1. Skip to navigation
  2. Skip to content
  3. Skip to sidebar
Source link: http://archive.mises.org/9877/the-health-czar-cant-calculate/

The Health Czar Can’t Calculate

April 30, 2009 by

Everyone seems to agree that the US needs a health czar. But without the bearings of economic calculation — that is, without pricing signals derived in a free market — all patients, hospitals, physicians, and producers of healthcare services (and the health czar himself) are left, to paraphrase Mises, groping in the dark. FULL ARTICLE


Barry Loberfeld April 30, 2009 at 8:17 am

From “What About the Poor?”:

In short, it must be understood that ending programs for the poor (via phase-out) is logically the last step in the process of desocialization, and there is a hideous glut of statism before we ever reach that point … at which this will all be academic. The economic freedom we’ll have then either will or will not convince us to move towards complete privatization. (One thing we can do right now about programs for the worse-off is terminate their use by the well-off. Our first target: “Medicaid was supposed to help the poor, but one of its most expensive roles is to serve as ‘inheritance insurance’ for the wealthy. One of the fastest-growing areas of legal practice involves helping the affluent qualify for Medicaid long-term care” — Dr. Jane M. Orient, executive director of the Association of American Physicians and Surgeons.)

It must be understood and openly declared. For decades now, the defenders of the statist quo have painted any electoral challenger to Big Government as intent on immediately abolishing poverty programs. Fear sets in, the challenger loses, and the entrenched defenders continue to make Big Government bigger. It is an obscene spectacle whereby the truly greedy hide behind the truly needy. It is both the perpetuation and the exploitation of poverty.

By declaring welfare for the poor off-limits and thereby disarming that fear tactic, we put an end to this travesty. Now let’s see the liberals (and “Big Government conservatives”) defend handouts for people who don’t need a hand up. Let us see them defend treating the middle class and the rich as if they were the poor. Let us see them defend their proliferating pork from the blade of budget cutting. And let us see them defend the regulatory policies that prevent everyone, including the poor themselves, from reducing poverty. (Also, by moving the fight against corporate privilege to the forefront, we effectively take it away from those Marxist die-hards — who point to such privilege as a validation of Marx — and their corrupt “solutions.” Social-democratic liberals, let there be no doubt, have always been the benefactors of Big Business. The latest example? Self-styled “progressive” E.J. Dionne Jr., who praises Fed chair Ben Bernanke for his $30-billion bailout of Wall Street: “He doesn’t want the economy to collapse on his watch, so he is willing to violate all the [free-market] shibboleths about the dangers of government intervention.” Evidently what’s good for JPMorgan Chase….)

By removing poverty from the debate, we also expose the egalitarians’ sham indignation over “inequality” — their demand for tax dollars, not because they have little, but because they have less. (This creed of more-for-more’s-sake is another perversely perfect example of a “politics based on greed.”) Finally, we prevent the exploitation of the poor as an excuse to put everyone on the dole, e.g., the invocation of the number of Americans without affordable health care — yes, a very real problem — to justify a move to “universal health care,” the popular Orwellianism for what really gets delivered: total government control of medicine. With that, we can begin to explain how government interventions (cartelization of the insurance industry and the Newspeak redefinition of “malpractice” to include besides negligence other things [e.g., fallibility], to pick but two) have only contracted the supply of quality medical care. From medicine we’ll move to other areas; now the forces of freedom will be gaining ground….


vlad April 30, 2009 at 8:39 am

Is it “Health Czar”?

dewind April 30, 2009 at 8:41 am

He might as well be the czar of a candy bar.

greg April 30, 2009 at 8:45 am

The reason health care reformers can’t put their finger on the problem is that they are looking in the wrong place. It is not a health care provider problem, it is a health care insurance problem. People buy insurance because of fear and insurance companies build that fear by artificially inflating the cost of health care. Basically when you get a statement from the hospital and see the total cost, you are relieved that your share was only $5,000 and you thank God you had insurance.

Here is my experience. I had a kidney stone that needed to be removed. The cost to remove it was given to me to be in the $10,000 to $12,000 range. With my insurance, I would pay $5,000 and my insurance would cover the rest. However, in my pain, I asked what I would pay if I didn’t put it through my insurance and paid cash. My total cost was now reduced to $4600.

I have to believe that the insurance company would have paid less than the $4600. So if I would have paid the deductable and processed the claim, the insurance company would have made money on my claim.

100% forced coverage will make this situation worse as they will inflate the cost more and the tax payers will get stuck with the difference. Plus the demand for medical care will increase as people try to get as much of this “free care” as they can.

Just make medical and insurance cost fully deductible and the present system would take care of itself and would cost the government much less.

Matt R. April 30, 2009 at 9:13 am


Excellent points! We’ve already tried having everyone covered in states such as Massachusetts, and the costs continue to rise. Between Medicare, Medicaid and insurance, there exists hardly any bit of a free market to determine prices.

Tim Kern April 30, 2009 at 9:40 am

“The second reason why it is theoretically impossible for a health czar to price services is that prices in a market economy are continually, instantaneously, and simultaneously created, destroyed, and recreated by the individual subjective valuations of consumers and producers facing the passage of time.”

This is, in fact, a sufficient reason to scrap the entire notion that central planning is possible.

All the computers in the world can’t account for the changes in technologies and humans’ preferences that take place each minute — even if the collected data could be complete and accurate (which conditions are necessary in that scenario, and are also impossibilities).

Further, as alluded to in other comments, health insurance would be a moot point if health care were somehow universally provided. An entire industry could be eliminated, freeing all the drones, and obviating all the paperwork of this complex system — and the elimination of the health insurance industry would, in itself, lower the overall costs of health care.

Except we’re overlooking the fact that someone as smart as Hillary Clinton or Tom Daschle could, of course, do the math in their heads. If only we had more people like them!

fundamentalist April 30, 2009 at 9:56 am

Nice description of the way Medicare sets prices! I work for an HMO and can verify that the process is very complex. Very few people can understand it. But the result is that Medicare sets the base rate for each and every single medical procedure that exists and there are thousands. That’s because federal law requires that Medicare always receive the lowest price, so our contracts with hospitals and doctors specify payment as a percentage of what Medicare gets, anywhere from 105% to 150% of Medicare, but never below 105%.

As for computing power substituting for markets, I remember Schumpeter saying something similar about the power of econometrics for planning back in the 1950′s.

greg: “My total cost was now reduced to $4600.”

Insurance companies contract with doctors and hospitals and agree to pay them a set fee for every procedure. For patients without insurance, hospitals have funds to make up the difference and so can negotiate a lower price. But the $4,600 wasn’t what the insurance company paid the hospital. If your procedure cost $12,000, that means that you’re insurance company contracted with the hospital to pay that amount for that procedure, based on what Medicare would pay for the same procedure.

EconAndre April 30, 2009 at 10:32 am

The health care Czars up north in Minnesota are conducting DNA sampling and research on newborn babies without informed parental consent. This is a violation of ethical guidelines for academic researchers and of human/property rights. Remember, Czar = Ceasar and so the state thinks it can do anything it pleases. Check out this link:

AC April 30, 2009 at 10:36 am

In order to reverse the health insurance mess we’ve created a couple things need to happen.
1) Allow people to purchase health insurance across state lines
2) Allow individuals to receive the same tax break for purchasing health insurance privately as their employer receives. This would involve not only income tax (Fed, state, local), but Social Security/Medcare taxes (both the employee AND employer portion, and unemployment taxes as well. Or you could lower tax rates and remove the current employer provided health insurance as a tax benefit to the employer. Ultimately you want to achieve no or very little tax difference between purchasing health insurance through your employer or on your own.

There are other “reforms” that could be argued, but the above 2 would radically reduce the madness that we now endure.

Barry Loberfeld April 30, 2009 at 10:51 am

From “Requiem for the Left”:

Contempt for the masses, not compassion for the poor, motivates the welfare statist, a disciple manqué of the Gotha Marx. It is from his creation of an “evil” entity — the “greed,” “selfishness,” and “materialism” of all others, of society — that he derives, with his advocacy of redistribution, an opposed “good” identity — his own “social conscience.” For a Michael Moore, the evil of America — of capitalist society — is that it will not “guarantee” free, unlimited medicine for all as a political right, while his own good is to be found right there in his support for such a noble (i.e., paper) proclamation. His position doesn’t come from a focus on the reality (theoretical and empirical) of health care as provided by the market vs. the State, a reality well known in Canada (which didn’t legislate free, unlimited medicine for all, but government control over all areas of medicine) and brilliantly dramatized in the Québecois export The Barbarian Invasions, the 2004 Oscar winner for best foreign language film. If the good is to be found in the market — in “civil society,” the explicit enemy from Marx to Chomsky — what is to be gained from setting oneself apart from — above — it?


Glenn O'Dell April 30, 2009 at 11:40 am

Mr Tenreiro may not know it, but he is a part of a medical monopoly long divorced from the need for calculation in a free market. The AMA was granted by federal law the power to limit the supply, and control the education, of Medical Doctors since the 1870s. The AMA and the drug companies “captured” the FDA from its inception in the early 20th century, and have used its power to suppress any competition in the USA. That is why The USA has the highest medical costs and the poorest results in the civilized world. A medical “Czar” would probably be one of their own who would further strengthen their monopoly.

Deefburger April 30, 2009 at 11:55 am

I was struck by the articles point of the problem of nationwide cost-benefit calculation. It really is possible only by “market forces”.

There is no way to know, in general, what prices and practices are fair or have what benefit and to whom. Pricing is further exacerbated by the inability of any participants to know fully the actual value of the money itself! Are we to assume that one person in DC is going to know what a dollar is worth, better than the Fed? Can one person in DC know what treatment I need or desire?

They will be left with only one alternative tto the problem, franchise. What they will do is reduce the whole health care system down to a set of instructions like flipping burgers at the fast food restaurant. Those instructions will outline exactly what can and can’t be done in any given situation and that will be that. They will commission studies to support their choices and they will set the price, the treatments available and that will be that.
If your illness isn’t on the menu, you’ll be S-O-L.

I t will be like taking all of the restaurants in the US and converting them to McDonalds methods, suppliers, menu and pricing. It will strain the suppliers as they struggle to meet the demant at the fixed price, unless their lobby can convince the czar otherwise. Suppliers will diminish or leave the country. And people will suffer with illnesses that don’t meet the requirements for treatment.

“No mam, your symptoms don’t come up on my screen as anything serious. Please come back when you have sickened with something we treat. Have a nice day :-)”.

“The system says chicken pox can only be treated as out patient for children under 12. Your son must be hospitalized until he’s better. If you take him home the heath authorities will arrest you for endangering the public health.”

“I’m sorry sir, but extraction of the tooth is all the government is willing to pay for. A root canal and crown are much to costly. Would you want to pay for the root canal and crowns of every American with a toothache? Of course not! Now sit down and take it like a man…”

This is what the Universal Health care System will look like after the DC rhetoric has wafted away in the breeze.

Any treatment not on “The List” will require pre-approval by the local czar.

Any behavior not approved will be cause for discount or exclusion, or even detention.

It may become illegal to leave some behaviors out of an admittance form, resulting in a fine of loss of coverage.

The problem of calculation is only resolvable in general and with linear computation if the initial conditions of the calculation are limited in scope. The problem the czar is facing is best solved by a neural net. The free market is the best such neural net computer because each of it’s elements is in direct contact with the relevant facts at the time of the calculation. The same knowledge of personal situation, pain and discomfort, treatment availability, payment options, desired outcome etc. cannot possibly be known by any preconcieved notion of Universal application of health care. Yet the market can and does do this all the time, because it is a network of desicions in the place and time of the decision.

Control and Regulation is the only means available to any “Head” of any system of complex interaction. Only a free market can operate under diverse conditions and diverse outcomes. What is happening over and over again in the financial industry with the Fed as the “Head” is what will happen in the health care industry under the same constraints. The reason is that a centralized decision making “Head” is limited in it’s capacity to know and compute. It’s like putting a PC in charge of the weather. Eventually, the weather must be eliminated in order for the computaions to match the reality.

Nick E April 30, 2009 at 1:03 pm

@Deefburger: Nice description of the UK National Health Service!

The crux of the problem is the cost of purchasing health services. People perceive that they have a non-zero risk of experiencing an injury or illness that’s prohibitively expensive to treat, so they desire to protect themselves against that risk. Hence the demand for insurance, which (private or government-provided) is essentially a Ponzi scheme in which I agree to subsidize the health care of others in return for having my care subsidized by a future group of suckers. But as risks go health service utilization is a poor one to insure against. If you hand people money to purchase something they want, the price of that thing will tend to rise. As will the cost of insuring yourself against that rise in prices. If health services were priced at anything resembling free-market demand, health care costs would almost certainly be much lower, because prices would arise from the rational calculations of individual consumers weighing alternate uses of finite amounts of (their own) money. But even here in evil capitalist corporate America we have nothing resembling a free market in health services.

David Spellman April 30, 2009 at 1:49 pm

Government Czars can calculate. OSHA has calculated the value of a worker’s life for various industries (and the price of human life varies by industry, which is interesting). When they decide whether to require safety modifications, they calculate the cost versus the number of lives saved. If the change costs more than the value of worker lives projected to be saved, they do not require it.

You can assume that the government will create a list of life values for every class of people under national health care. If you need a treatment or procedure, they will decide whether your life is worth saving based upon a formula. If you are deemed worth keeping by government criteria (such as favored group or productive capacity), you will live. Otherwise, you die.

Don’t kid yourself. The government can and will calculate what you are worth to them. If you thought taxation and regulation was oppressive, wait until you get a letter saying you are no longer fit to live in society. The ultimate end of totalitarianism is utilitarian decisions about who should live or die. Government deciding who lives or dies is the extreme opposite of life, liberty, and the pursuit of happiness.

AC April 30, 2009 at 3:54 pm

Qutoe from David Spellman:
Don’t kid yourself. The government can and will calculate what you are worth to them. If you thought taxation and regulation was oppressive, wait until you get a letter saying you are no longer fit to live in society.

Unfortunately David, it seems the populace at large fails to grasp this point. Furthermore, it’s one avenue the US Gov’t will use to get rid of those “sick old people” on social security and medicare.

Got unfunded social security and medicare liabilities? Get Soylent Green.

A gov’t funded mandate such as a national healthcare system sees the citizens as a cost, particularly certain “high risk groups”. The free market sees people as potential customers to serve.

B. Ranson April 30, 2009 at 7:04 pm

Few socialists are likely to be convinced that, “the reason why it is theoretically impossible for a health czar to price services is that prices in a market economy are continually, instantaneously, and simultaneously created, destroyed, and recreated by the individual subjective valuations of consumers and producers facing the passage of time.” Socialists aim to substitute central direction for the market process. As they see it, the wise decisions of a central planning board are better at allocating factors of production than the chaotic whims of the market.
Nor are socialists likely to be convinced that, “computers actually make economic calculation more complex and difficult.” After all, capitalists must also make decisions about investment in computers. The mountains of data generated by machines must be dealt with by private producers as well as the government. The fact that “all the computers in the world can’t account for the changes in technologies and humans’ preferences that take place each minute — even if the collected data could be complete and accurate” does not prove that the market is better able to use these machines than the government.

fli May 1, 2009 at 12:45 am

I also speculate that there is a very strange pricing phenomena in the medical industry and I do beleive insurance and or a cartel with the drug companies is the culprit. I think Corporate insurance is flawed, and I think several big organizations drug/insurance corps probably have some sort of cartel going on.

I did a little bit of my own investigation when my Father was going through his Cancer treatments. $6000-$10000 dollars a bag of medicine. The doctors confirmed that the bag was 99.1% water. After 6 hours and several bags in 1 Chemo session the tally is up pretty high. However the office cannot afford a simple television for their patients. I was shocked with that amount of money they didnt even have 1 TV in the entire Doctors office. Probably 20 patients at once, no TV. All sitting around for hours at a time…

The whole Doctors Office however did have brand new Crocs donated from the insurance company. The doctor told me however that he never sees a dime of that money per chemo bag. Just that occasionally the Insurance company throws them a bone, like new crocs. It always went to the drug company/insurance company. I beleive there somewhere between drug company/insurance company lies a cartel which is throwing the market off balance.That and the lack of real personal insurance due to “Corporate Insurance” mandate by the gov which has driven out much in the way of personal insurance. I think there lies the problem.

It’s hard for me to fathom that Intel Corporation can pour billions of dollars and spend 5-10 years developing a new microchip architecture. Then sell that chip on the free market for $100-$200 dollars a processor.

At the same time Drug companies stumble across new drugs with minimal R&D. With less time spent in development and much less money spent on research and manufacturing they sell their product at $10,000 a bag at 99.1% water.

Seems like there is a disconnect somewhere, and if I know the free market. It would appear to me that in healthcare the free market is whats NOT happening.

I would love someone to do a R&D and relative cost analysis comparison between the tech industry and the drug industry.

Use the Cell Processor as an example. 3 major corporations, Toshiba, Sony, IBM, All dumping billions of dollars, donating their most talented engineers and taking over half a decade to develop. They can sell this chip times 3 for 600 bucks in a single Playstation 3. (I think 3 cells per PS3) Now compare that, to the Drug industries $6000 per bag of chemo drug. Whatever it is.

I’m sure there are lots of variables I cannot account for but still it raises an eyebrow.

Barry Loberfeld May 1, 2009 at 9:14 am

From “Liberalism: History and Future”:

The name Ludwig von Mises gained currency during the demise of the Soviet Union because many (e.g., Robert Heilbroner, who was generally not known for his sympathy to free-market theories) pointed to his prediction that a socialized economy could only decline because its abolition of the market robbed itself of any means to rationally calculate prices and thus determine production. But the Austrian economist also made another stark prediction — that a mixed economy could not help but move towards total control. His argument ran like this: Imagine that the first control mixed into the economy is a price ceiling on the sale of milk, since the politicians promised to make it more affordable. What invariably follows is that the marginal producers of milk go out of business; milk actually becomes less plentiful. Now the politicians can repeal this control — or they can impose a new one on the “factors of production necessary for the production of milk … But then the same story repeats itself” on a wider level. If the latter course is chosen, we logically head towards socialization of the entire economy.

Let’s move from milk in theory to medicine in practice. For about a hundred years, America has been a nation of accumulating medical controls. Each new regulation was passed with the same justification made for the previous one: This measure will sufficiently correct the failings of the free market and thus save the free-market system. And the result? Today’s “crisis in health care” — as the welfare statists themselves call this iatrogenic disease. The more band-aids are applied, the more wounds appear! And with nothing but band-aids in their bags, these “liberals” (often the same aging advocates of past regulation) can now prescribe only covering the patient head to toe — i.e., the final move to the outright socialization of all medicine. What this says about the microcosm of medicine is obvious; what it means for our mixed economy is ominous.

What limits the limited welfare state? Even with socialism discredited both theoretically and practically, state control over society grows. Do the apologists for government intervention imagine that we can move isotopically towards the electrified fence of totalitarianism without ever touching it? This political progression…


2nd Amendment May 1, 2009 at 11:23 am

Even if the health Czar could calculate perfectly, my issue is not with the accuracy of the health Czar’s calculations.

My issue is with the coercion and enforcement of the health Czar’s decision.

Even if the health Czar could calculate perfectly and better than me, he has no right to force me to abide by his decision of medications, treatments and doctors or lack thereof.

I should have the right to decide which doctor, medication and treatment I want. It is not the health Czar’s business to limit my freedoms and choices.

I welcome the health Czar’s recommendations anytime, he can recommend me a doctor, a medicine or a treatment.

But he cannot force me anything.

You libertarians should stop focussing on the failures or inaccuracies of your opponents and focus on freedoms.

Because you run the risk of being proven wrong, there very well could be a good calculating health Czar, but that would still not make it right to force his decisions on others.

Just as with global warming, it could very well be true, but that doesn’t justify the government to regulate the market, control prices, create new taxes etc.

It’s the politics of global warming that I debate, not the science itself.

It’s the politics of health Czaring that I debate, not the accurace of the health Czar’s calculation.

My stance is always freedom and responsibility, the Czar’s ability to calculate has nothing to do with it, it’s irrelevant !

If someone wants to start a medical advisory business and calculate the best for me, I welcome his business anytime.

But the final decision is MINE, not the health Czar’s. And if he wants to force me into abiding by his decisions, I don’t care if his calculations are the best, it’s WRONG !

2nd Amendment May 1, 2009 at 11:27 am

My understanding is that programs for the “poor” are being paid for by the “little bit less poor”.

Someone earning $30,000 a year still pays taxes and some of that money goes on to pay food stamps and other things for the poor.

But the guy earning $30,000 is kept into poverty by his taxes.

If he could stop paying taxes, saving it and investing it, he could work his way out of poverty, then re-invest this money into classes or courses which would help him get a better job.

His better job could make him earn more money which he could reinvesting into starting his own business etc.

But because he is taxed, he stays poor and helpless.

And during that time, the rich is finding ways to avoid paying his “fair” share and he even receives bailout monies and bonusses.

I think the best way to help the poor is to give them opportunities. Instead of taxing and regulating them into status quo.

2nd Amendment May 1, 2009 at 11:47 am


Yes there are cartels, but they can continue to exist and bloat up prices only because the government makes it that way.

The FDA makes it so hard and complicated to manufacture and sell drugs that only a handful of large companies can venture in that market and they have the monopoly of the market, bloating up prices.

The American Medical Association is sanctioned by the government and they are acting like a medical mafia, outlawing alternative practices and online consultations etc. Basically eliminating cheaper and efficient alternatives.

Basically, the health care business is regulated into high prices and scarcity.

I don’t see why it should cost $40,000 to have a simple surgery procedure like removing a nail in your sull.

After all, it costs only $140 an hour to hire a team of roofers to tar up your roof.

Why health care is so expensive in America is because we are paying for Red-Tape and redistributionist health care programs.

You can go to India where health care is about 5 to 10 times cheaper than America.

The big difference is government regulations and red tape and of course greedy medical cartels.

Those greedy cartels could not survive in a free market environment.

They can only survive because the government makes it impossible for competition to exist.

For example, if it was lawful to give medical advice online, in chat rooms and to sell drugs over the internet, well health care would be extremely.

2nd Amendment May 1, 2009 at 11:52 am

In Quebec, there is a price FLOOR for the sale of milk, plus a huge excise tax and they need to purchase milk “quotas”. A producer cannot overproduce milk and try to sell it cheaper. He can only produce the quantity of milk his permit will allow, if he produces more he has to destroy it.

The result is that Quebecers are paying their milk 2 to 3 times more expensive than us.

Also, they have a price FLOOR for petroleum and gasoline products and they pay a 45% tax on the gasoline price plus 15% sales taxes.

Basically, gasoline has a MINIMUM PRICE in Quebec and the final price of gasoline is about 60% in taxes. Meaning that only 40% of the money you pay is for the gasoline itself.


If Obama gets his way, our country will look like Quebec.

2nd Amendment May 1, 2009 at 3:01 pm

The whole point of socialism is to impose and control prices, not to calculate the best one !

What socialism want is to decide what the prices will be, if they would calculate them then they would have to abide by the calculations results, they would no longer decide the price.

It’s precisely to evade market logic and dictate the prices that socialism was created.

Socialism is only concerned by political profitability, not economic efficiency.

The “calculated” price will always be the one which provides the biggest political return for the socialist.

Socialists don’t care about market efficiency. Socialists will never relinquish power in order to let the economy run smoother and better.

Socialists want control and power and couldn’t care less about market efficiency.

If socialists were calculating the best price, that would mean they would no longer be into control but that the data and math formula would be in control. That would no longer be socialism.

The whole point of socialism is to dictate the market, not to calculate it.

Vanmind May 1, 2009 at 7:25 pm

“The whole point of socialism is to dictate the market, not to calculate it.”

So at what point do the dictators get tried and punished? I know, I know: Election Day — except, not.

Bennet Cecil May 1, 2009 at 10:09 pm

No one is going to be happy with our new system except for the currently uninsured who will get something for nothing. The hospitals, doctors, drug companies etc will be paid less and work harder. Wage and price controls will be enacted causing shortages. Many physicians will retire or change professions. Patients who now have good insurance policies will encounter higher prices and less satisfying medical care.

President Obama’s plan is to try to force businesses and rich people to pay for everyone’s health care, just as his plan for higher taxation relies on them to pay the cost of the federal government. This will contract the economy and there will be no prosperity for working people and the middle class. They will not be free to buy what they want with the money they earn. The government will mandate how they spend their earnings and savings. The government and not the voter knows what is best for them.

President Obama agrees that universal health care is expensive, but says that we cannot afford not to do it. Just as everyone has a right to a house they cannot afford, everyone has a right to health insurance they do not purchase with their labor. Americans who are worried about losing their insurance and do not like high co-pays will support him. We have a very popular president and he will get what he wants.

Instead of fully funding Medicare and Medicaid, the government is going to seize control of the entire health care system. I Health care spending will bankrupt the federal government the same way it bankrupted GM and Chrysler. US treasury bonds will one day have the same value, about 10% of face value. Foolish fiscal and monetary policies will impoverish the US for decades until Americans elect someone who believes in small government, low taxes and a stable currency.

Lou Ohls May 2, 2009 at 8:19 am

It is nice to read that somebody actually gets it, although accepting the goal of “sustainability” is to accept human hubris, and the psychotic belief that “wishing will make it so.” Health care will be with us until extinction, even if it entails stirring chicken entrails with a magic stick. But the human dream of “sustainability” is equivalent to the illusion of “equilibrium” and the “clockwork universe”; it violates the second law of thermodynamics. Us civilized folks have had this problem since we accepted Euclid’s 5th Postulate. Euclid assumed that he could extend his plane into infinity. Lobachevsky and Riemann demonstrated that “it aint necessarily so,” and Einstein proved “What you see depends on where you stand; even space and time,” and that stuff is comingled.

I happened to be unfortunate enough to be Chairman of an ERISA Health Benefits Trust in 1987. As such, my duties amounted to adjustment of benefits and contributions, co-pays, deductibles, etc. for a relatively small group of people ( on pain of Federal civil and criminal liability if I got it wrong). In that year, the Federal Accounting Standards Board (essentially the same people who did the bean counting for the CDS and mortgage meltdown) issued a requirement (FASB 87) that corporate America place the present value of their future liabilities for promised medical care on the bottom line for credit rating purposes. FASB reneged, postponed the requirement to FASB 89, then later piecemealed and diluted the accounting. Applying their math, in 1987, the net value of the companies on the NYSE, minus the present value of future promised employee health benefits was zero. Applying the same math, I suspect that the present value of the future U.S. tax stream, minus the promised benefits, is somewhat less than that. I doubt that anyone who wants to eat regularly outside prison is willing to do the math. The CDS/mortgage bubble demonstrates our willingness to pay people to apply the wrong math.

Until cosmologists solve, i.e. predict, the “three body problem,” and extend their math to four, five, six ….. bodies, we have no hope of creating a system which will make health care costs predictable and sustainable. There are simply too many significant variables involved.

We do have the comfort though, that one in five tax dollars actually get to the target on domestic expenditures, while only one in eleven dollars get to the target on military expenditures.

Comments on this entry are closed.

Previous post:

Next post: