patrick.net

Who do you think would even look twice at your model? No provider would even consider it and lobbyists would ensure it was dead in the water - but it'll never make it that far.

I believe many of the assumptions in the model can happen on their own without politicians having to act on them For example, if we have very slow economic growth for the next ten years, medicare inflation can decelerate substantially. Providers will have no choice but to "lower" prices. Before entering Medicare a person might have been on a very expensive private plan paid by the employer (which paid providers more that Medicare reimbursement). With many people essentially switching to lower priced services, there will be pressure on overall prices by providers including private health expenditures.

If tax cuts are not extended beyond 2013 and lower provider prices, the problem is very manageable. My main point in providing the model is to show that with minor adjustments Medicare problem can be solved.

Need option to raise minimum age to 75 effective immediately.

You can increase the age to any number in the model. I believe you'll have to assume much slower economic growth since the benefit will disappear for a large number of people that will have to come up with their own money for health care. Additional result wil be healthcare price deflation which could help total medicare deficit.

Being on the front lines, I'd sure appreciate the feds/state regulators ending the fraud schemes instead of looking the other way.

I completely agree that we need to cut fraud and increase penalties especially as Medicare spending will increase as percent of GDP.

Taxpayer says

Lets kick out the top 1% and maybe even the top 10% from medicare eligibility.

I have a better idea, let's add everyone to medicare, like they do in Canada, France, Germany, Australia, Norway, Sweden, New Zealand, Japan, etc etc.

Do you agree with my model?

Free-market solutions for something as necessary and asymmetric as health care is literally a sick joke. I don't think we need redistribution (rich pay for all) but I do think we need a national universal system where the profits from medical care are strictly regulated if not eliminated.

People getting into medicine just for the big money need to find some other pursuit, like music publishing or something.

Taxpayer says

Why do you want to force your model on everyone? WHy do you not want to let everyone do what they want to do with their money?

Because we tried that in the 19th century and it sucked for many reasons (the Progressive Era was in reaction to the worst of the Gilded Age).

Socialist countries like Norway, Sweden, Denmark and Germany, on the other hand, have great successes with their mixed economies and i think we can learn a lot from them.

Now, I'm more a left-libertarian than socialist. I'd like to see how a land value tax system would work towards social justice and economic opportunity (by protecting the proles from the worst of the parasitical wealthy).

I just think the free market stuff is demonstrable BS. It's too centrifugal -- rich getting richer and poor getting poorer -- to work equitably in the real world, and thus never has.

You got a problem with my model, you've got to tell me what Norway, Sweden, and Germany are doing wrong.

Taxpayer says

yes, it succeeds in redistributing wealth. But that doesn't make it fair to the top earners.

There's plenty not "fair" about the libertarian minarchist system. But I prefer arguing about what works best over the long run in the real world, not abstract ideas of "fairness", since debating "fairness" is largely engaging in the wankery of ideologues.

Your definition of equitability is based on coercion.

No it's not. Much of Norway's socialist state is funded from royalties of land (oil in their case). No coercion required.

If you believe in freedom, then that includes the freedom to use your money as you see fit.

I tend to agree, yes, and that's why I'm a left-libertarian. I'd like to see a system that prevents the wealthy from subjugating the less wealthy via land ownership, since when the wealthy withdraw land from the commons they reduce the liberty of others.

If left-libertarianism actually worked, then I would not be a socialist. But I don't think eg. http://en.wikipedia.org/wiki/Geolibertarianism position goes far enough in preserving opportunity and limiting the rent-seeking opportunities that the free market creates. I'd like it to, but I have my doubts.

Taxpayer,

Since the early 1980s wealth has been redistributed to the top 1% via lower taxes. Medicare and SS run a surplus for all those years and every administration starting with Reagan used that for their own ideological initiatives. Raising taxes and cutting spending (lower Medicare inflation) are the only ways to reverse the process. If you look at a scenario three on this page: http://www.treatmentreport.com/blog/solving-medicare-through-compromise/ , you will see that you barely need 3% tax raise which does not even bring us to Clinton's tax rates. This scenario of slow growth is becoming more likely. I created the model about a month ago.

Also, US has a problem that it spends too much on healthcare as percent of GDP. Nordic countries or Singapore have much lower expenditures. In Singapore it's less than 5% of GDP and the quality of care is similar.

Taxpayer says

My model is based on freedom. I don't want to force anyone to do anything that they don't want.

Your model fails in contact with the real world. Find another one.

Taxpayer,

Medicare inflation (2.7%) is a lot lower than private healthcare inflation (5.8%). You can find the healthcare inflation data in the references section of the model (it's from S&P). So putting everything in private hands would make it more expensive.

Lets abolish medicare and SS. Let the current enrollees get back whatever money they put in (indexed for inflation and add a reasonable yearly rate of return on their past contributions). Then you and I wont be arguing whether medicare funds were misappropriated

That's the problem, the money is not there because it was given away as tax cuts and spending on other programs for the last thirty years. To get the money back, taxes have to go up and other spending has to go down.

Taxpayer says

I am fine with that. I believe I can shop around and get the best deal. IN any case, I think I should be the one who decides what to do with my money. I don't think it is required to pay it to the govt and then argue about who should get what back from the govt. I no body pays to the govt, then everyone will be free to do what they want with their money.

I run a good size small business and I wish I could get a "better deal" in insurance for my employees, but you can't. Every insurance company raises premiums the same way -- way up. I can get deals on individual providers but not on the bulk of the cost. Private system failed here.

Taxpayer says

Insurance company profit margins , I believe are less than 10%.

Wellpoint FY10:

Revenue: $58,801.80
Overhead: $8,839.40
Profit: $4,772.70

23% cost.

It is a combination of doctors ordering unnecessary tests; both for their personal gain and because of fear or lawyers.

Bullshit; stop talking out of your ass on stuff you know nothing about.

The main cost center compared to socialized medicine countries are for hospitalization and claims processing overhead.

http://www.ifhp.com/documents/IFHPPricereportfinal.pdf
http://www.eurekalert.org/pub_releases/2011-08/cu-ups080211.php

The average cost per hospital day in the US is 10X that of Canada, 6X that of Germany.

If that is the case for car insurance, then why should both of them pay the same for health insurance; when clearly the 60 year old woman is statistically more likely to use up health care dollars?

That's the way it already is. Health insurance is in fact relative to age. PPACA removed gender differences, and whether that is good or not is debatable, but it's a minor cost differential in the scheme of things.

Insurance is $3400 for a 30yo and $10200 for a 60yo. Ask Patrick for how it works when you turn 45 : )

What PPACA will do is subsidize the old person's health care costs, limiting premium cost to $3440 for 30yos and $3800 for 60yos (each earning $40,000 -- making more than ~$45,000 will result in losing PPACA subsidies altogether).

I agree that insurance company are only a part of the problem, but they are still a problem.

Taxpayer says

Anyway, going back to the discussion about getting a better deal; I believe health insurance would be more affordable if we were allowed to enroll in catstrophic care insurance.

That does not solve the problem. We buy $3500 deductible HSA compatible plans and premiums are still ridiculous.

Taxpayer says

How is raising taxes on the rich connected to the solution of the failure of the private system?

If you read http://www.treatmentreport.com/blog/solving-medicare-through-compromise/, you will see that raising taxes on top 1% is only a part of the solution. The biggest driver is lowering healthcare inflation in comparison to overall inflation.

Raising taxes simply recovers what top 1% "borrowed" from the government in the last 30 years. The money should have been given to them as tax cuts in the first place. By the way, my family benefited from this policy. However, I would like to see this county be strong and around in 30 years, and would pay higher taxes as needed.

Taxpayer says

I believe in small government and less taxes. It would be great if we can get taxes to like 5% or so.

What you envision is completely unrealistic. The model that I developed is trying to reform the current system where as you want a total collapse of the current system. Do you really think we can defend this county, do groundbreaking research in universities, provide police protection, and thousands of other services on 5% tax? By the way I used to be a huge Ron Paul supporter before others even knew who he was. The closer I studied his views, the more I realized is that he was completely unrealistic about 80% of the issues.

treatmentreport says

What you envision is completely unrealistic.

What taxpayer envisions is the economy of the plantation and company town -- i.e. the typical Banana Republic with the rich owning 99% of everything.

It's entirely realistic. Sucks for 50-80% of the population, but realistic.

Taxpayer says

Do you know what the meaning of profit margin is?

Don't patronize me, clown.

I was clearly demonstrating how Wellpoint has a ~25% off-the-top tap on the system, something your free-marketering viewpoint wants to dismiss.

In any case, what I am trying to argue is that people have the freedom to do what they want with their money, You want to deny that freedom.

And you want to argue your silly glibertarian bullshit apparently without understanding its real-world impacts.

Or, worse, wanting them.

Troy says

And you want to argue your silly glibertarian bullshit without understanding its real-world impacts.

At least he's not viciously attacking you personally - and your profession too. I stopped "listening" to his drivel.

Interesting argument but here's my take
1) increasing the age of medicare is political suicide for anyone in office. Granted the age of 65 was really established by Bismark in the 1880's (FDR copied that)
2) wage freezes for unions again are political suicide. I'm not pro or anti union but fulfillment of contract is key. If you break a contract that can lead to a downgrade further. Remember what happened when bretton woods ended?
3) instead of a higher rate on the top 1% why not simply cut them off from the system? That's the thought with some on social security.

I would say there has to be more on the competition side of things. Not EVERYTHING has to be performed by a doctor. If someone just has a sore throat they should not resort to that. Some states still make drug store clinics illegal...why? We need to encourage more people to become doctors. Heck doing more comprehensive health education might be much but the local governments might not like it.

mdovell says

instead of a higher rate on the top 1% why not simply cut them off from the system?

To ask that question is to answer it. Unless you think 1% savings are significant policy initiatives on a program that has a 5-10% of GDP long-run issue.

Troy says

Socialist countries like Norway, Sweden, Denmark and Germany, on the other hand, have great successes with their mixed economies and i think we can learn a lot from them.

Troy,
You can't compare USA to Norway, Sweden, Denmark and Germany, (and Finland). If you consider our education, infrastructure, and the level of corporate greed and fraud (especially in Healthcare), we are a third world country comparing to those.

Universal Health Care in USA will be more like it was in Eastern Europe, where you had to bring "gifts" to EVERY care provider to get "free" care. It will be even worse, because receiving such bribes for government insured treatment is a fellony in USA. Everybody will be insured, but nobody (without special relations) will get any healthcare.

Well, some will still buy private and very expensive insurance.

"You can't compare USA to Norway, Sweden, Denmark and Germany, (and Finland). If you consider our education, infrastructure, and the level of corporate greed and fraud (especially in Healthcare), we are a third world country comparing to those."

Those systems are totally different and of course they can spend more on those services given that their taxation rates are higher and we (USA) subsidized their defenses for quite some time. If they had to pay for their own defenses during the cold war they wouldn't have that much left for an outside economy.

Sweden has only 9.3 million people, Finland 5.3 (LA county probably has more), Denmark 5.5 and each of these is much smaller than the USA and in some cases smaller than individual states. When you have smaller areas you can provide services more efficiently regardless of governmental policies.

Heck one could argue Vermont does a good job on health care since they socialized it...but 90% of them were already covered by private insurance and there's only 620k people there so it is only covering 62k people..

I think the Netherlands has made a good case for decriminalizing drugs and prostitution. In the book Reefer Madness it details that the use of those services skyrocketed but then dropped like a rock. The public is turned off and it is mostly tourists that flock to those places.

The major threat I would see to europe is actually population growth. Outside of Ireland, UK and France it needs support either by allowing more immigration in or more incentives to have children/adopt
http://en.wikipedia.org/wiki/Aging_of_Europe
There are those in the USA that might not like immigration but it is often taken for granted. Factoring that out and it is fewer people paying in services and working. Until recently Russia was shrinking. In Detroit supposedly they are shrinking the city to meet the population. A city might be able to do that but not a country.

There is greed in nearly every country.

If you ever want to see something odd just look at the middle east and the establishment of the rentier state. It is socialism but without the taxation. All of the revenue is from oil profits. Plenty of education and health insurance is handed out free. But it also means that the government runs sponsored enterprises that crowd out nearly anything that is independent. Gradually people become poor but are rich in services. The underground economy is the only way people get certain things (alcohol for starters)

mdovell says

and we (USA) subsidized their defenses for quite some time. If they had to pay for their own defenses during the cold war they wouldn't have that much left for an outside economy.

bullshit. We just threw trillions of dollars away in a pissing contest 1960-1990, that wasn't defense.

The major threat I would see to europe is actually population growth. Outside of Ireland, UK and France it needs support either by allowing more immigration in or more incentives to have children/adopt

And I see population growth as a bad thing when under-employment is already so high. Europe needs fewer people not more.

The old people are easy to support in retirement. Give them a paper, a TV, some food, they're happy.

Taxpayer says

For example, if you are living in a city and there is a police force there, then every resident should pay the same dollar amount for the police.

So someone who owns dozens of apartment buildings, rental properties, and commercial properties will need the same amount of police and fire protection, infrastructure (streets, electric, water, sewer, etc.), city services (planning boards, permits, tax billing/collections etc.), school district taxes, as someone with a 900 sq ft house? That's an interesting thought. How does that work?

Or are you somehow proposing revamping the entire tax structure as it exists now and just charging every resident a flat amount very year for all the local, county, and state taxes. What would you propose to do with people who simply don't pay? The unemployed, cash businesses, that kind of thing. Debtors prison, the rack? At least property taxes you can take the house if someone doesn't pay. How would it be collected? That would be a very entertaining political battle

"bullshit. We just threw trillions of dollars away in a pissing contest 1960-1990, that wasn't defense."

You can call it a pissing contest all you want but much of planet was divided into usa and ussr camps (non aligned movement was interesting but not major). The USA subsidized europes defenses post ww 2. Yes UK and France did eventually build up nuclear weapons (we gave the UK the secrets on it) and other forms: Mirage and Tornado fighters etc.

The invasion of Hungry in '57, Czech in '67 and of course putting missiles in cuba pretty much indicated war was possible. I'm not saying domino theory was possible..vietnam we made some huge mistakes (China would never back then to start with they are not close to them like Korea).

If one party builds up weapons it is natural that others can follow suit. On the same level do you lock your doors (house/car etc)? Why? Why are there locks to begin with? Well there can be crime. It is impossible to suggest people will disarm on their own unless reductions are given by another party.

"And I see population growth as a bad thing when under-employment is already so high. Europe needs fewer people not more."

It is very hard to have an economy grow without population growth. Look at China vs. Russia. From the 1990's onward which one grew more? Much of Europes programs are socialistic. Socialism has a much harder time operating without a growing population. I cannot fathom Europeans paying higher taxes then they are right now. They either have to accept more people, cut programs, raise taxes or a combination of the three.

"The old people are easy to support in retirement. Give them a paper, a TV, some food, they're happy."

Happy sure but as that represents large portions of the population how is that productive?

If we have an economy that is based on consumption (regardless of what it is) and the consumers are not working or generating wealth (saving, investing etc) how long will that last?

There is not a single civilization within the history of the planet that has allowed an entire generation at once to retire on the laurels of the state. Normans, Mayans, Nubians, Romans, Gauls, Hans, Mongols, Persians etc. No western country is fully prepared for this.

mdovell says

The invasion of Hungry in '57, Czech in '67

these were lost to the west in 1945 (and the immediate postwar).

China would never back then to start with they are not close to them like Korea).

wah.

It is very hard to have an economy grow without population growth.

Wrong. Economic growth can and does come from ever-increasing productivity. Past a certain point population growth is a negative. If more population was good all Bangladeshis would be millionaires. Your argument is crap in that it is ignoring the very real-world limits on growth and wealth-creation.

Look at China vs. Russia

Russia destroyed itself in the 1990s, becoming a kleptocracy. I'd drink myself to sleep every night if I lived in Russia, too. China continued the Deng reforms from the 1980s.

Happy sure but as that represents large portions of the population how is that productive?

Retired people don't have to be productive. I was just saying they're not the major wealth sinks that people say they are. They've had a lifetime to buy all the crap they need to live so their further maintenance in dignity and ease is relatively minor.

If we have an economy that is based on consumption (regardless of what it is) and the consumers are not working or generating wealth (saving, investing etc) how long will that last?

All that matters is that consumption is in balance with production.

Currently this economy is $600B/yr out of balance:

http://articles.latimes.com/2011/aug/12/business/la-fi-trade-imbalance-20110812

http://www.census.gov/foreign-trade/top/dst/current/deficit.html

Agriculture is 2% of our GDP, thanks to productivity gains. Manufacturing will also be 2% of our GDP someday as robots do all the work.

We are already living in the Jetson's no-work future, but we don't know it because all the rent-seeking that has risen to take our incomes away. The apartment my parents rented in the mid-1970s for $300/mo now rents for $1500. It's the same apartment, what changed? Same thing with the apartment I rented in West LA for $700 in 1991 -- now it's $1500.

A trillion a year gets shoveled into housing. A trillion is lost in health services profit-taking. A trillion is burned by the pentagon uneconomically.

These are the major loss centers of our economy. Eliminate them and we could pension off half the population.

When it comes to healthcare you can't expect rational actors, so free choice based economic ideas are impracticle. Pain, illness, death, all of these force the amigdala to shut down our rational ability in favor of survival instinct. A parent, otherwise still healthy and fertile, will sacrefice their entire financial future to save a sick child rather than do a cost-benefit analysis to see whether the better course of action would be to have another baby and pull the plug if treatment costs go too high. Young, healthy, unattached people are irrational as well, underestimating risks to their health and miscalculating the odds of black swan events that can destroy them financially as well as physically. All levels of the healthcare industry, insurance, hospitals, malpractice lawyers, pharmaceuticals, all prey on this human falability. Free market soluctions can only work with homo economicus at the wheel, which is why they don't with healthcare. Government intervention is necesary when the market can't do something efficiently or can but refuses because there's more profit in inefficiency, which is why we need some sort of single payer system.

Taxpayer says

I am just saying that you have no business telling a company how much their profit margin should be.

The 19th century tried that and it didn't work so well. Your mindless freemarketeerism is getting pretty tired here. Free markets do not work, have not worked, and never will work in all sectors of the economy. Some sectors are quite difficult to trust-bust and preserve competition in.

you have no business telling me how I should spend my money or my time.

As a left-libertarian, I actually agree, in general. I don't believe in redistribution since I think this is patching something at the wrong level -- not solving the problems where they actually lie.

I think the core problems in our system is the predation on the working class. This comes from real estate, medical, energy, neomercantilism (eg. China), and, yes, government -- where monopolies enjoy pricing power and economic rents.

Trying to redistribute in the face of these flows out of the middle class is at best a difficult battle -- the nordic countries do not have a spotless record of success in their high-tax ways.

I prefer the scalpel of Georgist taxation on land, resource rents, and other natural monopolies like spectrum allocations. I think this would go a a long way towards fixing the long-term instabilities of the system.

Health care is screwed up now so we should do something with this, too. I think Japan, Canada, Aus/NZ, and the Eurosocialists have a valid model here to emulate.

We also need to cut government spending in half or so. $5.3T/yr is around $50,000 per household. I don't understand how this is even possible (maybe there's a loop-back effect as government employees pay income taxes that amplifies gov't spending footprint in the economy?)

I also have no clue what to do about China. Theoretically, their cheap labor should be a boon to us, but the problem as I see it is that money we send to them from our wages isn't coming back to us as work orders, so this is a flow that over time is impoverishing us -- the more we buy from them the poorer we'll become (so far this year we're only get $1 back for every $4 we send to China)

zzyzzx says

Need option to raise minimum age to 75 effective immediately.

Great, cancerous heart diseased forgetful people driving school buses. Let your kids ride!

I updated the model. It's now web based (IE9, Safari, Chrome, Firefox supported); no need for Excel. Play around with it and let me know what you think.

http://www.treatmentreport.com/models/medicare-model