Community For Affordable Health Care
Vol X, No 3, Oct, 2011
Transforming the $3 Trillion HealthCare Industry into Affordable HealthCare
By Utilizing the $2 Trillion Information Technology Industry
Through innovation by moving from a Vertical to a Horizontal industry
Thus eliminating $1 Trillion wasted
Insuring every American without spending the Extra $1Trillion Projected.
To purchase a copy of the business
plan, become an entrepreneur,
and changed the course of history, go to the bookstore at
In This Issue:
1. Featured Article: To Increase Jobs, Increase Economic Freedom
2. In the News: Put Doctors and Patients in charge of Healthcare
3. International Healthcare: Obamacare. Where did it originate?
4. Government Healthcare: Most of What You Know About American Health Care is Wrong
5. Lean HealthCare: ObamaCare is going in the opposite direction.
6. Misdirection in: Hospitals taking over doctor’s practices—150 percent increase
7. Overheard on Capital Healthcare Hill: What do Wall Street protesters overlook?
8. Innovations in Healthcare: Currently eliminated by the Government
9. The Health Plan for the USA: Level C: Outpatient Non-Hospital Based Medicine
10. Restoring Accountability in Medical Practice by Moving from a Vertical to a Horizontal Industry
Annual World Health Care Congress,
a market of ideas, co-sponsored by The Wall Street Journal, is the most
prestigious meeting of chief and senior executives from all sectors of health
care. Renowned authorities and practitioners assemble to present recent results
and to develop innovative strategies that foster the creation of a
cost-effective and accountable U.S. health-care system. The extraordinary
conference agenda includes compelling keynote panel discussions, authoritative
industry speakers, international best practices, and recently released
case-study data. The
8th Annual World Health Care Congress will be held April 4-6, 2011
at the Gaylord Convention Center, Washington DC. For more
information, visit www.worldcongress.com. The future is
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1. Feature Article: To Increase Jobs, Increase Economic Freedom
John P. Mackey is co-founder and CEO of Whole Foods Market, a $4.7 billion Fortune 500 company, and a "Fortune 100 Best Companies To Work For" every year since 1998. Whole Foods is one of the top 12 supermarket companies in America and the world's largest natural foods retail chain. He was named the Ernst and Young Entrepreneur of the Year in 2003. Mr. Mackey is a strong believer in free market principles and empowerment management, and co-founded FLOW with Michael Strong to promote an integrated vision of entrepreneurship directed towards social good. Mr. Mackey has lived on a vegetarian co-op, he and his wife, Deborah, both practice meditation and yoga, and spend as much time as they can on their 720 acre ranch west of Austin. John is a voracious book reader and participates in two monthly book clubs. He is always up for a lively debate about politics, economics, history or sports.
Business is not a zero-sum game struggling over a fixed pie. Instead it grows and makes the total pie larger, creating value for all of its major stakeholders, including employees and communities.
By JOHN MACKEY
Is the United States exceptional? Of course we are! Two hundred years ago we were one of the poorest countries in the world. We accounted for less than 1% of the world's total GDP. Today our GDP is 23% of the world's total and more than twice as large as the No. 2 country's, China.
America became the wealthiest country because for most of our history we have followed the basic principles of economic freedom: property rights, freedom to trade internationally, minimal governmental regulation of business, sound money, relatively low taxes, the rule of law, entrepreneurship, freedom to fail, and voluntary exchange.
The success of economic freedom in increasing human prosperity, extending our life spans and improving the quality of our lives in countless ways is the most extraordinary global story of the past 200 years. Gross domestic product per capita has increased by a factor of 1,000% across the world and almost 2,000% in the U.S. during these last two centuries. In 1800, 85% of everyone alive lived on less than $1 per day (in 2000 dollars). Today only 17% do. If current long-term trend lines of economic growth continue, we will see abject poverty almost completely eradicated in the 21st century. Business is not a zero-sum game struggling over a fixed pie. Instead it grows and makes the total pie larger, creating value for all of its major stakeholders—customers, employees, suppliers, investors and communities.
So why is our economy barely growing and unemployment stuck at over 9%? I believe the answer is very simple: Economic freedom is declining in the U.S. In 2000, the U.S. was ranked third in the world behind only Hong Kong and Singapore in the Index of Economic Freedom, published annually by this newspaper and the Heritage Foundation. In 2011, we fell to ninth behind such countries as Australia, New Zealand, Canada and Ireland.
The reforms we need to make are extensive. I want to make a few suggestions that, as an independent, I hope will stimulate thinking and constructive discussion among concerned Americans no matter what their politics are.
Most importantly, we need to radically cut the size and cost of government. One hundred years ago the total cost of government at all levels in the U.S.—local, state and federal—was only 8% of our GDP. In 2010, it was 40%. Government is gobbling up trillions of dollars from our economy to feed itself through high taxes and unprecedented deficit spending—money that could instead be used by individuals to improve their lives and by entrepreneurs to create jobs. Government debt is growing at such a rapid rate that the Congressional Budget Office projects that in the next 70 years public money spent on interest annually will grow to almost 41.4% of GDP ($27.2 trillion) from 1.4% of GDP ($204 billion) in 2010. Today interest on our debt represents about a third of the cost of Social Security; in only 20 years it is estimated that it will exceed the cost of that program.
Only if we focus on cutting costs in the four most expensive government programs—Defense, Social Security, Medicare and Medicaid, which together with interest account for about two-thirds of the overall budget—can we make a significant positive impact.
Our defense budget now accounts for 43% of all military spending in the entire world—more than the next 14 largest defense budgets combined. It is time for us to scale back our military commitments and reduce our spending to something more in line with our percentage of the world GDP, or 23%. Doing this would save more than $300 billion every year.
Social Security and Medicare need serious reforms to be sustainable over the long term. The demographic crisis for these entitlement programs has now arrived as 10,000 baby boomers are projected to retire every day for the next 19 years. Retirement ages need to be steadily raised to reflect our increased longevity. These programs should also be means-tested. Countries such as Chile and Singapore successfully privatized their retirement programs, making them sustainable. We should move in a similar direction by giving everyone the option to voluntarily opt out of the governmental system into private alternatives, phasing this in over time to help keep the current system solvent.
In addition, tax reform is essential to jobs and prosperity. Most tax deductions and loopholes should be eliminated, combined with significant tax rate reductions. A top tax rate of 15% to 20% with no deductions would be fairer, greatly stimulate economic growth and job creation, and would reduce deficits by increasing total taxes paid to the federal government.
Why would taxes collected go up if rates go down? Two reasons—first, tax shelters such as the mortgage interest deduction used primarily by more affluent taxpayers would be eliminated; and secondly, the taxable base would increase considerably as entrepreneurs create new businesses and new jobs, and as people earn more money. Many Eastern European countries implemented low flat tax rates in the past decade, including Russia in 2001 (13%) and Ukraine in 2004 (15%), and experienced strong economic growth and increased tax revenues.
Corporate taxes also need to be reformed. According to the Organization for Economic Cooperation and Development, the U.S.'s combined state and federal corporate tax rate of 39.2% became the highest in the world after Japan cut its rates this April. A reduction to 26% would equal the average corporate tax rate in the 15 largest industrialized countries. That would help our companies to use their capital more productively to grow and create jobs in the U.S
Government regulations definitely need to be reformed. According to the Small Business Administration, total regulatory costs amount to about $1.75 trillion annually, nearly twice as much as all individual income taxes collected last year. While some regulations create important safeguards for public health and the environment, far too many simply protect existing business interests and discourage entrepreneurship. Specifically, many government regulations in education, health care and energy prevent entrepreneurship and innovation from revolutionizing and re-energizing these very important parts of our economy.
A simple reform that would make a monumental difference would be to require all federal regulations to have a sunset provision. All regulations should automatically expire after 10 years unless a mandatory cost-benefit analysis has been completed that proves the regulations have created significantly more societal benefit than harm. Currently thousands of new regulations are added each year and virtually none ever disappear.
According to a recent poll, more than two-thirds of Americans now believe that America is in "decline." While we are certainly going through difficult times our decline is not inevitable—it can and must be reversed. The U.S. is still an extraordinary country by almost any measure. If we once again embrace the principles of individual and economic freedom that made us both prosperous and exceptional, we can help lead the world towards a better future for all.
Mr. Mackey, co-founder and co-CEO of Whole Foods Market, is a member of the Job Creators Alliance, a nonprofit devoted to preserving free enterprise.
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2. In the News: Put Doctors and Patients in charge of Healthcare
This week marks six months since Congress passed the healthcare reform bill in what has become all-too-typical legislative chicanery. Those in power crafted a mammoth piece of legislation and rammed it through Congress under a dire sense of emergency. Insisting on time enough to read the bill was dismissed as dangerous and crazy in a time of crisis. We were told that if we really wanted to see what was in the bill we would have to pass it first. I cannot imagine the Founding Fathers intended that Congress legislate in this manner. I would think if a member is not absolutely certain the entire legislation meets constitutional muster, the default vote should be “no” in accordance with our oath of office. But now that Congress has had six months to read the new law, there is a significant amount of buyer’s remorse on Capitol Hill.
The more constituents learn about the law, the more angry they become. 60% of Americans are now to be said in favor of repealing the entire thing. Unfortunately, it is much more difficult to repeal a law than it is to pass a bill. I wrote a while back about the egregious provision to require businesses to issue 1099s for all transactions over $600 as a way to partially pay for it. I have co-sponsored legislation to fix this issue, yet this is just the tip of the iceberg.
of all, in spite of the administration repeating over and over that this
legislation would not increase costs for Americans, they are now saying they
knew all along that it would. The Congressional Budget office estimates that
American families will see their premiums rise by an average of $2,100 by 2016.
The Wall Street Journal has reported that the cost of compliance is forcing
some insurers to increase premiums by up to 20% as soon as next year. Also, in
spite of repeated claims from the administration that we could all keep our
plans and doctors if we liked them, the administration’s own officials are now
predicting that won’t be true for up to
117 million Americans who will lose their current plans.
Major insurers are also dropping child-only plans because of mandates and price fixing on such policies leaving parents with fewer choices for their children, not more. In addition, in spite of claiming this law would contain government costs, not increase them, administration actuaries now predict it will increase healthcare spending by over $300 billion. This additional spending comes along with doctor shortages, fewer choices and more taxes, perhaps, worst of all, increases in labor cost because of health insurance mandates are discouraging employers from hiring new workers and even triggering more layoffs.
Anyone with a basic understanding of Austrian economics could have predicted the unintended consequences of these new healthcare policies. Central planning never increases choices and quality or cuts costs as promised. Price controls and government mandates always create artificial scarcity. Healthcare is not a right or privilege. It is a product, like food or clothing. As with any good or service, the free market regulation of supply and demand provides the optimal quality to the maximum number of people.
Once we realize the problems we are trying to solve today were created by government intervention beginning in the 1960s, we can begin to put patients back in control of healthcare, rather than third party oligopolies and government bureaucrats. The sooner the better.
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Barack Obama: the Last Anti-Colonialist
Barack Obama is perhaps the least known figure ever to enter the White House. A set of very unusual circumstances, including an economic nose-dive just a few weeks before the election, put him there. Only now, almost two years into his presidency, Americans are starting to ask: who is Barack Obama? This was the title of a recent column in the by Richard Cohen. The question was not about Obama's policies; everyone knows about those. Rather, it was one of Obama's underlying ideology. What motivates this man?
Europeans are routinely given a pre-packaged portrait of Obama: he is an historic figure, the first African-American president; he is the embodiment of multiracialism and multiculturalism; he is a cosmopolitan, in refreshing contrast to his parochial predecessor; and he looks and speaks the way that many in the world think an American president ought to look and speak. Consequently, Obama's critics are often dismissed in Europe as a bunch of right-wing fanatics, otherwise known as the Tea Party movement. . .
Even some of Obama's supporters profess to being mystified by what moves the man. Appearing on a TV show, editor Evan Thomas said he found himself curiously repelled by a president with whose ideas he generally agreed. Thomas called Obama "slightly creepy" and "deeply manipulative". He suggested that there was something fake and unreal about Obama's public persona. . .
There is no evidence that Obama is a Muslim. His father Barack Obama Sr was raised as a Muslim, the consequence of his grand-father Onyango Obama converting to Islam. His stepfather Lolo Soetoro was also raised in the Islamic faith. But neither man practised Islam, and Obama writes that his father treated Islam with the same contempt he reserved for African witch doctors. Obama studied Islam in Indonesia, where he lived for four years, but he also studied Catholicism and Buddhism and he seems to have emerged with no firm religious convictions at all.
The charge of socialism is closer to the mark. Obama as President has presided over the largest expansion of state power in American history. To an unprecedented degree, he has extended the tentacles of the federal government into banking, mortgage lending, finance, healthcare, insurance, automobiles, and energy. In Britain and the rest of Europe, such aggressive intervention is customary, but in America it is an anomaly. While Europeans debate ways to trim the bloated welfare state, Obama continues to make America's welfare state even more bloated. Consequently, America has become the world's largest debtor, and Obama threatens to stick the bill to the richest Americans, a group that he says is not paying its "fair share". . .
A good way to understand the American president is to ask a simple question: what is Obama's dream? Fortunately, we don't have to speculate about this because Obama himself provides a vital clue. Obama's autobiography is entitled Dreams from My Father. So there it is: according to Obama, his dreams come from his father. It is not Dreams of My Father. Obama isn't writing about his father's dreams. He is writing about the dreams he received from his father.
This isn't just a matter of a book title. Obama's book is chock-full of admissions that Obama derived his aspirations, his values, his very identity from Obama père. Although his father was gone for most of his life, Obama writes that "even in his absence his strong image had given me some bulwark on which to grow up, an image to live up to, or to disappoint". Obama writes: "It was into my father's image, the black man, son of Africa, that I'd packed all the attributes I sought in myself." Others who know Obama confirm this account. Obama's grandmother Sarah Obama told Newsweek: "I look at him and I see all the same things. This son has taken everything from his father. The son is realising everything the father wanted."
So who was Barack Obama Sr and what did he want? As a man, the senior Obama was deeply strange. He was a polygamist who had four wives and eight known children. He looked after none of them, and was accused by one of his sons, Mark, of being a wife-beater and an abusive father. He was also a chronic alcoholic who was known at Harvard as "Double Double" because he liked to order a double Scotch and tell the waiter, as soon as it arrived, "Another double." Since he regularly drove while intoxicated, he was involved in multiple accidents. In one, he killed a man; in another, he injured himself so badly that both his legs had to be amputated and replaced by iron rods. Eventually, he became drunk in a bar in Nairobi and drove into a tree, killing himself. . .
Eventually, Obama discovered the truth about his father from his half-sister Auma. Still, Obama didn't give up on his father. He went to his grave and wept. He pressed his hand into the earth and tried to commune with his father "through Africa's red soil". But Obama couldn't get back his dead father, so instead he decided to take his dream. He concluded that, although flawed as a man, the senior Obama had great ideals. Obama would realise those ideals, and perhaps in this way he could complete the family circle and be worthy of his father's love. Through a kind of sacramental rite at the family tomb, the father's ideology became the son's birthright.
But what was Barack Obama Sr's ideology? First and foremost, he was an anti-colonialist. He came of age in Kenya during that country's struggle for independence from the British. The Obama family suffered the scars of colonialism. In the 1950s, when the Prime Minister, Winston Churchill, cracked down on the Mau Mau guerrillas in Kenya, Obama Sr was arrested for his political activities, and Barack's grandfather Onyango Obama was placed in a detention camp and allegedly tortured. Anti-colonialism arose out of anger and humiliation, and in the case of Obama Sr those sentiments were the product of direct experience. . .
The premises of anti-colonialism, although familiar, are worth spelling out. The general idea is that the world is divided into two camps: the colonisers who are the white West, and the colonised, who are the peoples of the Third World. Anti-colonialists usually assume that the rich countries got rich by invading, occupying and looting the poor countries. Further, they claim that today it is no longer Europe but America that is the rogue elephant stampeding its way across the world. America now invades and occupies other countries in much the same way that the French and the British once did. Anti-colonialists hold that even when colonialism formally ends, there remain powerful concentrations of economic power in the rich countries. These economic elites are faulted with "neocolonialism", which is colonialism in a new form, economic exploitation. In the anti-colonialist view, these wicked elites — the banks, the insurance companies, the pharmaceutical companies, the oil companies and so on — continue to oppress not only their own people but also people across the globe. . .
Obama Sr says that since wealth and power are concentrated in the hands of economic elites, "We need to eliminate power structures that have been built through excessive accumulation". He proposes state confiscation of land and high taxation with no upper limit. Just in case the point is unclear, He writes: "Theoretically, there is nothing that can stop the government from taxing 100 per cent of income so long as the people get benefits commensurate with the income which is taxed."
At first glance, the idea of 100 per cent tax rates seems insane — how could an intelligent man, let alone an economist, propose such a thing? Plug in the anti-colonial assumption, however, and we can see the logic of the proposal. The assumption is that the rich man became rich through exploitation. So if you come to my house and steal my furniture, what's the appropriate tax rate for you? Well, 100 per cent, because it's not your furniture.
It may seem incredible to suggest that the anti-Western, anti-American ideology of Obama Sr that justifies massive state appropriations of private wealth is the belief system of the American president. But that is what I am saying. For instance, I believe that the premises of Obama Sr's paper can help us understand what President Obama means when he says the rich aren't paying their "fair share". The top 10 per cent of income earners in America pay around 70 per cent of the taxes. By ordinary standards, it would seem that the affluent are more than paying their share. However, if you assume that wealth is not earned through effort or creativity but is rather the product of greed and theft, then there is no limit to what percentage you can legitimately seize. Obama's rhetoric and actions suggest that he feels morally justified in state confiscation of wealth to whatever extent he can get away with it. . .
Consider Obama's attitude towards the private sector. He seems to regard the private sector as dominated by greedy, selfish, neocolonial exploiters. He rarely misses a chance to flay Wall Street for its excess, insurance companies for their greed, oil companies for their profiteering and pharmaceutical companies for their exploitative prices.
His solution seems to be to "decolonise" the private sector by bringing it under the heavy hand of government control. Obama even refuses banks that have received federal bailouts the chance to repay them. He says that first they have to pass a "stress test". How odd to require a debtor to pass a test before he can give you your money back. Evidently, Obama wants these banks to keep the federal money because with it comes federal control. . .
Consider a final detail that puts the icing, if you will, on the anti-colonial theory. Shortly after assuming the presidency, Obama decided to return a bust of Winston Churchill that had been displayed in the Oval Office. The bust had been loaned to America from the British government's art collection, and to many Britons it symbolised America's relationship with Britain. Chagrined by Obama's decision to return it, British officials suggested the bust could be displayed elsewhere in the administration. Obama refused and the bust now sits in the residence of the British ambassador.
Now recall Obama's prejudice against Britain for its colonial rule in Kenya. Recall, also, that Churchill was a champion of British colonialism. He famously said he had not become Prime Minister in order to preside over the end of the British Empire. As noted earlier, he was also Prime Minister in the 1950s when British forces arrested both Obama's father and grandfather in connection with the Mau Mau revolt. Later, Churchill blocked efforts to have a government investigation of the alleged atrocities in Kenya. So when we use the anti-colonial model we have a perfectly good explanation for Obama's hostility to Britain in general, and Churchill in particular. Remove the anti-colonial model and Obama's action in removing the Churchill bust becomes inexplicable.
The world has changed a great deal since the anti-colonial heyday of the 1950s and 1960s. Today countries are rising up not through state socialism but by using what has been termed "the advantage of backwardness". Countries such as India, China, Indonesia and Chile are using their low labour costs to make stuff that other people around the world want to buy. Thus they are growing at rapid rates. Many countries once labelled "Third World" have now become "emerging markets" and they are engines of global prosperity.
Many in Britain, I know, are deeply ambivalent about Britain's colonial legacy. But colonialism is now dead and so is anti-colonialism. No one today cares about it — except the man in the White House. He is the last anti-colonial. Obama's problem isn't that he opposes foreign subjugation. It is that he is trapped in his father's time machine. He is trying to apply the ossified, antiquated solutions of a generation ago to the very different problems of the world today. Obama's approach does poor countries no favours, because his remedies would not help them rise out of poverty. At the same time, Obama is trying to end America's leadership in the world, bringing to an end centuries of Western dominance. If he succeeds, the future for both America and Europe is likely to be less prosperous and less secure.
Government medicine does not give timely access to healthcare, it only gives access to a hazardous waiting list.
In America, everyone has access to HealthCare at all times. No one can be refused by any hospital.
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How failed attempts at central planning have led to tragedy
Most of what you have heard about the problems in American health care is wrong. Because the experts are so consistently wrong, their remedies consistently fail, and in fact make the problems worse than they were before.
We will get into the real problems and the real solutions soon, but first it is necessary to grasp just how wrong these experts have been over the years. And when I say “these experts” I mean the exact same people that have been advising policy makers for the past forty years. They began in the 1970s and are still at it forty years later.
The list of such mistaken failures is nearly endless. What follows are just a few of the highlights in the first of a series of articles on how we got where we are in American health policy, and where we’re headed in the future.
Soon after Medicare and Medicaid were enacted in 1965, the nation entered a period of enormous inflation in health care costs. This should not have been surprising. Vast amounts of new state and federal money were pumped into the health care system with no concurrent increase in the supply of services. Most of this was federal.
In 1965, state and local governments spent $3.7 billion on civilian health care, while the federal government spent only $865 million. Two years later, state and local rose 30 percent to $4.8 billion, but federal spending went up 655 percent to $6.8 billion. By 1970, state expenditures would rise to $6.6 billion, and federal spending would reach $11.2 billion over twelve times what had been spent five years earlier. The money both the states and federal governments spent on personal civilian health care went from 10.9% of total national health expenditures in 1965 to 24.1% in 1970.
The infusion of new cash into the health care system, and the fact that beneficiaries could consume services with no constraint at all, resulted in three decades of medical inflation rising at twice the rate of the economy as a whole.
In the 1970s, the experts were nearly hysterical about the rate of inflation in the health sector. Stuart Altman, now a professor at Brandeis University, was the head of HCFA. He recently reminisced — “When I was 32 years old, I became the chief regulator in this country for health care. At that point, we were spending about 7 1⁄2 percent of our GDP on health care. The prevailing wisdom was that we were spending too much, and that if we hit 8 percent, our system would collapse.”
The hysteria resulted in a raft of new laws intended to control the rate of health care spending which was increasing between 12 and 14 percent per year from 1972 on. These new laws included –
· Wage and price controls that were imposed by President Nixon in August, 1971. They were removed for most of the economy in January 1973, but retained for health care until April 30, 1974.
· Legislation creating Professional Standards Review Organizations for Medicare was enacted in 1972. These were intended to supervise physician practice to ensure appropriate treatments and lengths of stay, and restrain costs.
· The Federal HMO Act of 1973 provided seed money for HMOs that met certain federal qualifications, such as being not for profit, using community rating, providing a minimum set of benefits, and exempting HMOs from state insurance regulations on issues such as capitalization and reserves, board composition requirements, and advertising restrictions. It included a “dual choice” provision that required employers with over 25 employees to offer HMO options to their workers.
· The National Health Planning and Resources Development Act of 1974 required states to establish elaborate bureaucracies to control the growth of hospitals and other health care facilities. These agencies included Health Systems Agencies (HSAs), State Health Planning and Development Agencies (SHPDAs), Statewide Health Coordinating Councils (SHCCs), and a host of other committees and agencies. These efforts were designed to implement Certificate of Need (CON) programs, through which hospitals and other facilities that wished to make capital outlays would have to get prior approval from the agencies.
Naturally these efforts did not work particularly well. The thinking behind price controls and health planning is especially puzzling. Excess demand induced by Medicare spending had outstripped the supply of services and caused a surge in health care prices as predicted by basic economic theory. So the government response was not to lower demand or increase supply, but create a vast bureaucracy of health planning agencies to further reduce supply! Small wonder health care inflation got worse during these years.
More importantly, the whole thing whipsawed the entire health care system and caused providers to spend enormous sums to comply with the new laws and regulations – money that might have otherwise gone into patient care. We will never know how many people were damaged, perhaps even killed by this misallocation of resources.
The federal Health Planning Act was repealed in 1982, but the experts weren’t done. They had to find new ways to make a living and justify their PhDs now that they could no longer staff all the agencies created by health planning, so they came up with hospital rate setting.
They knew that with Ronald Reagan in the White House, a big federal initiative would go nowhere, so they focused on the states. This initiative was based largely on a single study published in the “Hospital Cost Inflation under State Rate Setting Programs” by Brian Biles, Carl Schramm, and Graham Atkinson. The article concluded, in 1980,
“… (T)he average annual rate of increase in hospital costs in (the six) rate-setting states has been 11.2 per cent, as compared with an average annual rate of increase of 14.3 per cent in states without such programs.”
Of course, those six states (Connecticut, Maryland, Massachusetts, New Jersey, New York, and Washington) started out as probably the most expensive and wasteful states in the nation. That is why they were prompted to adopt these systems in the first place. There was already plenty of fat to be trimmed, which would not be true for other states.
Indeed, a later article by the same authors in reported that the non-regulated states had a per capita hospital cost of $107.02 in 1972, while the states that adopted the price controls were spending $135.08 per person. Further, these costs were spread over a much larger hospitalized population in the non-regulated states, which had an admissions rate of 152.8 per thousand in 1972, compared to 131.1 per thousand in the states that adopted regulations.
Usually in research if there is a self-selected sample being studied, the researchers look to see what might distinguish the sample from the rest of the population and adjust their findings accordingly. Not so in health policy. Health policy advocates are so eager to push their preferred remedies that they ignore what should be standard techniques of research.
The study mentioned above completely overlooked many pertinent differences between the six regulated states and the forty-five (including DC) non-regulated areas. Obvious differences include that the six states tended to be no-growth or low-growth states, so they had little need for new hospital construction. They also tend to be high Medicaid enrollment states, but also with higher average incomes than the non-regulated states. Other possible differences that would have been worth exploring include the relative percentage of uninsured, the ratio of teaching hospitals, the availability of non-hospital alternatives such as home health services or free standing surgical services, and the presence of for-profit hospitals. All of these differences could have had a profound effect on the viability of hospital rate setting in the various states but none were even considered.
As it was, what the research discovered was that after 13 years of experience:
· The high-cost states remained high cost.
· These states began with lower rates of admissions, and ended with lower rates of admissions.
· They began with lower operating margins and ended with lower operating margins.
Yet somehow the researchers concluded that hospitals in the regulated states were “more efficient” than those in the non-regulated states, though it would seem that having fewer admissions at higher costs while maintaining low profit margins would be a slam dunk argument that these regulated hospitals were anything but more efficient.
Such one-sided research was persuasive enough to the “health policy community” that 30 states ended up adopting similar rate setting programs during the 1980s.
In 1997 “Tracking the Demise of State Hospital Rate Setting” by John McDonough, now a prominent professor of public health at Harvard. The article said, “Now, in the mid-1990s, state rate stetting is nearly gone; most major systems have been deregulated during the last ten years.” (Ultimately these systems were repealed by every state but Maryland.) The article explained that the growing managed care companies thought they could negotiate lower hospital rates than were available through price-controls, and that the regulators themselves agreed their rules were “incomprehensible.” published another article with a somewhat different tone, titled
Not mentioned by the author, but fairly obvious, was the reality that was evident to anyone who could see the full picture: once state government becomes responsible for setting prices, it also becomes responsible for ensuring the solvency of the facilities. Inefficient facilities are protected from failure, and any decision to close a hospital becomes a political, not an economic, one. A threatened facility can generate enough political support to keep its doors open, even when it makes no economic sense to do so.
Once again an idea of central planning was tried and failed miserably, at the cost of many billions of dollars and who knows how many lives lost or destroyed. All on an idea that was poorly thought through in the first place. And as you’ll see, within the realm of health policy, this was only the beginning.
Government is not the solution to our problems, government is the problem.
- Ronald Reagan
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5. Lean HealthCare: ObamaCare is going in the opposite direction.
Senator Marco Rubio’s OpEd “No Bailouts for ObamaCare” focuses on the Obama Administration’s communications that indicate the intent to authorize what could be a blank-check subsidy and bailout for health-care companies. But as noted, this a fatal financial flaw imbedded with “guaranteed issue” and “community rating” rules for health-care insurers.
Suppose we had a similar rule for banks, requiring them to give loans to the entire population. And further suppose that we eliminated risk-based underwriting so that every risk brings in only the same interest rate.
The banks would soon become insolvent, and banks would no longer be viable as independent entities without subsidies and blank-check government bailouts.
This underlying premise of ObamaCare will epitomize the fatal flaw of command-and-control central planning of economic activity.
Communism’s five- and ten-year economic plans did not work. Neither will Obama’s health-care scheme work. There are no economic “epidemics.” But health-care “epidemics” kill people.
Health-care disasters will be far worse than any economic disaster.
The Future of Health Care Has to Be Lean, Efficient and Personal.
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6. Misdirection in Healthcare: Hospitals taking over doctor’s practices—150 percent increase
BY JIM DOYLE • firstname.lastname@example.org | 314-340-8372
A few weeks after Allison Zaromb took her 4-year-old son Meir to see a dermatologist in an outpatient office at the SSM Cardinal Glennon Children's Medical Center campus, she received separate bills from the doctor and the hospital. Read more . . .
The cost for a 3-minute procedure to treat Meir's warts totaled $538, which included a $220 bill for physician services - and a separate bill for a $318 hospital "facility fee."
Zaromb, a periodontist who lives in University City, is now suing SSM Health Care Corp. and Cardinal Glennon Children's Medical Center in a proposed class action lawsuit on behalf of other patients.
The lawsuit, filed in September in the state Circuit Court of the city of St. Louis, accuses the non-profit hospital system of deceptive business practices - in particular, violating a Missouri consumer practices statute - in failing to fully disclose the costs. A judge still must decide whether to certify the lawsuit as a class action.
"No one told me that I would have to pay more than my co-pay before I took my son to that doctor," Allison Zaromb said in an interview. "Had I known they were going to charge a fee beyond my co-pay for the physician, I would not have taken him there."
With the proliferation of hospital-owned outpatient centers and hospital-owned physician practices, hospital "facility fees" have become increasingly common. Such hospital facility fees often involve greater dollar amounts than the fees charged by physicians. And as patients bear a greater portion of their health costs, they are voicing outrage over some of the bills they receive.
"The hospitals should be far more transparent in giving the consumers the information they need to make intelligent decisions," said John Phillips, one of Zaromb's lawyers on the case. "All the lawsuit is attacking is the failure to give patients decent information so they can walk with their feet and go to the low-cost provider."
Zaromb said that she had not been charged hospital facility fees in the past when taking her children to appointments at other outpatient centers in the St. Louis area. In this case, Zaromb's health insurer paid nearly half of the $538 total, but she was left to personally pay $206 toward the facility fee in addition to a $40 co-pay for the physician's charges.
Her lawsuit is the latest in a string of proposed class action lawsuits challenging St. Louis area hospitals' billing practices - a thorny subject that many hospital officials are reluctant to discuss.
SSM Health Care officials declined to comment on Zaromb's pending lawsuit, but described their billing practices at Cardinal Glennon and other SSM outpatient clinics. . .
Mark Reifsteck, president and chief executive of the southern Illinois division of Hospital Sisters Health System, which operates St. Elizabeth's Hospital in Belleville, Ill., said that hospitals have traditionally charged facility fees to cover the costs of their services.
But, he added, patients have increasingly complained about such fees with the proliferation of outpatient facilities, especially ambulatory surgery centers and imaging centers. Outpatient clinics have lower overhead costs than a hospital because they do not operate emergency rooms, so there is more pressure on hospitals to make up their high costs through such outpatient clinics.
"Hospital charging is very arcane and bizarre, and the biggest problem with the billing is that major payers such as Medicare and insurance don't pay the full cost," Reifsteck said. "So hospitals that take in large amounts of Medicare and Medicaid patients need cost-shifting to make up the difference - and sometimes outpatient procedures is the place to do that. When patients see (the bill), they'll get sticker shock." . . .
Officials at Mercy Health, which operates Mercy Hospital St. Louis in Creve Coeur, declined to discuss their billing practices, but issued this written statement: "How hospital services are billed is governed by the Centers for Medicare and Medicaid Services (CMS) and by individual insurance companies. Mercy follows both CMS and insurance company requirements in our billing practices for hospital services."
Under federal regulations, health systems are permitted to charge a hospital facility fee for an outpatient service if it's done in a clinic that is "hospital-based" - meaning that the clinic is owned and operated as part of a hospital or health system, regardless of whether the clinic is physically located on the hospital grounds.
St. Anthony's Medical Center and St. Luke's Hospital declined to discuss their billing practices, but St. Luke's said in a written statement that anytime a patient receives care at one of its hospital-owned outpatient facilities the patient is billed for physician fees as well as for "a facility fee that includes costs for things such as staff services, supplies and equipment that the hospital provides."
Saint Louis University Hospital, which is owned by Dallas-based Tenet Healthcare Corp., has a contract with university-operated SLUCare physicians group. The hospital runs two outpatient centers: a gastrointestinal clinic at a doctors' office building across the street from the hospital; and an orthopedic clinic with outpatient surgery and imaging equipment at the Anheuser Busch Institute. SLUCare physicians, who are paid by the university, treat patients at both clinics. The hospital staffs the two clinics with nurses, technicians, schedulers, and lab technicians. It also pays rent on the GI clinic, and owns the building where the orthopedic clinic is located.
"We have signs in our clinic, and new patients get a letter when they sign up, saying they will receive two bills," said Laura Keller, a spokeswoman for SLU Hospital. "We are very transparent and up front with that. We're not in the surprise business."
But not all patients are satisfied with SLU Hospital's billing practices. John Thomas of Ballwin said that Tenet Healthcare misled patients about the rising cost of medical bills associated with the hospital's gastrointestinal outpatient clinic.
He said the hospital issued a letter in January 2010 saying that, although its outpatient clinic would be under new hospital management, total health care charges for outpatients would remain the same. Instead, because of the addition of facility fees, he said, Medicare is being billed about 63 percent more for his wife Pat's outpatient visits than it was charged in 2009.
"It's not fraud. But just because something is allowable, does not make it right," Thomas said. "I consider this to be a blatant abuse of Medicare."
Phillips, a Seattle lawyer, has brought two successful lawsuits against Seattle hospitals that were based on similar grounds. Those cases resulted in refunds to consumers and agreements by hospitals to provide more billing information to patients on their web sites.
He said that several years ago consultants began advising hospitals that if they acquired physician practices and called those practices "hospital-based," the hospitals could charge not only for physician fees but also for hospital fees.
"From a consumer's perspective, when you go see your doctor, you go see your doctor - whether it's in an office inside a larger hospital complex or right across the street," Phillips said. "The doctor's practice remains the same. ... They're making the doctor's office a ‘hospital-based' clinic for one reason: to make money by charging a facility fee, not to improve consumer service."
Editor’s Note: When you see a physician in his private office, the cost of his office and staff is covered by the office fee since time memorable. Hospitals have found a legal loophole formed by government Medicare to increase charges more than 100 percent. This is fair warning to any physician who sells his practice to a hospital that he is unknowingly involved in hospital subterfuge. The hospitals have more clout than physicians to alter the rules in Congress or Medicare. Thus it is unethical for any physician to sell his practice to any hospital or corporation that is not a physician owned and controlled private practice.
Laws which formerly outlawed the corporate practice of medicine should have prevented this.
Well-Meaning Regulations Worsen Quality of Care.
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7. Overheard on Capitol Hill: What do Wall Street protesters overlook in their hatred of capitalism?
"Occupy Wall Street Crowd Blind to Benefits of Capitalism"
By Gary Wolfram
Whenever I watch media coverage of another Occupy Wall Street event I am reminded of an exchange between Jewish protesters in the 1979 Monte Python movie Life of Brian. One of the protesters asks another what the Romans have brought to the area and the conversation goes like this:
All right, but apart from the sanitation, medicine, education, wine, public
order, irrigation, roads, the fresh water system and public health, what have
the Romans ever done for us?
The point is that the Roman institutions brought a good deal to the area that was being overlooked by the protesters. The Wall Street protesters, in their hatred of capitalism, overlook things including the fact that over the last 100 years capitalism has reduced poverty more and increased life expectancy more than in the 100,000 years prior.
Every semester I ask my students: "What would you rather be? King of England in 1263 or you?" Turns out, students would rather be themselves. They enjoy using their iPhone, indoor plumbing, central heating, refrigerators and electric lighting. All of these things are available to the average person in America today and none of them were available to the aristocracy when the West operated under the feudal system.
How is it that for thousands of years mankind made very little progress in increasing the standard of living and yet today half of the goods and services you use in the next week did not exist when I was born? It wasn't that there was some change in the DNA such that we got smarter. The Greeks knew how to make a steam engine 3,000 years ago and never made one. The difference is in how we organize our economic system. The advent of market capitalism in the mid-18th century made all of the difference.
We need not just rely on historical data. Look at cross-section evidence. I try another experiment with my students. I tell them they are about to be born and they can choose whatever country in the world they would like to be born in. The only caveat is they will be the poorest person in that country. Every student picks a country that is primarily organized in a market capitalist system. No one picks a centrally planned state. No one says, "I want to be the poorest person in North Korea, Cuba, or Zimbabwe," countries which are at the bottom of the Heritage Foundation's Index of Economic Freedom.
What does it mean to be poor in our capitalist society that the Occupy Wall Street crowd so hates? Robert Rector of the Heritage Foundation has several studies of those classified as poor by the U.S. Census Bureau. He found that 80 percent of poor persons in the United States in 2010 had air conditioning, nearly three quarters of them had a car or truck, nearly two-thirds had satellite or cable television, half had a personal computer and more than two-thirds had at least two rooms per person.
Contrast this with what it means to be poor in Mumbai, India, a country that is moving rapidly towards market capitalism but was burdened for decades with a socialist system. A recent story in The Economist described Dharavi, a slum in Mumbai, where for many families half of the family members must sleep on their sides in order for the entire family to squeeze into its living space.
The Occupy Wall Street movement
has shown a lack of understanding of how the market capitalist system works.
They appear to think that the cell phones they use, food they eat, hotels
they stay in, cars they drive, gasoline that powers the cars they drive and
all the myriad goods and services they consume every day would be there under
a different system, perhaps in more abundance.
What is Congress Really Saying?
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8. Innovations in Healthcare: Currently eliminated by the Government
Innovations in healthcare are currently stymied by the HMO system that eliminated competition and therefore, innovations; by Medicare which likewise eliminated competition which prevents innovation.
Thus the major component of the Free Enterprise Economic System, which is the most ruthless controller of costs, has been paralyzed in the healthcare system. Hence, there is nothing that the insurance industry or the government can do about it.
The [Un] Affordable Care Act will not and cannot control the rising cost of health care.
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9. The Health Plan for the USA: Planning the Patient-Centered Health Plan for America
Level C: Outpatient Community Non-Hospital Based Medicine (Continued from July 2011 section 9)
A graded co-payment for every level of service-
See April Issue for Level A: Hospitals
See July Issue for Level B: Hospital Emergency Rooms, Urgent Care Centers, and Surgi-centers.
The research from HPUSA has elucidated some important clinical statistics to control health care costs. This data is hard to obtain and cannot be automated. It is labor intensive. At this point it is clinical: one on one. When we see large expenditures in health care, we try to determine if the patient is a candidate to be included in our series. We then indulge in a frank discussion of his or her responses to the questions concerning percentage co-payment and its effect on the patient’s utilization of health care benefits.
Health care can be stratified into a number of logical tiers. The most expensive and highly sophisticated care is in the traditional acute care hospital. We found with a 10 percent co-payment of the hospital costs as being the best number that did not preclude needed care and was able to allow for needed hospital care. With a 10 percent co-payment, the patient policed his hospital cost better than any oversight institution saving up to 40 percent of usual costs.
We also found in our research that a 20% co-payment of emergency room, urgent care centers and surgi-centers as being the most appropriate in reducing emergency room and urgent care visits and did not impose a significant risk of excluding needed care.
Level C: Outpatient Community Non-Hospital Based Medicine
Our research continued into the appropriate co-payment for out-patient care. We studied whether all of outpatient medical care should be treated equally. We consider out-patient care as physician’s office visits, physician’s office laboratory studies, laboratory testing, in clinics and freestanding labs, x-rays, CTs, MRIs, ECG, PFTs, ABGs, or any test a physician orders or does outside of the hospital complex.
We found that a 30 percent co-payment was effective in reducing outpatient costs to that which was necessary and did not diminish quality of care.
We found that this was more cost-effective and less intrusive than the current system of policing doctor visits and all outpatient costs in general that the current army of reviewers and their interfacing with doctors and their staff.
A major health insurance executive in a friendly discussion after a business presentations mentioned that they could probably eliminate much of their costly review process and pay that charges that doctors sent in and not lose significant more money. When asked if that were ever considered by his company, he replied that it never got significant traction in their meetings. The company did not want to lose their control over doctors.
We will proceed with Level D in the next issue as we dissect the entire proposed HealthPlanUSA proposals.
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10. Restoring Accountability in Medical Practice by Non Participation in Government Programs and Understanding the Devastating Force of Government
and Liberty - Network of Liberty Oriented Doctors, www.MedLib.ch/,
Alphonse Crespo, MD, Executive Director and Founder
Medicine & Liberty (MedLib) is an independent physician network founded in 2007, dedicated to the study and advocacy of liberty, ethics & market in medical services.
- We support professional autonomy for doctors and liberty of choice for patients
- We uphold the Hippocratic covenant that forbids action harmful to the patient
- We defend responsible medical practice and access to therapeutic innovation free from
- We work towards a deeper understanding of the role and importance of liberty & market in
MedLib is part of a wide movement of ideas that defends
- the self-ownership principle & the property rights of individuals on the products of their
physical and intellectual work
- free markets, free enterprise and strict limits to the role of the State
· Authentic Medicine - Douglas Farrago MD, Editor, Creator & Founder
SPEAKING HONESTLY AND OPENLY ABOUT OUR BROKEN HEALTHCARE SYSTEM
The mission of Authentic Medicine is to rediscover how much the art of medicine means and allow us to reconnect to our roots once again. It is about fighting back against those things that are taking us away from the direct care of patients while still pointing out the lunacy and hypocrisy of this job. Be part of the movement that will take back the healthcare system from the idiots who are ruining it.
Why we are moving to an era of Industrialized Medicine
The Quality Movement and why it is a scam
The ever expanding Medical Axis of Evil
Medical Dogma and the Alphabet Soup (JC, HIPAA,etc)
Bureaucratic Drag and the distractions from treating patients
Burnout and depression amongst healthcare professionals
Humor in caring for the patient and the caretaker
Reason Foundation: http://reason.com/about:
Reason and Reason Online are editorially independent publications of the Reason
Foundation, a national, non-profit research and educational organization.
Reason is the monthly print magazine of "free minds and free markets." It covers politics, culture, and ideas through a provocative mix of news, analysis, commentary, and reviews. Reason provides a refreshing alternative to right-wing and left-wing opinion magazines by making a principled case for liberty and individual choice in all areas of human activity.
Reason Online is updated daily with articles and columns on current development in politics and culture. . It also contains the full text of past issues of the print edition of Reason. Reason Online is entirely free.
· Entrepreneur-Country. Julie Meyer, CEO of Ariadne Capital, (Sorry about the nepotism, but her message is important) recently launched Entrepreneur Country. Read their manifesto for information: 3. The bigger the State grows, the weaker the people become - big government creates dependency . . . 5. No real, sustainable wealth creation through entrepreneurship ever owed its success to government . . . 11. The triple play of the internet, entrepreneurship, and individual capitalism is an unstoppable force around the world, and that Individual Capitalism is the force that will shape the 21st Century . . . Read the entire manifest . . .
· Americans for Tax Reform, www.atr.org/, Grover Norquist, President, keeps us apprised of the Cost of Government Day® Report, Calendar Year 2008. Cost of Government Day (COGD) is the date of the calendar year on which the average American worker has earned enough gross income to pay off his or her share of spending and regulatory burdens imposed by government on the federal, state and local levels. Cost of Government Day for 2008 was July 16th, a four-day increase above last year's revised date of July 10th. With July 16th as the COGD, working people must toil on average 197 days out of the year just to meet all the costs imposed by government. In other words, the cost of government consumes 53.9 percent of national income. If we were to put health care into the public trough, the additional 18 percent would allow the government to control 70 percent or nearly three-fourths of our productivity and destroy our health care in the process. We would have almost no discretionary income.
· National Taxpayer's Union, www.ntu.org/main/, Duane Parde, President, keeps us apprised of all the taxation challenges our elected officials are trying to foist on us throughout the United States. To find the organization in your state that's trying to keep sanity in our taxation system, click on your state at www.ntu.org/main/groups.php. August 13 you can working for yourself. It takes nearly 8 months of hard work for every American to pay for the cost of government. Read more . . .
· Evolving Excellence—Lean Enterprise Leadership. Kevin Meyer, CEO of Superfactory, has started a newsletter which impacts health care in many aspects. Join his evolving excellence blog . . . Excellence is every physician’s middle name and thus a natural affiliation for all of us. Read his The Customer is the Boss at FAVI “I came in the day after I became CEO, and gathered the people. I told them tomorrow when you come to work, you do not work for me or for a boss. You work for your customer. I don’t pay you. They do. . . . You do what is needed for the customer.” And with that single stroke, he eliminated the central control: personnel, product development, purchasing…all gone. Looks like something we should import into our hospitals. I believe every RN, given the opportunity, could manage her ward of patients or customers in similar lean and efficient fashion.
· Ayn Rand, a Philosophy for Living on Earth, www.aynrand.org/site/PageServer, is a veritable storehouse of common sense economics to help us live on earth. To review the current series of Op-Ed articles, some of which you and I may disagree on, go to www.aynrand.org/site/PageServer?pagename=media_opeds
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Words of Wisdom
They use to say the only thing the government didn’t tax was taxes. Then they invented the surtax.
Why do they couple death and taxes. Death only comes once.
The power to tax involves the power to destroy. . . Chief Justice John Marshall, Supreme Court decision in McCulloch v. Maryland, March 6, 1819.
Some Recent Postings
In The July Issue:
5. Lean HealthCare: Every industry is getting lean; we no longer have a choice.
Always remember that Chancellor Otto von Bismarck, the father of socialized medicine in Germany, recognized in 1861 that a government gained loyalty by making its citizens dependent on the state by social insurance. Thus socialized medicine, or any single payer initiative, was born for the benefit of the state and of a contemptuous disregard for people’s welfare.
Thus we must also remember that ObamaCare has nothing to do with appropriate healthcare; it was similarly projected to gain loyalty by making American citizens dependent on the government and eliminating their choice and chance in improving their welfare or quality of healthcare. Socialists know that once people are enslaved, freedom seems too risky to pursue.