evolution

Get excited now, and then again when it comes out in a year and a half. Probably alongside Starcraft 2.

I’ve been going back through the archives, and man, I used to be awesome.

The “non-prescription” kind. It’s something we should consider here in the States, in my opinion — but it will never happen. The “war on drugs” is a cash cow for many jurisdictions, and if / when the government gets around to managing health care, they’re going to manage health care.

Quick recap: The former New York Giant receiver carried a pistol into a city nightclub and accidentally shot himself in the leg. Michael Vick willfully operated a dogfighting ring, inflicting unspeakable cruelty on animals, and then lied about having done so.

Burress’s sentence: 24 months. Vick’s: 23 months.

In my America, which admittedly doesn’t exist, what Burress did would not have been illegal at all. Stupid, probably in any world. Not illegal.

Unless you’re a grasping hack of a DA who works in New York City. Then you’d probably wet the sheets.

And somewhere in the jungles of southeast Kansas, a man cries…

Whole Foods co-founder and CEO John Mackey wrote an op-ed that appeared in the August 11 Wall Street Journal, and in exchange for that a good chunk of his customers threatened to boycott his company’s stores. While that made me chuckle just a bit,¹ he made some concrete points that are serious topics for discussion.

I’m going to go way beyond “fair use” here, and I don’t really care. Italics appear in the original. And let’s all please remember, even though I already said it in the disclaimer to your left, I am not speaking for my company or any actuarial organization, or anyone other than myself.

First, his company’s plan design:

•?Remove the legal obstacles that slow the creation of high-deductible health insurance plans and health savings accounts (HSAs). The combination of high-deductible health insurance and HSAs is one solution that could solve many of our health-care problems. For example, Whole Foods Market pays 100% of the premiums for all our team members who work 30 hours or more per week (about 89% of all team members) for our high-deductible health-insurance plan. We also provide up to $1,800 per year in additional health-care dollars through deposits into employees’ Personal Wellness Accounts to spend as they choose on their own health and wellness.

Money not spent in one year rolls over to the next and grows over time. Our team members therefore spend their own health-care dollars until the annual deductible is covered (about $2,500) and the insurance plan kicks in. This creates incentives to spend the first $2,500 more carefully. Our plan’s costs are much lower than typical health insurance, while providing a very high degree of worker satisfaction.

The company plan design is interesting, and the money deposited into the “personal wellness accounts” may sometimes be a better expenditure for Whole Foods than health premiums for a similar effect. I generally agree with the sentiment in this point, but I don’t think HSAs are the cure-all Mr Mackey makes them out to be.

The health “insurance” many of us have is really only partially insurance – it is insurance combined with a discount card, with the “discount” being negotiated in bulk on your behalf by your health insurer. As such, it is not used in the way one traditionally thinks of insurance being used. Compare, if you will, to auto or home insurance. You collect on the policy if your car or home is partially or totally destroyed, and although you (sometimes are required by law to) carry it, you hope you’ll never use it. Contrast that with health insurance, which when you get it you are absolutely certain you are going to use it, and in fact you make specific plans to do so.

The HDHP is a plan designed more like a traditional insurance plan, but most people don’t want to use it in that way, which is why it will ultimately not work — alone — as a solution. Coupling the HDHP with an HSA featuring employer contributions as Whole Foods has done mitigates this somewhat, but not all businesses — especially small businesses — can afford to do that.

Repeal all state laws which prevent insurance companies from competing across state lines. We should all have the legal right to purchase health insurance from any insurance company in any state and we should be able use that insurance wherever we live. Health insurance should be portable.

Mr Mackey provides no examples. I’m not aware of any such barrier outside of dealing with a particular state’s insurance department. A number of out-of-state companies compete in the Kansas market, at least. I’m sure that other states have competitive markets as well. I’m not sure how much, if any, influence further removal of barriers would have.

Repeal government mandates regarding what insurance companies must cover. These mandates have increased the cost of health insurance by billions of dollars. What is insured and what is not insured should be determined by individual customer preferences and not through special-interest lobbying.

I couldn’t agree more in sentiment, but in practicality it’s another issue. I agree totally regarding the individual health insurance market. Ideally, a carrier would offer an “a-la-carte” menu of conditions to be covered, with a certain number of “extra value meal” plans to cover a range of things. That kind of flexibility could be difficult for carriers to implement on the back end, thereby increasing administrative cost, but I think rates could be lowered in aggregate.

The stumbling block is that most people who have health insurance do not have individual policies — they have group insurance provided or heavily subsidized by their employers. The employer chooses the plan and may not wish to (or may not be able to afford to) purchase everything the employees want or need to have covered. Thus enters the government, which we’ll discuss in a bit.

•?Enact tort reform to end the ruinous lawsuits that force doctors to pay insurance costs of hundreds of thousands of dollars per year. These costs are passed back to us through much higher prices for health care.

Absolutely, positively 100% true. Medical malpractice insurance is the single biggest expenditure for any practicing doctor. It is indeed part of the price of every health care service you use. But, there are 500,000 lawyers working for the government, so fat chance, buddy.

•?Make costs transparent so that consumers understand what health-care treatments cost. How many people know the total cost of their last doctor’s visit and how that total breaks down? What other goods or services do we buy without knowing how much they will cost us?

Again desirable, but hard to implement. Once the web of government interference in the health care market is broken, the rest of the system will have to realign as well, and health care providers will be once again be forced to compete directly for the consumer, which will place downward pressure on cost. Once that happens, transparency will take care of itself. This would be painful for insurers, but I think it’s a necessary part of safeguarding one’s market niche.

•?Enact Medicare reform. We need to face up to the actuarial fact that Medicare is heading towards bankruptcy and enact reforms that create greater patient empowerment, choice and responsibility.

It is indeed an actuarial fact — and dare I say an actuarial inevitability. Medicare is going to go insolvent, most likely within my generation’s lifetime. We have seen this inevitability before — we as a nation owe $36 trillion on Medicare for the next 75 years of benefits. That is not a typo. That means that in order to afford Medicare — which, I remind you, is not universal coverage or even close to it — this country will have to grow its economy by that much in the next 75 years, over and above that which is necessary for our other obligations,² to be able to afford it. Does that seem likely to you? Not even Ben Bernanke’s helicopter is that big.

It is also the single largest reason³ that I refuse to take seriously any advocate of “single-payer” universal health care. The point I want to make to any such people who haven’t completely plugged their ears to reality is this: The United States of America does not have and is not likely to make the money necessary to pay for it. Period. To reduce cost is to either reduce demand or reduce supply. Voluntarily reducing demand, which we’ll discuss later, is the only option in a free society. Any other is to forsake freedom, which is frankly not worth it to me.

Then Mr Mackey grabs the third rail and says what no one wants to talk about:

Health care is a service that we all need, but just like food and shelter it is best provided through voluntary and mutually beneficial market exchanges. A careful reading of both the Declaration of Independence and the Constitution will not reveal any intrinsic right to health care, food or shelter. That’s because there isn’t any. This “right” has never existed in America.

Even in countries like Canada and the U.K., there is no intrinsic right to health care. Rather, citizens in these countries are told by government bureaucrats what health-care treatments they are eligible to receive and when they can receive them. All countries with socialized medicine ration health care by forcing their citizens to wait in lines to receive scarce treatments…

…Rather than increase government spending and control, we need to address the root causes of poor health. This begins with the realization that every American adult is responsible for his or her own health.

Unfortunately many of our health-care problems are self-inflicted: two-thirds of Americans are now overweight and one-third are obese. Most of the diseases that kill us and account for about 70% of all health-care spending—heart disease, cancer, stroke, diabetes and obesity—are mostly preventable through proper diet, exercise, not smoking, minimal alcohol consumption and other healthy lifestyle choices.

All good points, and Lord knows I’m guilty as sin on that score.

There is one more component that no one wants to talk about, and it is this: Why, instead of demonizing health insurance companies, are politicians not looking at the single biggest driver of health care premiums — namely, costs of medical services? This is due mostly, in my opinion, to a collective delusion we as a society, and in particular our various representatives and bureaucrats, suffer from — the idea that any expense, no matter what it is, ordered by a health care professional is legitimate and necessary. It isn’t. We do the same in education, which is why we continue to throw freshly-printed Federal Reserve Notes at it while seeing diminishing returns. That’s not to minimize need — after all, many of those things are legitimate and necessary. We need to to a much better job of learning what that is, and stop paying for what isn’t. Then, and only then, will health care costs be brought to manageable levels.

I hope this helps, or at least sparks a thoughtful discussion. One thing I think that most agree upon is that the current situation is ultimately unsustainable.

1. Okay, a lot. [↩]
2. Unless we do away with some of those “obligations”, which doesn’t seem terribly likely. [↩]
3. The other is that it amuses me to do so. [↩]

The Declaration of Independence is 1337 words long.