Arthur B. Laffer’s Theory of the “Health Care Wedge” in Wednesday’s Wall Street Journal

We either pay for government-sponsored health care services up front, with Medicare and Medicaid cost-reimbursement payment methodologies to providers, or we pay for it on the back side, in the form of higher insurance premiums.

In following Arthur B. Laffer’s theory on the “Health Care Wedge” in Wednesday’s Wall Street Journal, I found myself raising an eyebrow in pleasant surprise. Although I’m not certain I agree with much of the gentleman’s political opinion, his assessment that the high retail price of health care services is inconsistent with their actual cost is accurate enough.

The eyebrow went up upon reading his initial assessment, stating that “consumers are receiving quality medical care at little direct cost to themselves. This creates runaway costs that have to be addressed.” Well, that’s pretty basic Macro 101 stuff, and hard to dispute.

"The health-care wedge," he explains, "is an economic term that reflects the difference between what health-care costs the specific provider and what the patient actually pays." He says that "health-care reform should be based on policies that diminish the health-care wedge rather than increase it.”

Well, that was actually a bit confusing, but he showed some acumen in even recognizing that health care costs and health care prices are not really the same thing. In fact, the ridiculous pricing that is dropping jaws all over America is wildly divergent from the actual per-patient cost of services.

Nor do I necessarily agree that his continuation, that “Mr. Obama’s reform principles—a public health-insurance option, mandated minimum coverage, mandated coverage of pre-existing conditions, and required purchase of health insurance—only increase the size of the wedge and thus health-care costs.

Moreover I suggest that a public option, provided that it pay at least the cost per patient for any given service, will not increase the size of the wedge. Mandated minimum coverage, provided that it pay at least the cost per patient for any given service, will not increase the size of the wedge, either. Nor will mandated coverage for pre-existing conditions, or required purchase of health insurance, so long as every coverage option provides for payment to providers consistent with the per-patient cost of services.

When Medicare was introduced, it paid facilities on a cost-reimbursement basis; doctors agreed to support the program only after they were granted provisions reimbursing them at their usual and customary fees. It was recognized that if payments fell below cost-reimbursement, it would drive everyone else’s rates up, in order to make up the difference. So when Medicaid was introduced, and paid providers at levels ridiculously below cost, did the Health Care Finance Administration get jealous or something? The current Medicare DRG payment methodology replaced cost-reimbursement in a misguided effort to "control rising costs", so that now Medicare payments to provider fall well below the per-patient cost of services too.

When the government does this (when we do this to ourselves, through the duly elected) we “hump-harumph” about it, and write a blog! When private industry does this, we of course call it fraud. In the insurance industry, they called it an HMO.

The theory was: if the federal government can negotiate with providers, convincing them to accept payment levels below cost-reimbursement, why can’t private sector HMO’s attract large regional employers to a low-ball premium structure, then negotiate similar below-cost rate structures with competing hospitals? If the employee groups are large enough, losing their historical market share could devastate smaller hospitals operating on razor-thin margins.

And so it was that HMO’s and PPO’s joined the ranks of the government payers, in setting reimbursement below costs per patient. As the number of traditional UCR payers dwindled in a market stacked with payers simply slashing “allowable” amounts to whatever they felt they could get away with, the squeeze was put on commercial insurance companies and those with no coverage at all, but who were forced into the position of being unwilling health care consumers by some medical emergency.

Whether we call it a “wedge”, or cost-shifting, or felony fraud, the effect is pretty much the same. When the government forces providers to give away services to the deserving few, then asks those who still pay retail for health care services to pay the costs of providing services to everyone who’s getting services for free, somebody is going to get ground up in the machinery.

The only fix is to require cost-reimbursement as a payment methodology for all carriers, including Medicare and Medicaid. Oh, we might add some severe civil or criminal penalties for private-sector for-profit companies that sell a health care coverage plan that pays less than cost-reimbursement. Only the government is actually allowed to steal from us while we watch it happen.

The influence of the three credit-reporting bureaus in America has gone a bit over the top, if recently observed experiences are indicative of a trend

There is an unspoken, unrecognized power in this country. There is a dependence on a financial services Triumvirate that wields unlimited power. This is a power we are not permitted to face, and from which there is no recourse. Because this Triumvirate holds the sword of Damocles over all of us, we cower at its might. The thought of being on the bad side actually invokes dread in most of us. No it is not the court system; in fact, it is not our government at all.

According to Jonathan Glater in a recent NYT piece, "It is generally legal to run credit checks on job applicants, but some states have restrictions. In Washington, which has perhaps the most stringent requirement, a candidate’s credit history must be substantially related to the job under a law that took effect in 2007. Last month, lawmakers in Hawaii approved a measure that generally allows an employer to review a credit history only after making an offer and requires the credit check to be 'directly related' to job qualifications. In California, Gov. Arnold Schwarzenegger vetoed a similar law. New York law requires a background check’s findings to be related to the job, but it addresses criminal records and does not mention credit checks. Lawmakers in Michigan and Ohio have proposed barring employers from using credit history in making employment decisions."

“In my opinion, it’s discrimination,” said Representative Jon Switalski, the Democrat who proposed legislation in Michigan. “If you miss a few payments or you have medical debt, your skills as a pipefitter or an electrician don’t diminish.”

Call me the quintessential conspiracy theorist if you will, but whenever I smell a rat in any situation involving money, I am immediately suspicious. Moreover, I'm convinced that the over-use of credit reporting has infiltrated far-reaching fingers into the financial services and insurance sectors, used as an excuse to bend-over those least capable of defending themselves.

Back in the day, a credit evaluation was part of a more labor-intensive process, mandated to be fair and based on reasonable risk as evaluated by multiple minds’ opinions of what criteria were appropriate to the purpose of the evaluation. If you were shopping for furniture, and were a young married couple, a couple of missteps with credit cards before they were together, even a few late payments before the baby came were tempered by the stars in a young couple’s eyes, certain of a future of hard work and a happy family.

Over time, I suppose I missed the transition; somewhere among the last twenty-years since I paid very much attention to such things, credit-reporting became a viable justification for predatory business practices among some of our Insurance Industry brethren.

One recent example involved an Allstate agent's quotation for homeowners’ coverage, originally quoted at just over $900 for the year. The rate was raised to $1,386 when a raw credit score under 500 was reported from Experian. Apparently it is company policy to increase premiums in such cases by 50%, without recourse to review or appeal by their underwriting department.

The woman at the Texas Department of Insurance was very nice, informing me that insurance companies are permitted to use credit reporting criteria within individual company formulae for determining rate. Actuarial science perhaps has data in support of elevated risk irrefutably attributable to a low credit score. Perhaps there is no actuarial science in support of elevated risk irrefutably attributable to credit scores at all. It has been hinted by some who should be in the know, that credit scoring is wholly subjective, although credit results within industries are used to evaluate the effectiveness scoring criteria.

Basically, the process is more random than I had thought.

My gut instinct is that there in the case of someone purchasing homeowners' insurance is probably not likely to hose his own property, based simply on his having had past income-stream interruptions. What I question most is the existence of documentation, the evidence in support of the position that a low credit score increases the risk that your house will burn to the ground, or be stripped clean by the criminal element in and around Travis County, Texas, in the commission of a felony.

Is Allstate implying that someone with money problems is more likely to burn his own house to the ground, or strip it clean in the commission of a felony? Or is Allstate simply in position to force someone who has had some financial issues in their past, to “assume the position” based on a low credit score, just because there is no one to stop them. Wholly unfortunately, I feel the truth of that supposition ringing like the harmonics of an expensive wind-chime.

Having had my share of credit issues in a previous life, it has been my experience that people with bad credit were more likely to have been ground up in the machinery of the system, than to have intentionally defrauded anyone. Many have had insurmountable balances due piled on them by a hospital. Many have lost their jobs, and are lucky to still own a home. Whatever the cause, most folks credit scores lag behind changes in their financial situations. Lots of customers with amazing scores are recently without gainful employment; lots of folks with low credit scores have recently achieved incomes well into six-figures.

Attempts to speak with someone at Experian, asking a very nice woman on the phone what recourse a person in such a situation might have, netted what should have been expected: they have no control over how any specific client company might use credit information supplied by a consumer in the course of business.

My curiosity aroused, I contacted Allstate in an attempt to speak with the underwriting department. Of course those extensions can’t be accessed by customers. I am left curious, wondering if the insurance industry might enjoy unfair economic advantage over those unfortunates with bad credit scores. I am left wondering if Allstate simply uses an unexamined raw credit score as unregulated license to take unfair advantage of an entire class of citizenry, simply because there is no one to stop them.

Finally, I’m left wondering if there is room for abuse here. The Triumvirate is inviolate, unapproachable. There is no appeal, other than through major legal expense and a serious time commitment poured through the US Mail. Insurance companies are apparently making Billions in what has the potential to be just another price-gouging scheme by just another faceless multinational.

As a brief post-script to this story, the situation was ultimately resolved when a bright young independent agent arranged a policy for this otherwise upstanding family, with a non-admitted carrier that did not use credit-reporting as a criterion upon which premiums were based.

In that I'm a proponent of constructiveness in my criticism, each state's Insurance Commission is tasked by the legislature under which it operates to carry out the will of the constituency, as espoused by our duly elected. The cure for any insurance company abuse, indeed the shortest distance between what we have now and virtually any behavior we would like to dictate to our insurance industry, is the legislative mandate empowering our network of state insurance departments and commissions. If we don't like that health insurance companies deny every claim, pending a ridiculous appeals process that ultimately results a lot of expense for everyone, we simply change the way they do business.

It makes sense that an insurance carrier might consider a poor payment history in deciding how a homeowner might PAY for the policy, whether or not to extend payment terms to a given party. In most cases, homeowners' insurance is paid in full, up front by the lender, and paid monthly by the homeowner as part of his mortgage payment. It strikes me as discriminatory to base the actual premium on a poor payment history; it strikes me as abusive and litigable to base that premium on a raw credit score, that can so easily be the result of catastrophic medical debt, layoffs in the engineering profession, or other factors out of the control of the individual.

On the Recent Marriage of Steam Turbine Technology to the Latest Generation of Liquid-Fuel Rocket Science

Native Sun Energy Corporation today announced the successful development of a patent-pending process to harness the power of stoichiometric hydrogen-oxygen combustion to drive modern, super-efficient steam turbine generator systems. Company spokesman Doug DeWitt states that Native Sun Energy represents the first commercial availability of 100% renewable electricity base-loads, generated entirely from raw renewable energy feed stocks. Rather than relying on fossil fuels, the traditional source for co-generation of variable-output renewable energies like wind and solar, Native Sun is using a patent-pending co-generation algorithm based on banking clean-burning hydrogen and oxygen. The company, based out of Austin, Texas, is completing a prototype pilot project that will invest $1 Million in advanced automation R&D, allowing the integration of this technology with the mainstream power grid. The fast-start capabilities of the system are its greatest asset; steam supply to the turbine inlet can reach fully-operational temperature and pressure in under sixty-seconds. "The key breakthrough in our R&D came from the guys at GE, in the development of super high-efficiency steam turbine technology," said DeWitt, company president. GE is also the leading producer of wind turbine technology in the US, second behind Vestas, the Danish manufacturer in world-wide sales. GE is also a market leader in transmission and distribution technologies here in the US. Native Sun Energy is in discussion with regulated utilities in Texas and eastern New Mexico, offering the first fully-renewable base-load product at wholesale pricing to the power-distribution and retail electric utility industries. The company has also developed relationships with construction teams within the wind turbine industry, in anticipation of the upcoming development of 10,000MW of transmission capacity in the ERCOT corridor in west Texas and the Panhandle. The upgrade will connect five designated Competitive Renewable Energy Zones in the area to major markets in the state, and provide immense green-collar employment opportunities in the region. Inherent in the design of the steam-driven co-generation system, there are no by-products of the process. There is no carbon footprint, nor does the system produce any greenhouse gases. The sole product of combustion is H2O, so there is no smokestack. The system is closed, returning all the water it uses to its internal holding tank. What little steam escapes into the environment, simply becomes clouds in the sky, and pure rainwater back to earth. Because banked hydrogen and oxygen are generated using raw wind power, DC current directly from the turbines to commercial electrolysis units, burning the gases together to drive steam turbines is 100% renewable as well. The company projects completion of the first project on-schedule, within the next 18-months. The facility is expected to have the capacity to co-generate as much as 500 MW of raw wind generation for a regional regulated utility in west Texas.

Comments on the $22,000 Baby Bill

It was with sympathy that I read Sarah Wildman's comments on the glories of the individual insurance market. At its inception (this go-around) the emphasis of the latest push towards comprehensive health care reform focused on abuses within the commercial insurance industry in what presents as just one of the flaws inherent in the way health insurance is funded here in the US.

As the rhetoric heated up, emphasis has been distracted by the buzz-words of obfuscation; phrases like "single-payer", and "public option" have been tossed around in the press with gay abandon, as those "honestly-desperately" attempting to wrap their heads around an amazingly complex issue parrot those phrases back as loudly as possible, perhaps with intent to demonstrate how really astute they are in a climate in which no one actually has a clue.

Over the span of my career I've made a lot of money explaining to hospital administrators and their CFO's how anesthesia departments are funded by multiple layers of reimbursement eligibility. I have spent countless hours explaining to groups of clinically brilliant anesthesiologist providers how to divest their nurse-anesthesia component from their corporate structure to take advantage of "loopholes" built into the system to accommodate special cases of provider deployment.

Here in America it is imminently possible that an entire industry may be eliminated from the national stage. We must however be mindful of the effect of removing an established gateway to 17% of our GDP, in an already slipping economy; can we afford to add another 3.5% to an already inflated unemployment statistic? Or do we need to amputate this arm of our economy, the cancer being advanced beyond repair? Can the system be saved?

Most definitely, YES, the system can be saved. What is right and good about the system, is mostly intact. What is broken about the system is decidedly Not how health care is provided to those of us who need it; we have the services to go around. What is broken is how those services get paid for.

There is nothing to be gained by throwing out a fundamentally sound design; using greed as the carrot that attracts the best and the brightest into health care, Machiavellian as it may be, results in the best and the brightest going into medicine, and has done so since the fifties.

Central to the current round of chat is the simple requirement to KNOW THE SYSTEM. For the purposes of health care funding, that means an obligation to study the system as it presents. It is really not so very difficult to understand what Medicare was supposed to do when it was introduced, what America was promised it would do by those who championed Medicare in the first place.

If the strain put on the system by those well-meaning congressmen and women has nearly broken the bank, they meant well. Effectively avoiding the inconvenience of actually Learning the System, it was decided that DRG payments would be set below cost-reimbursement levels that had been paid since the inception of the program. It was deemed "OK" for hospitals and doctors to simply pass those costs on to the rest of society that had really good insurance. When Medicare "cheating" the provider by paying less than cost was made OK by the federal government, the concept of a private-sector health care coverage option that was allowed to do the same spawned the HMO. As the number of HMO and PPO patients grew, the number of patients who still paid retail dwindled.

There were mumblings that doctors made too much money anyway, and this would bring them their collective come-uppance. Quite honestly, many professional providers in my field saw the trend as backlash against our making so much money. Making a lot of money can be popular in a lot of circles, but legislators who made less than we do had a chip on their shoulder about forcing the revenue that doctors make, down out of the nether regions. Fortunately or otherwise, they were in position to push the point, telling everyone to tighten the belt, bite the bullet, and otherwise take the position.

From the insider's perspective, it is my considered expert opinion that we do Not need to "throw out the baby with the bath." I contend that neither need we pass a giant package of legislation designed to confuse health care financing even more, without addressing what is really wrong at the system's root directory.

This is ultimately the story of health care finance in America, and what made it the envy of the planet back in the 50's and 60's, when it worked. Health care in the thirties and forties was out of reach of the emerging middle class, available only to the wealthy. The AMA and the AHA expanded health care access to that middle class, funding it entirely in the private sector. In a rather garish display of classic capitalist economics, America built the infrastructure we know today as Blue Cross and Blue Shield; I apologize for confirming the suspicions of conspiracy theorists from the radical left, that the health insurance industry was designed by doctors and hospitals for their own benefit.

Basing health care access on a booming post-war industrial base was actually a brilliant stroke.
The growing middle class was afforded health care coverage through the growing industrial base leftover from the war effort. Everybody had a job, everybody was going to college on the GI bill, everybody was buying a house... everybody had health insurance for their whole families.

Bridging the gaps between retirement and death, and between the unfortunate, the unemployed and the health care access mainstream were inevitable; these two groups fell through the coverage cracks, neither being gainfully employed. The promises of government-paid participation in health care financing were sound, based on solid theory; what happened to those programs, and the effects on the system of "cost-cuttting" measures designed to save our health care system from bankruptcy, have driven us exactly to that point: bankruptcy.

As opposed to socialized systems anywhere, our system paid “retail”, the cost of keeping the doors open, plus the salaries of some very well-paid providers. So long as everyone has access to such a system, which we all did, there were enough providers and services to go around. No one waited, no one was turned away. If your bill was more than you could afford, you made a phone call and it was written off. No one was sued over past-due balances. Every mother wanted her daughter to meet and marry a nice doctor, to provide for her and the children.

So in the American way, we paid more into the system than our Euro cousins did, and we have more mammography machines, more CAT-scan machines, more surgeons and other specialists than our Euro cousins as well. All that went wrong with the system was that the retail pricing went through the roof, the result of misplaced economic “good intentions”. Otherwise, there was a reason that doctors moved here from everywhere on the planet; our system was good enough to attract the Best-of-the-Best.

With everybody covered, the cost per patient was very close to the actual price being charged patients for services. Well, almost... those who were retired, too old to work but not yet dead, had no coverage. Oh, and those unfortunates who couldn't hold a job, had no coverage either. So the actual retail price for medical care services reflected actual costs per patient, plus about 15% in "clandestine cost-shifting" to those patients who did have coverage.

Medicare was introduced to cover patients in the retired-but-not-yet-dead gap, the first and most important to fill, obviously to everyone. Medicare was originally accepted by the medical community and health care financing economists, because of its "cost-reimbursement" payment methodology. So long as Medicare paid its fair share of costs, which it did admirably, the cost-shifting of the costs of providing elderly medical care could end, actually bringing down the cost of retail health care services. And it did.

Having worked so well with the "elderly gap", would not Medicaid work equally efficiently in closing the "underemployed/unemployed" gap? Giving it passing scrutiny and a lot of altruistic praise, the Medicaid program came into effect without even perfunctory intent to pay the costs of providing services to the poor. Unfortunately, Medicare cut its payments below the cost-reimbursement threshold in a misguided attempt to "cut costs", just like Medicaid was doing... HMO's and PPO's took justification from Medicare's lead, paying providers below the level of cost-reimbursement.

The theory, I suppose, was that providers would stop taking so much money out of the total reimbursement package, and start clipping coupons as middle-class wage earners. In practice however, the trend away from paying retail simply resulted in rather dramatic cost-shifting to those few patients who still DO pay retail, now a dwindling base of commercial insurance subscribers with inordinate means, and the now Ultra-unfortunate who must pay retail with no means by which to do so, driving them all into bankruptcy.

So health care is now accessible only by the wealthy, once again. No one with less than $250K annual income has any business trying to afford commercial insurance premiums. Disposable income of $1,100 per month for the obstetric care rider alone, would suggest a total monthly premium of $2,000. Were one to opt for a zero-deductible, zero-copayment policy that covered everything including pre-existing conditions, the price would be closer to $3,500 monthy. It has been estimated that the cost of current-retail coverage is about $40,000 annually. If you're not 65, and you don't raise your children in the ghetto, nor do you make a quarter-million per year, you can't afford health care in the US.

Commercial insurance companies base profits on what remains after payout of all covered claims, from the whole of those premiums collected in the fiscal year. This is so because we allow it to be so; back in the day it worked just fine, so obviously the system knows how best to police itself. The abuse of this formula is obvious, by denying claims, the corporate bottom-line pleases the stockholders intent on receiving a dividend check this year.

Fixing this won't require an act of congress. Each state has an insurance commission, each one holding a mandate to regulate the insurance industry in such a way as to ensure the public welfare on behalf of We, the People. The mandate for each can be altered, effectively altering corporate policy in each state. Let's make corporate profits a set percentage of total payout, changing the incentive structure to promote commercial insurance company "inclusions" of services, rather than "exclusions". When profits are tied to how much money in claims the companies can pay on our behalf, rather than how much money is withheld because of non-covered conditions, those particular abuses will disappear from the discussion table.

It wouldn't hurt to deny access to the legal system for any provider wishing to collect past-due amounts from patients who have incurred catastrophic health care balances. However, if the congress can effect a very-few select changes, the system can be effectively overhauled from within, and actually provide growth in the health care sector of GDP, thereby stimulating the general economy out of this Depression.

Simply put, to eliminate the cost-shifting to commercial insurance customers and the unfortunate uninsured, each program or policy must be brought to ground on the issue of paying the actual cost of providing services for each patient covered. This economic physics behind this single commitment will effect a nearly-immediate reduction in hospital and physician "retail rates" to levels that will raise eyebrows. I have made some thumbnail estimates on the order of 5- or 6-to-1.

OK, so when even middle-class families can afford health insurance at $500 per month, there will be those who are unable to access the system because of the deductibles and co-payments that for so long "hid" rising costs of retail, and subsequent insurance rates. I strongly recommend the elimination of co-payments and deductibles in any public option, as well as for state constituencies convinced of the possibilities of a more level playing field represented by eliminating the financial impediments to going to the doctor for those in the lower economic strata.

Not only will access to the system be augmented maximally, but the actual cost of health care per patient can be more accurately assessed by those in responsibility, those in position of oversight at the federal and state levels.

Moreover, an increase in access to the system will make the system grow. Recognize, however, that the "system" consists mainly of a very large body of our neighbors, many of whom have gone to school to become skilled health care providers. Recognize also that growth in health care, as a sector of GDP, translates to growth in this workforce; for a not-for-profit facility, this is almost a no-brainer. Nearly every dollar spent pays salaries of hospital employees in a not-for-profit hospital.

From a micro-ecomomics perspective, a growth in the health care sector from 17% to 25% of GDP would mean an increase in health care jobs, including professional providers, of nearly 50%. Such growth could only serve to stimulate the economy at-large, perhaps taking us out of a near-Depression. Such growth could only serve to reduce unemployment dramatically, as those searching for career-changes will find an open-admissions policy in higher-education programs serving the health care industry.

What more could we as a constituency want from our insurance commission? What more could we want from our federal government? What would make it easier for us to pay for health insurance on the front end, for those who cannot yet afford it, in such a way as to put the ball in the court of the public sector?

In fact, we can do just that, by authorizing a federal income tax credit for the purpose of purchasing a commercial health insurance policy at retail pricing. Insurance companies, it is already assumed, will be required to reimburse premiums collected above the cost of providing services, creating a truly market-regulated insurance pricing policy. The dramatic stimulus to health care as an industry, will find its way to the general economy in very short order, generating the kind of economic growth that John Maynard Keynes predicted, the kind of economic growth that Ronald Reagan's detractors dubbed "Voodoo Economics" for its uncanny ability to pay for itself given sufficient time and the Great Capitalist Machine at its unfettered finest.

My gut tells me that growth in the sector will generate sufficient growth in the general economy to generate a big enough income tax increase to pay for it. Let's not throw out the baby with the bath. Let's do this the American Way, taking the best of what our economic system has to offer, and putting it to work For us, for We, the People.

Update, August 8, 2009... Follow Sarah Wildman's story as she testifies before Congress!

Fallout From the California Medical Marijuana Industry

As I contemplate the California financial implosion I observe the newly-emerging Medical Marijuana industry, driving the economies of places like Mendocino and Humbolt County, and the city of Amsterdam jumps immediately to mind. The commonalities are striking.

It will be with the fascination with which we watched the formation of the Euro Common Market, that we will watch the transition of the $14 Billion (annual revenues) "weed" industry in California to a home-grown, socialist-capitalist "hybrid".

OK, so the Governor deleted child welfare and AIDS research; in all fairness to His Honor, the governor did what he had to do. His ship is being tossed in a mighty blow, a wicked storm, and he’s steering through it the best he can.

I'd love to see the Medical Marijuana industry step up to the plate and self-impose a "state-of-emergency" tax, earmarked to fund those state social-welfare programs recently deleted. If the industry is a little edgy about conservative political forces suddenly taking it all away, they should push the government a share of the take (maybe 10%?) and the people of California will respond. Make people and their government jobs dependent on your industry, gentlemen, and they will protect your industry. Entrench yourselves, the way every industry must in order to survive its infancy.

Contribute to some campaign funds, gentlemen... it's time to pony up like every other industry does it. One-Hundred-Thousand per candidate ought to do it. Ask the Distillers Association, or here; every industry entrenches itself into the fabric of American Society by bribing its officials. It's just how the system works here...

The industry is understandably on a razor's edge. What they're doing in California is consistent with the commission of a felony in any other state. What they're doing in California is technically a felony in federal court. Sounds amazingly like Amsterdam.

And now, as a result, We, the People are facing a phenomenon heretofore unique to Europe.

In most states (Texas, for one) We can be forcibly detained, convicted on a felony count and serve hard time for the commission of the heinous act of smoking weed. But upon moving across a couple of state lines into California, We can see a doctor, and for a yearly fee of $200, We can spend the year holed up in our apartment, having some guy in a sub-compact delivery vehicle bring us hybrid Euro-bud in a white paper bag, prepaid by credit card over the phone to the corner Medical Marijuana Dispensary.

If I have a prescription in California, and drive my car into Texas, am I crossing a felony-violation threshold, or does Texas law recognize my California prescription for sticky? Does that prescriptive authority cross state lines, or do Californians risk felony time carrying a discrete pharmaceutical "phatty" over state lines? Or are we moving towards a more European-style society, by which we're connected with California by a common currency, but what is openly legal within its borders is a felony violation just over the state line? What exactly do state Boards of Pharmacy have to present regarding recognition of interstate prescriptive authority? Will the reciprocity granted by many states extend into this arena?

MADD About the Underlying Philosophy of DUI Prosecution and Sentencing

MADD About the Underlying Philosophy of DUI Prosecution and Sentencing

Content:

With apologies to the Mothers Against Drunk Driving organization for exploiting the pun, there is plenty to be mad about. The distillers' and brewers' industry association has successfully convinced us that punishing those convicted of driving under the influence of alcohol should be punished be revoking their privleges to drive. As if the problem were not that they were drinking alcohol to the point of impairment, and then beyond to the point of irresponsiblility... as if revocation of the driving privilege will address the underlying behavioral culprit responsible for the commission of an act of grievious irresponsibility. The real issue is not that the offender was driving; the real issue is that the offender was drinking, in a manner that by definition expresses irresponsibility, and lack of control. This person drank alcohol in a manner that was out of control. It was irresponsible. It endangered the public welfare. It endangered the offender as well. In keeping with the trend of the Drug Court system, I concur with its tenets of preservation of self-worth and rehabilitation of offenders. Rather than remove the driving privilege, and allowing offenders to continue to drink, out of control, I recommend removing the drinking privilege, allowing offenders to continue to drive, in control, and able to maintain gainful employment. I recommend a databank system with identification information encoded on the magnetic strip of each state's drivers' licenses. I recommend that the strip access an online database, informing each point of purchase of the status of the person's alcohol privileges before the sale is permitted. I recommend funding for the system to be assessed from the industry, in the form of a state tax surcharge on sales. It is common knowledge that from a medical perspective, alcoholics are incapable of maintaining control. It is in fact the defining characteristic of this disease entity. Abstinence is recognized as the only viable assurance of maintaining control in the alcoholic patient. Upon conviction of an alcohol-related offense, it is in the best interests of the offender and the society at large, to deny drinking privileges to the offender. Conviction should carry misdemeanor weight, with full expungement upon completion of one-year of total sobriety. Supplying alcohol to a person known to be under suspension of drinking privileges, should carry felony weight upon conviction. Maintaining the ability of convicted offenders to drive back and forth to work is critical in maintaining a sense of self-worth, and in getting one's life consistent with healthy lifestyle choices. It is time to treat alcoholism as an illness, recognized by the medical community. Prison sentences and loss of driving privileges are counter-productive at best, and demeaning and demoralizing, pushing those suffering from this illness into the role of convicted criminal, perhaps even convicted felon.

A Short Primer in Health Care Reimbursement: What's Really Wrong With the System, and How We Can Fix It

[Editor's Note: for related articles here, or here... simply follow the links] I smiled when I read the headline. That's how it is when you're an industry insider, and it is pointed out how many people have no clue how the health care system we currently have here in America actually operates. Following the national conversation, it dawns on me that those we have elected to build a new health care system on our behalf seem to have no clue as to how the the current system works either. Unfortunately, it is not enough to know that it's too expensive, that lots of people are going bankrupt, or that a lot of people have no coverage. Moreover, I recently read that several legislators have simply thrown their hands in the air, frustrated by the apparent perception that it is entirely too complicated. OK, so it's complicated; the learning curve is admittedly steep. In attempting to make sense of the seemingly inscrutable, so a wise man once told me, "Follow the money," and all will become clear. And so it was that I was motivated to share the fundamentals gleaned over a 30-year career of advising hospitals and anesthesiology groups on the intricacies of the health care reimbursement infrastructure in America. Hospitals are an excellent place to start. It's true that corporate America has gotten into the industry in a big way. Bill Frist and Hospital Corporation of America exemplify this trend. But it must be realized at the outset that for-profit hospitals are not only in the minority, they must compete for patient load with a lot of Really Excellent not-for-profit hospitals on services and price. It stands to reason that if a for-profit hospital were making obscene profit-margins providing services to those wealthy enough to afford quality insurance coverage, BC/BS and their ilk would have made those facilities off-limits, putting them out of business in a big hurry. No, these facilities take their share of Medicare patients, although they dramatically limit the number of Medicaid patients, and rarely take patients with no coverage whatever, casually referred to within the industry as "self-pay". In truth, the prices charged at private hospitals are often LOWER than at inner-city "charity" hospitals, as prices universally represent a facility's cost of providing services to everyone, spread over a steadily-shrinking patient population with the financial resources to pay "retail". The formula by which prices are calculated bears examination, in the interest of the general enlightenment. In determining "retail pricing of health care services" the total cost of providing care to everyone, including the costs of maintaining and expanding physical plant to address future needs as well, is divided by the total number of patients cared for during the previous fiscal year. This data is included in a "cost report", that is the basis for Blue Cross' approval of a facility's rates for the upcoming year. All Medicare payments from the previous year are totalled; Medicaid payments, negotiated fixed-rate payments from various HMO's and PPO's are totalled. These fixed-payer reimbursement amounts are subtracted from the total cost of providing services. At the bottom line, the number of patients remaining, ironically the sum of patients with insurance that covers what the facility actually bills, and those with no coverage at all who are forced to pay "retail" out of pocket, bear the burden of the remainder of costs passed on from what is now the greater bulk of the system. Broken, indeed. So what happened to the system we could once afford? Before Medicare, before Medicaid, nearly everyone had insurance as an employee benefit, paid for by the great American corporations that were our industrial base, and the government so many of us worked for. With the cost spread out among 85% of the patient population, the cost per patient was manageably low. The total revenue to hospitals and doctors was substantial; physicians flocked to this country to get in on the obscene reimbursement being paid to physicians. What happened to those days? An inherent flaw in a system based on insurance coverage for employees, arises when those employees retire. Corporations could not afford the increased cost to cover retirees, as costs increased as age progressed, and the majority of elderly went without. Medicare was originally intended to fill the gap between gainful employment and death. Hospitals and doctors were cool with this semi-socialized plan. To gain acceptance by physicians, Medicare was designed around a Usual Customary and Reasonable (UCR) reimbursement system. This was soon replaced by a cost-reimbursement methodology, in which a provider was required to demonstrate the actual cost of services, on a per patient basis. For facility providers, they needed only to share their cost-report, as had been done for years in determining allowable rates with Blue Cross anyway, and the Health Care Finance Administration would reimburse those costs. Perfect. What about the other gap, the 15% who were unemployed, or under-employed, and couldn't afford insurance? Medicare worked so great, why not get onboard for Medicaid, too? Unfortunately, Medicaid paid well below the cost-reimbursement level. OK, we simply took that on the chin and passed the shortfall on to the 85% who had insurance coverage, right? Well, sort of. We jacked up the "retail" to reflect this 8-15% deficit, and passed the cost on to Medicare and all the insurance patients. As the insurance patients' prices rose, the cost of insurance premiums rose to meet the additional cost of services. Over time, HCFA noticed the rise in costs in excess of the normal rate of inflation, and raised the red flag. Medicare stopped paying for services based on cost-reimbursement, and in a misplaced effort to stem "rising costs" decided what was "fair reimbursement" in devising a calculated-flat-fee system of reimbursement based on Diagnostic Related Groups (DRG's). Unfortunately for the overall reimbursement infrastructure, these payments were below cost-reimbursement, although somewhat higher than Medicaid reimbursement. Once again the deficit was passed on to those who still paid based on what was being billed, now significantly higher than the actual cost of services per patient, in order to cover the growing deficit. Enter HMO's and PPO's, that took advantage of employers' shock at the dramatic rise in retail prices being paid for subscribers, and their growing dissatisfaction with paying double or triple what premiums were just a few years before. These managed-care groups negotiated on behalf of large regional employers, putting the gun to the head of those facilities competing for these patients, the life-blood of the health care industry. The result was a negotiated rate structure that was consistent with the mainstream trend initiated by the federal government in a misplaced attempt to "control costs", and paid consistently below cost reimbursement levels. Medicaid rolls began to grow as states expanded eligibility parameters. Medicare rolls begain to grow as people lived longer, and the pre-boomer generation reached eligibility age. The "price of retail", simply a function of total number of patients whose coverage will even so much as cover the "cost of services", did the predictable thing. Employer rebellion found them more and more opting for HMO's and PPO's that reimbursed along the lines of Euro socialist plans, below cost... leaving facilities in a very tough position. The retail price rose to reflect inceasing "cost-share" from Medicare, Medicaid, and some of the more onerous PPO's. Health care coverage need simply cover the cost of providing services to each patient, in order to effect a dramatic drop in the price each of us pays for our personal share of health care. Perhaps it is the responsibility of a carrier to provide as minimum coverage, the documented cost of providing services, as evidenced by a cost-report submitted by any eligble provider; paying a provider below the cost of providing services constitutes a de facto transfer of financial responsibility for a contractual obligation incurred by the reimbursing carrier. Not insidious enough to be considered fraud perhaps, but certainly "low class" by consensus. Today, with unemployment rising, and more employers dropping "health insurance that pays Retail", the $100 Tylenol, the $13,000 short stay surgery, the $1,200 pathology bill for reading your labwork results, all reflect the fact that less than 15% of patients are still charged retail. Those without insurance who experience catastrophic illness are literally ruined financially, when the hospital takes them to court to collect past due medical bills, confiscating their life savings, and the home they spent a lifetime paying off so they could retire in it. It all seemed like such a great idea at the time, letting employers pay for health insurance so that the great middle class could enjoy health care previously available only to the wealthy. It seemed like such a great idea that the government could cover the cost of health care for the elderly and retired, and then for the indigent poor as well. Had every component paid at least the cost of providing services to its little sector of the patient population, it would have worked, too. Now we have a real problem. The retail cost is so high, no one is willing, or able to pay for it any longer; it is once again available only to the wealthy. In order to reduce the cost per patient, the system has to be rebuilt such that every patient's coverage will pay the actual cost-per-patient that once appeared in the cost-report. That means that Medicare and Medicaid have to pay the original cost-per, before all the fixed-payers got into the program. Also, the PPO's and HMO's need to pay the same cost-per, as do all the other public option, single payer wannabe's, etc, etc. When every patient's coverage pays the actual cost of providing services to each patient, the cost per patient that is "retail" will plummet. Instead of $40,000 per policy for the Cadillac of coverage, the retail price for that same coverage will be closer to $7,000 annually. All of this has forced everyone in the industry to examine carefully what might be possible, in light of suggestions that we trash the whole thing in favor of welfare health care, essentially universal Medicaid coverage. There are some inherent flaws in such an approach, particularly in the long lines, long waits for scheduled surgery, and the denial of services to those sick enough that they're dying anyway, all characteristic of the European system. Were we all capable of affording Amazing Coverage, the Cadillac plan now priced at $40K per year, we would love walking right in, and having doctors coming out of the woodwork to serve our needs. Were we all to have Cadillac coverage, the best and the brightest are attracted to health care as a profession. Hospitals could afford to have enough mammography machines to serve the population on no-notice requests for care. Those who are now "2nd Class" patients, the Medicaid patients in the inner-city hospital, would be accepted at the uptown "Doctors' Hospital", and treated with respect. Moreover, were these policies of ours zero deductible, zero co-payment, required by law to cover every possible medical expense including pre-existing conditions with NO out-of-pocket expense, then we would all have equal access to health care, regardless of income or social class, and our coverage would honestly reflect the cost of providing services to each and every one of us, exactly. In fact, were we all to have this kind of coverage, the industry that now occupies 17% of GDP would probably grow to 20% of GDP, and perhaps more like 25% when we all had universal access to the system on a level playing field, rich and poor alike. The fundamental error in the criticism of such growth is that all that revenue goes into corporate profits of companies like HCA. In reality, with a little creative "watchdogging", this growth would actually translate to new jobs, excellent jobs, skilled jobs that pay well enough to support a family and buy a home. The growth in this sector would stimulate the general economy, dragging us out of the Great Depression of the Third Millenium. That kind of growth could in theory generate more than a Trillion Dollars in new tax revenue, and take a serious bite out of unemployment... Applying Keynesian theory, or Reagan Voodoo Economics as it was known in the 80's, that kind of growth could come from a tax-cut (analagous to a shotgun approach to economic stimulus), as it could from a tax-credit (more analagous to a precision strike approach) that stimulated the general economy via the health care sector. A Plan That Works Which brings me, at long last to the suggestions based on an intimate knowledge of the system, what is wrong with it, and what it will REALLY take to fix it. Let me preface these remarks with the caveat that these suggestions carry the beneficial weight of a high likelihood of support by the AMA, the AHA, the AHIP, the AARP, PhARMA, big business, and every family in America. First, in anticipation of universal coverage from SOME source, no provider, professional or facility can be permitted to pursue any individual patient for any balance due on any bill incurred in the provision of health care services. This will eliminate Immediately! the financial ruin of patients and their families by hospitals and physician offices. Secondly, health insurance companies must be regulated by each state's insurance commission, such that a company's retained portion of paid premiums may not exceed a pre-determined percentage of the total of paid claims in the previous fiscal year. In addition, should paid claims be lower than anticipated in the actuarial tables, and retained premiums exceed the pre-determined percentage allowance, refunds must be paid to each subscriber on a pro-rata basis. Coverages should routinely carry zero deductible, zero co-payment; out-of-pocket expenses will adversely limit access to those who are unemployed, and living on public assistance. Needless to say, companies will be encouraged to pay claims, rather than deny them, as their profit-margins will be tied to total claims paid; denial of claims for any reason, including pre-existing conditions, will be counterproductive to the corporate bottom-line. Thirdly, Medicare and Medicaid must immediately be revised to pay on a cost-reimbursement basis, or dismantled. The co-payment provisions for Medicare should be removed. Fourthly, corporate for-profit hospitals must be regulated as utilities, by the Public Utility Commission, to limit profits to utility-scale. Finally, if it is adopted, proposed public option coverage must follow the same cost-reimbursement, zero deductible, zero co-payment form as private coverage. Paying for the Plan I am a proponent of the Keynesian School, believing strongly in the Great Capitalist Machine and its ability to take stimulus money and turn it into a money-making system, creating jobs and making America great. As such, I recommend a tax-credit system for financing health insurance premiums. I believe that when the final tally per family comes in between $5K and $7K, that the commercial insurance industry will jump at the chance to finance every tax-filer's family-coverage policy, if it means borrowing the requisite funds from the private sector on January 1, provided that a tax-credit will be available to each filer on April 15th of the following year, when that year's return must be filed. I also believe that over the 15 month period between those dates, this Capitalist Machine of which we are all so proud, and tenaciously protective, will grind the Trillion-Dollar grist fed into it, generating so much growth in GDP that the surge in income tax collected will nearly, if not entirely pay the entire cost of the tax-credit. It is the essential advantage of promoting social change through the private sector, that the up-front financing of progressive reform can generate economic growth, rather than become a cost-burden on the taxpayer. The gift of growth or our economy, and the concurrent decline in our unemployment rate, might come to be at least as valuable as the health care itself. The skeptics will say we'll all go bankrupt; I laugh, pointing my finger at more than the entire cost of health care premiums for every family in America having gone into the coffers of the Banking Sector. OK, in fairness, I'll respond: It has already been predicted that at current growth rates, health care costs will reach 20% of GDP by the middle of the next decade. I propose that increasing health care as a sector of GDP to 25%, an overall increase of 50% in that sector. Particularly in the case of not-for-profit hospitals, an increase in health care costs directly translates to an increase in health care jobs. In a slumping economy with 10% unemployment, and a vanishing industrial and manufacturing base, how can this be a bad thing? I further contend that the resultant eight-percent economic stumulus package is less than or equal to that pumped into the banking sector to save it. Finally, health care costs are something in which we simply MUST all share as a society, in order that everyone has equal, unlimited access; financing it in this way gifts us with the Capitalist answer to health care reform, concurrently growing our economy and lowering unemployment by some 8%. Because health care claims paid to hospitals represents money that is for the most part paid to everyone who works in them, this "cost" is quite literally an investment in this vital sector of our economy. Money paid to health care workers is soon paid into the general economy. Claims paid to physicians and other allied health care providers on the Part B or Blue Shield side pays their employees, and the doctors themselves. This money does not go up in smoke, it is spent on rent, mortgages, car payments and groceries. It is also paid in taxes, back into the system. If there is sufficient growth in GDP, there might be enough to pay for the entire program. Nope, IMHO the program pays for itself. Regardless, we all need health care. At the bottom line, we all need health care; if the growth in GDP falls short of totally balancing the cost of premiums, no one will care.

Burning CO2 With Light, Making Sugar and Oxygen

Burning CO2 With Light, Making Sugar and Oxygen

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In theory, a very dense layer of rapidly-growing vegetation, capable of producing carbohydrate food energy, under an intense blue-spectrum light source, fed a slow trickle insufflation of carbon-dioxide, will convert water into sugar while excreting pure Oxygen as a waste-product. So from a purely theoretical perspective, we can grow a lot of agriculture, fed a lot of carbon-dioxide, hydroponically. In a perfect world, we can burn a little kerosene if we like, we can burn natural gas. We can make a little carbon dioxide if we like; our green friends will process it for us, making us breakfast, and something to breathe. In highly-efficient closed systems, the amount of carbon dioxide metabolism becomes a function of the amount of lumens in specific wavelengths designed to modulate vegetative growth with fruiting of nutrients. Essentially, sugar and oxygen output become a stoiciometric function of carbon dioxide and the electricity required to generate the light lumens. And at the bottom line, carbon dioxide is processed into sugar and oxygen, consuming electricity. This plant-cycled carbon-dioxide absorption "machine" as it were, consuming wind-generated electricity to convert carbon-dioxide from the atmosphere, literally sucking it out of the air we breathe, should qualify for a federal income tax credit, as a carbon-dioxide absorber of record. Carbon-dioxide absorption credits should be at least a tax deductible, better still, a tax-crediting renewable energy incentive in light of the worldwide service performed by an individual corporation.