I glanced at my bookshelf this morning and laughed.  “The Unknown Ideal” how fitting given the news these days.  I think it’s time for our leaders and lawmakers to revisit this book.

Capitalism: The Unknown Ideal

Here is the bill:

http://edlabor.house.gov/documents/111/pdf/publications/AAHCA-BillText-071409.pdf

And here is a diagram of how it will work:

The current healthcare/insurance industry is already a take from the healthy/wealthy and give to the sick/poor.  This bill will take this concept to the next level as well as introduce additional spending and waste.  This is a bad idea.  We should seek to reduce waste and spending on overhead. 

“U.S. health care spending is expected to increase at similar levels for the next decade reaching $4.3 TRILLION in 2017, or 20 percent of GDP.” (taken from NCHC)

With that, let me talk about where I see the issues.

Overhead

Where do we attribute this spending?  In the stat above $4.3T equates to about $14K annually per person in the US.  While some of the growth can be attributed to the increase in the aging population, where does the rest of the growth come from and where does this money go? Let’s look at the revenue of some of the larger insurance companies:

Conventry: $12B annually.

CIGNA: $20B annually.

Humana: $30B annually.

United Health: $80B annually.

At this rate, it should be obvious where we spend $2.4T today or see where how we will get to the $4.3T by 2017.  So do we need healthcare reform or insurance reform?

Where does the spending go?  Much of it is waste in the form of overhead.  Obviously insurance companies take a big chunk, doctors, hospitals, drug companies, long-term health care facilities, etc.  Think about all the paperwork you fill out, the plastic card you carry, the systems used to keep your records, the bills sent to you and your insurance company, etc. It takes a lot of people to support this system. I don’t claim to have the answers here but I keep coming back to Lean Systems and thinking if we could eliminate waste here it could dramatically decrease costs in this area.

Personal Responsibility

Atul Gawande wrote an interesting article for the New Yorker on where some of the money goes.  This article highlights some of the reasons for the increase in spending over the coming years.  Lack of accountability.  Why should people who take care of themselves, eat right and exercise be penalized (pay) for those that do not?  Jordan Shlain, MD suggests, “You either get with the health program or you don't get the benefits.”  A Practicing Doctor's Prescription for Health Care Reform.

Higher Expectations

As our understanding of the human body, disease and aging continues to increase so does the quality and efficacy of modern medicine and treatments.  We find ourselves in a culture that has zero tolerance for discomfort or inconvenience.  Have you ever gone to the doctor because you were tired and dealing with your common cold?  We are spending more, because we demand more.

Lack of a True Health Care Market

Have you ever comparison shopped for your health care?  Do you even know where to get this information?  Try calling your doctor’s office and asking how much it will cost for a test for strep throat test, an arm cast, CBC or CHEM-7.  How do you find the best orthopedic surgeon in your area?  It’s easier for me to find a good plumber that a good doctor. We need a better system to comparison shop and determine those providers that have the highest value (price vs. level of service).

Conclusion

ObamaCare seeks to solve a perceived problem through an increase in spending.  This is NOT the answer!  We should look at addressing the issues above in small test markets and empirically evaluate the outcome. As always your comments are welcome!

Additional reading:

Long Term Outlook for Health Care Spending

Canadian and American health care systems compared

Does Health Cost Too Much? If you think so, stop buying so much

Ann C. Engle’s Summary of Bast, J. L., R. C. Rue and S. A. Wesbury Jr. 1993

Ask the Editors: Why Does Health Care Cost So Much?

Recently my wife posted a letter from our congressman on Facebook. Comments flew based on this post. (As they always do around politics) The last, which I want to respond to in greater detail than I can on Facebook, is as follows:

From 1929-1932 the Republican president did nothing while the market corrected itself into oblivion.  Hoovervilles sprung up across America.  In 1933 FDR came into office.  The new deal followed.

My response:

Let me take your points one at a time. 1)"...The Republican president did nothing..." Obviously you're a Democrat or we wouldn't be having this discussion. That being said, Hoover took many steps in policy to try to repair the economy, but I agree he did not act legislatively. As I'm sure you know, many economists believe that no effort by the government could have corrected the multi-year depression. FDR himself blamed the depression on a bubble-like economy. Sound familiar? 2)“The New Deal followed.” While personally I think there is a time and a place for programs like the New Deal, there is no evidence that the New Deal was causal in repairing the economy. Most likely the economy would have fixed itself in about the same time. Again, I could be wrong. Taking a more Neoliberal vs. Keynesian (Yes, I love Ayn Rand too) viewpoint, I think that we need to let the market work these things out. While I understand the thought process behind increasing the amount of circulating money, doing so in a fiscally irresponsible way (creating unmanageable debt) is going to only delay and increase the size and duration of the downturn. Additionally, this is not the type of money management I want my children to consider acceptable.

I've been VERY busy with work the last year and as such haven't blogged much. I felt that anyone still reading this blog should have a look at Naomi Wolf's article. While I'm not sure if I entirely agree with Naomi's article, it's still worth the read.

I think those Apple commercials are pretty lame.  But that's always been Apple's approach to marketing, rip on the market leader.  This spoof on those commercials is really funny!

In a recent article by an ex-windows project manager, there is a segment which I found funny:

Every once in a while, truth still pipes up in meetings. When this happens, more often than not, truth is simply bent over an authoritative knee and soundly spanked into silence.

I found this funny because it is the epitome of some of the larger projects I have worked on. These are the projects (i.e. companies) that still use waterfall model and still fully expect to estimate a million line project within 5%. Change is still the exception. I was reading recently that 75% of software projects go over budget and over schedule. Why is this acceptable? It's obvious that we have outgrown the use of traditional estimation tools. Why are so many companies reluctant to change and try something new? Why are we ignoring the truth?

Thanks Sean for posting this! It wouldn't be so funny if it wasn't so true!

Tax Cuts - A Simple Lesson in Economics*

   This is how the cookie crumbles. Read it carefully. Let's put tax
   cuts in terms everyone can understand.

   Suppose that every day, ten men go out for dinner. The bill for all
   ten comes  to $100. If they paid their bill the way we pay our
   taxes, it would go something like this:

   The first four men (the poorest) would pay nothing
   The 5th pays $1
   Sixth would pay $3
   The seventh $7
   The eighth $12
   The ninth $18
   The tenth man (the richest) would pay $59.

   So, that's what they decided to do.  The ten men ate dinner in the
   restaurant every day, and seemed quite happy with the arrangement,
   until one day, the owner threw them a curve.

   "Since you are all such good customers," he said, "I'm going to
   reduce the cost of your daily meal by $20." So now dinner for the
   ten only cost $80.

   The group still wanted to pay their bill the way we pay our taxes.
   So the first four men were unaffected. They would still eat for
   free. But what about the other six, the paying customers? How could
   they divvy up the $20 windfall so that everyone would get his "fair
   share?"

   The six men realized that $20 divided by six is $3.33. But if they
   subtracted that from everybody's share, then the fifth man and the
   sixth man would each end up being "paid" to eat their meal.  So the
   restaurant owner suggested that it would be fair to reduce each
   man's bill by roughly the same amount, and he proceeded to work out
   the amounts each should pay.

   And so:

   The fifth man, like the first four, now paid nothing (100% savings)
   The sixth now paid $2 instead of $3 (33% savings)
   The seventh now paid $5 instead of $7 (28% savings)
   The eighth now paid $9 instead of $12 (25% savings)
   The ninth now paid $14 instead of $18 (22% savings)
   The tenth now paid $49 instead $59 (16% savings)

   Each of the six was better off than before. And the first four
   continued to
   eat for free.  But, once outside the restaurant, the men began to
   compare their savings.
   "I only got a dollar out of the $20," declared the sixth man. He
   pointed to
   the tenth. "But he got $10!"

   "Yeah, that's right," exclaimed the fifth man. "I only saved a
   dollar, too.
   It's unfair that he got ten times more than me!"

   "That's true!" shouted the seventh man. "Why should he get $10 back
   when I got only $2? The wealthy get all the breaks!"

   "Wait a minute," yelled the first four men in unison. "We didn't get
   anything at all. The system exploits the poor!"

   The nine men surrounded the tenth and beat him up.  The next night
   the tenth man didn't show up for dinner, so the nine sat down and
   ate without him. But when it came time to pay the bill, they
   discovered something important. They didn't have enough money
   between all of them for even half of the bill!

   And that, boys and girls, journalists and college professors, is how
   our tax system works. The people who pay the highest taxes get the
   most benefit from a tax reduction.  Tax them too much, attack them
   for being wealthy, and they just may not show up at the table
   anymore. There are lots of good restaurants in Europe and the
   Caribbean.