Monthly Archives: June 2013

Obamacare and the 1%, Part Two

Obamacare and the 1%, Part Two 6/30/13

The absurdly named Affordable Care Act (ACA), a.k.a. Obamacare, does nothing to make medical care more affordable, just the opposite.  The shame is, and shame is an apt word, there are a number of things the Federal government could have done to improve medical care in America, including make it more affordable, and such things would have required only a few paragraphs, not thousands of pages.

Those few paragraphs, however, would have tread on the interests of at least three “one percenters” who benefit from the current medical system: doctors, unions, and lawyers.  Obamacare and the 1%, Part One, scratched the surface on the AMA’s monopoly of doctor education and accreditation.  The AMA supported the ACA. The ACA does nothing to expand the number of doctors or other care providers.

Unions also supported the ACA because employer provided health care is a tax free benefit for workers, and negotiating health care benefits is one of the most important thing unions do for their members.  The ACA does nothing to change this tax loophole, which is fundamentally unfair to the self-employed and to workers whose employers don’t offer health insurance.

Many years ago I worked for a company that provided terrific benefits including Cadillac health insurance for employees and their families.  The company sent each employee an annual summary of what all the company benefits cost, health insurance being the largest, cafeteria subsidies the smallest.  I figured the company buying my health insurance saved me over $500 a year. What a deal, right? Not quite.

It’s a well known fact that people spend their own money a helluva lot more carefully than other peoples’ money, and that includes buying health insurance. If the company had paid me what they spent on my family’s health insurance,  I would have bought a high deductible policy that didn’t offer some of the benefits my employer offered, e.g. pregnancy coverage, and I would have saved money, after tax. More importantly, I would have incurred lower medical bills because of the deductible, money out of my own pocket I watch very carefully!

The company, Wausau Insurance, didn’t offer that option and I wouldn’t have taken it anyway. They had a great health insurance plan and saw it as a both a recruiting tool and a way to keep employees happy, so happy that they wouldn’t do foolish things like leave for another job that didn’t offer such a deal.  That brings up another problem with employer provided health insurance, lack of portability.  If you leave the company or get fired, say goodbye to your health insurance, a huge problem for the fired or laid-off older worker.

It happened to me.  “Gosh Mr. Burrows, your blood pressure has gone up in the last twenty years. YOU’RE UNINSURABLE.”  (True story.)

How did employer provided health insurance become such a way of life in America? People don’t get their auto insurance, or their home insurance, through their employer — or for that matter, their groceries, electricity, clothes, etc. Why health insurance? Because of a very stupid decision by the Supreme Court during WW II, when it declared health benefits did not fall under the wage and price controls of the time, which was a separate stupidity.

Thus, for over 60 years we’ve lived with this dual tax treatment, which is both unfair and encourages over consumption of medical services. After all, somebody else is paying for it, right?  Numerous critics have recommended the tax code be changed to make heath insurance either taxable or tax deductible; one or the other, but not both as it is today.

Perhaps the best known critic is Harvard economist Martin Feldstein, who wrote in the Wall Street Journal a few years ago, “Like virtually every economist I know, I believe the right approach to limiting health spending is by reforming the tax rules.” (WSJ 8/18/09)

In a separate article, Feldstein noted that employer-provided health insurance received a “federal tax subsidy of more that $220 billion” per year.  Feldstein would tax health benefits and use that $220 billion to help pay for a voucher system to purchase a fully portable policy with a deductible of 15% of family income.  The deductible is a key part of the plan: It would get people to pay attention to their medical costs, plus it would inherently incorporate ability to pay, e.g. if you make $100,000 per year, your insurance starts after $15,000 of medical bills; if you make only $30,000, you pay only $4,500 before the insurance kicks in.

It was, and is, a great idea.  It would be much simpler and cheaper than Obamacre. Interested readers can Google, Feldstein  healthcare  for details. As far as I know, his plan was never considered.  Do you wonder why?

In the WSJ article above, Feldstein wrote, “The unions are particularly vehement in their opposition to any reduction in the tax subsidy for health insurance, since they regard their ability to negotiate comprehensive health insurance for their members as a major part of their raison d’etre.”

Which political party do the unions give over 90% of their support to?  Hint: It’s not the Libertarian Party.

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Extra! Extra! Fracking Saves Silver City. Need for sustainability gardens delayed 50 years — or more.

EXTRA! EXTRA! Fracking Saves Silver City.  Need For Sustainability Gardens Delayed 50 years — or more.

Hydraulic fracturing of oil and gas wells, called “fracking”, has opened huge new reserves of oil and natural gas in the United States.  This is a good-news story that I don’t think has received the attention in the mainstream media, MSM, that it deserves.

My cynical explanation for this oversight is that the lib-progressives who control the MSM are obsessed with global warming, which they blame on fossil fuels. News about all that oil and gas being found could persuade people we don‘t need the very expensive energy produced by solar panels and windmills. In their eyes, the fracking bonanza is really, really bad news for Mother Earth.

However, it is good news for Silver City. Let me explain. The last couple of years I’ve attended numerous meetings around town concerned with climate change and how that was going to require Silver City to grow its own food, put solar panels everywhere, and so on.

The fact that Silver City has never been an agricultural center, for obvious reasons, has no effect on the true believers and their need to proselytize the sustainability religion, which is a spin-off from the Apocalypse Du Jour: Global Warming.

For the most part, these true believers are very nice folks, just not very quantitative.  For example, a key part of the self-sufficiency argument is that because we are running out of fossil fuels, it is inevitable that the time will come when it will be too expensive to truck food into Silver City.  One pundit said he thought maybe a doubling in diesel fuel prices would do it.

Let’s take a look at the math, assuming not a doubling but a quadrupling of diesel prices from $5 to $20 per gallon. Assume 20 gallons for a 120 mile round trip from Deming, and $50,000 of goods per truck. Fuel costs go from .02% to .08% of the cost of the shipment, i.e. fuel costs are still less than one percent even after a quadrupling of prices. My assumptions may be wrong, but it‘s of no importance in the aftermath of fracking.

The really big expansion from fracking has been in natural gas reserves, now estimated to be over 100 years and growing.  The rule of thumb is that a barrel of oil has about six times the BTUs of an MCF of natural gas. (British Thermal Units, a measure of energy; MCF = thousand cubic feet.)

With oil at $100 per barrel, divide by six and natural gas has a BTU worth of about $17 an MCF.  Since natural gas sells for only $4 per MCF, or $24 per barrel of oil equivalent, there is great economic incentive for users of oil and oil products to switch to natural gas.

Sure enough, the headline from a April 22 story in the New York Times read: “Trucking Industry Is Set to Expand Its Use of Natural Gas. —-This month, Cummins, a leading engine maker, began shipping big, new engines that make long hauls on natural gas possible.”

The article quotes T. Boone Pickens, well known oil and gas billionaire and long time natural gas proselytizer, as predicting the majority of the nation’s long-haul truck fleet will be fueled by natural gas in seven years. “Natural gas will always be less than diesel,” he said.

If Pickens is right, expect to see the letters CNG pop up frequently from now on, shorthand for “compressed natural gas.”  Truckers will save about $1.50 per gallon of diesel equivalent using CNG, and because it burns much cleaner than diesel oil, evil greenhouse gas emissions will be reduced, too.

The bottom line for Silver City: Transporting food here will be both cheaper and cleaner. Now we can expect to see a stop to all this nonsense about growing our own food to save the planet, right?

If you think so, I have this bridge in Brooklyn for sale —-

APOCALYPSE, APOCLYPSE! PLEASE HURRY!! On progressives, liberals and other Apocalypsers.

6/13/13

Have you ever noticed that you can tell a great deal about people based on their opinions on only a topic or two?  If you give me your opinion on food stamps, or global warming, or affirmative action, I can pretty much tell which side of the political spectrum you reside on.

Thomas Sowell, in the preface to his book, The Vision of The Anointed, wrote:  “If (people) are liberal, conservative, or radical on foreign policy, they are likely to be the same on crime, abortion, or education. There is usually a coherence to their beliefs, based on a particular set of underlying assumptions about the world, a certain vision of reality.”

One of the things I’ve noticed over the years about liberal-progressives, is that they are very gullible when it comes to forecasts of doom and gloom.  I think it’s because they WANT to believe the end is near. It’s almost as though deep in their souls there resides an old-time, fire and brimstone, born-again preacher screaming PREPARE TO MEET THY MAKER, YE SINNERS, YE FOULERS OF THE EARTH!

A little, or maybe a lot, of Elmer Gantry in every lib- progressive’s soul. A frightening thought!

All this came to mind recently while reading an article by the science writer, Matt Ridley: “We May Live on A Natural Gas Machine.” The article was about the possibility that carbonate sedimentary rock, under the pressure of plate tectonics, undergoes a substitution of hydrogen molecules for oxygen and – Voila! – becomes methane, which eventually finds its way to the earth’s surface, essentially providing us with a never-ending supply of natural gas.

Wouldn’t that be wonderful!?  Not if you are a lib-progressive. I know how they would view the possibility of such a bonanza for the human race: They would think it a disaster.  It would mean people would continue to burn fossil fuels for heat, light and transportation, and continue to add CO2 to the atmosphere, which will continue to warm the earth which will doom all of  humanity.

All that natural gas would also mean people wouldn’t need to put solar panels on their roofs, or build windmills, or grow their own food, or live in communes, or ride bicycles, etc. etc. ad absurdum.  People would continue to prosper, excel and become (gasp!) unequal, and not need the leadership of the lib-progressives.  Actually, they wouldn’t need lib-progressives at all, which is a suppressed truth down there in the lib-progressive soul right next to Elmer Gantry.

How can I be so sure of this reaction? Just look at their resistance to hydraulic fracturing, or “fracking”, a technology that has been used for over 60 years to increase the production of oil and gas wells.  Only recently have the environmentalists attempted to ban the practice because of its allegedly horrid effects on water supplies and air quality. Why is that?  Because fracking has recently unlocked huge new supplies of natural gas and oil, especially natural gas, where U.S. reserves are now estimated at over a hundred years, WITH LOTS MORE TO COME.

How terrible if you’re convinced global warming is caused by the CO2 mankind adds to the atmosphere, no matter that only a few years ago the global warmists would have welcomed replacing coal with natural gas. How terrible if you’re convinced human prosperity is somehow a sin.  How terrible if you want to destroy the modern industrial society, with all its intolerable inequities.

Apocalypsers have always been with us, and today’s crop is all high tech and modern science. No entrails reading for them. What hasn’t changed is the insistence that the End is nigh because human beings have been doing bad things, and that us ordinary mortals are too stupid to see it coming.  For example, apocalypser Vance Packard wrote in his 1960 best seller The Waste Makers:  “Americans have thus far chosen to suppress awareness (of a) dangerous decline in the United States of its supply of essential resources.”

Gosh, Vance, here it is 2013 and our awareness is still “suppressed.”

The best known apocalypser of the last fifty years is Paul Ehrlich, although he is about to lose the crown to Al Gore.  Back in 1968, Ehrlich wrote a bestseller, The Population Bomb, in which he predicted major, unavoidable food shortages: “The battle to feed humanity is over. In the 1970s and 1980s hundreds of millions of people will starve to death in spite of any crash programs embarked upon now.”

Add fifty years, change a word or two, and welcome to the modern Apocalypse, global warming.

Ehrlich made some other noteworthy predictions. On the first Earth Day in 1970, he sounded the tocsin on pollution: “In ten years all important animal life in the sea will be extinct. Large areas of coastline will have to be evacuated because of the stench of dead fish.”

Well, twenty years later, in1990, the stench of his predictions didn’t prevent the MacArthur Foundation from awarding him a $500,000 MacArthur Fellowship, nicknamed the “Genius Grant”. With geniuses like Paul Ehrlich and those who run the  MacArthur Foundation, who needs damned fools?

Obamacare and the 1%

6/10/13

I define one per centers as those who want the government to use its power on their behalf.  They want laws that advance their personal fortunes, ideologies, careers, whatever. Examples are all around us and the total of such people is closer to 100% than 1%.

Most are not evil, just putting their self interest first. Public employees want to retire after 20 years with generous benefits; unions want laws that make it easy for them to form more unions; sugar growers want import quotas; car makers want government subsidies for electric car buyers; one issue fascists want laws, pro or con, on abortion, renewable energy, gay marriage, smoking, sugary drinks, genetically modified food, global warming, localism,  etc. etc. ad infinitum.

One area of government abuse often overlooked are the laws that regulate professional standards. Such laws are justified as necessary to protect the public. More often than not though, the primary purpose is to protect the existing professionals against competition.  Becoming a barber, hairdresser, cab driver, realtor, etc., usually requires a government issued license, which can be difficult and expensive to obtain.  Almost always, the people in charge of defining the standards that the government enforces are people already in the business.  How cozy.

Most of us don’t think longshoremen and medical doctors have much in common, but the American Medical Association, like the International Longshoremen‘s Association, is a very effective labor union.  Milton Friedman wrote in his 1961 book, Capitalism and Freedom, “The American Medical Association is perhaps the strongest trade union in the United States.”

That was over 50 years ago. Has anything changed?  Unfortunately, no. To quote Friedman again, “The essence of the power of a trade union is its power to restrict the number who may engage in a particular occupation.”  The AMA exercises this power as much today as it did 50 years ago with a de facto monopoly on the issuance of  licenses to practice medicine.

This bottle-neck on the supply of doctors, according to study by McKinsey & Co. in 2007, added $58 billion to the nation’s medical bill, an amount probably higher today.  The report noted that U.S. doctors make roughly twice what their European counterparts earn.  Such high compensation should be attracting droves of new doctors but for restrictions on the supply of new doctors, crafted by the AMA and enforced by the government.

Why does it take at least nine years to become an M.D.?  The usual career path requires four years of undergraduate work plus four years of medical school followed by at least three years of residency. Some schools compress the first eight years into six.

As if this wasn’t discouraging enough, the Medical College Admissions Test is a five hour ordeal that rejects about 60 percent of the applicants. The kids who take the test are usually at the top of their classes.

Those who pass must then attend a medical school that is LCME accredited. LCME stands for Liaison Committee on Medical Education, which was formed in 1942 to oversee medical education. It was formed by the AMA, if you can imagine that.

Are all these standards needlessly high? Can the career path be shortened?  How much of the typical M.D.’s work load could be performed by less intensively trained professionals, e.g. nurse practitioners?  Do AMA standards prevent opening more medical schools, prevent more qualified students from becoming doctors?

The biggest problem with the Affordable Care Act, a.k.a. Obamacare, is that it did NOTHING to address supply bottlenecks in the medical industry, and the AMA is a big bottleneck in the supply of doctors. What to do about it?  I’ll have some thoughts in a future article, and please weigh in with your suggestions.