician determines that a generic will perform as well as the name brand and it provides a real savings for all parties involved I believe we can all agree that prescribing said generic over its name brand counterpart would be the most efficient solution. The physician has to use his/ hers experience, education, and be willing to put his/her career on the line in making such a determination; therefore, does not such an inheritance of such liability warrant a payment for carrying such risk?

The argument against paying physician for referrals is based on a fear that the physician is in a superior knowledge position when it comes to advising the patient on the recommended course of medical treatment. True, physicians do have knowledge on the subject of medicine that the common person does not have creating a knowledge gap and because we are talking about individual health and well-being we have come to believe that all financial incentive should be removed from medical decisions made by the attending physician. However, we do not hold this requirement to attorneys, car mechanics, accountants, and a number of other professions that present situations where the consumer is in a ‘knowledge gap’ predicament. Could a physician if he/she has incentive to prescribe generics over name brands focus only on the money and disregard the needs of his/her patient? Yes, but I would suggest that no solution is going to deliver a perfect system. On the flip side of that statement could a system develop where a physician has an incentive to prescribe money saving generics over name brand incite them to take the extra step of analysis to see if having the patient on generics in fact will deliver the same result, would that prove to be a better answer for all involved? Yes and the decision to prescribe one pill over another will not grant immunity for the physician from the malpractice liability that is in lock step with every decision he/she will ever make; generic or name brand.

"Doing well, by doing good"
www.doctorpricng.com

Becareful what you wish for-

2008-01-13T14:56:00.000-08:00

The issues with our Healthcare system are a direct result of the prosperity this country has seen. The previous statement might seem a little awkward but let me take a moment to explain. A growing crisis in this nation is obesity; people are suffering from eating too much! The capitalistic principles that have been the frame work for our great society has made our lives so easy that we have the time and the opportunity to take advantage of the foundation that has been set for us. For example, 150 years ago obesity was not an issue, a majority of people had to work the land in order to feed themselves, and life expectance rates were merely a fraction of what they are today. The all powerful 'dollar' provided the incentive for individuals to find solutions that could make themselves and for a price others more productive. Unfortunately, in our society it has become trendy to view individual productivity and individual prosperity as resounding evils. Is there really a difference between 'greed' and individual incentive? To view 'greed' as the embodiment of an elderly man stooped over in his over stuffed leather chair caring only to count his money I think is a very short-sighted depiction of the relationship that we all share with the word. In fact we are all greedy. Nature needs for us to be greedy to survive; it makes up the fabric that motivates us to do anything and we should not be made to feel ashamed but rather strive to create a system where the individual is rewarded; i.e. 'doing well, by doing good.' Our society has created a medical professional that has extended life, has improved life, and has allowed those that nature would have let die 150 years ago to live long enough to not only reproduce but also to prosper; therefore, why do we feel the need to socialize the system? I believe it is because we are too comfortable and our lives are too easy allowing us the time to feel guilty.

Guilt is imposed on us by those that do not care for the republic but rather see our guilt as an opportunity to garner power for themselves. The advancements of modern medicine have brought us to our current predicament. For example, 150 years ago those with Type I diabetes would not have lived long enough to be able to reproduce. Their genes would not have been allowed to make it into the next generation; however, modern medicine has allowed these individuals the opportunity to live productive rewarding lives. These medical advancements have actually increased the overall burden for our system. This may seem cold but think of the alternative; if we did not have modern medicine these people would not even be here. Medicine is expensive and very complex. Our system which is the best medical system the world has ever seen was built on individuals who had the incentive to bring about the cures and disease processes that so many have taken for granted.

The health care subject is a tricky topic to discuss because you are dealing with an individual’s well being and in our civilized modern society it is unacceptable to allow for someone to simply die because they are not able to afford care. However, individuals need to have some sort of responsibility for their care. The incentives of all involved parties need to be aligned in order to insure the most productive system. The more that is produced the more that can be made available; however, many short sighted individuals preach that a centrally planned system would benefit the majority. These socialist always forget the most important variable in their grand schemes; people need incentive to produce. A universal health plan may equal coverage for all but it will produce a reality of care available for none and I hate to think of the brave new world of medicine where those needing care are treated on a government budget. If one thinks that a universal health plan will debunk the ‘evil health care’ companies and move the system from setting monetary values to individual lives you will be in a for a rude awakening. For example, every time the government pays for a highway off ramp to be built they have calculated the ‘lives saved per foot’ i.e. for every additional foot that they extend to the off ramp ‘x’ number of lives will be saved; they are setting monetary value to human lives in every off ramp in America. Framing that for our health care debate, the government, ie a removed central planning authority, will have the power to determine who will receive care and who will not receive care; it is ironic that this is the same argument used to create such a system.

"Like Taking Candy from a Baby"

2007-12-31T11:26:00.000-08:00

I recently read an article on the front page of the Wall Street Journal that was describing the situation of a couple outside of Cleveland that had their house foreclosed over 11 years ago but managed to remain in the house through a series of court filings made on their behalf. Obviously, this couple had stopped making payments on the house, hence the initial foreclosure, and the 11 years after the foreclosure were surely not making payments yet the wife made the comment that (and I am paraphrasing)'...that it did not seem fair...it was like they were taking candy from a baby.' This struck a cord with me because the wife truly believes she is the victim in this situation and that is was not 'fair' that she was loosing her house because she did not pay her mortgagee. What a scary thought that personal choices may it be buying a house one cannot afford, or in line with the subject matter of this blog, choosing to for go buying health insurance because you would rather have HDTV that we have come to a point in our society that is not the individuals fault but rather the system is broken for allowing such an event to occur in the first place. A free society is about giving people the power to choose. With such freedom individuals must be able to make good choices and be able to make bad choices. If we allow for some third party to make choices on our behalf because they have been deemed to have some sort of moral authority over us we not only loose the power of choice but we loose the freedom that comes with it. People must be allowed to fail in a free society ie their must be consequences for ones actions. Cato the elder is quoted with the following;
"If we vote away our freedom for the promise of security... we loose both"

www.wcshort.com
www.doctorpricing.com

Take a Number

2007-12-23T19:21:00.000-08:00

Those that carry the banner for Universal Healthcare (ie socialistic healthcare) must have either short term memory loss or have never obtained and/or renewed their driver’s license. This week I spent 4 hours of my life trying to a) pay my personal property taxes and b) change the address on my driver’s license. I had to make three different stops at three different government buildings to obtain the correct documentation in order to complete my two rather simple tasks. I and my fellow law abiding cohorts were herded like cattle and every encounter with a state employee was met with complete frustration and a lack of understanding that left us completely at the mercy of individuals that had as much incentive to help as Britney Spears has in trying to find a pair of panties. The number of paper slips I pulled that secured my spot in different lines felt like a never ending journey through mediocrity and ineptness. This experience was met to accomplish a rather simple task but turned into a harsh lesson in the inefficiencies of bureaucracies.

Now what if the government ran our healthcare system? If I were to equate paying my personal property taxes and changing the address on my driver’s license to a medical procedure what would that medical procedure be in terms of the relative complexity to their respected systems? I would argue that paying my taxes and changing my address would or at least should be a rather simple process; therefore, in our thought experiment should I compare my DMV experience to a vaccination under a universal healthcare plan? Vaccination time tables are pre-set as our paying taxes and changing ones address maybe could be equated to updating an individual’s vaccination records; therefore, as a society is it reasonable for an individual in an universal health plan to spend four hours in order to seek out three different government departments in order to ‘gain approval’ and then be forced to interact with a system that is apathetic to the consumer or rather the tax payer? Taking this thought a step further what could we possible equate to a medical situation where one needs to see a physician what kind of inefficient process would exist in that situation? How long would the line be? Who or what would have the authority to grant the correct permissions for that individual to gain access to the care that is needed or rather has been sold to them in this glorious Universal Health Plan? I would hate to think that any individual’s wellbeing under a socialistic health system would be decided by the same people that forced me to take a number and wait in line to pay my taxes.

Where are my drugs

2007-12-16T19:02:00.000-08:00

A day may come very soon where you trip to the local pharmacy will be void of any new pharmaceutical drugs. This prospect is a very real consequence of the current pharmaceutical marketplace in this country. The development of this predicament stems from not being able to address the underlying issues within the industry; rewarding innovation. I will mention that another issue with the current pharmaceutical environment is the fact that chemical based drug production has been the basis of the development of new drugs for over a 100 years and potentially fewer and fewer compounds remain undeveloped that can actually provide benefits to patients. However, I believe the bigger problem is the current process and looming threat of universal healthcare.

In order to bring a new drug to market a company must invest literally billions of dollars into research with no guarantee that it will actually make it through the entire process; i.e. research, animal testing, human testing FDA approval etc. Drug companies get a bad rap because the physical pill costs pennies to produce and then retails for real dollars (in some case hundreds maybe even thousands of dollars) but that is a very short sighted view of the entire process. Yes, the pill is cheap to physically produce but the investment that goes into how to produce that pill is enormous. This misconception has lead to an out cry for more generic drugs by the public, which do offer a ‘cheaper’ alternative to name brand drugs (I will assume they are as effective as name brand) but deliver nothing in terms of innovation. Therefore, let me break down the value proposition for a large drug company; spend 10-15 years researching a new drug, spend million/billions of dollars to get it through testing, gain approval from the FDA, getting it into market, and then recoup all of your investment plus a profit before your patent runs out allowing generics to rush in and still your market share. Maybe, I am over simplifying this process but it is no wonder name brand pharmaceutical drugs costs are where they are today.

The other side of my thought process into this market is the very real probability that universal healthcare will become a reality in this country. Therefore, if I am drug company why would I take on the risk of developing new life saving drugs if at some point the government is going to set price controls? If I am exec at a drug company I am investing in products that would not be put under the control of the government universal health program, I would invest in cosmetic, hair, and penis pills. (Interesting....can anyone say Viagra)

Not all hope is lost. Biotechnologies may prove to save us from ourselves by finding solutions by altering DNA and re-growing parts that have gone bad. However, we maybe able to clone sheep but we cannot beat the market; if we do not allow individuals and companies alike to ‘do well, by doing good’ we might have to call on tribal showmen to cure us when we get sick

www.wcshort.com
www.doctorpricing.com

I am thinking of a number…

2007-12-06T14:43:00.011-08:00

It is the holiday season and everyone, including myself, is out trying to fill their Christmas gift list. I am not 100% sure what I am going to get everyone but I have been looking at many different items via the internet where I can compare prices, read reviews, and truly be an engaged consumer. These on-line tools allow me to research the cost and quality information on particular item of interest .For example, a new toaster varies in price depending on the features that one wants in a toaster but if you can narrow it down to a toaster that is made by GE, toasts two pieces of toast in one toasting session, sits upright, and silver you will find that the price for that toaster is pretty universal, with slight variations of course i.e. maybe a toaster in Miami is ‘cheaper’ then a toaster in Omaha because everyone in Miami is on the South Beach diet etc. In fact, as ‘enlightened consumers’ we have come to expect information on products and services to be at our figure tips when making almost all of our purchases except we do not expect cost and quality information when it comes to our healthcare.

Our healthcare delivery model for the most part does not incentives the consumer to search out cost and quality information because a) healthcare is very complicated and most people have very little true understanding of its complexities b) we pay a hefty premium for a third party to pay for our expenses (leaving us with little to no incentive to be good ‘consumers’) and c) a growing number of individuals feel that health care is an undisputable right that is found in a footnote somewhere in the original Bill of Rights (never mind the healthcare available to our founding fathers was pretty much limited to leaches and purges). For example, would you buy a car without doing research on the make and model of that car i.e. would you simply go on someone’s recommendation alone on buying that car? Therefore, the true cost of healthcare in this country has not been made readily available because there has not been an incentive to do so.

The Wall Street Journal (‘WSJ’) ran a story on 11/29/2007 titled “As Medical Costs Soar, The Insured Face Huge Tab;” that highlights Jim Dawson healthcare journey that starts with him nearly dying and highlights the bills that followed. This article addressed the very real problem of trying to quantify the true cost of care. For example, Jim Dawson did hold health insurance but because of the complexity of his illness went through the max coverage cap on his health insurance plan. At one point he owned over a one million dollars, which he accumulated during his hospital stays and exuberate charges for such items like Oxygen Masks ($2,225-$6,675) and socks ($791!) that were charged to him by the hospital.

“‘ I do not deny that our charges look insane,” says Dr. Point CPMC’s chief medical officer. But all hospitals operate the same way he says.”It’s the realty of the industry”’

Why is this situation, described by Dr.Point, ‘the reality of the industry?’ Hospitals/ Providers inflate their costs because of three main factors 1) large right offs 2) account receivables and overhead incurred on managing claims with insurance companies and 3) government mandated programs (Medicare and Medicad). This issues exist because the individual consumer has no incentive to be a better consumer, the insurance companies are being empowered by the consumer to manage all of their risk (in a traditional health plan) for a premium, have perfected the art of extending their accounts payable to the providers, and government health programs are run on a budget with little to no incentive for competitive forces to exist. Creating an effect where the true cost of care exist somewhere in the haze of inflated prices for health care services and insuffecient Medicare/Medicad reimbursements.

The solution will have to come not from the government but come from the empowered consumer. Consumers have to have an incentive to be better consumers of their own care in order to not only bring out the true cost of care but also to continue to advance the quality of care received. The rising cost of healthcare, due in part to the subject of this blog posting, has forced many individuals and employers to investigate consumer driven health plans where the consumer has more financial responsibility before the insurance kicks in (ie Health Savings Accounts “HSA”). The empowered consumer will demand pricing and will use the power of his dollar to find the best price; providers will compete for cash paying patients by catering to the needs of the empowered consumer, and insurance companies will find themselves in my opinion in a better position from an overhead standpoint by insuring only the catastrophic. Medicine is complicated; therefore, we must align the incentives of all parties involved otherwise the fight for discovering the true cost of care and curtailing the rise cost of healthcare will all be for not.

Grilled Stuffed TVs

2007-11-27T13:09:00.024-08:00

It was mid October; I was at my local Costco in utter disbelief that Christmas had already arrived in bulk. Everything one would need for decorating their house, to gift giving, and/ or holiday meal preparation all laid out in jumbo sized quantities. I did not know what annoyed me more the fact that Halloween was still a week away with Thanksgiving even further behind or the fact that individuals were stuffing their carts with plastic reindeers and ten gallon jugs of mayo all for the discounted price of $15.99.
Americans are victims of Madison Avenue. We have allowed our media outlets to determine our priorities as consumers. For example, it is 9:30 at night and you are watching your favorite sitcom, the show breaks for a commercial on Taco Bell’s new ad campaign “Fourth Meal.” As you watch the commercial you are bombarded with images of hot juicy cuts of meat wrapped in a soft taco shell just waiting for you to enjoy. These marketing campaigns are genius; they inspire you to be hungry and leave you with a need to feel 'hip', which can only be satisfied by eating a taco at 10:30 at night. The ‘food porn’ is just the beginning of the mind control that has gripped this nations priorities; i.e we have been programmed that everyone deserves a $30k truck that can go through the mud at 45mph while the seat warmers keep our butts nice and toasty. It is no surprise to me that this country has such a tremendous debt problem; in fact, are we really the ones to blame; the commercial said I had ‘earned and deserve’ that new 54’ Plasma TV.
We have come to believe that new cars, tacos at midnight, and fancy TVs are what we work for and deserve and items such as healthcare are undisputed rights. Does anyone else see a problem with this situation where we has a society have determined that paying a $1,000 for a TV is a legitimate purchase but planning for future health care expenditures has become a taboo subject amongst certain political groups? As a society would we vote to enact a government socialized program where everyone receives a new color TV? Sounds ridiculous and drawing the parallels between a socialized TV program to a socialized healthcare system are not one to one comparisons but should we show apathy for those individuals that make the personal choice to buy the new TV instead of health insurance and then crowd our ERs looking for society to pick up their healthcare bill? I am not saying that those without should go without needed healthcare; what I am saying is that individuals need to have the incentive to manage their health and their healthcare expenditures and not develop the mindset that “everyone” else will pay. For example, why are TVs flat and produce an amazing picture, because the market has pushed TV companies to compete by designing slimmer brighter TVs for the masses to purchase. If there was no incentive to produce better TVs because of a “universal TV plan,” where everyone gets a TV from the government, everyone would watch the nightly news on a black and white tub TV or worse yet because of government rationing would be forced to get their news from…the radio.
Comparing the US healthcare market to tacos, new trucks, or even TVs is a unfair simplification. However, the laws of economics and incentive driven behavior do exist in all facets of our lives including the healthcare marketplace; therefore, I encourage everyone to consider what some are proposing in terms of a universal government run health plan i.e. when was the last time you got your 10pm news from your radio.

A new healthcare blog...

2007-11-21T12:21:00.001-08:00

Marty Trussell has created this excellent healthcare blog for your reading enjoyment:

http://healthplaninnovation.com/?p=21

LASIK and you

2007-11-18T20:53:00.000-08:00

When LASIK eye surgery was first introduced it was an exciting new procedure that allowed for patients to break free from the bonds of glasses and/or contacts with little to no pain or down time. This new revolutionary surgery at first was only available to those that could foot its large price tag because almost all insurance plans did not cover the procedure. However, because of the high demand for the surgery and individual can now get LASIK surgery for as little as $350 an eye, which includes for many, cases a 100% satisfaction guarantee. I am not talking about buying a Honda I am talking about a medical procedure that involves a physician where not only a satisfaction guarantee maybe involved but financing is also an option for many LASIK hopefuls. The intriguing plot line in this example is that even medicine is not immune from the core ‘economic drivers’ that exist in every market and arguable exist in every ‘system.’ The incentive existed for providers, companies (may they be laser companies or financing companies etc), and the individual for the market to solve and create an opportunity for all involved to gain. The providers are able to use their medical skills to improve their patient’s eyesight and increase their top line revenues, the vested companies compete by developing better equipment and provide financing solutions to the market, and the individual is able to improve their quality of life. Everybody is aligned and everybody involved benefits, which has to occur to maximize ‘production.’
Could such a market exist in the broader medical market? Many say no and have developed plans to socialize the system by trying to ‘limit’ the current resources through an inefficient ‘re-distribution.’ But what can we learn from the story of LASIK? If you let the market run ‘more’ is produced and ‘more’ can be made available. The fear that free market critics paint is a picture of millions of Americans going without healthcare but the answer is not through socialistic rationing. Individuals need to have the incentive to want to improve their health condition, providers need to be able to ‘do well by doing good’, and large corporations have to be allowed to make money so they are willing to build the better laser or developed the new and improved cancer drug. No system is perfect but to solve the current healthcare ‘crisis’ we must align the incentives of all the involved parties. All should take a look at the LASIK market and understand that a socialized system might mean ‘coverage for all’ but it will also do us very little good because there will be ‘doctors for none.’

Tis the Season...

2007-11-15T13:01:00.003-08:00

Every year Americans across the nation go through an annual ritual that at times can be exhausting, confusing, and downright painful. I am not talking about stuffing a turkey or looking for that not so special gift to put under the evergreen tree I am talking about employer sponsored annual benefits enrollment. It is a complicated dance that employer must also engage in that may involve a small army of accountants, lawyers, benefit consultants, and vendors where the employer tries to deliver benefit options to its employees and try to manage the rise cost of actually offering these benefits. In some respects it is strange that millions of Americans associate obtaining such benefits from their employers, ie we do not get our house insurance or our auto insurance through our employer, but our tax code provides nearly zero benefit for an individual to obtain benefits, not to mention the benefits for the unhealthy to be part of a group plan, and does allow for the employer to write off their expense for such benefits against their own corporate tax bill. This unnatural connection between health benefits and one's employer does cause an episode of “biopolarness” to develop; providing rich benefits and watching the corporate bottom line. This situation is amplified with the double digit rise in healthcare costs that occurs year after year. The causes for these increase are many, and I could spend days righting on the reasons of rising healthcare costs, but we need to stay focused and study the following question: "Is there an opportunity for an individual to maximize their financial situation, still have a piece of mind in case a piano falls on his head, and help curb the rising cost of healthcare?"
Yes and the answer to the above question can be found through individual ownership of the financial healthcare risk below a preset high deductible and can be found at a local healthcare benefit enrollment meeting; let me introduce the Health Savings Account (HSA). The HSA requires a high deductible health plan ($1,100 for single and $2,200 for family) and will not allow first dollar coverage below the deductible. However, funds that are invested in the HSA can be pre-tax or tax deductible, grow tax free (think IRA), and the funds can be taken out tax free if used for a qualified medical expense (see publication 502 from the IRS). The ownerships of this account allows for the individual to be rewarded if they can manage their below deductible healthcare expenses with the notion of rolling unused HSA funds from year to year; basically, a healthcare IRA with a twist. At age 65, an individual can take the funds out of the account and use them for anything and only pay income tax (think IRA again) but an individual can still use the funds on a pre-tax basis for qualified medical expenses. A caveat for this account is if an individual does indeed use the funds prior to age 65 for non-qualified medical expenses, i.e. buying that bass boat you have always wanted, not only would you have to pay income tax but you will also be levied with a 10% penalty on the funds used. These accounts have already show to reduce the overall healthcare utilization by its policy owners, which makes these individuals from a high-level stand-point cheaper to insurer. Therefore, do not be shocked if from here on out you start seeing HSAs showing up at your annual holiday benefit enrollment meetings.

$40 Billion a year in Minnesota...

2007-11-12T15:51:00.000-08:00

I just got back from a Seminar up in Minnesota hosted by Medica. I was shocked, yet not surprised, that Minnesota pays nearly $40 Billion a year for their state sponsored healthcare programs. The causes of such horrific healthcare spending should not surprise anyone (not listed in any particular order):
1) obesity 2) zero incentive to engage in prevenetive medicine 3) falling numbers of primary care phyisicians 4) large number of uninsured who use the ERs for all of their healthcare needs. In case you were keeping score that is $7,741 per person per year! This is not a sustainable situation for the state. Minnesota has organized a commitee to try to a develop solution for this pending financial crisis and have set an aggressive goal of reducing the state's healthcare spending by 20% ($8 Billion) per year. My suggestion to the commitee is to design a solution that is built around aligning the incentives of the individuals, the payers, and the providers; otherwise, it will be a waste of everyone's time.

Check this post at Laissezfairehealthcare.com

2007-11-10T08:23:00.000-08:00

http://laissezfairehealthcare.com/

Smokers Helping Uninsured Children
http://laissezfairehealthcare.com/2007/11/08/smokers-helping-uninsured-children/

Primary Care Docs Where are you!?

2007-11-06T20:34:00.001-08:00

Last week I went into a TakeCare Clinic situated in my locate CVS Pharmacy. The clinic can administer care for such things as vaccinations, minor sprains, sore throats, camp and sports physicals, and other aliments that can be treated by a PA (physician assistant) or an RN (registered nurse). These items are listed in plain eyes view but are flanked by the aliments that they cannot or will not treat. An aliment that stood out on the ‘cannot treat’ list was chest pain. Chest pain can be as simple as being caused by bad Chinese food to a full blown heart attack; consequently, not providing the correct diagnosis can carry some serious liability. I asked the attending PA what the procedure was for someone who comes to the clinic with chest pain and she promptly responded with; “we recommend they go to the local ER for a full evaluation.” Excellent advice if you are having a heart attack not very cost efficient advice if it is heart burn; therefore, by simply righting off liability by sending patients with chest pain to the ER, which is out of this world expensive to treat heart burn patients, but treating simple aliments that keep a primary care physician in business, who could a) take on the liability of seeing a patient with chest pain and b) can determine if it is a heart attack or heart burn, are we really reducing the overall cost of health care or are we actually contributing to rising healthcare costs?

Primary care physicians are becoming an endangered species thanks to the health care delivery model that demands more of a quantity methodology rather then a quality one. This has in part developed thanks to government pricing mandates for government sponsored healthcare programs (see MediCare and MediCad) and the rise of health insurance companies trying to reduce their expenses by signing up doctors at discounted rates with the promise ‘of making it up in volume.’ Fewer and fewer medical students are considering primary care as a viable alternative because the financial reward does not exists; therefore, more and more are going into specialties. We are quickly moving to an environment where what seem to be the ‘quick and easy’ treatments are being offered out of pharmacies and when things get ‘tough’ patients are being sent to ERs and specialists. This model would work if the body’s functions were independent of each other and that every time an individual had chest pain it would be a heart attack demanding emergency attention. Unfortunately, the body is a complex system where every organ system has to work in harmony. A “quick” clinic is not designed to understand the whole picture and specialists even thou they study the entire body are blinded by what they have become experts in; therefore, the disappearance of the primary care physician might not only contribute to the rise in healthcare costs but also might restrict the quality of care individuals receive.

Incentive...drives innovation

2007-10-27T14:55:00.000-07:00

The health care marketplace in this country is in its current state because the incentives of all involved parties are not aligned. Name an industry where 4-5 stakeholders are involved in resolving a payment for service? Earlier this year I spent some time in the hospital (that was in February) and my claims have still not been resolved. To correct the current health care marketplace we need to look at the entire process and understand each stakeholder or we will continue to solve nothing and annoy many.---WCShort

Paper Kills

2007-10-21T21:17:00.001-07:00

http://www.ajc.com/metro/content/metro/stories/2007/10/21/newt_1022.html

Newt in the news

How fast it can grow....

2007-10-10T21:15:00.000-07:00

over $3k in my HSA after 20 months...all pre-tax...and growing tax free...

More Data-

2007-10-08T05:58:00.000-07:00

"Thirty-one percent were previously uninsured individuals buying health insurance on their own; 33 percent were employed by small businesses that previously had not offered any health-care coverage to their employees. Nearly 50 percent of these HSA accounts were for people age 40 or older. Finally, 42 percent of these accounts were for individuals and families with incomes below $50,000 who are buying HSA-type insurance policies — those with high deductibles — on their own"

--From the San Antonio Express

Ah yes, the Children

2007-10-04T06:52:00.052-07:00

Yesterday, President Bush vetoed a bill that was 'designed' to provide health insurance to '35 million' children who are either uninsured or have 'limited' means to obtain coverage. The house and senate democrats responded by vowing to garner enough votes in the house and senate to override the veto setting the stage for a broader battle between universal government sponsored health coverage (democrats) and a more consumer centric market approach (republicans).

The issue that I have with this ’plan’ is that it is another attempt by politicians to over promised, over tax, and being a removed third party (ie the government) will under deliver. The United States has the best health care coverage, technology, and access to care in the world. The social healthcare systems of Canada, Great Britain, and communist China do provide 'coverage' for all but the quality of care received is horrendous and the access to care involves long lines and rationing. Look no further then the new state mandated healthcare program in Massachusetts where everyone can get 'coverage' but that guarantees nothing; i.e. 'coverage for all...doctors for none.'

People are selfish creatures. Our behavior is driven by incentive. It is my hope that the American people are not fooled by this latest ploy by DC politicians to promise 'coverage for 35 million children' because it will do very little to help the ‘children’ but may help a certain Hillary get elected. The classic line 'don't cut your nose off despite your face' is very appropriate when we discuss the healthcare industry in this country.

Another market solution...

2007-10-02T08:45:00.000-07:00

Need to find a way to help fund retiree benefits? Try incenting your exisiting workforce to be more efficient healthcare consumers...

http://www.thonline.com/article.cfm?id=175147

Excellent Article!

2007-09-30T17:06:00.000-07:00

http://www.pittsburghlive.com/x/pittsburghtrib/opinion/columnists/purcell/s_530109.html

2007-09-29T16:05:00.000-07:00

Who Pays for Health Insurance?

2007-09-29T15:16:00.000-07:00

A great article from the WSJ-

http://online.wsj.com/article_email/SB118904358759518916-lMyQjAxMDE3ODI5MTAyNDEzWj.html

Post Number 1

2007-09-29T14:44:00.000-07:00

This Blog is designed to provide information on the US Healthcare Market Place