Skin in the Game for Public employees

Across the political spectrum many people are unhappy with the actions of government, too often with good reason.  The Tea Party movement began in 2009 in the first months of Obama admin.  Black Lives Matter has been protesting police shootings since 2013 or so.  Some of their early grievances, mainly Ferguson, were not [IMO] justified, but for most of the subsequent ones,  the grievances are wholly justified.  When the Ferguson incident first happened, a minor controversy ensued after Charles Barkley ran his mouth.  Hard to believe I know.

All Americans love Charles Barkley and ESPN gave him a chance to repent and discuss his views with Kenny Johnson, who all Houstonians love for his cool-headed play when Houston Rockets won two straight NBA championships, destroying Celtics, Spurs, Mavericks, and, most deliciously,  Lakers along the way.  Their discussion was  100x more intelligent than anything else at the time about race, police, police shootings, Ferguson and BLM.  And at the start of that discussion Charles says something beautiful “We, as black people, need the cops in our community. They’re not there just to quote-unquote kill black men, they’re there to protect us, and we, as black people, have got to develop a relationship with them.”

That is a worthy goal.  It is also bigger than the black community and bigger than the police and their way too often trigger-happy gun play.  At the general level, we all, as citizens, want to have good relationships with government officials.  And we need responsible people working for the government to make that happen.  That’s not what we get.  Taking a knee or blocking a freeway doesn’t change anything in any meaningful way.  What is needed here is the art of the deal.

You can’t fix a problem if you don’t define the problem  and identify the causes correctly.  For the problem of police shootings, I maintain that the cause is not racism.  In support of this position I can offer many examples of white-on-white police shootings  as bad as any of the ones BLM is protesting.  The better name of the cause  is government-ism.  It’s not white supremacy, it’s government supremacy.   And it goes way beyond police shootings.   This creates an opportunity to build a coalition for change.

Spoiler: To stop the  [unjustified] shootings BLM is protesting, make police officers personally liable for use of force.  In the exact same way private citizens who use firearms and other weapons in self-defense are personally liable. This will change the trigger-happy behavior immediately.  Police will have skin in the game, as defined by Nicholas Taleb in his Incerto series of books and papers.

Any attempt to impose personal liability on police officers will be opposed by police unions, DAs, most judges and most elected reps state and federal. It will politically difficult thing to put into law and practice  The release from personal liability for police  and LEOs and all other government employees, is aka qualified immunity, and was  given to them by judges who are not disinterested parties.  But I cannot stress enough that in agitating, cogitating, and maneuvering for change, we need to speak of law enforcement officials with respect.  Referring back to Charles B, we,  all of us, need wise, honest, prudent cops, DAs, tax collectors, judges, counter intelligence investigators, undercover cops,  regulators, etc.  in our communities.  And there are many good ones. But

It is worth noting that there is something about law enforcement and politics that will attract authoritarian / totalitarian creeps, sadists, and perverts.   New York AG Eric Schneiderman was recently revealed to be violently abusive, sadistic creep who physically abused women he called his slaves.  One internet wise guy remarked how surprising it was that sadistic assholes would want to be prosecutors.  Same is true for many other government employees whether law enforcement officers, elected officials, judges,

Thinking back to problem definition there is this saying, one way to solve a problem is to make it bigger. Could a bigger solution to a bigger problem create bigger coalition? One capable of overcoming the fierce resistance all proposals to make government officials accountable are sure to encounter.

There’s lots of interest across the political spectrum in criminal justice reform.  Kim Kardashian recently met with Trump and secured a pardon for Alice Marie Johnson.  Most of the focus by lefty criminal justice activists  is on high US incarceration rates and long prison terms.  That was the focus of the criminal justice reform bill Trump recently signed.  The concerns are about harsh treatment for those that are [presumably] correctly convicted.  But what is more urgent for criminal justice reform than discouraging wrongful deaths, reckless use of force, false convictions,  politicized investigations and harassment? Which happens all too often….

As an example, the DoJ recently settled a lawsuit for $101 million dollars for wrongful conviction for murder of four men, each spending decades in prison, two dying there.   DoJ attorneys and FBI agents knowingly withheld evidence which would have exonerated the men.   The $110 million was paid for by US taxpayers who are also, no doubt, at this moment paying the pensions of all the people who did this.  And this is not an outlier, as there are inevitably many more undetected cases than the one that are discovered, litigated, and paid out in damages.

Then there are the actions of Federal prosecutors recounted in Sidney Powell’s book Licensed to Lie.   She  saw, up close as a defense attorney, the same tactics of withholding exculpatory evidence by Federal prosecutors used to convict Merril Lynch employees in the wake of Enron collapse.  The same group of  prosecutors used the same tactics to falsely convict US Senator Ted Stevens , flipping control of the Senate in the process.  Now some of the same people are working for Robert Mueller.

Another example, the IRS recently settled a lawsuit by tea party activists for $3.5 million, admitting that they gave 21 CDs full of information on political opponents of Obama to the Obama White House (seems as bad as Nixon enemies list, no?).  Key IRS attorney Lois Lerner was put on leave with full pay to help her deal with the stress of the results of her own corrupt actions. She is or soon will be cashin’ her pension checks.

Could BLM activists and lefty + libertarian criminal justice reformers join Tea Party / Trump supporters to support and enact reform  of qualified immunity?  Stranger things  (e.g. Trump) have happened.  The reform is very simple

1. Qualified Immunity only applies in response to active shooter or live hostage situations.  In case of active shooter the qualified immunity applies to anyone acting to stop the shooter or shooters.
2. In all other activities. government employees hold full liability for damages caused by their actions as employee with their pension fund acting as a deep pocket backstop over that.  Taxpayers are permanently off the hook for civil servant misdeeds.

Incentives for quick on the trigger gun play, no-knock raids and ultra aggressive SWAT tactics  change, bigly.  Note again that with respect to use of force, it merely gives law enforcement officers the same liability that private citizens have now.  Prosecutors, investigators, and detectives will have good reasons to play it straight and  fair.   Putting pensions at risk will help make the change cultural, all government employees will be more focused on fairness, safety, and justice.

If this reform were enacted it is likely to create  a market for insurance for police and prosecutors.  A light bit of regulation will help insure that the good effects of the reform are preserved,  say a minimum deductible of $100K for LEOS and $250K for prosecutors and bureaucrats and some basic minimum capital  requirements for insurers.  Not rocket science.

A coalition where some sides consider some of the other sides to be racist sounds like a tall order.  Probably easier to get Koreans to make peace with each other.

Update Feb 2019  Updated this post based on intelligent feedback from people on twitter.  Crazy I know

 

 

 

 

 

 

 

 

 

 

 

 

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The Grievance Culture Thought Experiment

Mr. Obama amused me a few years back when he advised the country ,after some jihadi terrorist attack, to stay off our high horse and to remember the crusades.  The absurdity of the statement, given that USA did not exist until 500 years or so after the crusades is one thing.  But a grievance over events 850 years ago is more fundamentally  a loser mentality on first principles.

Barack’s dopey comment give me the idea for a thought experiment.  We could expect people who fought in wars or had wars fought around them to nurse some grievance against their opponents as we would slaves against their masters.  I thought about the example of someone who fought in the Civil War on either side, but I think a better example is World War II.  For example, an American soldier or Marine who fought in the Pacific in World War II.  Maybe he fought in the battle for Manila, savage spasm of combat that killed more civilian that either Hiroshima or Nagasaki atom bomb attacks.

In 1945 the war is over. The man goes back to the USA. And for the rest of his life he hates Japanese people. He doesn’t want to associate with them. If he had a business he wouldn’t want them as customers or employees.  Maybe he is rude to Japanese people when he encounters them, maybe even violent.  And he passes this hatred on to his children.

It is these children that are the subject of the thought experiment.  As they live their lives they have this choice.  Move on and let it go or carry the grievance forward.  Which behavior should we applaud and encourage and why?

Say they do choose to carry the grievance flag and pass it on to their children.  Then those children as they live their lives face the same choice. Move on and let it go or carry the grievance forward.  And the thought experiment asks which side are you on?

Now iterate this 40 or 50 times to get to the crusades, or 3 or 4 times to get to European colonialism or 4 or 5 times to get to slavery  or Indian wars in the Americas.

Or you know. Move on and let it go.

For better science mandate warning labels

Many people claim to love science ,with and without the f-word intensifier, and lament the fact that some large part of the population disagrees with and does not accept ‘science’.  I have a real problem with this meme, because it does not acknowledge the enormous range in predictive capability and actual knowledge produced across the many fields of study that claim to be science produced by the scientific method.  A perfect example of the trap occurred at the time of the total solar eclipse in the USA earlier this year.  Famous media scientist Neil Degrasse Tyson opined  that people who trusted science to predict solar eclipse should also trust predictions of global warming and associated bad effects there from.

It is a bogus comparison and a bogus argument and Tyson should know better than to make it.  Eclipses can be predicted with models based on linear differential equations that are solvable, and accurate to the limits of observational measurements.  Climate models also use differential equations for some of the processes they model.  But many critical climate processes are non-linear, chaotic, not well understood and not  measured or only recently measured  in detail.  Examples include precipitation, troposphere hot spot, and cloud formation.  Climate models are not validated and will fail a rigorous validation process, just on the issues around tropical hot spot and cloud formation.

But there are much bigger problems in science than bogus claims about the capabilities of climate science.   The website five thirty eight has an excellent article on one of the most prevalent forms of bad science, studies based on probability of a null hypothesis being less than 0.05.  Most of the social sciences, psychology, nutrition studies, and social justice, political studies are based on null hypothesis p <0.5.  In the article they coin a useful term,  p-hacking, selective partition of input data can produces spurious correlations.  p-hacking can also be called cherry-picking.

At a step below null hypothesis p <0.05 are qualitative studies, which should not be regarded as science, but as speculation and opinion.  It would be one thing if qualitative research were confined the social sciences, but it is growing in medicine.  When it gets to physics and chemistry, it may be too late to stop the contagion.  Action is needed.

Given what is at stake here, I would propose we can not leave science to the scientists,  let regulate it like we do other industries.  A great low-cost, easy-to-enforce regulation is warning labels.  They worked really well with cigarettes.  I have helpfully provide a couple of samples.  The proposed regulation is:

1. All published studies using the null hypothesis p , 0.05 method should carry the warning label saying the study uses methods know to produce spurious correlations.
2. All qualitative studies should carry the warning label noting that this study is options and anecdote.

These regulation are low cost for scientists, scientific journals to implement.  The benefits will large in comparison.  So it you f-ing love science, get behind me here and let’s do this.

How to move things along with North Korea

Trump is about to meet with the Chinese leader Xi Jinping.  Astute observers are noticing that Trump’s policies with respect to North Korea set up some interesting incentives for China. They don’t want North Korea liberated and unified with the South.  They really don’t want South Korea or Japan to get nukes.  A coup that makes North Korea a Chinese protectorate or province might be their best option. Trump would wise to use the meeting to address Chinese people directly, maybe with something like this.

“Great to be meeting again with President Xi.  On this occasion I am reminded of his visit with my predecessor at the White House, where his pianist played ‘My Motherland‘ Though this was controversial with some people, I have no problem with that. Some say the song is anti-american, but I hear the pride of Chinese people in the bravery of their troop and their skill in mobilizing 700,000 men across the Yalu river to spring what is arguably the biggest ambush in military history.   Of course I and all american have a similar pride int he bravery of our troops and their in skill in, for example, the landing at Inchon. So I would like to propose a toast to the bravery of and skill of the soldiers of both sides – Chinese, Americans, and Koreans.

But those battles are 65 years ago now.  Looking of the Korean Peninsula as it is today, what do we see? South Korea, protected by American troops , South Koreans, and UN allies, is one of the richest, freest, cleanest countries on earth.  Its products in semiconductors, cell phones, automobiles are purchased world wide. It’s cultural exports are also globally consumed, gangnam style.  Meanwhile North Korea is a slave sate that routinely kidnaps citizens of its neighbors. Its citizens are starving, cold, impoverished and abused by its government.  It’s reckless nuclear program threatens the region and the world.  The contamination of of large parts of China with nuclear fallout or waste from an accident, let alone nuclear conlict, is very, very real.

If the Chinese people are able to use their influence to affect a dramatic change in North Korea, history will view that as a greater accomplishment than anything their brave soldiers did in those battles now long ago.”

 

Predicting is hard, especially about the future

The next release of climate change forecasts should dramatically reduce worst case scenario for fossil fuel emissions.  Changes in energy markets – fracking/horizontal drilling, growing US and non-OPEC production, new sources of nuclear energy in development, and growth of electric vehicles all act to reduce the most probable and worst case amounts of CO2 that will be released over the next century and beyond.

Scott Adams recently published a Dilbert cartoon which noted that forecast of climate change necessarily depend on economic forecasts. The record of economist in forecasting accurately over longer periods than 12 months is not too good. Especially if we are talking about market shares in a dynamic, competitive markets like energy.  That is much, much harder than forecasting 5 year economic growth.  In climate models the economic forecasts are embedded inside forecasts of fossil fuel emissions and global atmospheric greenhouse gas concentrations.  The name for these forecasts is reference concentration pathways (RCP) and there are four of them. The worst case scenario is RCP 8.5,  the “OMG WE BURN ALL THE COAL” scenario, i.e. strong economic growth and coal as the preferred or necessary fuel.

Looking at the world energy markers in 2016/2017 there are huge changes that that were not obvious in 2008:

1. Forget “Peak Oil.”  Also (maybe more importantly) forget peak gas.  Independent of the US EPA and whether the president is Trump or Obama, the natural gas industry is successfully waging its own “war on coal.”  And they are at  the point in this war that general Sherman was in the US civil war when he marched his troops out of Atlanta, torches in hand.  Within a few years natural gas electric power will be drastically cheaper and cleaner than coal globally.
2. Whether greens activist stop nuclear power in Europe amd the USA, China and India are going to build out with nukes, not coal. Both countries are developing third-generation nuclear reactor designs that are intrinsically safe and, potentially, very low cost.  And in the west, many VC funded nuclear power development companies are going for it.
3. Growth of electric vehicles. In evaluating energy sources for transportation an important conversion factor is cost of electricity to cost of gasoline (or diesel). The conversion for gasoline is about 12 times electricity in cents per kilowatt hour (kwh)  to gasoline in cent per gallon. This accounts for different energy content in a kwh and a gallon of gas and the higher efficiency of an electric vehicle.  So electricity  at $0.05 per kwh equals $0.60 per gallon.  Add on a generous tax for roads and you get $1.20 a gallon.  Want to cut fossil fuel emissions?  Allow creation of cheap abundant sources of electricity at less than $0.05 per kwh   That pays for the extra upfront cost of EVs.

Together these three market forces guarantee that RCP 8.5 is ridiculously pessimistic and should be discarded.  Going forward we can confidently consider RCP 6 as the worst case scenario.  There are many reasons to suspect global emissions will be even lower.  As global liquefied natural gas prices settle towards five dollars per MMCF,  global prices for electricity from natural gas will settle towards $0.03 to $0.08 cents per kilowatt hour. Coal cannot compete on economics, it loses on public health, environment.

A key reason for the competitive advantage in natural gas is the availability of gas turbines.  Amazing machines, spinning at over 10,000 RPM, yet reliable 24/7 365.  They are built on productions lines like cars, driving capital costs down to less than $1 per watt.  Fortune 500 companies like GE, Caterpillar, Siemens and Mitusbishi are in this market to stay.  What has been holding them back in parts of the world not blessed with local supplies of natural gas is the big premium for liquefied natural gas that occurred when Japan shut down its nukes after the Fukushima accident. One of the reasons they were able to do this quickly was the global gas turbine supply chain.  The downside was  a large differential in natural gas prices, with Asian LNG importers paying much more for natural gas than North American customers, even after allowing for cost of liquefaction and transportation. But not anymore.

Another reason natural gas growth is likely to exceed forecasts from 8 years ago is that gas turbines are the best cheapest reliable backup power for renewables.  Gas Turbines can ramp output power up and down in seconds while maintaining high levels of efficiency.  If China and India continue to build out renewables, they will see the value in gas turbines.

Next generation nukes. including fusion, are a few decades away, but they are coming. Tri-alpha Energey has raised over $600 million (all private venture funding), to design and build a fusion reactor.  There are a half dozen other nuclear startups in USA, plus the well funded efforts by the governments of Russia, India and China.  And the successful designs will be the ones that can beat natural gas on price.

Electric vehicles are a wild card in forecasting global fossil fuel emissions, but if central planners want to drive their adoption, removing the barriers to growth of low-cost nat gas and nuclear power is the way to go.

Update 2017 Jul 2:

I took a look at Exxon Energy Outlook, a yearly forecast of global energy trends over the next 35 years so.  Lo and behold their 2017 forecast for emissions in 2040 [last year their outlook covers] is lower than three of the four RCPs.  Note this graph is of fossil fuel emissions, the one above is concentration in ppm.  Also note RCPs forecast is in peta-grams Carbon per year, Exxon shows emissions in billion tonnes CO2.

Update 2017 Jun 2:  To celebrate relegation of the Paris Accord to the ash bin of history, added links on China and India nuke plans and note on superiority of nat gas as a backup to solar, wind and other renewable power with sketchy uptime and reliability.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rethinking free trade in crude oil

In the late 70s, early 80s, I saw the damage protectionism did in Latin America firsthand. I’ve been a free trade supporter ever since. But I now support slapping tariffs on imported oil with an exception for Canadian and Mexican oil.  I like that it reinforces an important new reality – We, the USA, do not need Mid Eastern oil.  Nor do we need Russian oil. African, Central Asian, South Asian and Aussie neither. #wegotoursbitches  The policy implications of this for US interests are large, I think,

All the newly converted Russophobes should line up to support this idea.  It is a good swift kick in the cojones to our modern day Vlad the impaler, from the dark steppes and the KGB.  It may not stop him from his impaling ways with Russian gymnasts, but he will have much less money for hacking western pols email accounts.  Of course it doesn’t take a lot of money when they fall for spearphishing scams that teenagers were using ten years ago, as with Podesta, Blumenthal, DNC, and, of course, hdr29@clintonemail.com.  But the point is we be #resisting #resistPutin

I am thinking $10 tariff per bbl of West Texas Intermediate (WTI) equivalent.  WTI is the Pabst Blue Ribbon of crude oils and a feedstock any refiner can be proud of.

Lots of economists will argue the tariff won’t change much because oil (in aggregate) is a fungible product. And I agree with them.  Only when market prices are very low in 21st century terms (low 30s and below) will it have any effects.  Those effects would principally be american consumer pays more for oil than otherwise, american oil producers produce more than otherwise, and US government gets a little bit of tariff revenue.

With or without the tariff I see real possibilities that oil prices could get very low for several years.   Oil demand could fall below estimates by several percent over the next few years, due to combined effect of electric cars/ bikes and ride sharing services.  If they do the price is likely to fall more than a few percent, perhaps into the 20s.  This would dramatically and probably permanently  reduce the power and influence of petro-states everywhere.  Not a bad thing as far I am concerned.

If I am wrong about the low oil price period (I could easily be, especially if war in Mid East were to intensify) then the US oil price is same as world price, US government gets no tariff revenue and the decline of the petro-states takes another 5-10 years unless war drags them down sooner.

I also support expanding our list of approved tariff-free exporters to other countries in this hemishpere.  One could call this policy Americas First .  Again this underscores the fact this, mostly peaceful, region of the world does not need oil from exporters in regions prone to conflict, fanaticism, and gangster governments.  And begs the question why the USA would ever spend blood and money trying to make it peaceful.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Newly converted Russophobes should love this policy, if they can just stop quivering with rage for a few minutes. . It is a swift kick in the cojones to our modern day Vald the impaler, from the dark steppes of Muscovy.

 

 

 

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.