What you can do for your country

Economic Death Panels: Time to halt the assult on productivity and innovation

It makes more sense to me that our troubles come from low interest rates. Everyone wants to blame Big Banks. Big Banks behaved badly. Government also behaved badly. But persistent low interest rates are like leaving money in the open to attracts thieves. There is culpability in the decision even if the thieves were wrong to do so.  The Wall Street Journal today had a good piece on an economist who made some important observations on low interest rates before the depression (The Man who Predicted the Depression)

 
The Man who Predicted the Depression
Ludwig von Mises explained how government-induced credit expansions led to imbalances in the economy.

Frankly, persistent low interest rates are like life support for an ailing patient.  If we are going to have death panels, it would be nice to have them right now - so the weak industries are displaced.  I know that Obama wants to end the boom bust nature of our economy, but it is the boom bust that keeps our economy vital.  If wants to be a tree hugger, he should learn from the environment.  Forest fires are healthy for ecological balance.

On top of low interest rates, it does not help that now the strategy is to tax and burden productivity to death:

• Higher taxes on wealthy - the folks that fund new business
• Increase taxes on capital gains - the funding source for start ups
• Taxes against business innovation - i.e. Health care tax on drug companies that are too successful
• Higher wage costs via changes in minimum wage - leading entrepreneurs to hold back on hiring new talent to protect profits for growth and new taxes
• New 5.4% taxes on adjusted gross income to pay for Health care
• Regulatory uncertainty slowing investment

Easy money and these kinds of taxes discourage innovation and productivity enhancing endeavors. The only way to pay for all the people in retirement is to increase output per unit worker of those still working.  As people retire, they will keep moving investments to income producing, rather than growth oriented, investment.  This means there will be even less investment in innovation. But, innovation is the only way to do achieve the gains required to balance the economy.

Health care and Cap and Trade work to constrain the economy.   I guess the bright spots will be Bad universals healthcare will discourage immigration and reduce the number of people needing care.  Declining economies will reduce industrial output and CO2.  So if you love the environment and hate immigrants this might be your time to be happy.

I however think its a sad state of affairs when our government and our people give up on the prosperity that made us great.

How Health Care is Killing Us (Government Advocates Mediocrity in Land of Innovation)

I have been working on crystallizing my thoughts on how to fix health care.  I am frustrated that the proposals in Government all seem incremental, taking the solutions we have but locking them in under yet more centralized government control.  We are the most innovative and productive nation on earth, but we seem ready to fix health care by expanding the status quo and replicating the plans of other lesser countries (Europe, Canada, Etc).

I received my issue of the Atlantic last night on my Kindle DX and found a the article I wish I had written:  How American Health Care Killed My Father - The Atlantic (September 2009).  The author very thoughtful integrates his business experience, loss of his father, and political thinking into a very complete approach for health care that drives consumer choice, reduces cost and motivates innovation.

  Key highlights of his article include:

• Why do MRI prices (Covered expense) remain high years after introduction while Lasik surgery (non Covered Expense) has dropped from $2000 to $400?
• Why vilify the profits of health insurance companies when they would pay 4 days of our nation's annual health care costs?
• We don't use auto insurance to pay our gasoline costs, why do we use health insurance for paying routine health costs like checkups?
• Do government regulations limit innovation?
• Why can't a consumer ever find out the cost of a procedure upfront?  How can cost be managed if the customer of the care can't even see the cost?
• Over the life of a typical employee, $1.77M is paid into health insurance (employee and company payment together).  If we gave everyone $1.77M, could they do a better job managing it?

In health care, the notion of a free market seems foreign to some.  Won't those companies cheat individuals?  Insurance companies and doctors can't possibly do what is right for the patient in a free market because they will just be focused on making a $.  The reality is the market is already being perverted in various ways depending on the direction of various regulations about what can or can't be funded.  Hospitals do everything they can to squash new innovative surgery centers that are set up to take advantage of Medicare's unwittingly payment of higher margins on lower end surgical procedures.  Loopholes will all ways be found in every system.  But can they be corrected quickly?  Only in a market based system.

Government has a key role in assuring integrity and standards in the system, but price really should be a function of consumers engagement with doctors to determine the best price, innovation and quality.  Because of constraints driven by medicare and insurance companies, the most costly health care is typically someone who pays out of their own pocket, but those same people are probably the cheapest people to treat because the doctor does not need to file claims etc.   This is a market perversion driven by a top down driven regulatory environment.

The author goes on to suggest the broader implementation of Health Savings accounts, a form of major medical insurance that kicks in for the absolute worst case tragedy that costs more than 50K (with no cap), and various other thoughtful modifications.

Between the Atlantic Article, the WSJ oped article from Whole Foods CEO, and the plan at Safeway, exists an answer to health care I can live with that will drive innovation, reduce cost, and expand coverage.