John Stossel: Is America Number One? (Video) and Transcript

Here is video from a special John Stossel did in the late 1990's. This program could air today and would still be relevant. The transcript for the show is here.

John Goodman on Priceless Healthcare: The Problems With Healthcare

A while ago I finish John Goodman’s great book Priceless:Curing The Health Care Crisis. If you learn one thing about this book it is how to make healthcare more free market oriented. People forget the free market does not exist in healthcare like it does in technology, the grocery store, and other markets. People also forget that doctors and hospitals work for insurance companies. Goodman made some excellent points in the book. I wanted to share not only what I learned but my comments as well. 

Part of the problem with health insurance is that very few people are paying for their own healthcare. In fact, 90% of the costs is paid by someone else (government, insurance, company). It is interesting how doctors nor most health professionals can't tell you the price of tests, drugs, or other services. In fact Medicare has 7,500 different billing codes. According to Goodman there are actually Medicare 6 billion prices at any given time. Medicare by the way will go broke as the unfunded liability is around  There is actually something called the International Classification of Diseases which is now on its 10th edition (starting in 2014) and will feature over 68,000 codes. Some of the codes are bizarre including people who get sucked into a jet engine and contact with dolphins. The codes seem to dumb down critical thinking and decision making. The way I understand these codes is doctors have to explain to the insurance company why a patient saw them. The "code" is suppose to explain what the purpose of the visit was and then is used to determine how much doctors get reimbursed. There is plenty of fraud and abuse in these codes. There will be bill padding, up charging, kickbacks, along with other shenanigans.

How confused would people be if we had food insurance and went to McDonald's and had no idea what a burger actually cost? We should make healthcare single payer in terms of having the individual pay of course. I will talk later about how we can actually do this using a free market system.

Health insurance is a very bizarre market. Employers offer what is known as group health insurance. Due to HIPPA rules in group insurance everyone has to be offered insurance (regardless of their health condition, age, or sex). Health insurance is tied to unemployment which is strange. Part of the reason why so many people are uninsured is their health insurance isn't portable. Could you imagine how many uninsured drivers we would have if your car insurance was tied to employment? Actually if you think about it you actually need car insurance to utilize your health insurance. Despite what some people say the insurance market is highly regulated by each individual state and if an insurance company wants to raise rates they first must get approval from the state to do so. The average profit margin of the insurance companies like Aenta, WellPoint, and Humana is only 3.5%. Compare this to the rich profit margins of broadcasting which has a profit margin of roughly 69% or software companies with an average profit margin of 18%.  They are also told how much they can spend on "administrative costs" which is known as a medical loss ratio which requires 85% of their premium income on medical care and less than 20% on administrative costs. However, no one can seem to define what administrative costs precisely are. Could you imagine if bureaucrats were able to tell Wendy's how much they could spend on food?

Speaking of insurance President Barack Obama promised people that if they liked there plan they could keep it. However, employers may just drop employees as employers can always just just pay the $2,000 fine/employee if the employee amount is greater than 50 employees. The Congressional Budget Office predicts that 9 million will actually lose their healthcare insurance. In terms of cost Avik Roy at Forbes does an excellent job of summarizing the costs of both California (64% to over 160% increase) and the Ohio Department of Insurance which recently said they were going to be increasing premiums 88%. People fail to realize that since insurers will be forced to insure people with above-average risks they will recoup that money by charging healthy people higher premiums.

The average wait time for the emergency room (ER) has been increasing in recent years. In 2009 (the last year for which data is available) the mean wait time was 58 minutes (which is a 25% increase from 2003). Some patients wait and die in the ER. In 2008, this happened to Michael Herrara of Dallas, Texas who waited 19 hours at Parkland Hospital Retail and died waiting for care. Compare this to retail clinics (for-profit) which are often open around the clock, post prices online, and often have little to no wait time. This may explain why retail clinics have had a four fold increase with an estimated 6 million people using a retail clinic in 2009. What is even more surprising is that 91% of patients are satisfied with retail clinics. The only free market hospital in the country is the Oklahoma City Surgery Center which posts prices and one of the only free market doctors (Dr. Michael Ciampi) posts prices online, Even the Cancer Treatment for America posts success rates online.

When looking to other countries it seems the United States actually does have a decent quality healthcare system despite what critics like Michael Moore say. The problem with world rankings is that they take into account things that have nothing to do with healthcare. For instance the fact that Americans kill each other more, have more fatal car crashes, and other events distract from the quality of medical care. Another example is when the United States calculates things like infant mortality we count all births instead of other countries which use more liberal measures and only count the infant dead depending on various factors which would artificially make their infant mortality statistics look better.

Canada which touts its "free" healthcare isn't so free. Canada also outlaws private insurance. Of course Canadians are paying for healthcare in the form of longer wait times. The wait times in Canada are horrendous. 10% of patients wait more than 8 hours in the emergency room. 25% of Canadians wait more than 4 months to see a specialist. No wonder why close to 30% of Canadians find the length of wait time for a specialist unacceptable. Canada is also behind on medical technology as well. According to Goodman, the United States has 1,000 PET (positron emission tomography) units while Canada has only 24 units. This technology is used to diagnose cancer. What is astounding is that even the people uninsured in the United States get more access to medical treatment than other countries. In the United States even the uninsured get more preventive care in Canada (prostate exam, mammogram, etc). Also doctors in the United States typically spend more time with patients than nearly any other country.

British National Health Service found after 30 years access to healthcare was better than when the program started. Speaking of Britain in a survey that came out a few months ago 40% of people who work for the National Health Service wouldn't even recommend it to their family or friends!

The United States is also facing an increasing in shortage the number of drugs available. Data from the University of Utah shows there was a shortage of 74 drugs in 2005 and by 2010 increased to was 211 drugs. Some of these drugs are used to treat serious and life-threatening conditions. There are a few reasons why these drugs are in such short supply.  A program known as the 340B program requires drug companies to give 23% rebates on brand named drugs and a 13% rebate for generic drugs to providers that treat a large number of people without means, clinics treating Medicaid patients, and hospitals and clinics in the Public Health Service, etc. Another reason why there is a shortage is because the FDA after 2010 began heavily regulating drug manufacturing plants. As can be seen on page 11 of this House Oversight Committee report the number of FDA warning letters to manufacturers increased 155% from 2010-2011 and 250% from 2009-2011.

Speaking of costs what I learned in reading Goodman's book was that even "preventive care does not actually lower costs. This study done in Health Affairs showed that preventive care actually increases costs. The study showed 20% of preventive options actually lowered costs while 80% of preventive options actually increased costs. Something else I learned was the price of lab tests are 50-80% lower in hospitals compared and also available within one day. Wal-Mart has multiple drugs that can be purchased for only $4 for a one month supply (Wal-Mart has saved people $3 billion on prescription drugs as of March 2013)

What will even make things worse is a bureaucratic led Preventive Services Task Force which will decide who should or shouldn't get a mammogram, prostate exam, or colonoscopy. I am not a doctor but I do know everyone is different in terms of how they respond to drugs, treatments, and the side effects they receive. A cookie cutter top down approach is a pretty ignorant way to run healthcare.

As someone who is interested in technology even I thought electronic medical records (EMRs) would have done a world of good. These records started around in 2004. Recently one of my doctors learned the EMR system for one hospital but now is no longer seeing patients at a different hospital because he doesn't want to learn their EMR system. He told me he spent 12 hours just learning the EMR system for one hospital. President Obama years ago wanted to "invest" take $50 billion of taxpayer money over 5 years to look into EMRs and the results haven't been too great. This Washington Post editorial finds that after the Children's Hospital of Philadelphia added electronic prescriptions resulted in a threefold increase. The EMRs also add about half an hour more because part of the program is the person using them having to keep okaying hundreds of messages the EMR system might have. Even the New York Times published this article that showed that EMRs did not help doctors help increase productivity or quality benefits. 

Medicare and Medicaid are two more future train wrecks waiting to happen. The Medicare unfunded liability $89 trillion. Not to mention Medicare fraud is about $60 billion a year. Between both Medicare (for people over 65) and Medicaid (people with few resources) the waste is about $100 billion per year. Medicare is expected to go broke between 2016-2024. A survey from the American Medical Association (AMA) shows that about 20% of doctors are already reducing the number of Medicare patients they see. According to Goodman about a 1/3 of doctors don't take Medicaid patients. What is tragic is that children on Medicaid wait 22 days longer than children on private insurance. According to Goodman an experiment in Florida showed that when Medicaid enrollees could choose between private managed care plans the cost was lower and patient satisfaction was much higher than traditional Medicaid.People like to say how efficient and cost saving Medicare is. However, the facts tell a different story. Robert Brook at the Heritage Institute shows that actually private insurance spends less on administrative costs than Medicare (which is quite amazing given how much private insurance companies can spend is heavily regulated). 

Bloomberg Article: Medical School $278,000 Debt (Because Lack of Free Markets)

This recent story from Bloomberg got me somewhat irritated today. The story discusses how medical school students are burdened with medical school debt. Going to a private medical school for 2012-2013 is over $50,000 according to the AAMC. What is really shocking is that 79% of medical school students will have more than $100,000 in debt. Note this is just for going to medical school this doesn’t even begin to look at overall debt (mortgage, car payments, credit card debt, etc).

I examined the 2012 physician compensation report (by Medscape) which can be found here. Salaries range on the low end of $156,000 for pediatrics to $315,000 for radiology. Specialties like gastroenterology can make over $300,000 while plastic surgeons make $270,000 and internal medicine doctors make $165,000. What I found it interesting that 9% of doctors don’t discuss the cost of treatments considering they don’t even know what the costs are. In the business world you would be out of business if you had no idea what the costs were.

The question is why is medical school become so expensive? Medical knowledge has only grown exponentially over time and you could argue doctors know actually face competition because patients can often Google their symptoms and figure out what they have (doctors also use Google as well). This surgeon discusses what practicing surgery was like in the 1970’s.

Supercomputer Watson (made by IBM) can analyzed 1.5 million records in seconds, attend medical school under a minute, in just two years researchers at the for-profit IBM have reduced the size of Watson from a master bedroom to a pizza box while increasing the speed by 240%. Conventional medicine can get diagnoses right only 50% of the time while Watson can get around 90% of cases correct (less for cancer given how complex they are). Of course, these percentages will only improve over time.

What is interesting is that the average MCAT and GPA scores of the people who get accepted into medical school has steadily risen since 2001. According to this medical journal from 1911 there were 129 medical schools which is roughly the same number of medical schools in 2013! Granted since 1911 the population has exponentially grown exponentially so by definition there are fewer people per doctors.  This may be why so many doctors don’t spend much time with patients.

A no-brainer would be to allow more medical schools to open to allow let more people become physicians. Starting a medical school is no easy task either. Another no brainer is allowing nurse

practitioners and physicians assistants as I mentioned in this post. The empirical evidence I have seen shows nurse practitioners and physician assistants as just as effective as doctors and cost a fraction of what doctors cost.  The cost of medical education falls is yet another example of the Peter Rule. The Peter Rule which states that: over time if prices rise and qualify suffers look to government intervention as the culprit. 

John Allison on Financial Crisis and Market Purity

John Allison recently spoke to AEI on December 6, 2012. I have a lot of respect for John Allison who actually was a CEO of a bank during the financial crisis which gives him more credibility to discuss the topic rather than someone who believes what should have happened. Allison did a great interview for the Kaizen where he discussed his career at BB&T and explains how he grew the company. Dr. Walter E. Williams also wrote a column about the recent book John Allison published called "The Financial Crisis and the Free Market Cure . I read the book myself and really had no idea how much the banking industry was regulated or how government policies really were one of the main causes of the financial crisis in 2008. Allison was not to long ago was named the President and CEO of the CATO Institute. Cheers for Mr. Allison and bringing some sanity in a world of insanity!

Surgery Center of Oklahoma: First and Only Free Market Hospital in America

I saw this recent video about the Surgery Center of Oklahoma which may be in fact the only free market hospital in America if not the world. I blogged about the hospital in this post.  What is interesting is that the hospital actually posts prices for surgeries. What I found interesting was the hospital also published infection rates which I don’t see regular hospitals do. In the investment industry fund managers post data like risk, return, and other important data. Why don’t hospitals, physicians and surgeons do the same? As long as the insurance company is picking up the bill do patients really have that much incentive to care? By the way the Surgery Center of Oklahoma has a lower infection rate of a mere .001% which is much lower than the national average of 2.6%. Hospitals hire administers which can be in the six figure range and really just handle paperwork. I am amazed when I go to a doctor why they ask me the same questions (even after I have been to the same doctor for years). Never mind the fact that there is a staff just talking to insurance companies and filling out paperwork. Is this really making us better off? I would say no. Healthcare is not run like a business. What we need is more hospitals like Surgery Center of Oklahoma which don’t take insurance and inform patients of what the prices are. If you had more hospitals like this they would have to compete not only on price but also quality as well. This would be great for patients and lead to some advancements as doctors would try new things to improve care and reduce the risk for the patient. I notice we don’t need an Affordable Food Care Act, Affordable Computer Care Act, or Affordable Video Game Act. Food, computers, and video games operate in a free market where competition increases quality and lowers prices. Healthcare is not a free market by any means. Can you think of any think the government provides that is of higher quality and cheaper than the private sector? Economist Dr. Walter E. Williams summed it up with his own Williams’ law which states: whenever the profit incentive is missing, the probability that people’s wants can be safely ignored is the greatest.

H/T- Carpe Diem

Testing Milton Friedman and Free To Choose DVD

With this being Milton Friedman’s 100^th birthday the Free to Choose network is celebrating it by broadcasting “Testing Milton Friedman” this fall on PBS. I was surprised that it will not air on my local PBS station but have no fears I am sure it will be posted on PBS online, YouTube, or other various places. At any rate, I was excited to see that the original “Free to Choose” that was made in 1980 is now available on DVD here. For only $35 the 10-part series can be yours. I remember seeing Dr. Walter E. Williams and Dr. Thomas Sowell on the series however had no idea who they were.  Sowell destroys some ignorant fool here. “Free to Choose is really a classic and should be seen by anyone of all ages. 

David Koch: Speaking Your Piece: A Civic Duty

The New York Post published an op-ed  here from David Koch who is the executive vice president of Koch Industries. David Koch needs to continue writing about how free-markets can help solve our problems. 

My favorite paragraph is this:

"Meanwhile, the eyes of the world will be on our national political gatherings, none more keenly than those of people suffering under oppressive regimes around the globe--if they are lucky enough to have access to a TV screen or the Internet."

Post Office Default, Do We Really Need USPS?

In what seems to be great news the Post Office announced that it will default on its $5.5 billion payment for future retiree health benefits. The United States Post Office (USPS) will also owe $1.5 billion in workers compensation and millions in interest payments. As I have pointed out here, here, and here despite the USPS best efforts of cutting jobs, talking about cutting back services, and closing down certain facilities USPS will lose $14 billion this year. What is even worse is that since the inception of the United States Post Office has lost $33 billion and counting since the founding in 1789. This figure actually understates the true amount spent since USPS is exempt from paying taxes on things like vehicles, tires, and other goods they purchase.

Technology like e-mail, online payments, and even cheap cell phones made sending things snail mail obsolete. If grandparents want a picture of their grand children parents no longer have to go to Eckerd’s (now CVS) or Walgreens to develop pictures and then send them in a package to their loved ones. Today in a few seconds people can snap a picture and e-mail it without any postage. Banks and payment transfer companies are also to blame since they developed ways for people to transfer money electronically. The Federal Government is going to stop mailing paper checks next year for people who receive Social Security and instead pay direct deposit or by debit cards.

Why USPS is still operating is beyond me. People worry if USPS was no longer in business who would deliver the mail. My answer would be FedEx, UPS, DHL along with other logistics providers. Cities or neighborhoods could decide who they wanted as their provider.  Have you ever heard about how great of an experience someone had with USPS? Profit seeking companies like FedEx and UPS have to make sure they not only deliver in an efficient manner but also create shareholder value which makes employees accountable. USPS employees are not held accountable and not until 2008 was an employee actually laid off.  USPS has 546,000 employees in 2012 which is a large decrease from the 752,949 employees it had in 2002. If USPS were to disband other companies like FedEx, UPS, and DHL could absorb these employees and would need more since they would have more things being delivered. Profit seeking companies would also want to make sure people in rural areas got their mail or else they couldn’t make profit. Given how inefficient USPS is not only would profit seeking companies need more help they would be hiring workers who would be paying more in taxes, and the companies themselves would have more profit which means they would pay more in taxes.

Do people really even need mail besides for sentimental things considering people e-mail, scan, fax, or call us if they really need something important? Not having to get all those advertisements in the mail would be a positive thing but of course we just trade off those for spam.  I really can’t understand why anyone with a pulse would want USPS to still exist given the billions that is wasted, the inferior service, and the lack of accountability.

Post Office Hunger Strike and Time to Privatize Mail

Postal workers have now gone on a hunger strike to protest the cuts that will be made to the United States Post Service (USPS). Yesterday 10 postal workers stood outside in front of the U.S. Capitol to protest that Congress has done little to help the situation. Representative Dennis Kucinich help lead the rally of the so few. Kucinich made a statement that he would help try to strengthen the Post Office and do what he could to try not to privatize it.

The Post Office is expected to lose $14 billion this year. Last year the Post Office lost around $8.3 billion. With e-mail and texting becoming a common place fewer and fewer people are sending letters. In 2006, Congress required that USPS prefund their retirement health benefits (like most private companies already do) which cost $5.5 billion per year. In order to cover some of these costs the postmaster general Patrick Donahoe has mentioned getting rid of Saturday delivery. The Post Office has a history of threatening to cut Saturday delivery as mentioned in this article however only did it once in 1957.  This of course will help USPS lose less money however won’t put the post office in the black any time soon. As I mentioned in this post last year since the Post Office opened it has lost more than $13 trillion.

Free market solutions like letting FedEx, UPS, DHL and others take over will work wonders. People point out the jobs that will be lost at the USPS if we were to privatize mail. UPS and FedEx would be hiring the qualified workers from USPS to help them with the increase in business. People would save hundreds of hours every year for not having to deal with USPS. Also the increase in business for companies like UPS and FedEx would cause them to earn more money which would lead them to pay more in taxes. At the same time the taxpayers would be saving over $14 billion per year. Other countries like Germany, The Netherlands, and even the EU mentioned in 2008 that they wanted to eliminate national monopolies on the mail system by 2013. Let us let free markets work when it comes to mail.