Bits and Atoms

software and hardware

Fixing US Healthcare System

Vote on Obama care changes scheduled for today is depressing. The debate is all about coverage,and how the changes will affect coverage. But coverage is the wrong number to look at. Life expectancy is clearly better than coverage as an indicator of healthcare, though still flawed to be sure. And a few years into Obamacare life expectancy just declined for the first time in many years.  Funny considering all the talk about obamacare death panels. Our central planners in Washington don’t know what they don’t know and they’re forcing all their attention to to the wrong things because that’s what creates opportunities for graft for them.

This short essay on US healthcare is good,  but stops short of  naming names of “vested interests who built sweetheart deals for themselves into … the system”  But I will. Vested interests from Obamacare are trial attorneys, liability insurance companies, government employees (but, of course) +. drugs companies  (versus medical Device companies that got taxed) & large corporations (versus free lancers). The list suggests way to reform US healthcare, especially if one filters for ways to reduce cost of healthcare and access to it. Forget about coverage for 5 minutes.  Here is my list:

1.  Allow limited liability services, drugs, and devices. Sophisticated buyers of technical services like Boeing, Exxon, and Intel demand complete transparency with respect to their supplier’s insurance. Some contracts may require $1 million a professional liability service, others might require 10 million.  And these big corporations are very savvy about understanding that lower insurance requirements equal lower prices.  US Healthcare consumers we would benefit from similar leverage and choose.  Healthcare  providers might offers services with different tiers of liability, say $50K, $500k and $5 Million.  Allow  insurers to offer health insurance policies that pay only low liability price.  Have Medicare and Medicaid pay only on the low liability price.

2.  Make drug prices same in USA as elsewhere.  The only thing stopping us is the FDA, and our patent judges.  See more here. Note that anyone who tries to say that healthcare is better in Europe because of single-payer, socialized healthcare, and uses life expectancy to back up the claim, has no real way of knowing if better life expectancy is due to the single-payer, socialized model  rather than the wider assortment of drugs and devices that are available in Europe compared to USA. It may be the case that all we need is the freedom to heal ourselves.

3. Lots of countries to our south get a lot of bang for the buck in healthcare by making many more drugs over the counter.  We need that same right here in USA.  Pretty obvious the vested interests opposing this – doctors, nurses, AMA, Plannned Parenthood.  They change the price of lots of simple drug treatment from $40 to $200.  That’s why it will bi-partisanly opposed with the ferocity of the Japanese at Iwo Jima.

4. Modify Medicare so all healthcare cost for the patient’s last 6 months of life plus half of payments from the previous year (months 6 to 18 before death) come from the patients estate, if there is one.  I expect big savings out of this one.  Medicare spends a big portion of its money on people with a few months to live.  Would be smart to pair this reform with lowering estate tax rates to rates like 5%..

5.Allow policies that do not cover treatment for mental health, IV drug abuse, and sex change procedures.  Inevitably mental healthcare is more prone to fraud and indulgent overuse.  And fraud is a big part of our healthcare costs, more than Drug company profit. IV drug users take more than their share of health care dollars. They need to own that.  Sex change procedures are expensive and if people want to have them it’s fine to do so.  But other consumers should not have to pay for that cost anyone than great implants or other cosmetic surgery is covered with healthcare.  All of these should be private expenditures.

6. Allow polices that discount for documented regular exercise. Set up some good incentives, you know. Fitbit and the other fitness trackers would use a boost.

7. Keep the mandate, but make the penalty for no insurance go into uninsured person’s HSA instead of to government employees. Allow catastrophic policies which may be a better deal for many young people and people with large HSAs.

Fraud in Government Healthcare costs more than Drug Company Profit

Trump vowed to repeal and replace Obamacare.  But many people are warning that it could be a disaster to repeal it or, amusingly, that it is too complex to change (if so, why was it enacted in the first place?)   And many Obamacare supporters acknowledge that it has created serious problems  (like tripling the cost of insurance) and needs to be fixed. Now Mr. Ryan has introduced a healthcare reform bill that is getting criticism from all sides, probably for very good reasons.

Liberal/Progressives and many healthcare professionals despise the health insurance industry, its profits, and the compensation of its executives.  I believe their anger is mis-directed.  To demonstrate  why it is misdirected,  I  calculated an annual spend for healthcare insurance company profits, drug company profits, medical device company profits, excessive and unnecessary administrative costs, and fraud in government healthcare expenditures.  Full disclosure my numbers are what the pros in the ivy league ivory towers call ‘qualitative’.

To calculate profits by these [evil] insurance company I totaled annual profit for all companies in  the google finance list of related companies to Anthem(ANTM)  which includes most the public US health insurance companies.  This number does not include private health insurance companies and can be considered biased low for that.  I don’t believe there are many of those, but I have not researched the issue extensively.   Also to the extent any of these companies make profits on health insurance outside the US the number is biased high with respect to comparisons of US healthcare spending.  Profit margins are in the range of 0 to 5% with an average of about 2.5%.  Total Profit is about 15 billion USD annualized.

To calculate Drug and Medical Device company profits I did the same calculation for Glaxo (GSK) and Medtronic(MDT) respectively. The same biases apply here.  For drug companies profit margins range from 7 to 25% and total profit was 64 billion USD.  For device companies profit margins ranges from negative to 20% .  Because of large losses at a couple of companies, total profit was only 786 million USD small in relation to other  sums.  That serves as a handy reminder that these companies take risks to make their profits.

As an aside I will note that the relation between profit margins for these industry groups seems about right.  Drug companies are engaged in a riskier and more challenging tasks than health insurance companies. They “deserve” more profit.   And one thing the profit numbers do not show for the drug and device companies is the losses by failed startups in their industries.  Drug and device company profits grow from soil fertilized with the sweat, tears and dollars of venture capitalists.

Now let’s turn to some other costs that are part of US health care system.  As customer or consumer, one can sense that you are dealing with a lot of administrative overheard with healthcare in USA.  Pricing is opaque and almost impossible to get before service is rendered.  Bills are paid months after service is rendered.  System by which prices are discounted is opaque. Hyper regulation, exemplified by the skull-crushingly stupid requirement to fill out and sign the same stupid privacy disclosure form every time time one sees a new provider is just one of the many drivers of administrative bloat.  All of this serves the interests of the administrati,  embedded in  insurance, government and provider service companies, like Charlie in the Mekong delta.  These people work tirelessly making, following, not following, and massaging  rules, terms, conditions, and cash flows. All while adding no value to the poor US healthcare consumer.

How can we quantify the unnecessary admin costs that US healthcare consumers are stuck paying? It’s widely accepted that US healthcare spending is about 19% of the US economy.  I’ve seen estimate of the total administrative burden in healthcare costs at 25%. It sounds low to me, but I’ll take it.  For a first pass say  10% of the 25% in costs  are bloated and unnecessary costs that would not be there in a more efficient system.   So 10% of 19% of the 18.85 trillion US GDP turns out to be 35 billion dollars, about 2.5 times our spend on profits at those wicked insurance companies.

Fraud in the Medicare and Medicaid program is, by the government own admission, 8% of Medicare and maybe something higher for Medicaid.  The bar graph uses a 10% average for both programs to get a  95 billion dollars budget item for fraudulent healthcare services.  Even at 8% it is still larger line item than drug company profit.

Total  spend by government on healthcare for 2016 was projected at just under a trillion dollars in 2016.   And there is clearly significant fraud going on, with some law firms are very interested in acquiring whistle blower plaintiffs.  I gotta say I find the fraud number to be amazingly, incredulously high.  And I am more than a little suspicious that some of the prosecutions amount to criminalizing behavior after the fact.  Our 400 FBI agent task force uncovered less than 1% of the posited fraud.  Still pulling in 712 million is a good return on the 100 million dollar investment in FBI agents, I guess.

If the government is, in fact, losing tens of billion of dollars every year to fraudsters, I will  guarantee you this – government employees are in on the take and a chunk of it gets back to elected officials.  Just ask Slim Pickens as Henry Biege in Rancho Deluxe – it’s always an inside job.

I did not put error bars on the graph but these numbers are +/- 50% for sure.  But even with that level of uncertainty it gives clarity  as to where the waste is in US healthcare. And it is not the drug companies. not the device companies and not the insurance companies.  Working on a sequel to explain how to fix US healthcare system.






Resolve the Police – BLM disputes with Reality TV

it’s MLK day,. In a spirit of healing , I offer up my  plan to resolve the complaints of Black Live Matter (BLM) with a reality TV show.   Reality TV is clearly a powerful social  and cultural force.  Visionaries such as myself realize that it can be use for more than just artful display of competing cosmetic enhancements among housewives in tony neighborhoods nationwide, while in no way denigrating the successful efforts of our nation’s plastic surgeons (do not click that link.)

The crux of the disputes and protests are the rules of engagement between police and citizens, complicated by the extreme distrust of police by black communities, especially in cities long run by Democratic political machines.  To succeed, the program requires participation by black political and cultural leaders.  A short list of desirable participants would include:

  1. BLM leaders – Sharpton, Shaun King (aka Talcum X)
  2. Black police leaders – Two good ones would be David Brown, the Dallas police chief who handled the horrible shooting of police officers in Dallas with class and dignity and David Clark, the very conservative sheriff of the Milwaukee area. Also the police chiefs in Chicago, Detroit and Baltimore.
  3. Black Gangsta rappers – Snoop, Dre, Fitty Cent and many others would be great candidates. Many others to choose from obviously.
  4. Black politicians – Many to choose from, but local leaders in cities with controversial incidents would be a great choice.
  5. Some token white politicians – it’s MLk day, we want to judge by content of character right?  I am thinking Rahm Emanuel, Bernie Sanders, and maybe Barack Obama.
  6. Some  regular guy on the street law enforcement professionals.
  7. Some real world gangbangers.

The format of the show  is two to five participants are assigned roles in force on force training exercises loosely based on some of the controversial incidents.  One or two are police others are the citizens. The remaining participants will sit as judge and jury awarding points and fines based on the actions of the police.  The players with the most points win money for themselves and/or their charity.

The challenge is that participation in the show will force the kind of accountability that many of the desirable participants seek to avoid like bad case of DRD.  Money is a big motivator and popular TV show usually has a lot of that throw around.  Making this idea really work may take more than just money. What’s needed is a charismatic leader, someone with experience in reality TV, fully engaged in our nation’s political issues, to champion this thing.   Calculating…   Calculating…  Trump is the obvious choice, but I wanted to executive produce this thing!  It’s my idea, man.  But for the good of our country I’ll settle for a assistant executive producer role.  Peace out, and keep hope alive.





Trump at the border

If Trump succeeds in closing off and controlling illegal access across the US southern border the biggest beneficiaries are likely to be Mexicans who are not members of the various cartels.  There is no question that total border control can be done, wall or no wall.  Deploy three men with rifles every mile and provision a generous allotment of radar motion detectors and night vision  and nothing is getting across.  Operating 24/7 365 requires a force of 15,000 people.  US customs and border patrol employs 21,000 people.  DEA employs 10,000.  If the Trumpster wants to get really serious he has the US Marines.  The Zetas, the Sinaloans, the Nortenos are no doubt “bad hombres”  armed to the teeth, but they will never, ever, ever win a gun fight with US Marines.

The rational way to build the wall is to let the people guarding the border decide where to first build walls. But I’m not even interested in whether a wall is built or not.  I think it’s more interesting to speculate about the effects of closing off illegal border crossing into USA.

I do not think it will materially change the available supply of illegal drugs inside USA.  Too many ways for drugs to get in – hidden in commercial shipments, via private aviation, boats.    Or domestic suppliers might start synthesizing cocaine and heroin and/or create GMO plants with coca leaves.

Could the same thing apply to illegal entry of construction, agriculture, and other “low skill” labor?  Less likely I think.  I will admit most day laborers make enough in a year while here  to afford a round trip commercial flight to Central America.  So maybe they can probably afford a contraband flight.  But I still think illegal crossings would be much, much lower.  And if US government deports or the illegals elect to go home, we will see a tightening and some wage inflation at the low end of labor market.  And hence reduced income inequality in the USA.

Beside income inequality, there are probably big savings for US government and taxpayers in gaining control of southern border.  For example, what does it cost to deport someone from USA once?  I would be amazed if it is less than $20,000.  How about nineteen times?

But I would still say the big winners if the border is controlled are the Mexican people. Reason for this is simple – controlling the border cuts the cartels supply chain.  Control illegal transit of people, things and money across the border is what they fight for. it pays for the bullets as well as plenty of guns, girls and tequila.  Once it is cut off, control of the territory along the border in Mexico is no longer worth fighting for.

Just to put my money where my mouth is I took a modest position in the Mexican stock market right after it fell about 20% when Trump won.  Has not bounced back much but we will see!





How to get lower drug prices in the USA

Regulators and insurance companies could instantly get medical drug and device prices in the USA to meet or beat any prices in the developed world.  All it takes is the same kind of free trade policies that get us open, fair prices for DD-RAM, flash storage, FPGAs, microprocessors, GPUs, and other electronic components.  It’s kind of funny given that our soon to be new president is talking up tariffs and protectionist policies.

To Illustrate the point I just purchased medicine from overseas, for the first time ever. I needed two drugs to do a treatment for pre-cancerous crud growing on my scalp.  The total cost getting one drug from Canada and one from the UK was less than half of quotes from US pharmacies.

One of Trump’s claims that rings true to me is that our leaders sell out Americans and make us patsys for the rest of the world.   High drug and device prices here in the US exist for one reason only – it creates lots of opportunities for graft by senior civil servants in the FDA and US patent office, members of Congress (who are exempt from insider trading), and judges.

All the claims about the need for a central authorities to negotiate prices with drug companies is cover for middle men in government and admin looking to take a cut. When pricing is open and transparent, as with electronic components and also, for example, airline fares, middleman and brokers add  little or no value and should add little or no cost.  Electronics companies have figured out the value of distributors (like Allied, or Newark).  Medical drugs and devices, like electronics, have a very high value to weight and volume. Many are likely best distributed in a similar fashion.   Some, like drugs that need to be injected or devices that are surgically implanted, might work better through the value added partner chains. But drug and device companies would be wise to look for more direct, one-price business models for customers globally.  It is almost certain to be in the best interest of their shareholders, their customers / patients, and their employees.







Merry Christmas 2016!

Merry Christmas to All!   Today as we celebrate the birth of Jesus, a nice Jewish boy who went into his father’s business, as one wiseacre put it. On this Christmas day, I am thankful for two privileges which I shared with almost all Americans.


  1. Jet fuel privilege – jet fuel privilege is shorthand for the ability to get on a modern commercial aviation flight and go anywhere in the flipping world safer than 99.9% of all humanity has ever been able to travel in all of recorded history.  If you’ve ever taken a commercial aviation flight, you have jet fuel privilege and you need to check that sh*t.
  2. Emergency room privilege – access to modern emergency rooms in the case of trauma, heart attack etc. is is yet another incredible benefit available only in the last 50-60 years or so.   Capability in the emergency rooms increases so rapidly that there’s no question all of us here in the developed world are in the 1% of all humanity own recorded history with respect to this privilege.




Can Trump succeed with authoritarian programs?

How to save the Union and dramatically reduce political bitterness

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