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Greed and Healthcare

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What is more susceptible to greed, a competitive system or a government granted monopoly?

Henry Gifford offers:

Obviously, the system more susceptible to bad effects of greed is a system where a person or a company can buy power from the government more cheaply than they can earn it by providing goods and services at a price that a consenting adult freely chooses to buy from them.

Dylan Distasio answers:

I think upon closer inspection, the answer to that question is not always as simple as it seems. When a "competitive" private system isn't truly competitive, you get greed of magnificent proportions as in the case of the Californian power market that was plundered by traders simply because they were able to get away with it within the system at the time.

The deregulation of utilities in California and other places was a failure in large part due to flaws in how the system was privatized, but it was still a massive failure. Perhaps there are some industries that are not easily privatized, and where it isn't advisable if the interest of the consumer is actually being protected.

I don't think the healthcare market is an equivalent one to the power generation and transmission market, but it would appear severely broken in its current completely private form. The extent of how badly broken it is may not sink in for those of us who have insurance, but it sinks in very quickly for those who don't.

As someone who is generally a libertarian, and who still owns a great deal of pharmaceutical stocks, I am troubled by my own conclusions, but the current state of "competitive" US health care leaves a lot to be desired.

I don't think there is a simple answer here.

Scott Brooks adds:

This aptly describes that biggest problems in healthcare ... misaligned incentives!

Health insurance is the only insurance that people feel like they need to use!

No one wants to use their car insurance, the disability insurance, their E&O insurance, or their life insurance. But everyone feels like they need to use their health insurance ...

And that drives the cost of healthcare up, way, way up.

The end user (the patient) is shielded from the true cost of the care they are receiving, and as a result has absolutely no incentive to demand a better price.

The end user is has no financial incentive to properly use their healthcare.

Insurance companies have absolutely no incentive to institute wide spread wellness programs that are actually used and not just a pamphlet that says, "How to control your diabetes".

Employers treat health insurance as a commodity. They put it out for bid every year or two and go with the company/consultant that gives them the least increase in cost and least decrease in benefits.

The doctors have no incentive to do more than they are. They get paid the same $20 + health insurance company reimbursement whether they spend 2 minutes or 20 minutes with a patient. And to top it off, their paperwork and reporting burden gets greater and greater each year while their pay gets cut.

HMO's have no incentive to change. They may derive their profit from seeing patients and administering so called treatments, but they stay alive by playing the government game/politician game and bureaucracy game. Wellness, real marketed and delivered wellness programs are not in their budgets as it would cut into profit margins (a perfect example of walking over dollars to pick up dimes) (this discussion warrants an entire post in and of itself....Professor Bangs needs to comment on this).

Politicians have no incentive to make any changes. As a matter of fact, the current system is perfect for the vast majority of politicians. Why? Because the current path our healthcare is on can lead to one and only one possible end ... socialized medicine!

Think about it. How much can we continue to see increasing cost (an average price increase of 12%/year) and decreasing benefits, before the "collective masses" demand that the politicians "fix" the problem?

Properly aligned financial incentives, specifically incentivizing the patient to properly use their healthcare is the only possible solution to solving this problem.

Henry Gifford mentions:

"Deregulation" in California was done by forming two new government agencies, and a new state government monopoly on buying and selling all electricity in the state. They signed long term sell contracts and bought on the spot market, and made billions for the first few years. Then the market went against them, and they stopped paying the bills, tried to get price controls in effect in other states, and started "investigating" suppliers for price gouging. Guess what? Suppliers stopped selling to the state and the lights went out.

This strikes me as a classic case of privatization - the government being the only buyer, claiming it is a more free market than having the government run things directly.

I think California was a huge success for the government, as it gave "deregulation" a bad name that will last for years to come.

But a government monopoly is not my idea of a free market.

I think it is inaccurate to call the current health care market "completely free." A large %, perhaps 1/2 is paid directly by the feds, 1/2 of the rest is indirectly paid for by tax deductions. I am not free to buy insurance that does not cover me for preexisting illness, as the law prohibits insurance companies from selling it, therefore I cannot buy health insurance for myself as an individual in the state where I live any more. This is not my idea of a free market either.

Gordon Haave comments:

Problem solved. You simply have a total misunderstanding of the health care market. The best word for it would probably be facist, and in the original meaning of the word, not the politicized one. That is, the government has simply chosen to use private actors to implement its policies, but they are still almost completely under government control. Hospitals are run almost completely like government bureaocracies, as the various level of governments issue regulations forcing them to run that way. Plus, well over a third of all pateints are paid for by the government, and another large number don't pay at all, but the hospitals have to treat them anyway.

To suggest in anyway that this is a failure of capitalism is simply incorrect.

Scott brooks continues:

If one looks at pharmaceutical industry, one will see that there are many inherent problems there. One is that the pharma industry creates drugs that only treat the symptoms and not the cause.

I know that the pharma world has done some wonderful things, but if one were to look deep, one would see that the vast majority of drugs treat the symptoms, leaving the "cause" to continue...which does not lead to good health, it only leads to masking the real problem ... kind of like putting lip stick on a pig ...

This masking of the real problem also leads to, in some cases (dare I say, many cases), more negative side effects than positive side effects.

The healthcare system in America is sick ... very, very sick.

And having a discussion of how "America has the best healthcare system in the world" is not relevant. The rest of the world is ahead of us in healthcare....ahead of us in the sense that they are already where America is headed.....they are further down the path of socialized, collectivized medicine ... which is the only reason that America's healthcare system is the best in the world.

Saying we're the best is wrong. Saying we currently "suck less" is more appropriate.

Also, a simple understanding of definitions is in order here in light of Henry's and Gordon's posts.

Socialism: Government ownership and government control over industry.

Fascism: Private ownership of industry but with government control over that industry.

America and most of Europe is moving toward a Fascist state not toward a socialist state.

Dylan Distasio adds:

Well, I think it could be argued that some governments are good at war barring the current administration, but that's a discussion for another thread ...

I agree in theory on government in general, and in practice on government in most things, but what is your proposal for having the market address the current issues in healthcare? I'm not asking this facetiously.

I don't think the government should administer the health care system as it does now, or to a greater degree down the road, but I do think the current system is in dire need of change. I'm also not 100% convinced that leaving the market fully to its own devices (if even possible in practical terms) would be an alternative that is the most desirable one in terms of ethics.

The challenge here is balancing the fact that we are dealing with actual human lives here as opposed to widgets. A decision that is the right thing to do from a human rights perspective may not always correspond with the right decision from the market's standpoint. At the crux of this issue is the question of whether every human being is entitled to a basic level of healthcare, and if so defining what that level is.

David Lamb comments:

My brother is an M.D. We are very close and talk and teach each other about our areas of endeavor. We live just south of Phoenix, AZ by about 20 minutes. He has over 1500 patients, employs 4 other doctors of various specialty, a number of nurses with the same varying degree of specialty. He employs 3 people just for billing to the insurance companies, to try to keep on top of the red tape.

One does not really want to bring up the insurance industry to this brother of mine because of his hatred (my word) of them. He is a liberal democrat in every way (though less so now). Graduated Ivy League, was going to help the little man back in his neck of the woods (AZ) by offering almost nothing for office visits to the Mexican immigrants, and all other semi-rural/poorer "citizens". The idea was very noble (for the ignorant, I told him) but then reality hit him between the eyes within the very first year.

He says that the insurance industry, who absolutely runs his medical field, dictates entirely what meds to offer to the sick and ailing; what to charge for the meds, how often and how much of the meds to take; and where to get them. If the paper trail is followed there is only one place that it leads.

They don't care about the ultimate health of the patient, but the mere dollars that they can get from the meds and hospital and doctor's office visits (they get a piece of that, too). As Scott just stated, it's nothing more than putting lipstick on a pig.

But we all know this already, to one degree or another. My brother no longer feels money is evil, dirty, and abhorrent to a real society. Rather, he now understands that socialized medicine will never work, has never worked, and will never work because he who controls the purse will eventually develop bright, beautiful feathers and start to strut around. And the system can then bid adieu to doing what's right for the populace.

But I have a couple of questions that constantly go through my mind whenever I hear or read anything on our health care system and how to improve it to take care of more and more people. Why does it behoove any government to assume responsibility for paying a part or all of its people's health care? Do I feel, as a citizen of this country, that the government is responsible for my health? When did this line of thinking begin in our history? (These are serious questions.)

Also, if I can assume that if I am going to the local hospital or doctor's office and that the government, in one form or another, to one degree or another, is liable to pay for my health care, why stop there? Why not get them to pay for my education, my house(s), my children, my automobiles, boats and other toys? Yes, it can be argued that there are people who just cannot afford to buy meds or a simple doctor's office visit. But, in my mind, this should not fall into the lap of the government but elsewhere.

In my family we take care of our immediate family members' needs (whatever they may be). If one is at a crossroads in life, we give them a roof over their heads until they can figure things out (I was on the receiving part of this one). If one is jobless we offer them what we can to help them feed and clothe themselves until they can do it for themselves again. If one is sick, we don't automatically go to our favorite brother's office for him to give us a prescription, but instead, upon him educating us, we eat wholesome and nutritious foods, get as much exercise as possible, and let our great bodies help themselves. If one breaks his or her arm (as my daughter did this past year), of necessity we go to the hospital to set it. Most hospitals around here offer a cash payment option, which greatly reduced my daughter's broken arm bill from $6,000+ to $1,500 if paid within 30 days. Instead of making those terrible and barely used insurance payments each month, why not put aside the same amount and save for that rainy day? How often do those hospital emergencies really happen? My wife asks me, well what happens if one gets cancer (like a family friend) whose bill is now above $150k? Who has that tucked under their mattress?

There are no simple answers for the exceptions to the rules. There are always going to be obligations that we simply cannot perform. But I know there are insurance policies out there that address these anomalies. They just aren't advertised very well.

In the end, when the people begin to require too much of it's government, they lose more than the power yielded. They lose their ability to rely on themselves, their brothers, their comrades, and their neighbors, for help in time of need. And as these momentary needs are relied on more and more from the government, we rely less and less on ourselves. Which, at the end of the day does the individual and the community a great disservice.

How does this discussion apply to the markets? In my opinion, there are many parallels. But one I will state is that relying on another person's trading system to do my analysis and eventual trading will always get me in the end. It may help me feel better today, but tomorrow it will make me weaker because I didn't put forth the effort and time into self-development.

Henry Gifford responds:

One answer to the $150K medical bill, limited in usefulness only to those people who have a credit card, is insurance with a $10K deductible. I used to buy such a policy (sliding payment from $5K to $10K) with a million dollar limit for $350/Year when I lived in Texas in 1990.

I didn't make believe all the paperwork didn't cost anyone (me) anything, thus it made more sense to me to just pay for any bill that wasn't huge, which I figure anyone with a credit card could do. The savings would quickly exceed $10K, leaving everyone permanently ahead - doctors, insurance companies, and customers too.

When I moved to NY the next year the same policy cost me $700. A couple of years later the AIDS lobby convinced the governor that healthy young people should be able to wait until they got sick to buy insurance, and a law was passed requiring same. My premium went over $3,500.

In the next few years, more and more sick people bought insurance, and I was one of fewer healthy (never made a claim) people paying insurance. Soon I got a notice that such insurance would no longer be available. After a few years they cancelled everyone in NY State.

I'm a member of a nationwide engineering society, which sells health insurance to it's members unless they live in New York State, so that option was out. Numerous insurance brokers told me there is simply no insurance available I can buy at any price, and therefore unless I could get insurance through my employer, my choices were to be uninsured or to join a HMO and get coverage for all but the big stuff for about $20K/year.

From this I learned that regulating such things doesn't seem to make improvements.

The $10K deductible policy, if it were still available, strikes me as a huge step toward incentivising people being responsible for themselves. It makes me sick even writing about the concept that there is such a need.

Pamela Van Giessen finishes:

Henry's post brought to mind how we can all be brainwashed and that counterintuitive thinking is sometimes the ticket to cost savings. This is annual benefit enrollment time in most companies in the U.S., and mine offered something new this year -- something called a Focus Direct program. For much lower premiums (savings to me and mine of approx. $3500/annually), one has more control over healthcare options but a higher deductible. It took me about 5 minutes to determine that this option was for us. We are relatively young, no major health problems, and we're still well covered for something catastrophic. Yes, we will have $2500 deductible (though the company pitches in $750 toward that, and if the amount is not touched, then it rolls over to the next year and accrues) but I've been known to spend that on a purse so it's not a cost that we couldn't cover. Additionally, all preventative care from mammograms to annual physicals and vaccines is covered. In 13 years, we've had only one major medical problem (tendon surgery) that cost $5000. Even if we have a repeat of a like event, we're still ahead. We only lose if one of us gets really sick or broken and even then we may be better off because we have more freedom for treatment.

Many of my younger (and presumably even healthier) colleagues are not going to take the option. The deductible is too scary, the control frightening. They don't like HMOs and having decisions foisted upon them but they are frightened by making their own choices. They don't like the hefty monthly premiums but don't want to risk that they might have to pay a couple $1000 out of pocket even though I can well imagine these are amounts within reach to them when you factor in going to concerts, bars, dinner, clothing, etc. Further, the odds of them having to spend that amount are low. Very low.

We've created a society of scaredy cats and now that the insurance industry has woken up to the fact that employer-sponsored health insurance is nothing more than socialized medicine and that costs have (predictably) gone up, and are trying to retreat and put control in the consumer's hands, consumers are afraid. The insurance biz is going to have to do some work to un-brainwash folks.