The overwhelming bulk of the essays I’ve published were written in
one day. Once I’m ready, I can easily write thirty pages in a day.
Well, with difficulty and cognitive hangover, but I can get it done. As
part of my new Whale mode, though, I’ve decided to reject that way of
doing things, what I have called “spasmodicism”. I spent 3 hours
writing what follows, but now have had enough, and will come at it again
in a day or two. I’ve tried to scale this mountain before, and not
made it. This time, I feel I will. Part of my problem is that if the
goal is helping people reframe things in fundamentally new things, I
have to explain basic elements that are foreign to them, like how
business works. This necessitates a comprehensive, and thus long,
approach. The final product will likely run to 20-30 pages, but
hopefully be USEFUL. My target is people who write for a living.
To be clear, Romney and Ryan have very good options open to them as
to what to replace Obamacare with. If we accept that the government
should take on preexisting cases, we should put them on Medicaid, rather
than corrupt our entire system; we should require all States to allow
all carriers to sell in their jurisdiction; and require all States to
allow all carriers to offer Major Medical/Catastrophic health insurance
directly to individuals, as opposed to rationing access solely to those
employed by companies ABLE to buy them insurance.
Further, we should resist the call to expand Medicaid, since it is
ALREADY bankrupt. It will only get worse. I spent an hour reading a
comprehensive summary of Obamacare, and how they claim to be able to pay
for it, and it amounts to a vast expansion of subsidies and hand-outs,
with NO chance that the taxes they will be levying will pay for even a
fraction of them. The very possibility should have been laughed out of
Congress.
Anyway, here it is:
Fast forward to today.
There are about 17,000 KFC franchises, some of which are owned by the
KFC Corporation, but the vast majority of which are owned by individuals, who
in effect pay royalties for the name and process. Part of being able to use the name involves
adherence to a very systematic process of quality control, such that you can go
to any restaurant anywhere in the world, in principle, and get the same
food. Many people value this, which is
why so many choose to eat there, and hence why so many people invest their
money and energy opening them.
Insurance carriers compete with one another. As in all competition, the goal is to provide
the best product at the lowest price.
What product is best? Well, can
this question be answered finally? Would it not depend on your needs? Healthy people need one type of coverage, and
those who abuse their bodies need another.
one day. Once I’m ready, I can easily write thirty pages in a day.
Well, with difficulty and cognitive hangover, but I can get it done. As
part of my new Whale mode, though, I’ve decided to reject that way of
doing things, what I have called “spasmodicism”. I spent 3 hours
writing what follows, but now have had enough, and will come at it again
in a day or two. I’ve tried to scale this mountain before, and not
made it. This time, I feel I will. Part of my problem is that if the
goal is helping people reframe things in fundamentally new things, I
have to explain basic elements that are foreign to them, like how
business works. This necessitates a comprehensive, and thus long,
approach. The final product will likely run to 20-30 pages, but
hopefully be USEFUL. My target is people who write for a living.
To be clear, Romney and Ryan have very good options open to them as
to what to replace Obamacare with. If we accept that the government
should take on preexisting cases, we should put them on Medicaid, rather
than corrupt our entire system; we should require all States to allow
all carriers to sell in their jurisdiction; and require all States to
allow all carriers to offer Major Medical/Catastrophic health insurance
directly to individuals, as opposed to rationing access solely to those
employed by companies ABLE to buy them insurance.
Further, we should resist the call to expand Medicaid, since it is
ALREADY bankrupt. It will only get worse. I spent an hour reading a
comprehensive summary of Obamacare, and how they claim to be able to pay
for it, and it amounts to a vast expansion of subsidies and hand-outs,
with NO chance that the taxes they will be levying will pay for even a
fraction of them. The very possibility should have been laughed out of
Congress.
Anyway, here it is:
Refute
and Replace: an attempt at common sense analysis of Obamacare
and Replace: an attempt at common sense analysis of Obamacare
Anyone wading into the specifics of Obamacare is easily
confused without a clear template for understanding what is being proposed, why
it is being proposed, and whether or not it is a good thing for most Americans.
confused without a clear template for understanding what is being proposed, why
it is being proposed, and whether or not it is a good thing for most Americans.
I have not seen a clear treatment of this topic, and aim
here to remedy that gap. As I see it,
prior to beginning any specific discussion of Obamacare, it will first be
necessary to explain what the goal is.
Having established that, we need to understand the components involved,
specifically: how businesses work; how health insurance works; how healthcare
works; and how government works.
here to remedy that gap. As I see it,
prior to beginning any specific discussion of Obamacare, it will first be
necessary to explain what the goal is.
Having established that, we need to understand the components involved,
specifically: how businesses work; how health insurance works; how healthcare
works; and how government works.
Only following a good understanding of these basics is a
discussion of the Patient “Protection” and “Affordable” Care Act warranted.
discussion of the Patient “Protection” and “Affordable” Care Act warranted.
The goal, one would assume, is a healthier nation, in
which people work more effectively, and are healed more rapidly when their
minds or bodies are affected by an illness than they are currently, at costs
that are the same or lower than they are presently paying. The goal, in others words, is to use the power
of the government to help an existing service be delivered more efficiently.
which people work more effectively, and are healed more rapidly when their
minds or bodies are affected by an illness than they are currently, at costs
that are the same or lower than they are presently paying. The goal, in others words, is to use the power
of the government to help an existing service be delivered more efficiently.
A core stipulation that must be made at the outset is
that the primary doctor ALL Americans have is themselves. We all know that being obese, out of shape,
smoking, doing without sleep, alcoholic, chronically stressed and the like
breed illness. So does old age—necessarily–which
invariably ends in death, typically after a prolonged period of declining
health.
that the primary doctor ALL Americans have is themselves. We all know that being obese, out of shape,
smoking, doing without sleep, alcoholic, chronically stressed and the like
breed illness. So does old age—necessarily–which
invariably ends in death, typically after a prolonged period of declining
health.
Any intelligent strategy will harness the
energies of the American people in supporting their own health. Obviously, if you never get sick, it is a matter of no importance if you have health insurance, or access to health care. It is precisely because of being in good health and wanted to save money that many young people opt not to buy insurance.
energies of the American people in supporting their own health. Obviously, if you never get sick, it is a matter of no importance if you have health insurance, or access to health care. It is precisely because of being in good health and wanted to save money that many young people opt not to buy insurance.
The goal, then is better health, and therefore reductions in the need both for insurance and healthcare. In achieving success in any
project, one must have accurate information, motivation, and physical
capability. A good plan will focus on
maximizing all three elements. Much of the rest of this treatment will deal with that topic, directly or indirectly.
I
How
business works
business works
I will deal with the actual businesses of healthcare and
health insurance presently, but for now let us take an unrelated business, say
that of a fast food franchise, and for the sake of being concrete that of
Kentucky Fried Chicken.
health insurance presently, but for now let us take an unrelated business, say
that of a fast food franchise, and for the sake of being concrete that of
Kentucky Fried Chicken.
Harland Sanders began serving fried chicken in the 1930’s
from a gas station he owned in North Corbin, Kentucky, typically to travelers
passing through on their way to Florida.
How he bought the gas station, I don’t know, but the normal route is
working hard, saving money, and amassing the money necessary. Sometimes it is borrowing money from banks or
individuals, and paying it back when you succeed, and declaring bankruptcy when
you fail.
from a gas station he owned in North Corbin, Kentucky, typically to travelers
passing through on their way to Florida.
How he bought the gas station, I don’t know, but the normal route is
working hard, saving money, and amassing the money necessary. Sometimes it is borrowing money from banks or
individuals, and paying it back when you succeed, and declaring bankruptcy when
you fail.
There was a first day he opened for business. It was likely an existing gas station, that
he had perhaps bought from someone, so he knew what the rough business would
be, but perhaps he built it from scratch, having noticed that the road was
well-travelled and that he would be providing a public service with his gas
station to people who would otherwise not have been able to buy gas at that
particular spot. He had a gas station
there in other words, because he correctly surmised there was a need for it,
and it would not have come into being or continued being had he not devoted his
energies to it.
he had perhaps bought from someone, so he knew what the rough business would
be, but perhaps he built it from scratch, having noticed that the road was
well-travelled and that he would be providing a public service with his gas
station to people who would otherwise not have been able to buy gas at that
particular spot. He had a gas station
there in other words, because he correctly surmised there was a need for it,
and it would not have come into being or continued being had he not devoted his
energies to it.
When people stop on the road they are often hungry, so
he offered food. Again, he provided a
needed service, one which would not have been available if he had not put his
energies into it.
he offered food. Again, he provided a
needed service, one which would not have been available if he had not put his
energies into it.
His business consisted in buying gasoline at one price,
selling it for a higher price, and keeping the difference. His chicken business consisted in buying the
chicken for one price, adding labor, and charging a higher price for it. Had he not earned profit, he would not have
been in that business, and travelers would not have had access to gas and food
at his location.
selling it for a higher price, and keeping the difference. His chicken business consisted in buying the
chicken for one price, adding labor, and charging a higher price for it. Had he not earned profit, he would not have
been in that business, and travelers would not have had access to gas and food
at his location.
He had no way of knowing, for sure, what his daily
income would be. Some days he no doubt
made a lot of money, and some days he wondered how he was going to pay his
bills. This uncertainty is an
unavoidable fact in running a business. It causes fear, and the fear of failure
is one reason why many people don’t go into business for themselves, even
though it is an option for all of us, over some time horizon. He was not born
rich, and made his way through hard work.
income would be. Some days he no doubt
made a lot of money, and some days he wondered how he was going to pay his
bills. This uncertainty is an
unavoidable fact in running a business. It causes fear, and the fear of failure
is one reason why many people don’t go into business for themselves, even
though it is an option for all of us, over some time horizon. He was not born
rich, and made his way through hard work.
Net Profit is revenue less costs. If he had a lease, he had to pay that every
month from the proceeds of his business.
If he had a mortgage he had to pay that every month. If he had employees, he had to pay them what
he had promised, regardless of how much (or, to the point, how little) money he
made. He had to pay taxes on the business revenue, and probably on his personal
revenue since he was likely incorporated.
month from the proceeds of his business.
If he had a mortgage he had to pay that every month. If he had employees, he had to pay them what
he had promised, regardless of how much (or, to the point, how little) money he
made. He had to pay taxes on the business revenue, and probably on his personal
revenue since he was likely incorporated.
[Since “corporations” are often demonized, and shock
expressed that corporations are treated legally like people, it might make some
sense to deal briefly with this topic.
From the dawn of the first common stock corporation to the present,
incorporation (which is related etymologically to Corps, and Corpse, for “body)
has served one purpose: limiting potential losses in the event of failure. The corporation “owns” property, not the
individual running it. This means that
if it goes bankrupt, only those assets it holds are taken, and not the personal
property of the person running it. Prior
to the innovation of incorporation, failures meant personal ruin for
investors. Historically, corporations were
initially formed for risky trade conducted overseas, for example with China or
India, in which a certain percentage of ships were lost at sea. This trade by definition was useful, since
only those products were purchased overseas which people WANTED, and were
willing to pay for. The risks taken by
investors, if they were profitable, were ONLY profitable because they provided
a desired service at a price people were willing to pay; a service, it must be
said, that would otherwise not have been provided.]
expressed that corporations are treated legally like people, it might make some
sense to deal briefly with this topic.
From the dawn of the first common stock corporation to the present,
incorporation (which is related etymologically to Corps, and Corpse, for “body)
has served one purpose: limiting potential losses in the event of failure. The corporation “owns” property, not the
individual running it. This means that
if it goes bankrupt, only those assets it holds are taken, and not the personal
property of the person running it. Prior
to the innovation of incorporation, failures meant personal ruin for
investors. Historically, corporations were
initially formed for risky trade conducted overseas, for example with China or
India, in which a certain percentage of ships were lost at sea. This trade by definition was useful, since
only those products were purchased overseas which people WANTED, and were
willing to pay for. The risks taken by
investors, if they were profitable, were ONLY profitable because they provided
a desired service at a price people were willing to pay; a service, it must be
said, that would otherwise not have been provided.]
It is worth emphasizing as well that the flip side of
profit is failure. Many people form
companies in the hope of making money, and instead, if they are providing a
product or service which people either do not want, or do not want at the price
they have to charge, they are unable to pay their bills. By definition, any company which stays in
business MUST be providing something people want at a price they are willing to
pay. There are of course many ways to interfere
with market forces, but this fact is in all cases ineluctable, even in cases of
monopoly.
profit is failure. Many people form
companies in the hope of making money, and instead, if they are providing a
product or service which people either do not want, or do not want at the price
they have to charge, they are unable to pay their bills. By definition, any company which stays in
business MUST be providing something people want at a price they are willing to
pay. There are of course many ways to interfere
with market forces, but this fact is in all cases ineluctable, even in cases of
monopoly.
Sanders unquestionably had competitors, people trying to
secure the same business he was getting.
They could take it from him in several ways. One, they could sell gas or chicken more
cheaply. This they could do by buying
gas at a lower price, or by having lower costs, or by demanding less profit.
Two, they could provide superior service at the same or even a higher
price. They could be more friendly,
quicker to the pump, more thorough in cleaning windshields, having cleaner
bathrooms, better marketing, etc.
secure the same business he was getting.
They could take it from him in several ways. One, they could sell gas or chicken more
cheaply. This they could do by buying
gas at a lower price, or by having lower costs, or by demanding less profit.
Two, they could provide superior service at the same or even a higher
price. They could be more friendly,
quicker to the pump, more thorough in cleaning windshields, having cleaner
bathrooms, better marketing, etc.
To stay in business, he had to keep all this in
mind. The very survival of his business
depended on it. At various times, he
likely used all of these strategies. In
his particular case, part of his appeal was clearly that he made the best fried
chicken in the area. If you had to get
gas, and had several options, why not try the place everyone said had the best
food in the Appalachians? In other words, competitive pressures caused him to
INNOVATE.
mind. The very survival of his business
depended on it. At various times, he
likely used all of these strategies. In
his particular case, part of his appeal was clearly that he made the best fried
chicken in the area. If you had to get
gas, and had several options, why not try the place everyone said had the best
food in the Appalachians? In other words, competitive pressures caused him to
INNOVATE.
His chicken was so good that he was awarded an award
seemingly peculiar to Kentucky, that of Kentucky colonel, by the Governor.
seemingly peculiar to Kentucky, that of Kentucky colonel, by the Governor.
Then a highway was built, bypassing his restaurant, and
his business was ruined. Back to the
drawing board, he invented a quicker, better way of frying chicken, in a
pressure cooking, and using a proprietary blend of herbs and spices that is a carefully
guarded secret to this very day (as is the recipe for Coca-Cola). He then decided to grant people the right to
his recipe and methods, in exchange for what amounted to a royalty on every
meal sold.
his business was ruined. Back to the
drawing board, he invented a quicker, better way of frying chicken, in a
pressure cooking, and using a proprietary blend of herbs and spices that is a carefully
guarded secret to this very day (as is the recipe for Coca-Cola). He then decided to grant people the right to
his recipe and methods, in exchange for what amounted to a royalty on every
meal sold.
His first franchise was in Utah, where his chicken was
sold at an existing restaurant, and soon proved extremely popular, to the
extent that he started signing up new clients at a very rapid pace.
sold at an existing restaurant, and soon proved extremely popular, to the
extent that he started signing up new clients at a very rapid pace.
Change in his business environment, in other words,
caused his previously valuable service to be much less valuable, forcing him
again to INNOVATE, and create something that did not exist before. The increase in sales of his product
necessarily meant that his product was one desired by the public and one which
would not have existed if he had not been trying at a minimum to pay his bills,
and with luck amass a fortune.
caused his previously valuable service to be much less valuable, forcing him
again to INNOVATE, and create something that did not exist before. The increase in sales of his product
necessarily meant that his product was one desired by the public and one which
would not have existed if he had not been trying at a minimum to pay his bills,
and with luck amass a fortune.
The subsequent history is long and convoluted (Dave
Thomas, as one example, was an early franchisee and came up with the idea of
the rotating bucket; the bucket itself was almost an accident, and the result
of another franchisee buying up paper buckets created for another purpose
entirely at a steep discount, and INNOVATING with respect to a new and popular
way of packaging the chicken meals. You can
read about it here (http://en.wikipedia.org/wiki/KFC),
but the net is that from his initial idea, a long series of new ideas and
products evolved, such that KFC is today an internationally recognized brand.
Thomas, as one example, was an early franchisee and came up with the idea of
the rotating bucket; the bucket itself was almost an accident, and the result
of another franchisee buying up paper buckets created for another purpose
entirely at a steep discount, and INNOVATING with respect to a new and popular
way of packaging the chicken meals. You can
read about it here (http://en.wikipedia.org/wiki/KFC),
but the net is that from his initial idea, a long series of new ideas and
products evolved, such that KFC is today an internationally recognized brand.
Fast forward to today.
There are about 17,000 KFC franchises, some of which are owned by the
KFC Corporation, but the vast majority of which are owned by individuals, who
in effect pay royalties for the name and process. Part of being able to use the name involves
adherence to a very systematic process of quality control, such that you can go
to any restaurant anywhere in the world, in principle, and get the same
food. Many people value this, which is
why so many choose to eat there, and hence why so many people invest their
money and energy opening them.
KFC and its franchisees employ an enormous quantity of
people, who, if they did not work there, may not work at all. One sees this idea that if one company you
don’t like fails, that some other company will take up the slack by hiring
those people. Why would this be so? Every company in existence came into being as
a result of the desire to solve a problem of supply that the public had, and
succeeds on a sustained basis only IF it provides a product or service people
want at a price they are willing to pay.
If KFC went under, some other company providing the same service would
come into being, or that product would stop being delivered, and those jobs
lost permanently until some new innovator came along.
people, who, if they did not work there, may not work at all. One sees this idea that if one company you
don’t like fails, that some other company will take up the slack by hiring
those people. Why would this be so? Every company in existence came into being as
a result of the desire to solve a problem of supply that the public had, and
succeeds on a sustained basis only IF it provides a product or service people
want at a price they are willing to pay.
If KFC went under, some other company providing the same service would
come into being, or that product would stop being delivered, and those jobs
lost permanently until some new innovator came along.
Corporations like KFC provide ALL revenue
which the local, State, and Federal governments use to pay their bills, both in
terms of taxes levied on the corporate entity itself, and the wages paid the
employees.
which the local, State, and Federal governments use to pay their bills, both in
terms of taxes levied on the corporate entity itself, and the wages paid the
employees.
As I will discuss, governments can borrow money, but
that is money that has to be paid back out of tax revenue, and usually with
added interest. Governments can inflate the
currency, but by devaluing the value of everything else, that, too, amounts to
a tax levied on the private sector.
that is money that has to be paid back out of tax revenue, and usually with
added interest. Governments can inflate the
currency, but by devaluing the value of everything else, that, too, amounts to
a tax levied on the private sector.
Ultimately, then, there is no path which is
fiscally sustainable than that of collecting taxes from profit making
institutions and the individuals they employ. The solvency of government, then, is
necessarily tied to the solvency of corporations like KFC. This point is unavoidable.
fiscally sustainable than that of collecting taxes from profit making
institutions and the individuals they employ. The solvency of government, then, is
necessarily tied to the solvency of corporations like KFC. This point is unavoidable.
II
How
Health Insurance Works
Health Insurance Works
Insurance, like incorporation, is a means of managing
risk. Managed risk means people take more
chances, and thus create more. It has
been essential to our modern economic miracle.
risk. Managed risk means people take more
chances, and thus create more. It has
been essential to our modern economic miracle.
We all know that bad things happen. Houses burn down, thieves take things,
tornadoes and hurricanes hit. But they
don’t hit ALL of us ALL the time. They
hit some people, and leave everyone else fine.
Across any broad population, you can predict that a certain number of
bad things will happen, even if you don’t know what will happen to who
when. The possibility of structured risk
assessment, however, is essential to the modern business of insurance.
tornadoes and hurricanes hit. But they
don’t hit ALL of us ALL the time. They
hit some people, and leave everyone else fine.
Across any broad population, you can predict that a certain number of
bad things will happen, even if you don’t know what will happen to who
when. The possibility of structured risk
assessment, however, is essential to the modern business of insurance.
With respect to health insurance, actuaries can say that
in a given population of one million people, approximately X number will have
heart attacks (a number higher among smokers, who pay higher premiums), Y will
get some form of cancer, Z will get hit by cars, etc. Across wide populations, largely accurate
statistical summaries can be built which enable health insurance providers to
estimate what their likely costs are going to be in any given year, and
calculate premiums which are higher than their likely costs. The difference is both their profit and their
reason for being. Without profit, they
would not provide this service.
in a given population of one million people, approximately X number will have
heart attacks (a number higher among smokers, who pay higher premiums), Y will
get some form of cancer, Z will get hit by cars, etc. Across wide populations, largely accurate
statistical summaries can be built which enable health insurance providers to
estimate what their likely costs are going to be in any given year, and
calculate premiums which are higher than their likely costs. The difference is both their profit and their
reason for being. Without profit, they
would not provide this service.
Insurance carriers compete with one another. As in all competition, the goal is to provide
the best product at the lowest price.
What product is best? Well, can
this question be answered finally? Would it not depend on your needs? Healthy people need one type of coverage, and
those who abuse their bodies need another.
That market would be best which best allowed insurance
carriers to innovate, and consumers to decide which products were best by voting
with their money. As things stand
currently, most Americans do not have access to a market in which insurance
carriers are allowed to innovate, or are even allowed to compete.
carriers to innovate, and consumers to decide which products were best by voting
with their money. As things stand
currently, most Americans do not have access to a market in which insurance
carriers are allowed to innovate, or are even allowed to compete.
As one obvious
example, roughly half of Americans do not have the ability to buy insurance
directly from the carrier. If you live
in, say, California or New York, you MUST get the insurance through your
employer. Why? You buy car insurance
directly. You buy life insurance
directly. You buy home-owners insurance
directly.