Obamacare and Healthcare

Today the Supreme Court ruled in a 5-4 decision that the government can force people to buy health insurance. What the Supreme Court did in essence is place a tax on people for not doing something. The legislation entitled Patient Protection and Affordable Care Act plans to try to provide more people with health insurance. I like the key word “affordable”. If you ask someone what is the cost of an affordable house, college, or health insurance could they give you a number? The AMA endorsed the plan in this press release. According to a Gallup Poll done in December 2011 around 17.7% of Americans didn’t have health insurance. This turns out to be close to 50 million people. However, this paints a false picture. Around 25% of these people who are counted as uninsured can get Medicaid and the State Children’s Health Insurance (S-SHIP) but never enrolled. Another 20% of the people who are counted as uninsured are not legal immigrants. Also greater than 33% of people have incomes over $66,000 yet many choose not to purchase healthcare since they are young. Also a very small percentage of people (2.6%) of people go without health insurance for three years or longer.

Another big question is about pre-existing conditions. I would say on this there are some people who through no fault of their own have conditions that they had no fault in causing. However, the idea of insurance is to plan for unforeseen events. One problem is that health insurance is often tied to employment. You can’t take your health insurance policy with you from company to company since the company is paying for it. A better system would be companies just to increase the pay by the amount of what the insurance is worth and let consumers purchase their own health insurance. Also since people can’t purchase health insurance across state lines it artificially increases in the price of insurance. This requires insurance companies to comply with different regulations and restrictions which impose costs on them which are passed on to the consumer. If you don’t believe that there is much regulation in insurance can you even name three new insurance companies in the past five years?

The government does a poor job of managing the money taxpayers give it. Medicare fraud is estimated at $48 billion for 2010. Total spending on Medicare was around $528 billion which means 9% of spending on Medicare is payments to bogus people. If any private organization had a business like this they wouldn’t even exist. If people were paying with their own money instead of a third party paying this wouldn’t occur. Speaking of Medicare according to this article the last two months of a patient’s life cost Medicare $55 billion and it estimated that 20%-30% of the expenses have no impact yet the government keeps spending money.  

The idea of free markets is to create competition which drives down prices and increases options which would allow more people to have health insurance. Two other things that increase cost as I have pointed out here and here the lack of not enough private hospitals and FDA also increase the cost of healthcare. If we had more hospitals it would increase competition and bring down costs. The FDA limits the type of drugs that can go on to the market which artificially increases the price since drugs that the FDA doesn’t approve will never end up in the hands of patients even though some people in the clinical trials benefit. Allow patients to use drugs after the drugs were tested for safety in Phase I and you would see more innovation and prices for drugs drop like a rock. Healthcare isn’t complex we just need more free market solutions. 

Obamacare and Taxes

Richard Epstein: Killing the Long-Term Flow of Technology

Richard Epstein hits a home run on this one.

The Koch Brothers: Inside Koch World (Bill Koch The Other and Misunderstood Koch Brother)

(Continued from Part 1 here). David and William Koch during the 1970’s also joined Koch Industries (William was later fired) and Frederick is the only one who never got into the family business. Frederick in recent years reportedly spends $20 million on his art collection and castles while living in Monte Carlo and London. David also went to work for Arthur Little after graduation and then worked at Amicon Corporation and Scientific Design Company. David joined Koch Industries in 1970 and founded the New York office. By 1979 he was managing Koch Engineering and became executive vice president. William also joined Koch Industries in 1968 and founded Koch Venture Capital. Apparently William lost $90,000 and Charles was not too happy about this. He then ran Koch International Company for a short period before founding Koch Carbon and then became vice president of corporate development for Koch Industries.  William was successful as a chemical trader however he struggled. Some of his ideas included purchasing Checker Cab and funding an onion pill to lower cholesterol. These ideas were both flops. William was then fired by the board after he tried to take over. William had always claimed the dividend payout was $5 million in 1983 which is around $11 million in today’s dollars. William complained that the dividend payout was so low that he had to borrow money for his house and he was one of the wealthiest men in America. Around this time the Koch brothers were sharing dividends between $20 to $30 million per year (according to an article the company only paid out a dividend of 7% of its annual earnings). This is actually a small amount considering 90% of Koch Industries earnings are plowed back into the company which has led to a substantial growth.  

In 1983 William started Oxbow Corporation and set up business in Florida to avoid state income taxes (I guess incentives do mater). According to this article, William is a very detailed oriented boss who hired smart people and compensated them well.  Although, his experience at Koch Industries didn’t work out William seemed to work pretty hard being the first one in at 7 a.m. and would make sure employees were prepared and sometimes could lose his temper. William does have a softer side. He enjoys collecting art and wine. In fact he has a wine collection of 40,000 bottles of wine that are worth more than $12 million. His art collection consists of over 400 pieces and according to this article he transports them to his 42,000 square foot home in Florida to Cape Cod. On a single afternoon he spent $240,000 for centerpieces for flower arrangements according to this article. William also likes to sail and in 1992 won the American Cup for sailing after paying $55 million in 1992 according to this Sports Illustrated article. His love for sailing began when he was 13 years old and continued at a summer school naval program in Lake Maxinkuckee, Indiana. Then in 1984 he bought his first bought a 75 foot Hood cruiser.

His house is worth close to $26 million according to this recent article. According to this article he has so much art in the house that he actually had to start hanging it from the ceiling. William has more than $100 million of art and furniture in his house (I hope he has an insurance on all that art). He has used his house in the past for charity purposes however decided to cut this back in the early 2000’s. Not only does William like to collect art and wine he also use to collect women similar to his brother David. David in his playboy days had 3 dates per day. 

While already married to Joan Cranlund in 1995 he tried to evict model Catherine de Castelbajac from a $2.5 million condo that he owned at the Four Seasons Hotel in Boston according to this article. William claims that from October 1994 to August 1995 de Castelbajac ran up a bill of $47,000 at the Four Seasons hotel. William was seeing three women at one time (his wife, de Castelbajac, and Marie Beard). Just one year after he married Joan Cranlund he married Angela who was almost two decades younger than him. According to a 2001 New York post article Angela Browder Gauntt was a stunning blond with green eyes, unpretentious who herself was already divorced when a mutual friend suggested her and William get together. For their first date they went to the Commander's Palace in New Orleans. He sent flowers the next day but they only saw each other once or twice in the next nine months. Part of the reason was because he was still trying to handle Catherine de Castelbajac and he also had a daughter with another another lover named Marie Beard. William had been with many woman and was ready to have a real family. 

Only after five dates William purposed in May 1996 and then they were married in November 1996.  However, there was no honeymoon after the wedding. William was also traveling with his job so it made it hard to made time for his family. Things however got worse. In July of 2000 Angela successfully issued a restraining order according to this article against William for punching Angela in the stomach. The restraining order required Bill to live in the guest house or beach house while his wife Angela lived in the main house. Also Koch was not allowed to drink alcohol 24 hours before he visited his children. William openly talked about the fact that he went to rehab in 2000. 

Angela however did alright in the end as she was paid $16 million in addition to making monthly child support payments of $21,800 ($10,900 per kid) for the two kids that they had together as seen here. In addition to this William also agreed to pay for college for the children. This agreement overruled an initial prenuptial agreement where Angela would have only got 1% of William’s net worth. At the time in 2000, he was worth $650 million which would have been a little less than $7 million. After the divorce from Angela William had former lover Marie Beard moved into his $30 million 30,000 square foot mansion. At the same time William reportedly trying to romance Barbara Chevellard. William is now married to Bridget Rooney who was married to Kevin Costner. 

Speaking of family William also wants to build his own town in western Colorado that will just be for his friends, family, and historians. In 2007, William spent $51 million on four properties in Aspen, Colorado. One of the properties is 17,000 square feet. This of course was after Charles and David each purchased $2.5 million homes in 1992. This article talks about how beginning in 2007 William started to buy up land in Bear Ranch which is near the Ragged Mountains. The town has its own train station, saloon, and firehouse. William also uses his money for charity as well. In 1994, William gave $5 million to help fight crime in Kansas and founded the Koch Crime Commission according to this article.  According to this profile William donated $64.6 million in 2011. He created and funded Oxbridge Academy for $50 million. Speaking of education William also had three degrees from MIT including a doctorate in chemical engineering which was 372 pages and entitled "Flow of Light Gases, Through the Voids, On the Surface, And In The Solid of A Solid Microporous Media" where the citation can be found here from the MIT library. Truly William Koch is an interesting man. 

The Koch Brothers: Inside Koch World (A Family History)

The Koch family is probably one of the most interesting families. Stories of money, power, and lawsuits have affected the whole family. I have covered the historical net worth of the Kochs brothers here.

 I first learned about Charles Koch after watching a celebration dinner for Dr. Walter E. Williams and was curious about who he was and when I found out he was it lead me to explore not only who Charles Koch is I realized there were four Koch brothers (Charles, David, William, and Fredrick). The easiest way to remember them is Charles likes to collect money, David (use to) collect women, William collects everything, and Frederick collects castles.

To understand who the Koch brothers are today we first have to understand where they came from. The brothers were the son of Fred Koch who created a better way of turning crude oil into gasoline. Koch then went to the Soviet Union and installed cracking units through the country. In 1940, Fred Koch created Wood River Oil and Refining Company and then acquired Rock Island Oil and Refining Company in 1946 which then turned into Koch Industries.

Growing up the Koch boys were all taught about hard work. Fred Koch didn’t want his sons to become country club bums. When Charles was only five and Frederick was seven the boys showed up to work to a former marine who was a groundskeeper. When asking for money David Koch remembers “If I wanted to go to the movies, I’d have to ask him for the 25 cents”. Growing up Fred Koch took his sons on trips to Africa and the Arctic Circle where they would hunt and fish. All the boys went to different schools growing up. Charles and William both went to Culver Military Academy in Indiana, Frederick went to Hackley School in New York, David went to Deerfield Academy in Massachusetts. Charles got busted for drinking on a train and was expelled from school. Brother David in this article describes his own brother as “a bad boy who turned good”.

In 1958 Charles, David, and William were enrolled at MIT earning engineering degrees.  Charles and David both earned master’s degrees in engineering while William earned a PhD in chemical engineering. Although William earned a PhD it took him eight years and he finished it in 1971. His dissertation was entitled  "Flow of light gases through the voids, on the surface, and in the solid of a microporous media" which ended up being 372 pages and the citation can be found here. While at MIT David and William were both on the basketball team. Charles, David, and William are all above 6’0 tall (David is 6’6, William is 6’5, and Charles is 6’3). David held the record for the most points scored in one game until 2009. What is impressive however is that David averaged 21 points per game (how many modern day billionaires can say that?) William was second string on the team and sitting on the bench. At MIT both Charles and David were in fraternities.  Frederick went to study English and drama at Harvard and Yale.

After college Charles went to work for Arthur D. Little after he graduated and then went to work with his father in 1961. Fred Koch told his son that if he did not join the company he would sell it. When Charles Koch took over the company had $250 million in revenue and today the company has around $100 billion in revenue. Charles at first was not interested in the family business but thought managing a company was more interesting then working for someone else. The first job Charles had was to create an engineering division in Italy. According to a Wichita Eagle article from 1998 Charles worked seven days a week in the beginning. In the early 1980’s according to this article he was putting in 10 hour days. Charles not only worked long hours at home but according to this 1997 Fortune article he worked 12 hours per day and expected executives to work on Saturday mornings and would call meetings that ran into Saturday night. Charles even proposed to his wife Elizabeth over the phone and flipping through his calendar to plan a wedding date. Charles is what I would call a busy man trying to create value. 

 David was no slacker either as in this article talks about how he left for work around 9 A.M. has a driver pick him up around 9 P.M. for dinner. In 1966, Fred Koch died at the age of 67 of a heart attack while hunting ducks. Interestingly enough every day for breakfast Fred has a tall glass of buttermilk which made have lead to heart problems in his later years. 

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.

Day in Life of CEO

H/T-Inc.

Thomas Sowell on Obama (Uncommon Knowledge

“Obama has an absolute talent for saying things that make no sense, but not only sound plausible but inspiring”-Thomas Sowell 

Jordan Flynn: The Case for Bone Marrow Compensation

On Rock Center with Brian Williams there was a story about a young girl named Jordan Flynn who suffers from fanconi anemia an incurable disease that requires the patient to have a bone marrow transplant. People like Jordan not only suffer but thousands of people die every year because they can’t find a bone marrow donor.

Currently due to a 1984 law (National Organ Transplant Law) it is against the law to be compensated for organs. “Do-gooders” like Michael Boo of the National Marrow Donor Program worry that compensation would make donating bone marrow unsafe because people may not disclose all their information. Mr. Boo needs to first take an economics course to realize that compensation will not only lead to more bone marrow but higher quality bone marrow. If people were paid for bone marrow based on the quality they would have every incentive to make sure they were donating the highest quality so they could get the most money (being self interested can work wonders). Also companies could be created to check the quality of the bone marrow before it was used. In addition to this the process would improve which over time would reduce the risk and make it safer. Also this could lead to new discoveries in other areas as well given most things are discovered by accident.

Data shows that only 2% of the entire population is on the national registry for bone marrow. One problem is that people can back out at any time and face no penalty. If people were paid a few thousand dollars they might be more willing to roll up their sleeves and let the blood flow out and money flow into their bank account.

It is bizarre why people would object to selling bone marrow when people sell things like sperm, hair, eggs, and essentially rent other body parts. Of course politicians and “do-gooders” pay no price for the harm done. Innocent people are in pain and may die because of a law that essentially doesn’t even benefit anyone. Is there anyone who has been saved or helped because of the 1984 National Organ Transplant Act?

End The FDA Monopoly

As I have mentioned here here and here about much of the FDA does not only stifle innovation but more people die because the FDA does not allow drugs on the market that could save lives. What is interesting is today there is even more drug regulation than ever before despite we now know more than ever about the human body and how it operates.

Writer Doug Bandow echoes this same message. The FDA nor politicians pay no price if a drug fails to get passed that may save lives. There might be outrage from people who could benefit from the drug like in the case of Avastin where people were outraged when the FDA panel ruled that the drug was not effective for breast cancer. I wonder how many individuals on the FDA panel currently have a family member, friend, or loved one with breast cancer. Perspective of course matters. People who often have serious illnesses are not only informed about their particular illness but have more knowledge than politicians and in some cases more knowledge than individual doctors. The time people and family members have to wait to get approves comes at a cost. The length of time to approve drugs has increased from 7 months in 1962 to 10 years by 1970. Now it takes between 10 to 20 years. Waiting a decade or so for a drug that could help people with life threatening and chronic illnesses is undue pain that no one should go through. By the FDA waiting to approve drugs people not only suffer in pain but some die. The Competitive Enterprise Institute found that when the FDA waited to approve beta-blockers cost 100,000 lives. This was because the drug was already approved in other countries yet the FDA waited three years to approve the drug.

Getting rid of the underlying monopoly would do a wonder of good. I think there might be an analogy to the FDA and financial services industry. If the FDA were in the financial services industry it would like something like this...An investor wants to purchase a new security, however  first the individual has to go to an individual certified by the state to practice financial advising (parallel to AMA). Once with the financial advisor the financial advisor can only recommend products that the (FPA-Financial Products Agency or FDA equal) approves. However, not only does the security have to be approved, but the security has to be related to the risk tolerance of the individual client. Clearly, as you can see people would be up in arms if this process were true. More choices, means more freedom, which means better outcomes whether it is in medicine or financial services.

It would be best to abolish the FDA all together and allow the underwriting laboratories or third parties to independently test the drugs. There would even be competition because drug companies could use more than one lab to test whether or not their drug was effective and to run the experiments. By the FDA limiting how many drugs are on the market limits the choices. Not only does it limit choices it leads to few drug companies since so much money is required to create just one drug. Drug companies have so many failures that the only drugs people talk about are the blockbuster ones. This is why drug prices are so high because consumers pay for the drugs that the FDA doesn’t approve (company passes along costs to consumer). More drugs will lead to more experimentation which is a good thing because no two people are alike. Not even the greatest scientist possesses 1/10^th of 1% of the total knowledge of the human body.  What makes us believe politicians will do any better?