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Thoughts from the Frontline

The Healthcare Blues

February 27, 2013

It has been some time since we peeked into my worry closet. A few questions this weekend prompted me to think about things I am paying attention to but have not written about, and one thing that I am not worried about at all, despite the apparent media hysteria.

But first, a quick note. My tenth annual Strategic Investment Conference (May 1-3 in Carlsbad, California) seems to be filling up nicely. The speaker lineup is exceptional: Kyle Bass; Ian Bremmer; Mohamed El-Erian; Niall Ferguson and his wife, Ayaan Hirsi Ali; Lacy Hunt; Charles and Louis Gave; Jeff Gundlach; Anatole Kaletsky; David Rosenberg; Nouriel Roubini; and Gary Shilling.

Seriously, where else can you find a roster like that? And the attendee list has a who’s who” feel to it, as well. Those who come regularly know that the real value is in meeting the other attendees. David Rosenberg noted last year that this is the top investment conference he has ever addressed. The speakers all seem to bring their “A” game. The attendees agree, and this year we will have more interaction than ever.

The conference always sells out, and we offer an early-bird registration, which is about to run out. Because of security regulations, we do have to limit attendance to accredited investors and those in the securities/investment business. You can start the process by going to the Strategic Investment Conference page.

But before we go any further, did you know that you can now absorb Thoughts from the Frontline through your ears, if your eyes are otherwise occupied? That’s right – our new audio service delivers my weekly letter to your cellphone, iPod, MP3 player, or computer, whenever and wherever you choose. You can check it out right here.

And now, let’s peek into my worry closet.

On Being a Professional Worrier

I should note that I am a professional worrier. I get paid to think about what can affect our economy, finances, and investments. Over the years I have become quite good at it. But the sheer volume of things to worry about has grown so much that there is not enough time to worry about everything, so I have had to prioritize.

For instance, there was a…

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J Wire

Feb. 27, 2013, 5:17 p.m.

20% of GDP.  It is the Healthcare Hog Trough.

D. Max Williams

Feb. 27, 2013, 2:40 p.m.

I am 70 years old and financially comfortable (unless hyper-inflation sets in). Last year, I had a pacemaker installed. Doctors and hospitals billed about $63,000. Insurance (Medicare Advantage plan) paid about $13,000. I paid less than $300. Conclusions:
1. Hospitals and doctors seriously overbilled if they can accept $13,300 to settle a $63,000 bill.
2. Medicare MUST means test its payments to insurers.

John Morris 1965

Feb. 27, 2013, 2:32 p.m.

I’m glad yo’re not worried about sequestration… I’ve got a 20% pay cut coming once the furloughs begin. And that’s on top of two years of pay freezes. And I was already making 10% less than my private Software Engineering counterparts. (You can believe Fox News if you want to about federal employees making twice what other people make… they’re comparing professionals to kids working at Pizza Hut… but by and large, federal workers take home a lower salary than their private counterparts.)

Say hello to recession in Virginia!

Wayne Bradley

Feb. 27, 2013, 1:50 p.m.

I live in Canada and get my healthcare from the universal system run by the provinces here.  I have a general practitioner who I like, and I can access just about as wide a variety of services that you Americans can.  I’m generally happy with what I get here.  I have no worries about insurance plans, we don’t have any.  There are some disadvantages, for instance I hear that services are rationed, but I have to say that anything me or my extended family has needed has been provided. 

Canadians as a whole pay far less than Americans for pretty comparable service, unless you are as rich as Mr. Mauldin and can afford anything.


Michael Guy

Feb. 27, 2013, 12:08 p.m.

My understanding is that the US has the best healthcare system if you have a good job or the money to pay.  If you’re in the bottom 25% of income earners it’s not good. 
I’m in Australia where I think we spend 9% GDP and there’s only a few areas of medicine where the US outperforms our system.  So from an Australian perspective the US is spending a lot of GDP for a bad outcome for 25% of the population and small gains in a few specialist areas! I would not call that the best. 
I believe 50% healthcare spending is in the last year of life.  With an ageing population there is a big problem with a larger proportion of the population entering that last year of life.  The focus will need to be on managing dying rather than attempting to preserve life at all cost.

Feb. 27, 2013, 9:57 a.m.

Since it’s apparent that our elected officials cannot keep from over-promising benefits that the government cannot reasonably expect to keep, and since voters will never elect a candidate who will keep them from having access to the public purse, it follows that it’s probably impossible to substantially change our health care delivery system.

The best we can do is tinker at the edge. One alteration I suggest is getting rid of the fee-for-service part of Medicare. That step alone will save gobs of taxpayer money.


jack goldman

Feb. 27, 2013, 9:35 a.m.

Big problem with health care is the wealthy are over charged so the poor can have free health care. This is common in business. Wealthy people are over charged, and really don’t care, so the poor can be given free charity. Someone has to pay. There is no free lunch. Free lunch means someone else pays, not me, free to me.

The real problem is the American lifestyle, meat, fat, oil, dairy, sedentary life, is the unhealthiest lifestyle on the world. It’s not the health care industries fault we eat badly, smoke, watch TV, and are fat and lazy. It is grotesque how much of our problems are self induced. Wake up America. Stop invading and killing people. Stop ruining your own health. We have the resources but most people are greedy and lazy. We have met the enemy and he is us.

jack goldman

Feb. 27, 2013, 9:30 a.m.

People confuse the US Debt, $16T with the deficit, $1.3 T. People confuse health care with health care insurance. All Americans had health care before Obama Care. Now they will be getting something they did not have, health insurance, where healthy people get to pay for something they do not use and don’t want.

The government is a far more expensive part of the GDP then health care. Health care insurance is a wasted asset, a parasite on a valuable commodity. Government wants to nationalize health care. This will only add expense so immigrants and unemployed people who ALREADY had health care will get “health insurance”.

Get the facts straight. I want health care. I do not want to pay for other people’s health care insurance.

Dallas Kennedy

Feb. 27, 2013, 8:43 a.m.

There’s no “GOP prism” going on here whatever, and John needs to stop apologizing for his views. They’re not “Neanderthal,” and not even particularly “Republican,” as the Republicans have completely failed to do anything to stop the rise of both health care costs and spending. Indeed, except for Ryan and a few others, they rarely talk about it.

Unfortunately, at this late hour, when the US federal government is head toward almost-certain bankruptcy, we’re still stuck in the 1960s on this issue, as in many others. Democrats and liberals don’t want to admit that much of the Great Society bestowed upon us by Kennedy, Johnson, and Nixon has placed the US on a path of chronically living beyond its means and opened a Pandora’s box of government paying more and more for all sorts of perverse social outcomes. Meanwhile, I keep hearing conservatives talking about some free market ideal that is a distant memory in more and more areas of American life, no less so in health care. We haven’t had a free market in medicine for fifty years or more. The rise of the insurance model, then government programs like Medicare, have seen to that. In such a world, transparency is nearly impossible.

The reality of what we live in today is a cronyistic system where powerful interest groups, mostly Democrats and clients of the Democratic party, have developed protected pricing power and direct and indirect public subsidies. Go down the list: academia, public education, medicine, law, realtors and homebuilders, Wall Street, etc. A major reason that Obamacare passed in 2010, and Hillarycare didn’t in 1994, is that the Congressional Democrats (who were the ones in actual control) were careful not to antagonize providers of expensive, specialized health care services (hospitals, doctors, etc.), which makes up about 80% of medical spending. Insurance companies in particular will be major winners, as will hospitals and other fixed centers of health care services. The losers will be pharmaceuticals and other technologies, even though they make up only 20% of medical spending. Does that seem odd to anyone? When you see former Obama health policy types heading off to work in the insurance industry, it becomes less mysterious.

In spite of fitful, sporadic attempts by Republicans in the 80s and 90s to stop the rising tide of subsidized insanity, the grip of the “blue social model” of powerful interest groups, government subsidies, and cronyism has gotten tighter and tighter since the late 90s. We have no serious political opposition in the US. That’s why only bankruptcy or the credible threat of bankruptcy will force the federal government to change. The rest is hot air.

Feb. 27, 2013, 8:20 a.m.

The problem with the cost of healthcare today is the same as it has been for decades… government involvement. Government rules involving Medicare & etc are supposedly designed to cut down on fraud, but all they do is increase unreimbursable costs. As a board member of a two county ambulance district, we had to “charge everyone the same”, even though the government only paid “50% of 80%” (ie 40%) of the bill - which did not cover costs. So in order to stay solvent we had to jack up prices so that the government paid actual costs, which left private payers paying two to three hundred percent of actual costs. Get the government OUT of the healthcare business - and watch costs go down.

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