Questions and Observations

Free Markets, Free People

Deconstructing Health Care “Waste” Numbers

We found out recently that the government perpetrated myth that the health insurance industry were a bunch of “robber barons” was a load. So how about this point that it likes to push about “waste” in our health care system?

Well Reuters obligingly publishes an article today entitled, “Healthcare system wastes up to $800 billion a year.”

The estimate is actually 505 to 800 billion but why not go with the higher number when your “perspective” is to support government reform. Anyway:

The U.S. healthcare system is just as wasteful as President Barack Obama says it is, and proposed reforms could be paid for by fixing some of the most obvious inefficiencies, preventing mistakes and fighting fraud, according to a Thomson Reuters report released on Monday.

The U.S. healthcare system wastes between $505 billion and $850 billion every year, the report from Robert Kelley, vice president of healthcare analytics at Thomson Reuters, found.

“America’s healthcare system is indeed hemorrhaging billions of dollars, and the opportunities to slow the fiscal bleeding are substantial,” the report reads.

“The bad news is that an estimated $700 billion is wasted annually. That’s one-third of the nation’s healthcare bill,” Kelley said in a statement.

So now we have 3 numbers to go with telling anyone with an ounce of sense that they’re really not sure how much waste there is. But for the sake of argument, let’s stick with the 800 billion. Obviously they intend too because this is the sop they’re going to throw out there and claim it will “pay” for their “reform”.

The list is rather interesting. For instance:

* Fraud makes up 22 percent of healthcare waste, or up to $200 billion a year in fraudulent Medicare claims, kickbacks for referrals for unnecessary services and other scams.

200 billion or 25% (not 22%) of the waste comes from the portion of the medical system the government already runs. The same system which now saddles us with 52 trillion dollars worth unfunded future obligations.  To this point, the government has demonstrated absolutely no ability to curb such fraud or waste. In fact, it has never shown any interest or desire in tackling the problem.  Why should we believe they’re serious about it now?

* Unnecessary care such as the overuse of antibiotics and lab tests to protect against malpractice exposure makes up 37 percent of healthcare waste or $200 to $300 billion a year.

37.5% of additional “waste” comes from doctors protecting themselves from malpractice law suits. Yet there is nothing addressing tort reform in these bills. How, then, does what the administration and Congress are offering address this problem? It doesn’t. It would be a fairly easy fix – but they’re ignoring it.  It’s called special interest politics.

That means, to this point, 500 billion of the 800 billion dollars in “waste” are either unaddressed (tort reform) or have never been successfully addressed (Medicare).

* Administrative inefficiency and redundant paperwork account for 18 percent of healthcare waste.

Ever talk to a doctor about the administrative hoops one has to go through to get Medicare to pay for service. Certainly private insurance can be a hassle as well, but there are few if any doctors who won’t treat patients with private insurance while there are a whole host (and growing) who won’t treat Medicare patients. Or said more succinctly – it’s mostly a government paperwork problem.

* Preventable conditions such as uncontrolled diabetes cost $30 billion to $50 billion a year.

And that may or may not be helped by more preventive medicine – there are very mixed reviews on how cost effective it really is. However, even if it did a 100% better job than is now being done (which is extremely unlikely), a) it won’t cost less and b) it still remains up to those needing such treatment to seek it out. Regardless, at most it is 6% of this 800 billion in “waste”.

In summary, the government is responsible for 25 – 40% (add in about 15% of that admin number).  Malpractice avoidance – something they could fix or at least lower with tort reform – accounts for 37.5% of the total.  Preventable conditions may or may not constitute the final 6% described here. That leaves 14% or in undocumented waste, probably broken down in numerous smaller categories that are going unaddressed.

What this all means is government could clean up its own mess and cut waste to 600 billion, pass tort reform and cut it to 300 billion, make Medicare easier for doctors to administer and cut it to about 150 billion.

Instead we’re stuck with an attempt at a complete overhaul with the government trying to sell us on the idea that the problem is with the private sector and giving government more power over health care is the cure.

The cognitive dissonance is so loud you have to wear earplugs.

~McQ

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Will 2010 Be A Bad Foreign Policy Year For Obama?

I can’t help but think James Carafano is on to something in his comparison with Obama’s rather naive foreign policy with another naive foreign policy –  that of Jimmy Carter. Why does Carafano feel that 2010 may be Obama’s 1978?

Because America’s enemies had taken measure of the man during his first, change-filled year in office. They saw weaknesses they could exploit. In the second year, they made their move.

Carter was a big “soft power” advocate, and believed diplomacy was the be-all and end-all of foreign policy. He was of the opinion the US could essentially negotiate anything. He also felt that the US was too arrogant and needed to humble itself before the world. While those who shared his views welcomed these changes, those who opposed us saw them precisely as Carafano describes it – weakness – and ruthlessly exploited that weakness. His 2nd year in office was a series of foreign policy disasters.

Sadly, warning signs that others will use the administration’s “soft power uber alles” strategy to undermine U.S. interests are already cropping up.

» The Russians are demanding more and more at the strategic-arms negotiating table, while giving their U.S. counterparts less and less.

» Iran and North Korea are running out the clock, sending diplomats into the umpteenth round of talks while their scientists toil feverishly advancing their nuclear and missile programs.

» In Latin America, socialist dictators continue to outmaneuver the White House.

Meanwhile, new al Qaeda-related or -inspired plots appear to be popping up every day. Three in the United States were thwarted last month. A Boston-based plot was thwarted just last week. Turkey uncovered another network the week before that. In Afghanistan, the Taliban is on the march.

And the year is not over yet.

The point about al Qaeda sponsored plots uncovered in the US recently are interesting and have had me wondering since first reading about them why AQ has suddenly decided that now is the right time to again attack the US. Is it a coincidence that they seem to become more emboldened with the change in leadership in the US? No, I don’t think so. I think the fact that three real plots to attack us coincide with a real belief that the US is in a weaker position now than it was last year. I’m coming to believe that al Qaeda’s plans reflect the belief of the world at large that the US is a nation with weaker leadership less likely to strike back if attacked.

Now, that may end up being completely wrong, but in terms of deterrence it appears that the perception of strength and a willingness to go after our enemies should they attack us seems to be waning. And that’s dangerous for all of us.

It’s one thing to modify a foreign policy approach with the addition of more soft power. There’s nothing wrong with soft power per se. But it’s application a) takes a long time to bear fruit and b) as proven by Carter, its application alone or in lieu of the use of hard power when necessary is seen as a sign of weakness, not strength.  What Carter never learned about international politics is it is better to be respected than liked.

International politics is a world of anarchy. And while countries attempt to lay out and abide by rules they all supposedly agree on, in the end they almost always act in their own best interest and blow off the agreements if necessary. For those who line up against us, their best interests are served by a weak US. It allows them to act as they wish, with minimal penalty, to achieve their desired goals. The litany of foreign policy failures under Carter underscore that reality.  They tested the perception of weakness found in the Carter foreign policy and upon realizing its reality, exploited it. What Carafano is attempting to point out is the Obama administration is presently building the same sort of perception of the US that did Carter.

Given that, it certainly not at all a stretch to expect the same sort of attempted exploitation of the US by its enemies that occurred under the Carter administration. Keep an eye on developments in 2010. They may very well bear out Carafano’s thesis.

~McQ

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Fact Checking The Democrats – Private Health Insurance

Private health insurance companies have been demonized by the Democrats and the administration as modern day “robber barons” who are raking in obscene profits mostly by denying you coverage. But a simple fact checking dispels that sort of an attack as negative propaganda with no basis in reality:

Health insurance profit margins typically run about 6 percent, give or take a point or two. That’s anemic compared with other forms of insurance and a broad array of industries, even some beleaguered ones.

Profits barely exceeded 2 percent of revenues in the latest annual measure. This partly explains why the credit ratings of some of the largest insurers were downgraded to negative from stable heading into this year, as investors were warned of a stagnant if not shrinking market for private plans.

In other words, the methodical demonization of private insurance by government has put the industry on very shaky footing. Should a public option – defined as the government selling insurance or, as the Democrats are trying to rebrand it, Medicare part E – be placed into law, there’s a distinct possibility that the private market may dry up. Another untruth the government is pushing is that it’s entrance into the market will offer “choice and competition”. In fact, with the unlimited borrowing power of the US Treasury backing the public option and no requirement to make an profit, there will likely be less competition and at some point  no real choice.

A little reality check pertaining to the industry:

Health insurers posted a 2.2 percent profit margin last year, placing them 35th on the Fortune 500 list of top industries. As is typical, other health sectors did much better – drugs and medical products and services were both in the top 10.

Congress v. Insurance Industry

Congress v. Insurance Industry

It is pretty tough to characterize an industry making an average 2.2% profit margin as one which is exploiting its customers. As a comparison:

The railroads brought in a 12.6 percent profit margin. Leading the list: network and other communications equipment, at 20.4 percent.

Can anyone point me to the government characterization of those two industries making obscene profits or exploiting their customers? Apparently the government has no plans to take them over – yet.

In fact, the private health insurance industry isn’t at all in the ‘obscene profit’ category and falls more in the “average” category when it comes to comparison to other industries in various sectors:

The industry’s overall profits grew only 8.8 percent from 2003 to 2008, and its margins year to year, from 2005 forward, never cracked 8 percent.

The latest annual profit margins of a selection of products, services and industries: Tupperware Brands, 7.5 percent; Yahoo, 5.9 percent; Hershey, 6.1 percent; Clorox, 8.7 percent; Molson Coors Brewing, 8.1 percent; construction and farm machinery, 5 percent; Yum Brands (think KFC, Pizza Hut, Taco Bell), 8.5 percent.

In this case the devil isn’t in the details, it is instead in the factually incorrect and disingenuous attack of politicians.

~McQ

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Jeb Bush To GOP – Stop Being The Party Of “No”

Worst. Advice. Ever.

Seriously.  I hear this all the time, and it is nonsense. It gives credence to opposition propaganda spin.

It is bad advice because it conflates the job of legislators with the party’s job of building the party and attracting new voters.  And that’s true for both parties.  The GOP is supposedly the ideological opposite of the Democrats.  That would tell most voters that the GOP most likely to oppose what the Democrats propose in the legislative process.

Guess what – that makes them the party of “no”.  That’s their job, if they believe in the ideological principles which supposedly undergird their party.  As I recall it, the Democrats had absolutely no problem being the party of “no” when they were in the minority.  In fact, they reveled in it.  And look where they are now.

He told the group that Republicans are often “too nostalgic” and that the party needs to be more “forward looking” in order to regain national success. Bush reminded the audience that voter demographics are changing and called for the party to become more “youthful” and to abandon their image as “the old white guy party.” “Tone matters,” Bush said, “in twenty or so years our country will have a minority majority.”

But this doesn’t necessarily mean that the party must move towards the center. When asked by a student if the party platform needed to become more moderate on social issues, Bush replied, “no.” Rather, he stressed that Republicans “need to apply conservative principles to 21st century problems.”

What Bush describes here is the job of the party, not its legislative representatives. Their job is to represent their constituency and to oppose legislation that isn’t in keeping with the desires of their constituency and ideology. That means, when Democrats are in power, saying “no” a lot.

On the other hand, where is the GOP’s plan to become more ‘youthful’? Where is it’s media campaign to change the “tone”?
Where is the plan to “apply conservative principles to 21st century problems?” Or, more succinctly, why hasn’t the party produced these plans in anticipation of the fight for Congressional seats in 2010?

As far as I can tell, the party is AWOL in all those areas.

In the meantime, the GOP legislators, for the most part, are doing precisely the job they should be doing – if the GOP actually believes in the principles they espouse – and that is being the party of “no”. And if they want to build any credibility at all, they must continue to be the party of “no” (just as the Democrats would be if the positions were reversed). Abandoning that would be the worst mistake they could make.

~McQ

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Campaigner-In-Chief

I think Toby Harnden of the UK’s Telegraph describes pretty well what most of us have observed and concluded about President Obama:

Perhaps we should not be surprised that the land of the permanent campaign has produced a president like Barack Obama. During his White House bid, Mr Obama’s staff argued that his masterful oversight of the machinery that ultimately got him elected was his highest achievement.

In many respects this was true, though Mr Obama was more chairman than CEO. Even Republican political operatives acknowledge that the Obama ’08 campaign was a thing of beauty.

Essentially, however, Mr Obama won because of his persona – post-racial, healing, cool, articulate and inspirational. In a sense, therefore, his greatest achievement in life is being Barack Obama. Or the campaign version, at least.

Therein lies the problem. While campaigning could centre around soaring rhetoric, governing is altogether messier. It involves tough, unpopular choices and cutting deals with opponents. It requires doing things rather than talking about them, let alone just being.

Mr Obama is showing little appetite for this. Instead of being the commander-in-chief, he is the campaigner-in-chief.

I think this is best reflected in a number that’s been circulating recently – Obama has done 2 to 3 times more political fundraisers at this point in his presidency than did either GW Bush or Bill Clinton. While they were apparently concentrating more on the job at hand Obama seems unable, or unwilling, to drop the campaign mode and step into the governing role.

Consequently Afghanistan strategy is adrift, health care reform is leaderless and Obama flits around doing fundraisers and campaign-style townhalls.

Now, he is stumping for Democratic candidates in states he won last year but which are now in danger. Last Wednesday in Hackensack, Mr Obama took to the stage to proclaim: “Your voice can change the world. Your voice can elect Jon Corzine, governor once again of New Jersey.” Change the world? Mr Corzine is a former Goldman Sachs executive whose political career was launched when he spent $57 million of his own money on a Senate seat in 2000.

The rally was an attempted 2008 reprise. There was the spontaneous (or not) cry of “I love you!” bashfully acknowledged by Mr Obama with a “I love you back.”

There were the Obama-led chants of “Fired up! Ready to go!” and the ubiquitous “Yes We Can” signs.

And as he always does, Mr Obama blamed every economic woe on the Bush years, conveniently forgetting that Republicans are no longer in office and it’s been his mess for nine months now.

The “blame Bush” card, just like the race card, is wearing very thin. It is also worth remembering that the budgets that were passed by Congress during the last two years as well as the initial 700 billion bailout package appropriated by that same Democratic Congress all had Mr. Obama’s stamp of approval by way of his vote for each of them.

But, going back to the subject, it seems like every time it gets a little hot in Washington DC, Obama’s answer is to leave and rally somewhere as if doing so will somehow improve the other situation.

And then, in what one can only describe as a fit of stupidity that compounds the problem of perception, the White House picks a fight with a news organization with which it has issues. It ends up rallying the other news organizations to the side of the one it’s picking on and ends up looking both petty and vindictive.

Finally, it appears even the comedians have had enough:

“President Obama agreed to commit an additional 40,000 troops to help fight Fox News,” quipped NBC’s Jay Leno. “Senior White House adviser David Axelrod told reporters that Fox News is just pushing a point of view. Well, yes, but at least they’ve got a point of view.”

Losing the comedians is usually an indicator of a loss public support. And all of them are now taking pot-shots, even the odius Bill Maher.

Harnden concludes:

Mr Obama was elected on a promise of being post-partisan to Washington and transforming the country. Thus far, he has won the support of only a single Republican for his health-care plan and has shown himself to be as aggressive a Democratic partisan in office as anyone in the fabled Clinton war room.

Beyond the grand announcements, fine speeches and his eager acceptance of the Nobel Peace Prize, Mr Obama has yet to achieve anything of substance. It is time for the campaign to end.

But it won’t. It can’t. And there is a very simple reason for that – Mr. Obama has never done anything of substance, nor has he ever run anything of substance. He simply isn’t equipped with the experience and know-how necessary to do that. He’s never been a leader, had to be a leader and doesn’t know how to lead.

He knows how to campaign. It’s that at which he is good. Campaigning is all “grand announcements” and “fine speeches” in which the campaigner never has to put up or shut up. Now that he finds himself in this rather awkward position of actually having to deliver on his “grand announcements” and “fine speeches”, he reverts to that he knows best. And that means a perpetual campaign.

~McQ

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Eating For The Planet (Updated)

The next step in enviro-whackiness? Sweden’s on it:

New labels listing the carbon dioxide emissions associated with the production of foods, from whole wheat pasta to fast food burgers, are appearing on some grocery items and restaurant menus around the country.

People who live to eat might dismiss this as silly. But changing one’s diet can be as effective in reducing emissions of climate-changing gases as changing the car one drives or doing away with the clothes dryer, scientific experts say.

Yes friends – emission labels, not nutrition labels. Eat unhealthy if it helps save the planet – that’s you role in life. Apparently, however, it is all still a little confusing:

Shopping for oatmeal, Helena Bergstrom, 37, admitted that she was flummoxed by the label on the blue box reading, “Climate declared: .87 kg CO2 per kg of product.”

“Right now, I don’t know what this means,” said Ms. Bergstrom, a pharmaceutical company employee.

It means that right now someone has a “bright” idea that is voluntary. But given Europe’s proclivity for nanny-state control of the lives of its citizens, one has to wonder how long it will remain voluntary or before foods with high emissions are slapped with a carbon tax.

Kristian Eriksson, 26, an information technology specialist, looked embarrassed when asked about the burger he was eating at an outdoor table.

“You feel guilty picking red meat,” he said.

Only if you buy into the swill known as AGW, Kristian – only if you buy into it.

UPDATE: Fran Smith finds some problems with the labeling:

But the Swedish food police admit that they are some problems in balancing healthy eating with low-carbon-footprint eating. And it doesn’t always work. Their guidelines that form the basis for the labels tell people to eat carrots instead of tomatoes, and not to eat many bananas. Have they not read or heard about the antioxidant properties of tomatoes? There are also a lot of questions about their methods of measuring climate-friendly production. In their view how the production contributes to the landscape is a big plus

And there’s the implied “buy local” side of it all:

[L]ocally grown, Swedish stuff produces lower emissions. Guidelines don’t state it but it’s implied: Imports are bad because of emissions from transportation — whether truck or ship or plane.

For instance, a New Zealand apple has a CO2 equivalent of 4 while a Swedish apple only rates a 1. So not only will those buying into this nonsense feel guilty eating a burger, they’ll feel guilty eating an apple if it’s not a Swedish apple.

UPDATE II: Ryan Young notes:

This new religion is a piece of work. It comes complete with a deity (Gaia), clergy (activists), indulgences (carbon credits), and now, dietary restrictions.

~McQ

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If You Were A Democrat In Congress, What Would Your First Domestic Priority Be?

Health care reform?

Cap-and-trade?

Or, perhaps, economic recovery and jobs?

On Thursday, Obama’s economic adviser Christina Romer told Congress the administration agrees with other analysts that the economy will grow in the third quarter, and beyond. Even so, she said, “unemployment is likely to remain at its severely elevated level,” and noted expectations that few jobs will be added through the third quarter of 2010.

And what happens during the 4th quarter of 2010?

So why are Democrats fiddling with health care reform and cap-and-trade instead of the economy and jobs?

All I can figure is the radical element in control of the leadership in Congress right now sees the small window they have to push this garbage through as more important than putting policies in place which would enable economic recovery and create jobs.

Politically its a mixed bag for Democrats – push the extremist agenda through but at the cost of seats and possibly a majority in the midterm elections. Apparently they (the liberal Democrats, certainly not the more conservative Democrats who’re actually the one’s who might lose their seats) think enacting the legislation is worth the cost of 2010. And then, they might just be arrogant enough to think they can pull both off.

~McQ

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Unsurprisingly, Top Performers Leaving Companies Under Pay Czar’s Rule

It floors me when people who have an inkling of how markets work warn what will happen if pay restrictions are imposed on some of the companies in an industry, but not all, and those warnings are disregarded. And no, I’m not campaigning for all companies to come under the “pay czar’s” control. Instead, what is clear is the “pay czar’s” unilateral pay cuts are now hurting the very companies you and I (and our grandchildren’s grandchildren) unwillingly bailed out. And while I mostly agree with MichaelW’s thoughts on the subject, I also understand that the way it is being done does not help make their profitability (that’s how they’re going to pay back the bailout money) better. In fact, it stands a much better chance of hurting profitability:

Many executives were driven away by the uncertainty of working for companies closely overseen by Washington, opting instead for firms not under the microscope, including competitors that have already returned the bailout funds to the government, according to executives and supervisors at the companies.

“There’s no question people have left because of uncertainty of our ability to pay,” said an executive at one of the affected firms. “It’s a highly competitive market out there.”

It would be a bit like the government getting its hands on an NFL franchise for whatever reason that was failing. After “saving” it with your tax dollars, the powers to be decide that one of the things they need to do is severely limit the salary of players, because, you know, in relation to Joe Six-Pack, what the players make is obscene. So they unilaterally put salary caps on what players can make that are well below industry standards.

Any guess what happens when free agency rolls around? Any idea of how many drafted players are going to say “no” and remain unsigned when their salary demands aren’t met? Why?

To quote the executive, “It’s a highly competitive market out there”, and there are teams more than willing to pay the price for that talent. Why? Because the talent has proven themselves or have tremendous potential (as in the case of high draft choices).

So if it is blindingly obvious what would happen with an NFL franchise if the same thing was done there, how do these people who are doing a very populist political thing endemic to identity politics, think what they’re doing will be the exception?

They’re unilaterally limiting the talent pool in financial institutions we’ve paid to bail out which puts in jeopardy the ability of those companies to pay back the bailout money.

That doesn’t hit me as very bright. But then, a lot of things that have been done recently fall into that category, don’t they?

~McQ

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