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Healthcare Myth: We Can, and We Should, Live Forever!

We all want to live longer

It is clearly an historical ideal to live longer. We all, for the most part, desire not to die anytime soon. I am sure that for most of us it is a completely natural instinct to continue to live. We often find it morally abhorrent to want to die prematurely – like from suicide. It would be completely counter intuitive from what we know about the survival instinct, and the laws of natural selection to decide to become premature feedstock for the organisms that prey on us. Our individual desire to survive is primitive and persistent for most of our lives. And it is safe to say we have been built this way!

Google plans to conquer death.

Recently, Google, the people that brought us ubiquitous search and became known for their informal corporate policy, “Don’t be evil” – announced that they have set up a division to conquer death.  Named Calico, CEO Larry Page announced that Apple chairman Arthur D. Levinson will head up this organization.

Levinson and Page have properly reset expectations for the long term results for curing death to focusing on something a little more simple and immediate like curing cancer and other such things.  While curing cancer seems like a big deal to most, Page also said, “Curing cancer would only add 3 years to people’s average life expectancy.” Page wants to instead focus on eliminating a greater spectrum of aging problems. It may be wise to not focus too heavily and capriciously on “curing” cancer as a goal because so far cures for cancer have been few and far between.

The idea of conquering death is such a grand vision – a moonshot in Google-speak.  It takes the concept that money, science and technology can “cure” everything to a whole new level! It also begs the question, “Can money, Science and Technology really cure everything?”  A more appropriate question is, “Can money, science and technology actually cure anything?”

Can we cure everything?

Take cancer for instance, we have spent trillions of dollars, over many decades, in a quest to find a cure for cancer.  We have found some ways to treat cancer. We have found some indications that DNA – genetic markets – can give us indications of a propensity to get cancer.  We have even, more recently, found other protein bio-markers that may provide methods to detect specific types of active growing cancers, like breast cancer, in general body fluids, like saliva. Yet, we still have not found a cure for cancer. In fact, we disagree, on whether there is a single cause for all types of cancer or if there are in fact multiple cancers and multiple causes. Once thing that is clear after many decades, and many trillions of dollars, is that it does not appear we will have a cure; or even a good enough understanding of what cancer is and how it works to have a real cure, or cures anytime soon.

What is a disease?

The question, “What is a disease?” seems relatively simple. But, like most other things in healthcare, it is not simple at all. We have devoted billions of dollars and years of effort to mapping the human genome. We began the process with the idea that DNA, and the genome, would become the be-all and end-all of the science necessary to finally understand how the body, disease, and other things worked. Along the way, we have constantly felt that the single answer we needed to achieve the dream was right around the corner. But, the reality is that this has been a torturous and long city block in order to get even close to this corner. Now that we are getting close enough to catch some fleeting glimpses of what may lie beyond, we are starting to see some startling ideas emerge.  First, we are becoming aware that there may be another critical chemistry that works in the body.  While DNA is the blueprint for design, there is another tool-set at work that controls what things do and how they do them.  Dubbed the “Epigene,” only in the past few years, are we getting some glimpse of what it may be and how it might work. What we have learned is that the the reality of DNA  as the magic bullet of for diagnosis and treatment has fallen short of our early expectations.   Another of these fleeting glimpses from around the distant corner is even more startling in its ramifications. This glimpse raises questions that reach to the very core of what the definition of disease really is.

“disease /dis·ease/ (dĭ-zēz´) any deviation from, or interruption of, the normal structure or function of any body part, organ, or system that is manifested by a characteristic set of symptoms and signs and whose etiology, pathology, and prognosis may be known or unknown.”

A few of the brave researchers, who have taken a glance around the far corner, are now pondering if what we call cancer really is a disease. Okay!  I can hear many of you shuffling your papers, and tapping on your keyboard!  I can almost hear what you’re thinking “…OF COURSE ITS A DISEASE! PEOPLE ARE HURT BY IT, FAMILIES ARE DEVASTATED FROM IT AND MANY PEOPLE DIE AS A RESULT OF IT EVERY SINGLE DAY!  IT HAS TO BE A DISEASE!!!”

This is all true. We believe that anything that impacts us individually, or attacks members of our family or circle of friends is harmful and therefore it is abnormal, unnatural. We tend to perceive everything we experience, healthcare even more so, as individuals. We innately feel that whatever is good for us – and by extension, our friends and family – must also be good for all. To some extent, this idea is also just as true.  As long as we stay in the world of us as individual creatures, we can come to the conclusion that the process that causes what we define as cancer is bad for us all, as individuals, and therefore it must be a disease. This is because if, as individuals, we can all find a way to figure out how not to die from it, we will all be better off. This is an appropriate and logical conclusion based on the scale of our question.

Unfortunately, there is another scale of consideration.  One that we seldom, if ever, consider. This scale is decidedly larger than ours. This scale begins above the benefit for the individual and any collection of individuals and rises to what is actually good or bad for us as a species. This also is not just a simple measure of how things affect the species today but, how the decisions we make will also affect the species many generations from now!

Which brings us to the question of what is a disease and, if what we call cancer is really a disease.  The few brave and bold souls who have peeked around that distant corner are now wondering if cancer is simply one potential outcome from a necessary and vital process – a core component of natural selection. They wonder if the mechanism that causes cancer is a natural part of the engine that causes both death and evolutionary adaptation.

While disease and death are bad for us as individuals – and by extension for our friends and families – it is often a very good thing for our survival as a species. Death, and to a lesser extent disease, is the ultimate selection system for improvements in species viability – species robustness.  When selection pressures, like susceptibility to diseases have been artificially set-aside through biochemical means like antibiotics and drugs, the individuals who would have died or been significantly harmed, continue to thrive and reproduce.  In doing so, they are passing on the traits for the same susceptibilities of disease, and increasing the dependence on the artificial means required to fight off the natural selection process. In effect, we become more dependent on technology and artificial methods to stay alive. The collective species becomes less viable, less robust.

The more people that don’t die, the less robust we are because those who were susceptible to the disease did not get cancelled out.  This is a very hard thing to consider and the tendency is to just argue it all away.  But, it is a real issue and there is more than enough evidence that it has been happening to us for at least hundreds of years.  Today, we have dozens of hyper-resistant bacteria where we no longer have any effective biochemical treatment options.  We have numerous illnesses we thought cured that are once again rearing there predatory heads and beginning to become problematic.  We are also finding that a number of historical treatments, we once thought quite effective, have been delivering unexpected and unwanted side effects to us later in life.

It is likely that cancer, is not a disease per se, it may be more a natural process of mutation that often can cause death but in some cases provides beneficial changes that make us more robust. And, for a number of reasons, some already stated, while death is always a bad thing for an individual creature, it may not be a bad thing for the species at large.

What’s wrong with living longer?

Against the backdrop of the preceding discussion, we need to look at the effect of a significantly aging population on our healthcare system and the underlying healthcare costs. 60-70 years ago, much less money, time and resources were allocated to treating the diseases we now understand are associated with old age.  In the 1870s, when my grandfather was born, the life expectancy for his generation was about 48 years old. He, and many like him, actually lived into their 90s, yet, many also died at birth, in their early years, and into young adulthood from accident and disease – particularly from infections.

The population did not see as high an incidence of many of the diseases that cost us the most today.  We have successfully converted many of the fatal conditions of old into the chronic, and often very expensive, diseases of today.  Then, people that were susceptible to infection and disease earlier died and many fewer were able to live to reproduce. In effect, those that died were selected out of the gene pool. Those that survived were more robust – less likely to succumb to the disease or infection. Due to modern medicine, technology, and biochemical advances from Pharma and Biotech, we are now able to survive these selection pressures – diseases – and reproduce.  As a result our children now have a much higher incidence of susceptibility to these infections and diseases and we require a much higher application of medications and therapies to continue to survive.

Since we are now not dying, we are living longer and as such we are experiencing an exponential growth in the cost of care to keep us alive. As we are aging beyond the historical median life span for humans, of 45 years old, the cost of this extended survival is rapidly increasing. As we age, the natural mechanisms to check the population of the human species – diseases – increase in number and duration. Cancer, dementia, cardiovascular disease and many other age related conditions are just as likely better to be perceived as mechanisms of natural selection and population control than as diseases or anything else.

If it’s about individual survival, why should we consider cost?

This is a great question, and would have been a good one to ask in perhaps 1945.  Today, while the need for survival may be individual in nature, we long ago decided the cost of survival must be, at least in part, born by the community at large, in our case the nation.  The effect on our pocketbook has been significant.  While in 1872 people lived for 48 years on average, today we are living about 78 years. In 1872 a person spent relatively little on healthcare and that which was spent was spread relatively equally throughout their lives.

Today, 85 percent of our total lifetime healthcare expenditures will come in the last five years of life.  The average numbers are staggering.  For a person born today, from birth thru the age of 73, they will spend about $100,000 on healthcare.  In the last five years of their life, assuming they die at 78, they will spend 5 times that amount or $500,000.  As we continue to extend life, each additional year is adding massively to the end of life weighted cost. Much of our spending for healthcare is also now weighted heavily to treatments and therapies that are for improvements to our Quality of Life, not our basic survival.

We soon will face a difficult and emotionally filled discussion and decision.  If most of what we treat in old age are things we characterize as diseases, but are really the result of naturally occurring processes and species control systems, then it is likely the long term costs will be innately unsustainable. If we could find cost effective genetic methods to improve the species – assuming we will find the will to affect the changes to the genome – then there may at least be a smaller cost curve in our future. But these are both big ifs!

Regardless, in the short run, we will see continual increases in the unsustainable level of healthcare costs. We can change how we consider what is included in healthcare, we can lower our expectations and we can alter what we believe should be covered between the healthcare we actually need and the healthcare options we want. If we are willing to do this, we can buy some time to discover more about how things actually work – the science, we can develop more mechanisms to treat the symptoms – technologies and we can make a determination when direct manipulation of the genome is appropriate. If we continue on our current path, healthcare costs will consume our economy. This is a mathematical certainty.


In order to solve for these problems, we must develop an integrated solution that provides the necessary system architecture and systemic controls to address our needs for care and our wants for care separately.  We need a system that begins to provide real accountability for the cost and efficacy of care we receive from providers. We need a system that helps inform us as to the real value and results we should expect from the healthcare providers we select. And, we need a system that effectively manages our own choices between the care we need and the care we want; and, the system needs to work in a totally transparent manner to prevent cost shifting from the needs side to the wants side hiding the real cost.

We need to recognize the cost that our instinct for individual survival, combined with our own ingenuity, science and technology is having on us as a species and more immediately perhaps, as a nation. The referenced Whitepaper presents a series of solutions that help to address these issues.  The proposed solutions break our healthcare system into two markets characterized between the basic LifeCare we need for all and the optional Quality of Life Care we want for those that make the life choices to obtain it.

LifeCare is constructed to provide the care that everyone needs to survive, thrive and be productive. LifeCare is constructed to assure affordability, access, fairness, efficacy, accountability, price certainty, transparency and transportability. No networks, no deductibles, and no co-pays are needed to assure affordability, efficacy and access.  The innate approach also preserves the option for choice. Choice based services are delivered through the Quality of Life Care market. This market driven system provides the variety and value based services that people want.

Both market driven systems are tightly integrated through a single point of administration providing full easy access, comparison, and assistance.  This same single point of administration provides the integration of care between the various facilitators, providers and payers with full coordination of care and benefits to the individual user – called participants – across all available sources.  This assures that if there are alternate sources of care and funding available, everyone in the participants virtual care group is both aware of it and able to coordinate their activities to assure the best outcome. And, as an additional benefit, this approach should be able to reduce the national healthcare spend by between thirty and forty cents on the dollar.

(Thomas W. Loker is a contributor to California Political Review.)

Myth: Healthcare, It’s Good for What Ails You!

“This is the third of a series of articles that will be published over the coming days and weeks. The series of articles will define the problems, at a higher level, that we have in what we call our healthcare system, why they are important and how they have conspired to foil our various attempts to “fix” healthcare. Each article will encapsulate one, or more, related issues, describe the problem and its effect today, how it historically developed and describe the framework of the solution(s). The final article will summarize the solutions and describe their intrinsic benefits.”

Do our expectations of Healthcare match reality?

We have a large number of myths that govern our beliefs about our current Healthcare system – or non-system to be more accurate.  One of the larger set of myths that drive our perceptions of both the positives and negatives of our healthcare system are our beliefs and expectations as to what we should get from healthcare and the underlying medicine.  We believe, that modern medicine has cures for almost anything we face.  We believe that the continual research and discovery that has occupied much of the past 164 years has led to a firm and almost complete understanding of the science of disease, injury, and treatment.  We believe that there is little difference in cost between the things we need for survival and the things that we want to improve our lives.  We believe that the current methods of treatment and the discoveries we have made over the past 80 years are making us a stronger more robust species.  We believe that the doctor is typically the best and most qualified person to deliver the care we need. And we believe that in most cases going to the doctor is safe and leads to improvements in our health. These are just a few of the myths and misconceptions we have about the current state of medicine and what we should expect from our healthcare system.

Is Healthcare effective?

Doctors and the practice of medicine have come a long way since my grandfather was born in 1872. In the year of his birth America was only just beginning to understand Lister’s pivotal study on antiseptic practice – lowering significantly the incidence of infection – and the discovery of ether to provide a method for painless surgery.  But, through a good portion of his youth and young adulthood America was still dependent, and plagued, by the ills of Patent Medicines, charlatan physicians and quack medical treatments. It was not until he was well into his 50s that the first antibiotic, penicillin, hit the market. Since those days, medical education and licensing has been completely changed, science has expanded and much has been discovered. Many great strides have been taken by medicine and its practitioners. Nothing in the following is meant to call any question into the care, education, skills and abilities of modern practitioners. The information is presented not to show how poorly they do their job; but, to show that we tend to ask way too much of them, in most circumstances, and that it is not their abilities and skill that are in question, it is the state of our misunderstanding of where we really are in our knowledge of our own biology and its interactions with the world and the other species that live in it.

Beauty may be in the eye of the beholder, but good, effective, accountable care is very hard to discern, let alone find, given the myths we hold about the practice of medicine.  Let’s start with a few shockers. In January of 2008, Peter Orszag, then Congressional Budget Office director, reported to the Senate Budget Committee that more than $700 billion of the then $2.9 trillion in annual spending that year did nothing to improve a patient’s health and even produced harm.  Dr. Elizabeth McGlynn, et. al., reported in 2003 in The New England Journal of Medicine, in an article entitled, “The Quality of Healthcare Delivered to Adults in the United States,” that physicians get the diagnosis wrong about one-half of the time.  Dr. Norman Scarborough in his paper, “Medical Misdiagnosis in America 2008: A persistent problem with a promising solution,that multiple autopsy studies have revealed frequent clinical errors and misdiagnoses with error rates as high as 47 percent.  Sanjaya Kumar, MD, MSc, MPH and David Nash, MD, MBA writing in their book Demand Better! Revive our broken healthcare system (2011), found that only about 20 percent of clinical practice treatments that doctors deliver to patients are backed up by solid controlled trial evidence of effectiveness.

The effectiveness of medications do not fare any better, and in many cases they are just becoming worse.  The best historical medications, like aspirin, have typically only been able to be metabolized – chemically broken down and used – in about 68 percent of the people that take them.  Today many of the medications we are proscribed have significantly less efficacy and many more side effects than those in the past. As time has gone on, it is safe to say that Pharma has picked much of the “low hanging fruit.” The chemistries coming forward today have less effectiveness and many more side effects when proscribed through our current healthcare system. Biotech created medications offer some hope for efficacy and lower side effects but they often have problems with large scale production – unlike traditional Pharma. We are at the advent of the day when soon a pharmacist will require your genotype and phenotype – body chemistry type – to be able to dispense an effective and safe medication. 10 years ago experts in both industries were calling for a focus and development of systems to effectively deliver “personalized” medications to patients – something not supported by the current infrastructure.

So according to the real data 50 percent of the time physicians get the diagnosis wrong; when they proscribe treatment only 20 percent of the treatment actually has an underlying scientific basis in best practice; and, when they proscribe medications, at best, only 68 percent of us can actually chemically use the medication – often it’s much less. Yet, with all of the above statistics in evidence, more than 85 percent of the people who visit a doctor report that they were cured by the treatment or medications provided based on the visit.

Much to our collective dismay, unfortunately, the practice of medicine today is still much more art than science. How can there be such a large disconnect between the statistics of care and our impressions of care? We often confuse the body’s innate ability to heal itself in a given period with a beneficial effect of a visit to the doctor and the provision of their services or medications. We have been trained to believe that the doctor can cure anything and that technology has solved for all but the most deadly of diseases. We have unobtainable expectations of the ability of doctors to cure us of almost anything. Surprisingly, our expectations are not simply to cure us, but to repair us. Not simply a repair to an “as good as new” level, but to a level better than we were before we ever got sick or injured. As a result, we also have evolved to a point where, for many, our expectations far outweigh the reality of care that can be delivered. When the care does not meet our expectations, what do we do?  We sue! To combat this rising tide, doctors have evolved to proscribe more diagnostics, treatments and medications – practicing so called defensive medicine.  This has both driven costs much higher and increased the very same overuse problem that is also driving the risk of simply seeking healthcare.

Is Healthcare safe?

The Institute of Health Improvement reported in 2007, that about 40,000 times per day there is an incident of medically induced harm – about 15 million cases of medical harm per year. There are a significant number of incidences of Hospital Acquired Infections (HAIs), about 4,600 per day according to the Centers for Disease Control and Prevention (2007). Medication errors are one of the consistently deadly forms of medical error. Another Institute of Medicine report, “Preventing Medication Errors” (2006) showed that medication errors account for about 1.5 million patients harmed each year.

In their book, Internal Bleeding: The truth behind America’s terrifying epidemic of medical mistakes, Robert Wachter, MD, and Kaveh Shojania, MD describe a few of the kinds of problems people face when seeking care:

  • About 12,000 heart-attack patients are mistakenly discharged from hospital emergency departments each year because a physician failed to diagnose them as having a heart-attack or restricted blood supply.
  • Twenty percent of hand surgeons operate on the wrong hand or finger at least once in their career.
  • An estimated one out of 10,000 surgery patients end up with a surgical instrument or sponge left in them
  • Physician fatigue degrades performance. Staying awake for 24 hours is like being legally drunk with a blood alcohol level of 0.1 percent. And yet, extended-duration work shifts remain common for physicians doing their medical residencies.

Dr. Kumar, and his coauthor, refer to what they call the deadly triad of healthcare delivery: under-use, over-use and misuse, as the core to many of the current problems in effective healthcare. A 2009 report by Consumers Union, “To Err is Human – To Delay is Deadly: Ten years Later, a million lives lost, billions of dollars wasted,” by Kevin Jewell and Lisa McGiffert stated,

“Despite a decade of work, we have no reliable evidence that we are any better off today. More than 100,000 patients still needlessly die every year in U.S. hospitals and healthcare settings – infected because of sloppy compliance with basic cleanliness policies, injured by failure to follow simple checklists for safety – the equivalent of a national disaster every week of every year.”

Patients are no safer outside of the hospital setting. Most specialists report receiving no information from the primary-care physician before specific referral visits, and many primary-care physicians report not having received any information from specialists by four weeks after a specific referral. Two-thirds of the time the Primary-care doctor doesn’t have the discharge summary for a patient returning for the first visit after a hospital stay. When the discharge summary is available, they often lack information such as diagnostic test results – missing up to two-thirds of the time – and test results pending at discharge.

The IOM report, To Err is Human, cited earlier, came to the conclusion that medical error is not a “bad apple” problem and that most medical errors do not result from recklessness or malfeasance. It is also true that many times the person that is front and center in deciding the best mode of treatment, the doctor, is not the best person at all times to affect care.  Sometimes they have the least information. Sometimes they have had the least interface with the patient – in some cases never having seen them personally. And sometimes, they do not have the best background for the determination of most appropriate medications to be provided.

In all, the To Err is Human report summed up our current systems this way:

“Imagine arriving at the airport and being invited to board an airplane that is little more than a horse and buggy with jet engines attached. Yet, this is what we ask patients to do every day – put their lives in the hands of a healthcare delivery system built in a nineteenth century for the solo-practice doctor with a black bag and trust it to support teams of doctors and other professionals using twenty-first century technology.”

No wonder seeking healthcare is one of the most dangerous things you can do.   Fishermen are considered one of the most dangerous occupations with a death rate of 200 per 100,000 fishermen. Loggers experience the rate of 102 deaths per 100,000. Firefighters suffer 4.4 deaths per 100,000 firefighters. But, if you look at the rate of death from medical errors it dwarfs firefighters, doubles death rates for loggers and beats death rates for commercial fishermen with approximately 265 deaths per 100,000 patients admitted. One could begin to draw the conclusion that seeking healthcare is not one of the safer things you can do! And, one would be correct!

Does more money spent mean better care received?

In June, 2009 The New Yorker ran an article called, “The Cost Conundrum: What a Texas town can teach us about healthcare.” In it, Atul Gawande, MD made this observation:

“Healthcare costs ultimately arise from the accumulation of individual decisions doctors make about which services and treatments to write an order for. The most expensive piece of medical equipment, as the saying goes, is a doctor’s pen.”

The financial incentives in healthcare, even with the advent of the Affordable Care Act, still stimulate the provision of more healthcare services – often, as shown before, with no evidence to justify the additional services. While for a period of time, with the adoption of the so-called “managed care” model, utilization rates and costs did decline from the 1980’s to 1990’s; spending bounced back with a vengeance. America has historically had a visceral reaction when systems are put in place that restrict choice – even if they were only perceived restrictions. One of the main drivers of rising costs is rising utilization.  Rising utilization is driven by a few items including, defensive medicine, new more expensive protocols and new more expensive medications – often with little or no gain in efficacies – and the biggest factor is the rising incidence of physicians simply providing more services.

But, more spending is leading to fewer positive results.  Over the past 60 years we have trained ourselves as consumers of care to ask for more and, the providers of care have responded by coming up with many new offerings of care.  Along the way we have forced our employers to demand more of these wanted types of care to be covered under insurance and, insurers have responded by increasing plan coverage to include the additional items we demanded.  We certainly did not expect providers to offer us less care at the same time we were pressuring the people paying for services, employers and insurers, to pay the providers less in order to keep our premiums down.  Did we? When Medicare and Medicaid came into law in 1964, there were about 450 diagnostic codes governing what was provided and paid for services.  Today we are about to have over 100,000 codes for services and payments.  Who sells more products, a boutique store with 25 types of shoes, or a department store with 16,000-30,000 different products to choose from? Healthcare is in many ways no different.

One of the things that distinguishes U.S. healthcare from other countries is the sheer volume of care we consume. As an example, Shannon Brownlee, in her book, Over-treated: Why too much medicine is making us sicker and poorer, (2007) notes that we get three times the number of expensive MRI scans as the OECD average, and compared with other countries, we have many more specialists who often recommend expensive procedures or surgeries. According to Dr. Kumar, in Demand Better, in some cases the tests we spend more on are actually less beneficial.  A $20 blood-pressure test turns out to be superior to a $32,973 electroencephalography test, a $24,881 CT scan and a $22,397 cardiac enzymes test. Yet, despite the evidence, there has continued to be an explosive rise in excessive expensive tests. There were 40 million CT scans performed in 2000 and 72 million in 2007.

There is a very dangerous complication to the outcomes focus on reimbursement inherent in the ACA and many of the other current proposals. The same reimbursement system that rewards hospitals to lower readmission also stimulates them to provide more complex acute care on the front end and encourages hospitals, and providers, to get patients out of the hospital quickly.  Dr. Kumar, sum up the lessons we should learn this way:

“Spending more on healthcare delivery does not bring more quality… When you have a hammer, everything looks like a nail. Doctors are paid to keep using the same hammer, doing the specific things they were trained to do. They’re going to set a target income, and they’re never going to stop – at least until the payment (and delivery) system is radically altered.”

Overall more money spent does not equate to better care received. In fact, often the more money that is spent on care is having the opposite result because as noted earlier, the more care you receive, the higher the cost due to error.  There is also an almost perverse correlation.  The more care you receive – the more money you pay – the more errors you get – the more care you need – stimulating higher cost – more care – more error – more care – more cost…

Does our disconnection between our expectations and what can be delivered increase our costs?

The short answer to this question is obviously, yes! But, the answer itself belies the depth of the problem or the insidiousness on how these myths and misconceptions have conspired to drive up the cost in our system or damage our ability to make fixes to the system.  Further, if we do not understand these issues well, then the result will be just what we have had for the past 40 years – a series of fixes, and proposed fixes, focused on the symptoms but not addressing the systemic problems. First, and foremost, our over expectations for services, that our medical healthcare system has under delivered, has driven an ever expanding assumption that we can get any, and all, of the care we need or want, with equal weight through the very same delivery system. We also believe that we should have no increase in cost except as a result of greed, or fraud. We have so held on to the belief that the gains we have made in knowledge and science over the past 100 years have solved all the problems, we now do not recognize why our healthcare system is not working. In continuing our unshakeable faith in the myths that medicine can cure all, we have spent the past 40 years demanding continuously increasing services from our employers who paid the bulk of the bill. Employers, in turn, demanded these increases from insurers. The insurers accommodated the demands and added the increased coverage and raised premium prices to cover the increased costs and additional risks.  And who do we blame?

As this transpired over time, and the costs got more, and more, out of control, employers – no longer willing to shoulder all the expense – pushed back on the rising costs to insurers, who passed on part of the expenses back to us in the form of co-pays and deductibles. We have seen significant rise in the scope and breath of items covered. We have seen significant expansion from basic care, to include vision, dental, office visits, physical therapy, advanced medications and numbers of chronic diseases not covered under older insurance plan models.  We have also seen a significant increase in the so called “Quality of Life” covered items.  We have convinced ourselves as consumers that we can look at the care we need and the care we want with equal weight and entitlement.  As a result, as time has gone on, we have expected more care and we have assumed we could get it at the same price.  In fact, many today believe that somehow the subsidies that are being paid to eligible people are not real money.  I have had more than one person tell me it is really just a group discount that there is no money actually being paid for the subsidies.

So the answer is, yes. And, even more importantly the yes has a number of complications and multiplying effects.  It has driven us to believe that the care we get today is much more expensive than the care we got a few years ago; and that the cause is simply because of greed. We now, for the most part, blame insurance companies, pharmaceutical companies, hospitals, doctors and others.  We feel they are all getting rich, and somehow this is on the backs of the ability of us to get the care we need. There are instances of greed everywhere, and there are of course bad actors in any system. This is simply not the case in general, and if you review the last article The Plague of Myths: Myth 1 Healthcare Costs Too Much, you will see that even our understanding of the cost of care we receive is highly suspect.

Is our current practice of medicine and its delivery through our healthcare system good for us as a species?

We have a general belief that everything we receive as treatment or medications, particularly antibiotics, is good for us.  We routinely gauge the effectiveness of care based on our own personal outcomes, or those of family and people close to us. This is a fine measure in the short run and it is a good measure if we are looking at our own circumstances.  It is not necessarily a good measure in the long run and likely a very bad measure when evaluating our future as a competing species on earth.

We get infections that historically would have killed us, or caused significant damage to our ability to survive or reproduce.  We get injuries and suffer diseases that just 60 years ago would have left us dead or again severely crippled.  Today, we see the rise of many species that prey on us – like bacteria and other microbes – that are now very resistant to the drugs and chemistries that we have to combat them.  We have microbes like; Clostridium difficile (c-diff), Carbapenem-resistant Enterobacteriaceae (CRE), Methicillin Resistant Staff Aureus (MRSA), drug-resistant Tuberculosis, and a recent strain of antibiotic-resistant Neisseria gonorrhea. We do not want to forget about viruses. There was a recent discovery of a polio-like eneterovirus in California with no known treatment.

While it is easy to chalk this up to other factors, like the use of antibiotics in feedstock or the overuse of antibiotics in general,  one big factor is how we have been treating diseases for the past century.  We have effectively removed ourselves from natural selection years ago. As I said in my book, The History and Evolution of Healthcare in America: The untold backstory of where we’ve been, where we are and why healthcare needs more reform!

“The practice of healthcare, after all, is largely a war with other species (bacteria, viruses, and other complex pathogens), a war with our environment (accidents, violence, and pollution), and also a war with ourselves (diet, exercise, work habits, and sleep). From time to time, we can see gains for ourselves in these battles, but our mortality assures us that we will all eventually lose the war. Basic biology and the laws of nature have stacked the deck against us. Innovations in technology, science, and medication have helped many of us delay the day of our ultimate surrender, but these advances have also fostered the false belief that no price is too high to pay for an extra day or week of life.”

Overall, another of the bigger problems is we make decisions for the provision of care weighted almost solely to the needs and wants of the individual. While no one can argue with the heart of this decision, we may be approaching a time when we will need to also look at the effect on us as a species.  History has shown that, in some cases, what is good for us individually could very likely become bad for us as a species. There is now ample evidence to show that the mere use of antibiotics – not necessarily overuse – has led to the rise of hype-resistant strains of bacteria. The treatment of other diseases, and conditions that would have limited or prevented reproduction has increased the incidence of the very same disease or condition in the population.  These are very thorny and difficult issues that someday soon we will need to address. Some of them may need to be addressed in the decisions we make about the provision of care, and others will be those we will need to address as a society. Who among us wants to make decisions that may be detrimental and damaging to those we love? Yet, we may one day in the not too distant future have to make such decisions.

In the end, the continual trend to extend life for each of us as individuals, and to allocate more of our funds for quality of life care verses basic life care has had a very significant effect – one that we will explore in more detail in our next article.


In order to solve for these problems, we must develop an integrated solution that provides the necessary system architecture and systemic controls to address our needs for care and our want for care separately.  We need a system that begins to provide real accountability for the cost and efficacy of care we receive from providers. We need a system that helps inform us as to the real value and results we should expect from the healthcare providers we select. And, we need a system that effectively manages our own choices between the care we need and the care we want and the system needs to work in a totally transparent manner to prevent cost shifting from the needs side to the wants side hiding the real cost.

We need to rethink the delivery of the care we need.  We need to establish best practice protocols for as much of the needs based care as we can, but not in a manner that binds doctors from not exercising their own judgment or choice. We need to re-think our healthcare continuum and reallocate roles and responsibilities of care in order to provide the most appropriate resource improving access, efficacy, and cost efficiency. We need to create a representative group or peers from the healthcare continuum including patients, care facilitators, care providers and payers, housed in a national organization but appointed through the various states and territories to make the required decisions and changes to our delivery system.

This type of system can be created incorporating most of the current infrastructure. It will significantly simply many of the practical problems that plague, insurers, providers, patients and third party administrators.  It will significantly lower costs, free resources, lower liability, reduce duplication of services, reduce fraud and provide easier access. Finally, it is designed to provide full portability, transparency and price certainty so that America and Americans can make informed and accurate decisions as to the cost and resulting value for the services they receive and to effectively compare cost and performance between services, providers, institutions, methods and other nations.

(Thomas W. Loker is a contributor to California Political Review.)

Does American Healthcare Really Cost Too Much?

This is the second of a series of articles that will be published over the coming days and weeks. The series of articles will define the problems, at a higher level, that we have in what we call our healthcare system, why they are important and how they have conspired to foil our various attempts to “fix” healthcare. Each article will encapsulate one, or more, related issues, describe the problem and its effect today, how it historically developed and describe the framework of the solution(s). The final article will summarize the solutions and describe their intrinsic benefits.  

Does American healthcare costs too much?

We believe that our healthcare system costs too much.  This forms the basis for many, if not all, of the assumptions we make about what is wrong with American healthcare.  It provides the justification for the historical vilification of most of the players in the system including; doctors, pharma, insurance companies, hospital systems, patients, etc.  It provides the basic assumptions that virtually any other system in the world is better than the American system in providing care, on almost any set of criteria, as long as cost is a part of the measure. It also sets the stage for why any solution simply must be a governmental solution because – in the generally held opinion – clearly the American free market system has let us down when it comes to healthcare. But is it really true that American Healthcare costs too much?

The question is predicated on what the real question, or questions, are actually asking.  When asking a person if something costs too much, most people will have one of two deliberative responses.  The first deliberative response is, “Yes, it costs too much!” The second deliberative response we may hear is, “Compared to what?”  The problem is that neither of these responses really have a true answer.  In the first deliberative case, when asked, everyone will respond that something costs too much, typically because, emotionally, we always want to pay less.  In the rare occurrence where there is a more rational real evaluative process at work – which is not as typical an occurrence as we may wish it were – this determination is mostly due to; it used to cost less – now it costs more, and therefore it costs too much.

In the second deliberative case, we apply a variety of measures, more often than not, to prove that it does, in fact, cost too much.  We innately carry a bias to find a reason that something is not giving us the value we seek.  This has been ingrained in us as consumers. It is further complicated for us in healthcare because the numbers that we use to determine how much care is costing us as individuals, or as a nation, are often wieldy inaccurate and unspecific. As individuals, we do not have real transparent and price certain information to form a judgment. We may know what we pay in premiums, we may know what we have to pay in deductibles, we may even know what we are supposed to pay in Co-Pays but we really do not know what the doctor is getting paid, unless we pay the bill ourselves.  Further, we often have no transparent mechanism to assess comparative value, nor do we have the ability to fully understand the other hidden costs that layer in the system driving up the true care costs. Some of the hidden charges show up in the price as rebates, some show up in fees that are assessed on insurers or providers, some show up in taxes that we pay, and some show up in raises we do not get because employers decided, or are forced to, put more money in benefits costs. Some of the costs we see, we understand, are due to cost shifting from government payment shortfalls to providers being passed back to private pay patients and insurance patients. We simply do not know how much hits us individually, nor what hits us nationally.  So when we ask the clarifying question “Does it cost too much, compared to what?” we will add qualifiers like, Compared to a single payer system, or to the governmental form they have in England, or France, or Germany.  Or, we may say compared to Medicare, or Medicaid, or Romney care in Massachusetts, or to some other idea.  The problem is they are not comparable for a variety of reasons. The whitepaper address many more of them than we will in this article.

Lest you think you are alone in the dark as a patient, neither providers, nor insurers, nor anyone else knows either.  We have evolved a false economic structure for our healthcare services over the years and now we have a system that is mechanically, and in other ways, driving costs higher each cycle, making the true cost of care less transparent, stimulating the need for more hidden self-predatory and self-propagating systems to fund these spiraling costs, and these systems are requiring that many charge more to offset the other spiraling costs. If we do not know what it costs in a real and true sense, then we cannot answer the prime question, “Does American healthcare cost too much?” This is regardless of which of the former deliberative paths; emotional or rational, we choose to apply to get an answer.

Do we really know how much America’s healthcare costs?

The short answer is, NO – we don’t. We just think we know what it costs because the government produces a combined healthcare spend number that is nationally reported.  But, does the number, that is reported, actually represent what we really pay for the healthcare we consume? You guessed it, NO – it doesn’t.

The real number is likely far less than what we is reported; but getting to the real number is very difficult.  Why is it so difficult?  Well that’s because of a number of factors. A few of them are;

  1. We do not collect consistent comparable data – it includes both actual reimbursements and invoiced prices.
  2. Much of the reimbursement data that is collected, is tainted by the false economic structure in place that both influences its price and affects the reporting
  3. Some of the data reflects what is charged at invoice; but what is typically paid to providers is a significantly smaller number – averaging 22 cents on the dollar invoiced – unless you are a self-pay patient.
  4. The numbers that are calculated based on what is reimbursed to providers for the service – actually paid, not invoiced – is tainted by a number of hidden and in some cases arbitrary calculations and mechanisms that drive up the reported reimbursement price as well.

False economy – false pricing

The whitepaper has many examples of items that obscure the true price and that have created a hidden disruptive system of back funded programs and self-predatory and self-propagating pricing. Here we will discuss one of the easier examples.

Rebates exist in almost every industry and in most segments of our economy. Typically, they have little effect – other than fooling us into believing we are getting some kind of great deal and that we need to purchase today to take advantage of the saving.  In actuality, they are nothing more than a simple artifice of marketing to get us to buy now and believe we have just gotten a great buy. Of course, they are an illusion.  Manufacturers follow the practice of, “Mark up – to mark down.”  What we pay for the product is what they planned for us to pay all along.  We got the very same deal we would have gotten if rebates did not exist and in the end nothing is harmed – except our ego.

Healthcare prices invoiced are historically highly inflated to compensate for a number of other hidden charges and do not reflect a fraction of what is actually paid. The problem is there is no real understanding of what is finally paid for any of these services.  As stated earlier, invoiced rates receive actual payments of only about 22 cents on the dollar and sometimes much less.  Even the recorded reimbursement rates are inaccurate due to numerous mechanisms in the current systems. The following is just one example and this shows the effect of rebates in the nation’s pharmaceutical system’s real cost and pricing.  Simply, many levels along the supply chain get money back from pharmaceutical companies based on the volume that they purchase in a given period. Effectively, they pay more for the product at the time of sale but if they reach a certain volume of purchases, they get money back from the manufacturer. These rebates flow back to pharmacies, Pharmaceutical distributors, hospitals and others often months after the actual purchase, the dispensing and the sale of the product.  There are complicated formulas that account for how much money goes back into the supply chain post purchase.  In itself, this obscures what is really paid into the system for the product.  Rebates in true consumer market retail systems are not a problem because the price we consumers pay is the price we accept.  But when the payment is made via a government program and not based on our own discretion; and when the government is mandating rebates back to itself and then flowing the rebates to pay for the services that generated the rebate, these rebates become a big problem!  Lest we blame Pharma for this, as some method to hide pricing and make hidden profits, this is not the case.  Pharmaceutical manufactures did not create this system – our government did. The biggest players in pharmaceutical rebates are the federal and state governments who demand rebates from Pharma for the drugs their benefits programs proscribe to their program participants.

This example is of the California AIDS Drug Assistance Program (ADAP).  Spending about $500 million per year for drugs for HIV/AIDS patients that meet their eligibility criteria, since California is paying directly for the services you might assume that the true cost of the medications is the $500 million that California spent for the drugs. But, you would be wildly wrong! The $500 million is paid from three main sources.  About 50 percent of the funding is provided to California through the federal Ryan White Care Act program – a significant portion of these funds come to the federal government from mandatory pharmaceutical rebates paid by the manufacturing company to the Center for Medicare and Medicaid Services (CMS). This government mandated rebate program assesses a rebate ranging from 17 percent to no more than 100 percent of the Average Manufacturer Price (AMP). These rebates flow back to CMS months after the provision of the medication to the program participant, purchase and payment to the pharmacy that dispensed them and the subsequent processing of the claims to the state.  Of the remaining 50 percent of the $500 million, this is provided by California.  Slightly less than ½ of these funds are derived from the CA general budget (about $120 million from state taxes) the other, slightly more than ½, come from a “Special” Fund in the CA budget that is where similarly mandated rebates are paid to California by pharmaceutical companies that provide medications to participants in the CA ADAP program. Somewhere between 1/3 and ½ of the funds that are counted as payment for these medications are just artificially inflated pricing that is collected at the time of payment, flows to the manufacturer and then flows back to the state to begin the false economic cycle all over again. So, in the case of California, the true cost of the drugs provided by the Cal ADAP program to participants is at least 1/3 less than the reported $500 million number.

Similar governmental backflow funding mechanisms that generate false cost data is seen in a number of the Affordable Care Act fee structures.  When fees are assessed on the costs of premiums, and are then collected and used to pay for the subsidies in premiums you purchase, you have a similar self-propagating and expanding cost driver.   There are many, many of these structures in our current healthcare system and the ACA and other proposed legislative fixes, have not only NOT fixed them they are inadvertently adding many more layers too them. So we just do not know what we pay for healthcare in America either as an individual patient or as a nation! It’s that simple. So if we really do not know these numbers how can we determine if our system is worse than some other system? Particularly when part of the question we are asking has our inflated cost in the mix?

Is the American total cost of care number an “apples to apples” comparison to other countries?

So what is the current projected total estimated cost of healthcare for our current year, 2014? It is $3.8 trillion.  Whew, it hurts one’s head just to think about that number. Particularly, when you remember that there is only an estimated $17 trillion of currency in circulation – this is from the most generous estimates.  In 2009, we reported that we spent only $2.9 trillion.  As we described above, these are not true and valid numbers.  These are just the numbers we’ve calculated.  We have been calculating these numbers for a long time but that makes them no more accurate.  In fact, we have made a number of substantive changes to the factors that influence pricing, as have been partially described above, and as a result, it is more than likely that this number is inflated by as much as 1/4 to 1/3, or perhaps even more. The effect of the self-predatory and self-propagating factors, like mandated rebates and penalties, as well as the false structure of massively inflated invoice prices that do not directly relate to actual reimbursements, all contribute to this false economic and false understanding of what we are really spending. The problem is not just that we are comparing non-real numbers, there is at least one other problem. We do not count our system like most of the others do either.

An issue that exists in comparing the U.S. healthcare spend, let’s say against England or France, is that America counts all healthcare including Medicare, Medicaid, private pay, insurance, self-insurance, military and retail care through all channels of care. We do not have one system, we have many, and we count all of them indiscriminately and as stated, inaccurately.  Most countries with central governmental healthcare, are only counting the official governmental healthcare system numbers.  They often do not recognize that there are also private choice based systems for people that want to buy care and can afford to purchase directly from providers outside of the governmental system. These national numbers are often significantly under-reported when compared to our own.

So when we see comparisons of the cost of care in America, as compared to other countries, we are never looking at apple to apples comparisons. We must realize that the number we claim we actually spent, is not a true and accurate number. Taking all these corrupting factors into consideration, and eliminating the partisan bias on either side, it is highly likely that the U.S. healthcare system will fall in the upper third to middle of other nations as compared by cost, outcome and efficiencies. What is unequivocal is the U.S. ranks at the highest percentile for options and choice.

Once again, one of the key assumptions that drives our opinion of America’s healthcare system is that other nations measure their healthcare costs as we do, and what they report is reflective of the same things we count in America, but this is an invalid assumption as well. So when we look at comparative costs for procedures between any other country and ourselves, we are really at a loss to make an effective measure due to the problems in how we create costs and how we count the costs. This is addressable, and relatively easily fixable. And, it is a fix that systemically will combine with the other needed solutions to solve some of the other fundamental and systemic problems in our current healthcare system. They will combine in an elegant way to create a simpler and more effective, consistent, and fair approach and will solve for the goals outlined in Article 1: Introduction to the Real Healthcare System.

Another thing that is driving up our costs, are our own expectations of the care we should receive, its real efficacy, the extent of the care, and modern medicines true ability to provide to us what it is that we believe they can deliver.


In order to solve for these problems, we must develop an integrated solution that provides the necessary system architecture and systemic controls to remove the need for these extraneous and obfuscating price and funding systems.  We must set up a system where cost shifting cannot occur.  We must assure that there is no mechanism that can self-propagate and become self-predatory.

The solution for this set of problems will remove rebates and other back funding mechanisms, and will bifurcate the market for the basic care we need while delivering through a separate market the optional care we want.  One market will be incentivized to provide all the basic care we need efficiently, cost effectively and efficaciously to every American regardless of income or means equally and fairly. The other market will be designed to deliver choice to obtain the care we desire and want with a range of options of price and value based services.

These two markets should be tightly integrated and managed through a single point of administration that will allow for a truly patient centered system incorporating easy sourcing and access, transparent pricing, price certainty, and portability as well as full coordination of care and benefits across all available sources.

This type of system can be created incorporating most of the current infrastructure. It will significantly simply many of the practical problems that plague, insurers, providers, patients and third party administrators.  It will significantly lower costs, free resources, lower liability, reduce duplication of services, reduce fraud and provide easier access. Finally, it is designed to provide full portability, transparency and price certainty so that America and Americans can make informed and accurate decisions as to the cost and resulting value for the services they receive and to effectively compare cost and performance between services, providers, institutions, methods and other nations.

(Thomas W. Loker is a contributor to California Political Review.)

The Healthcare System that Squeezes America

This is the first of a series of articles that will be published over the coming days and weeks. The series articles will define the problems, at a higher level, that we have in what we call our healthcare system, why they are important and how they have conspired to foil our various attempts to “fix” healthcare. Each article will encapsulate one, or more, related issues, describe the problem and its effect today, how it historically developed and describe the framework of the solution(s). The final article will summarize the solutions and describe their intrinsic benefits.

We don’t have a system

When it comes to America’s, so called, Healthcare System, one of the biggest reasons that most of the attempts to “fix” our healthcare system have consistently yielded more unintended consequences than benefits is that we treat the symptoms of the disease not the disease itself. We have a number of misconceptions about our healthcare system and the first and foremost is that we believe that it is, in fact, a system.  It’s not!  It never has been.  What we think of as our healthcare system is really nothing more than a disjointed, tangled collection of practices, methods, procedures, policies, laws and guidelines that have been developed over the past 200 plus years.  Most of this collection of things were developed for the furtherance of one failing group or another.  Most were promulgated to preserve the business of individual practitioners – doctors, physicians, pharmacists, hospitals, pharmaceutical manufacturers, insurers, nurses, therapists, program sponsors, etc. With rare exception, many of this collection of things were not focused on the needs of the patient.

We believe that healthcare has been part of the free market, and some believe, and have even stated publically, that the free market system has failed healthcare. Yet, healthcare has never been in the free market.  Almost since the inception of America, healthcare has been carved out and in many ways protected from the effects on businesses and practices of healthcare.  No, healthcare is not a system; it is just a non-integrated set of protections granted to the various providers like doctors, physicians, pharmacists, hospitals, regional physician groups, associations and others.

In the earliest days of our nation there was a rise of what at one point were called cartels, including the AMA, the Proprietary Manufacturers Association – then they were patent medicine manufacturers, know we know them as “Pharma” or pharmaceutical companies, the ABA and many others. Each of these groups were originally formed to preserve their business practices or deal with a variety of issues that arose at the start of the nation. Some of the things they did were to create laws to preserve their positions and influence, and other times it was the government, or other groups striking back, taking actions to limit a groups control, influence or business. The result was the gradual creation of this series of disconnected practices, methods, rules, laws, etc. that have evolved into this that thing we think of as our healthcare system. And to repeat, it’s not a system.

So in summary, that thing that we call a system is really a collection of self-predatory practices and methods that promulgate massive increases in costs, erosion of effective checks and balances, little accountability and responsibility, and exponential unintended consequences to patients, providers, facilitators and program sponsors.  In addition, this non-system has spurred a belief system that is more simply a plague of myths and misunderstandings.

A plague of myths and misunderstandings

We have many beliefs about healthcare, and its underlying core of modern medicine, that have caused us to establish a set of unrealistic and unobtainable expectations when it comes to the care we receive. Much of what we believe about healthcare and the practice of medicine is wrong. We have ingrained these myths into the basic discussion of care so tightly that what we say is often obviously disconnected from what we actually mean. We speak of single payer systems, and specific cures for diseases. We routinely confuse popular beliefs or historical methods with actual scientifically backed best practice. We misunderstand the true extent of medicines capabilities. We conflate our needs with our wants and ascribe equal weight and priority to both. We have so disconnected ourselves as consumers of care that we do not truly understand the real effect of the care we receive.

We have such fundamental flaws in our care system that the simple process of seeking care is now statistically one of the most dangerous activities we can do in our lives. Some of the biggest reasons our prior attempts to “fix” healthcare have failed, actually lie in our own myths and misunderstandings. In order for us to finally create an accessible, accountable, efficient and effective healthcare system, including a safety net for all, we have to first identify, and get agreement on, these Myths and Misunderstandings and other fundamental problems. We will begin this process in our next few articles.  We believe we can do this, and we believe once we identify the fundamental problems the process may get much simpler.

We have bipartisan agreement on goals

While it has become almost hopelessly lost in the rhetoric of politics, we have had almost universal agreement on the basic goals for our healthcare system for many years.  In meetings with both republicans, and democrats whether they lean conservative or progressive they tend to agree on the following goals:

  • Available & Accessible Coverage for All (100 percent of Americans)
  • Affordable Coverage for Americans
  • Affordable Coverage for America
  • Minimum Standard of Care
  • Affordable Coverage Regardless of Pre-Existing Condition
  • Affordable Coverage Regardless of Disease State
  • Reduction of Overall U.S. Cost of Care
  • Reduction of the Individual Cost of Care
  • Ensure Coverage for the Underserved
  • Provide an Effective Safety Net

The problem has never been on the agreement of the ideals, for the most part, it has been on the methods and mechanisms to achieve them, to pay for them or their priority.  The sad part of the dialog about our goals is that none of the proposed systems can, or will, deliver on these goals. None of the proposed fixes, prior to, or since the passage, of the Patient Protection and Affordable Care Act (PPACA) will deliver what we want.  This is not to be interpreted as yet another partisan repeal or replace argument against the PPACA.  All of our prior, and post PPACA, solutions have had in their core real benefits.  It is just as false an accusation to state that the PPACA is completely flawed and offers no benefits, as it is to say that the PPACA is a great concept and will give us everything we want.  This is neither the case for the PPACA or for any other proposed legislative fixes.

One example of this double sided coin is the argument about the PPACA fixing the problem for people in the past that were not able to obtain insurance due to preexisting conditions, or the corresponding problem of people getting sick only to be cancelled. There has been great benefit for many who have significant chronic illness who were unable to gain insurance. But the method, codified in the current law, does not really gain them the affordable insurance they think they are getting as many are finding out. This is not just an issue for the PPACA. It is also an issue for all the other proposed fixes.

While it is true that many are now able to get the care they need, truly a benefit for them as individuals, there is a compounding problem even for those that are gaining care they need. The mechanism that has been implemented to get them care and to minimize the impact of the additional cost of these “sicker than average” patients on their insurance plans – often driven by some form of group, either employer based or geographic – the law has allowed the creation of high risk pools and the payment to the patient, or the insurer, of subsidies to offset the much higher premium cost due to the accumulation of all of the really expensive sicker patients into one group. Once again, this has been good for the individuals, but as we will explain in a later article, combined with other methods in the law and in our current system, this is having very bad effects overall.  Again, we are not attempting to argue against the PPACA here. This is just an example of one small part of a regulation that is combining with other parts of the current thing we call the healthcare system that is spawning large unintended consequences in many areas.

We believe that these fundamental problems can be fixed and that we can develop an integrated set of solutions that will address all of the problems we face and deliver on each and every one of the original bipartisan goals. But, we think there are other systemic goals that need to be part of any solutions.

Systemic goals

While working on the Whitepaper to identify and address the fundamental problems, we also identified a number of additional systemic goals we think must be ingrained in any resulting healthcare system that we describe.  We have developed our set of solutions to address the historical and current issues and to provide the simplest and most effective system to achieve the following additional goals:

  • Deliver on the promise of available, affordable, effective and easily accessible care  covering basic health needs for all (100 percent of Americans) – LifeCare Plans
  • Provide integrated choice driven, available, effective and accessible care covering the additional services that Americans want – Quality of Life Care Advantage plans
  • Assure a cost effective, fair, and easily accessible Safety Net for all Americans
  • A solution that converts “Patients” from inactive recipients of ineffective health services, to active Participants in the selection, management, delivery and prevention of care.
  • Assures price certainty, cost transparency, and full care portability
  • Require No Deductibles, no Co-Pays, no hidden fees – all cost easily defined, certain and accountable
  • Provide full cost disclosure for all parts of healthcare, no hidden reimbursement systems, no rebates and no self-propagating cycles that obscure full and true cost
  • Assure coverage regardless of pre-existing condition or disease state
  • Deliver a system with checks and balances that select for reduction of overall U.S. cost of care as well as reduction of the individual’s cost of care
  • Allow no government “Death Panels” instead provides a representative citizen group of participants, facilitators, providers and sponsors that are empaneled to determine what constitutes basic health needs, treatments and therapies and establishes effective payment rates for providers under basic LifeCare Plans
  • Assure appropriate, effective, and efficient delivery of basic health needs
  • Effectively balance care outcomes expectations to healthcare’s ability to deliver effective services.
  • Deliver the ability to seek the provider(s) of their choice
  • Transform employers from the provider and manager of healthcare through Employer Sponsored Insurance to focus on wellness and prevention and act as a facilitator to help employees both afford basic health needs, LifeCare plans and effectively plan and save for Quality of Life Advantage services.
  • Improve Participant outcomes
  • Integrate any market based solutions by providing a single system of resources for Participants, Facilitators, Providers and Sponsors to fully effectively coordinate all care and benefits needed by Participants across all available sources. This system should:
    • Provide Participants
      • a central place to identify and register their care needs
      • automatically apply for all benefits with a single dynamic entry system
      • source, review, compare and select Facilitators and Providers
      • manage access to their information and provider network
      • provide access through a true Participant centered system between all Facilitators, Providers and Sponsors with adequate security, information needs and access controls
      • Match all needs to all appropriate and available resources in a least cost tiered method approach
      • Assure checks and balances to inform, enforce and secure privacy controlled interactions among their virtual care team.
    • Provide Facilitators
      • An effective and low cost system to assist Participants in sourcing, applying and accessing all needed resources.
      • A mechanism to appropriately identify appropriate payment resources by matching the participants needs to Sponsors registered program eligibility criteria
      • A systemic mechanism to identify potential Provider and Sponsor conflicts and areas of potential duplication of services and benefits
      • Mechanisms to help identify and report fraud
    • Provide Providers
      • An effective and low cost system to appropriately match their services to Participants needs
      • A mechanism to assist in establishing fair, effective and competitive pricing.
      • Improved ability to manage patient mix and reallocation of services to other Providers
      • An efficient and effective way to identify, qualify and integrate their services with additional Sponsors to expand the opportunity for payment.
    • Provide Sponsors
      • Effective and low cost system to identify and integrate Providers with the Sponsor’s program Participants via a much simpler and drastically lower cost model.
      • A fair and effective system to eliminate duplication of payments due to the unknowing duplication of services by Providers
      • An effective mechanism to identify and reduce or eliminate duplicated payments due to fraud and abuse
      • An effective mechanism to manage the provision of multiple services by multiple providers through multiple programs with effective balancing of roles responsibilities and cost
      • Allow for new ways to spread cost of services via;
        • Balancing of payments across all eligible programs
        • Payer of last resort systems
        • Negotiated share of cost settlement
      • Innate validation of most comorbidities across Provider sources
      • Eliminate the Silo Effect

As we move through each of the fundamental problems in our historical and current system we will make sure that we incorporate these systemic goals into what becomes our final integrated set of solutions.  With this as background, we will start with one of the myths that plagues each and every discussion we have about our American healthcare approach. This myth, more than most of the others, not only provides the basis for our basic discontent but also provides the framing that support both ideological extremes.

(Thomas W. Loker is a contributor to California Political Review.)

4 Straight Years of Slowing Health Care Costs: Really?

U.S. Marks 4 Straight Years of Slowing Health Costsso blasts the headline from ABC News on January 7, 2013. Like so much of the debate over Healthcare reform, many that read the article will walk away believing that things relating to healthcare costs are really improving—along with the economy. After all the article proudly says that the percentage that healthcare costs make upon of the Gross Domestic Product (GDP) has declined for the fourth straight year. This must be a good thing—one would think! But, like so much of the reporting on the ACA and healthcare costs it is based on flawed logic, false numbers and bad assumptions.

The article and its assertions are false in at least two material ways. First, the article makes the assertion that America spent $2.8 trillion in 2012. Yet, it is difficult to believe this number for a couple of reasons. One is that the government is not consistent in reporting it.  Recently this number has been reported at over $3 trillion and as is now typical with almost all government reported numbers, it has been revised either up or down depending on what is the better message for the administration–by coincidence I am sure.  Second, the number is false.  It is false because the total number spent is based on inconsistently reported data. Some of the data is actual reimbursement for services provided, and some is for the amount invoiced.  While the reimbursement amount is closer to reality, in some cases it includes government mandated rebates from companies, like pharmaceutical companies, that can be as high as 50% of the price paid—so these numbers are often not the net costs.  Also, the invoice price data is not close to the real amount paid as most of the reimbursements for invoiced (billed) prices in healthcare are paid at the average rate of 22 cents on the dollar. So, the total healthcare spend number, as reported, could be inflated by as much as 1/3 over what was really spent in the U.S. When the article reports the average cost of care for citizens of the U.S. it is reporting the average cost for this inflated number.  The cost is likely much less, and more likely much closer to what is spent in other developed countries.

The bigger issue is the representation that the ACA has bent the cost curve down as percentage of GDP. This doesn’t pass the smell test either for easy to see reasons.  First, how does a law that is only now actually implementing in 2014 get credit for bending the cost curve downward in 2010 just because it was passed?  Sure, there were many “initiatives” that the President took on when he was first elected but none of these substantively altered the mechanisms of the need, delivery, invoicing or reimbursement of care that is how the costs are derived in the system.  Second, is the assertion that the U.S. economy is now rising faster than healthcare costs. It is in this statement that the rudiments of the fraudulent truth are found.  The GDP in terms of dollars in circulation has risen significantly since 2010.  But by how much the real value of the economy has risen is subject to much debate.  The rise in GDP is less based on productivity and more based on the Quantitative Easing and other extraneous mechanisms the government has used to inject new, baseless money into the economy.  By a number of estimates, the Federal Reserve, and the current administration, have injected between 4 and 6 Trillion dollars of new money into the economy. This has been done either directly through bond issue, or bond repurchase, borrowing or through back channels like increasing access to new currency for lending to banks. Increasing the amount or currency in circulation 20 to 35% massively inflates the economy and the GDP and, of course should show some reduction in the percentage that healthcare costs reflect of the GDP. The fact that the cost reduction is a measly 0.1% is some indication of how high the health care costs have continued to rise since 2009 if a 20-35% increase in total currency has only equated to a 0.1% reduction in the percentage the cost reflects of the GDP.

Also, for most Americans it is clear that the economic recovery as reported is not translating into more buying power for the middle class in fact but, may seem so in appearance if you just look at the reported dollars. We are constantly told the stock market is doing great and rising as if this in some way is a measure of the U.S. economy, but it is not.  The stock market is speculation based on feelings for the most part.  And, when the government of the United States, profligately creates massive amounts of new currency and injects it into the economy—via the stock market through quantitative easing or other mechanisms—of course the stock market values will rise just like the GDP.  And, this rise is likely not based on any increase in production, or real value of work product, in the country but, mostly on baseless new currency. So, this too is a false indicator.

In conclusion, perhaps it is mathematically true that the economy is rising in dollars, and it is also true that the cost off healthcare, as calculated, has declined by 0.1% in the past year. But the questions of; why this is happening and what is this change based on, are not going to yield the answers that we are expecting or that we are being led to believe. In the end we are in for a massively rude awakening.

(Thomas W. Loker is a contributor to California Political Review.)

Value Based Insurance: It Sounds So – “Valuable”

Value Base Insurance Coverage, it sounds so — valuable. But is it really valuable? Is Value Based Insurance Coverage (VBIC) what you really want — what you may need? Well, perhaps, that simply remains to be seen. As we move through the implementation of the Affordable Care Act, ObamaCare, VBIC will become the next big thing we need to pay close attention to. You can be sure that soon this item will be getting quite a bit of ink as the potential ramifications become apparent.

Like so many things in life, the reality of this “value” based system may be fraught with unintended consequences for the individual and massive values and benefits for hospitals, providers, insurers and the American government’s own pocket book. As has been seen repeatedly before, when these incentives are so stacked against the consumer, choices become limited.

While we have all heard the disingenuous dialogue over the ACA’s “Death Panels,” this is more the reality of what we can expect under ObamaCare. While insurance will now be broader in scope and cover many more diseases, conditions and treatments, the extent of coverage, location, provider choice and the options one will be able to find for treatment are where the real limits will be.

One of the main drivers for the rising cost of care is not the coverage that insures “Life” (survival), it is the coverage we increasingly demand for our on-going “Quality of Life” care. The large majority of the things that get paid for under insurance, and a significant piece of Medicaid and Medicare are no longer processes to keep us alive, but procedures to help us have a better quality of life. Most of these are not areas that in the long run will meet the coming “Price/Value” test for approved care. More and more of these procedures will be where we will find the expense is going to come out of our own pocket. And, as this number grows, a larger and larger percentage of the cost will shift from some other payer — i.e. the federal government, or other members of the insurance pool — to our own Health Savings (HSA) or bank accounts. This is one reason people are seeing the disheartening rising deductibles in the new health plans. We just can’t afford to pay for every procedure for all people; so either we limit the number of people or we limit the extent of the care they can get. Since we cannot socially stomach the idea of someone not getting care because of lack of money — regardless of the personal reason — we will be forced into a system that is limiting the kinds of care, or options, that we can receive under the societal dole.

In the, not so distant, future, you just may find that the cancer you have will still be removed under your health care plan, but the extensive remediation or cosmetic/reconstruction may not have the required price/value calculation and won’t be covered. That transplant you want, or that knee replacement, given your age is no longer cost justified under your insurance plan.  You will be welcome to pay for the procedure out of pocket, and likely out of the insurance network, if you choose and if you have the cash, or a private policy.

One thing to note is that there is a limit on what you can bank in your Health Savings Account.  As VBIC becomes our new reality, perhaps it’s time to demand a change to the current lifetime contribution limit mechanism — from a total of $3,250 for a single person and $6,450 for a family —  to an annual contribution limit but no life-time cap. Maybe then we can pay for the things that we will no lover be eligible for under the VBIC system. As of 2013, the U.S. Treasury Department modified the prior “Use it-or-Lose it” rule and now graciously allow you to carry over up to $500.00 in your HSA per year. Not much help as we age and find fewer and fewer VBIC coverage options to maintain the quality of life we desire. You would think the government, “for the people” doesn’t really want you to have these options given these limits and the coming VBIC system of reimbursement. Maybe its time that “we the people” remind them that the government is also “of the people and by the people”, and demand this change.

In the end, mostly due to the math, this VBIC outcome is a certainty, the question simply becomes when it happens, not if!

(Thomas W. Loker is a contributor to California Political Review.)

The ACA Exchange Poster Child

California, has long had the reputation as being one of the most progressive, or liberal, states in the nations. Often in a neck and neck battle with New York over who gives more free-stuff to its people at any given time, California long ago adopted the philosophy that what is good for some, should also be good for all. The concept of income redistribution though higher taxes is not a new one for California residents.  Yet this state, nicknamed “the Golden State,” and home to Hollywood, Biotech, Oil and Silicon Valley fortunes often confounds because there are also strong anti-tax forces that from time to time rise up and limit California’s spending power through measures like Proposition 13. California is home to so called crazy liberals, like the younger version of Jerry Brown, nicknamed “Governor Moonbeam” during his youthful term, and conservatives like Ronald Regan.  Perhaps the best example of California’s bifurcated nature is the current incarnation of Edmund G. “Jerry” Brown.  While starting life as a strong progressive liberal in his first term as governor, his experience after those years, including a very successful term as Mayor of Oakland, re-forged Governor Brown to a more pragmatic leader.

California, will never be Texas, Mississippi, or Wisconsin.   California will always be a place that while not completely unfriendly to business will be one of those places that simply cost more to build a business and employ people.  California will also be a place where federal programs like the Affordable Care Act, the ACA, or Obamacare, will be readily embraced by a significant percentage of the population; either as a result of their socio-political beliefs and willingness to let government provide for the less fortunate or because they are themselves the less fortunate who either want or desperately need the access to the wealth of others in order to survive. The ACA exchanges are another example of California’s progressive bent. California was one of the first to begin development of their exchange and was one of the first to have their exchange up and operating.  As a result of this aggressive committed approach, California’s exchange system, called Covered California, has been touted as the shining example of success of ObamaCare exchanges. The good thing is the data systems work much better than the federal exchanges! But as you will see in the interview below, they are not perfect.

I have a friend, we will call him JB, who is well ensconced in the high tech industry. He is not a partisan in any extent of the word.  He is one who excels at what he does, has been an entrepreneur a few times and is well versed in the vagaries of developing systems, the difficulty of launching new sites and new products and recognizes that things do go wrong. So he has the background to expect some difficulty and to not be unreasonable in his demands and concerns. He has been attempting to sign up for insurance since the October launch.

Here are excerpts of our recent discussions.

TL: I understand you are embarking on an adventure to get insurance under the new mandate, tell me a bit about what made you start of this journey.

JB: This all started when I received a notice  from my current insurer that my policy did not meet ACA minimum standards and that they were not going to participate in the California exchanges, and the company was not going to offer individual insurance in California in 2014.  They said that they might come back into the market in 2015 depending on how the exchanges go, etc.

I initially signed on for an account on CoveredCA in the middle of October.  There was a lot there.  My current plan cost me $1733/month and had pretty low co-pays for doctor visits, drugs, etc. and about a $5000 out of pocket maximum before they paid for everything.  I’ve been pretty happy with the plan for the last two years and it has covered quite a lot of expenses for me and my family.  What I found was that to get a plan that was “close” to my current plan in the way of copays and day-to-day coverage that I was going to have to buy a “Platinum” plan.  The problem was that the premium was going to increase from between $2100/month to $2300/month depending on which plan of the 4-or-5 that I picked.  In addition to the increase in monthly payments I would also have to absorb an increase in the out of pocket max to $8000 and “moderate” increases in copays (i.e. a primary doc visit went from $20 to $25).

(Author’s note: This gets confusing between all the numbers and JB’s experience is slightly below than the average but, the average total annual health care cost for a family of four with all premium payments and costs added, through the exchanges with no subsidies, now is topping $17,000 per year)

To get a plan that was similar in cost I had to drop back to the “Silver” level.  But at this level there are very large increases in copays to $45 for a primary care visit, large deductibles and a massive increase in out of pocket max to $12,700/year. 

I looked at dropping back to the Bronze plans but the difference in monthly cost didn’t justify the lower coverage especially given my health care consumption history over the past two years.  I would have easily consumed the monthly difference if my day-to-day usage were the same as last year.

TL: You told me you modeled the costs can you tell me what you did to get a handle on this?

JB: To help figure this out I downloaded from my current provider the two year history of my health care consumption.   I then put these into an EXCEL sheet and used that sheet to predict what my costs with the Silver, Gold and Platinum plans would have been if my health care consumption was the same as last year.  I also modeled if I had a “catastrophic event” what it would be.  The results were that if I choose the Silver plan  over platinum I save roughly $4000/year if my consumption stays the same and it will cost me about $1000 more for the year should I have some kind of “big” event.   So the Silver plan was the obvious choice for us.

TL: How difficult was it for you to get the information and create your own model?

JB: That took me the first two weeks to get all of the data, build the model, etc.  This was actually pretty easy.  The “window shopping” on the CoveredCA website was pretty good, they had rough estimates of cost that I could use in the models and my current provider was good enough to give me access to the data from the last two years.

Then came the fun.  I created my CoveredCA account, started to do the application process.  It was overwhelmed with errors.  Things like, text not rendering right on the screen, things overlapping on the screen, links that go to places that don’t exist or “you don’t have the privilege to go here” etc.  The web site was clearly not ready for prime time when it went live.

TL: This is consistent with what I have heard from others.

JB: As you know, I have been in tech for my whole life so I’m familiar with these kinds of startup glitches but let me tell you some of the weirder things:

The site asks you to upload a bunch of stuff as part of the application.  Copies of your driver’s licenses for all in the family who have them, school IDs, proof that your insurance was cancelled, and a few other things.  What’s interesting is as part of this process I had to upload a copy of the letter from our insurance company for me, my wife and each of the kids.  One would think that one copy of the letter would be sufficient but that was what the site wanted. 

The upload process was also fraught with errors.  I had to upload about ten documents.  After every 2-3 the site crashed, I was kicked out, I had to log in from the beginning, answer a bunch of questions that I already had answered and then could upload the next 2-3 only to find it crashing again.  But, after a lot of time, effort and irritation I did finally get through that and got the documents loaded.

At some point during the process I must have typed a wrong password a couple of times and my account got locked.  This was somewhere around the third week of November.  I have yet to be able to get back into my account.  There is no password recovery process, all I get is a box that says “you are not authorized to log in.” 

TL: Did you call on the phone and speak to representatives?

JB: I’ve spoken to people on the phone, I’ve chatted in the on-line chat and have submitted email requests but no one can resolve this issue. 

The phone system is a joke.  When you call the line is busy.  If you actually get through the wait times are ridiculous.  At some point they stop counting how long your wait will be and tell you that your wait will be “more than 30 minutes”.  There is no call-back mechanism and no way to schedule a time to talk to a human.   In all I called 4 times, my average wait time was about 40 minutes with one wait as short as 27 and the longest about 50 before a person answered the phone. 

The chat system is even worse.  I experienced the chat system counting down from my starting position at 200+ in the queue to the point when I was next and then it responded “there is no one to talk to you” and ended the chat.    This did not just happen once, it has happened to me at least a half a dozen times.

I have submitted two email tickets, both were followed up with an email telling me that someone would call me within 2 days.  I have yet to receive a call.

TL: So what was the nature of your prior plan?

JB: My prior plan was a COBRA plan from United Health Care that I was intending to convert to a new plan in the exchange. While my first visit to the exchange was distressful, I want to note one thing, there is one positive that came out of this process so far.  The EXCEL modeling that I did showed me that I was “over insured” in the past.   I was paying higher premiums to get low copays but given my actual consumption I would have been much better off with lower premiums and a higher copays.   The process, because of the massive sticker shock on an equivalent plan, forced me to take a good hard look at what I was buying. 

TL: So how is your quest for insurance going now?

JB: My odyssey continues!

I have had two major issues with CoveredCA in the last month and still don’t have health care.  The first is that for some reason the CoveredCA folks treat your tax status different than the IRS.  As an example, it asked if I claimed my wife as a dependent and if we filed married/joint.  I answered yes to both.  Bzzzt, wrong.  If we’re filing jointly then she is not a dependent.  That caused all kinds of errors.  

TL: Now that’s an interesting interpretation! Tell me more about the process did it get easier?

JB: Not Really, Other questions expected nice exact answers.  For example, a surprising question, “How much will you make next year?”  As someone who is running a startup that has not been funded, I have no idea.  I can guess but they want you to swear under penalty of perjury that you’re telling the truth.  That makes me nervous.  And the answers make a difference.  

TL: I can see why, they would make me nervous as well. Tell me more about your odyssey.

JB: Second, somehow the system decided that my wife and I, and my one son, were in an ACA plan and my other son was to go on MediCal.  No one can figure out which question we answered that made that decision for us.   That’s NOT what I want, I want the kids to have the same doctors so that we don’t have to manage the paperwork for multiple places.  That is in the system with a trouble ticket that hasn’t been resolved as of 11/26/13.

TL: Have you found out what caused this problem, and more importantly, have you gotten your son back on your family policy?

JB: I still have no idea how my son ended up on MediCal, but on one phone call we discovered the wife-as dependent thing, that I told you about earlier.  That could have done it, but in one of the rare occasions I got to speak to a person on the other end of the phone, they call kept telling me that this should not be happening.  They changed more things in the application (since I could not get in) and eventually it went away.  But, I never was informed of that they changed that fixed it so I have no idea what the problem was.

TL: What else happened?

JB: Third, and this is the best.  I somehow got locked out of the system.  If I try to log in it says “you are not authorized to log in” and kicks me out.  No chance to recover or reset my password, just a message to call the number.  I’ve called at least a half dozen times, I have 6 open trouble tickets, I’ve waited on hold for at least 5-6 hours, and no one has been able to resolve my issue.  I have asked that my account (1) be unlocked so that I can use the existing password, (2) my account be unlocked and the password reset with a new one with a link sent to my email of record and (3) that I be able to create a new account.

TL: So, have you been able to create a new account?

JB: No, It would not let me create a new account since I’ve already used the SSN that I have.  But, a person who I did get on the phone said there is a way to create a new account and link it to the old one but the “access code” that the web site asks me for is “not able to be generated at this time.”  So, I have not been in a position to fix the account myself.

TL: Amazing!

JB: Meanwhile I go onto their online-chat to talk to people, I get in line at #272, wait 45 minutes until I get all the way down to #2 and then it gives me a message that says “no one is able to handle this call right now,” with the option of leaving an email (that goes unanswered) You can’t call, if you do you get a busy signal, and even when you do you get it to ring and get connected, you have to wait nearly an hour.  It’s a damned mess.  And, California is supposedly the shining star of the web sites.

TL: Well, for what its worth, I hear from many others in Washington DC, and elsewhere in the country, that the Federal Exchange, and most of the other states exchanges, are much worse.

JB: I am incredibly frustrated.  My former plan ends on 12/31/13, there is no way to renew it because not only did my former company’s insurance company not continue to offer my plan, they chose to not offer ANY plans in the individual market in California for 2014.  Oh joy.  

TL: Well that kinda blows the myth that if you like your plan you can keep it.

JB: My latest trouble ticket has a call back by 10:00 am on 12/10.  I’m not holding my breath.  Update: JB says they never called.

This was a follow up e-mail I received from JB later in the day!

JB:  By the way, I spent an hour and a half on the phone today, one hour of it actually talking to someone, and got signed up for a CoveredCA plan.  The guy on the phone says that a typical call lasts between an hour and an hour and a half, but since I had done some of the work before being locked out I was on the light side. They still don’t have a way to re-enable my account so any changes I want to make I’ll have to call. –Absurd!

This was from a later e-mail exchange.

TL: In the end what conclusions have your drawn about this system given your experience, background and needs?

JB: In the end I think that the best solution for this health care crisis is allowing people to contribute pre-tax money into a healthcare spending account that continues to roll over into the next year as long as there is money and then offering catastrophic/high deductible insurance.  This allows people to even out the cost of their day-to-day healthcare, small high-cost events through the spending account and prevent people from going broke if something really bad happens.   What we have built with the ACA is high premium plans that are essentially a catastrophic policy (with high out of pocket costs) with a prepaid health care plan.  This ENCOURAGES over use, i.e. I already paid for it so I’m going to go use it, which the system can ill afford.


While JB may not be typical of the Covered California experience—we will never know, because these details are not published—they are much more typical of the experiences in many other states and in the federal exchanges.  Lest people begin the inevitable retort, “But, the exchanges are improving rapidly and the Affordable Care Act is bringing benefits,” please refrain.  The debate will not resolve.  Clearly, the ACA, ObamaCare, is bringing significantly lower premiums to people who gain subsidized care.  It is driving significantly more people into MediCaid.  The ACA has already had a major impact on the dialog over what is good healthcare.  What the ACA has not yet done is lower the cost of care of most of American’s, lower the aggregated cost of care for America as a whole, improve the quality of care for Americans or provided us yet a roadmap how we will gain from this legislation.  It may do this and it may not.  Proponents remain optimistic and critics skeptical, although some proponents have moved into the skeptic category.

In the end, the debate is moot anyway. What started as the Affordable Care Act, as it is now being implemented is only a shadow of its legislative self.  Its stated goal, “as the path to a Federal Single Payer System,” now seem extremely remote, its goal to eliminate disparity of care has already had the opposite effect driving many practitioners and hospitals, estimated now at over 50%, not just away from Medicare and MediCaid but insurance based reimbursement as well. Many who now have moved into the world of “retail” medicine?  The cost for the larger “insured” population, including Medicaid & Medicare, will soon cause significant restrictions not in the breadth of diseases covered, but in the extend of coverage.  Fewer doctors, fewer hospitals and fewer prescriptions covered will be just one part of the formula to lower costs.  The next shoe will not be “death panels” it will be limits to treatment.  You have breast cancer, no problem. We will remove the lump or breast!  Reconstruction is not an option in your plan. You have a suspected prostate cancer, we will put a watch on the mass, at some point maybe do a biopsy, and when we are sure it is cancer, and it will kill you before you die of natural causes, we will remove the prostate.  If you want incontinence therapy or treatment for erectile dysfunction you can use your Health Savings Account.

These are not suppositions nor is this an attempt to scare people.  It is just the facts as they are unfolding. We will be forced to make such decisions or these decisions will get made for us by economic collapse.  It is little more than the interplay of exponential math of population growth and the linear, additive math of support services required.  The math has been known for centuries and it is inevitable.

(Thomas W. Loker is a contributor to California Political Review.)

Inferno: A Coming Global Crisis?

Light Summer Reading

In his latest book, Inferno, author Dan Brown explores a world where past symbols and artifacts from Dante Alighieri’s Italy, and his famous work The Divine Comedy, become the vehicle to unravel a diabolical and deadly plot of a modern day bio-terrorist.  I originally grabbed this book because we were coming to the close of summer and I just finished working on a series of articles about the current issues of our healthcare system that will be appearing later this fall.  Frankly, I was looking for a diversion from the complicated world of healthcare reform and Obamacare. I wanted a respite, a brief mindless romp in Dan Brown’s always entertaining world. Having read much of his prior work, I was confident that Mr. Brown would not let me down.

I found this work characteristically suspenseful, interesting, thought provoking and fun to read till I got to the following section which, in the story, lays the groundwork for the epic conflict between the antagonist, Bertrand Zobrist , a world renowned biochemist and leading geneticist and the protagonist, Elizabeth Sinskey, M.D., the head of the World Health Organization. Once again Robert Langdon, Harvard Iconographer plays the supporting but critical role as co-protagonist in deciphering the clues and keys to the mystery.

“I’m a biologist. I save lives … not souls.” says Dr. Sinskey.

“Well, I can assure you that saving lives will become increasingly difficult in the coming years. Overpopulation breed far more that spiritual discontent. There is a passage in Machiavelli—”

“Yes,” she interrupted, reciting her recollection of the famous quote. “’When every province of the world so teems with inhabitants that they can neither subsist where they are nor remove themselves elsewhere … the world will purge itself.’ She stared at him.  ‘All of us at the WHO are familiar with that quotation.”

“Good, then you know that Machiavelli went on to talk about plagues as the world’s natural way of self-purging.”

“Yes, and as I mentioned in my talk, we are well aware of the direct correlation between population density and the likelihood of wide-scale epidemics, but we are constantly devising new detection and treatment methods. The WHO remains confident that we can prevent future pandemics.”

“That’s a pity.”

Elizabeth stared in disbelief. “I beg your pardon?!”

“Dr. Sinskey,“ the man said with a strange laugh, “you talk about controlling epidemics as if it’s a good thing.”

“She gapped up at the man in mute disbelief.

“There you have it,” the lanky man declared, sounding like an attorney resting his case. “Here I stand with the head of the World Health Organization—the best that the WHO has to offer. A terrifying thought if you consider it. I have shown you the image of impending misery.” He refreshed the screen, again displaying the image of the bodies. “I have reminded you of the awesome power of unchecked population growth.”  He pointed to his small stack of paper. “I have enlightened you about the fact that we are on the brink of a spiritual collapse.” He paused and turned directly toward her. “And your response? Free condoms in Africa.” The man gave a derisive sneer. “This is like swinging a flyswatter at an incoming asteroid. The time bomb is no longer ticking. It has already gone off, and without drastic measures, exponential mathematics will become your new God … and ‘He’ is a vengeful God. He will bring to you Dante’s vision of hell right outside on Park Avenue … huddled masses wallowing in their own excrement. A global culling orchestrated by Nature herself.”

“Is that so?” Elizabeth snapped. “So tell me, in your visions of a sustainable future, what is the ideal population of the earth? What is the magic number at which humankind can cope to sustain itself indefinitely … and in relative comfort?”

The tall man smiled, clearly appreciating the question. “Any environmental biologist or statistician will tell you that humankind’s best chance for long term survival occurs with a global population of around four billion.”

Four billion?” Elizabeth fired back. “We’re at seven billion now, so it’s a little late for that.”

The tall man’s green eyes flashed fire. “Is it?”

Not light summer reading after all!

The last question posed by the antagonist, Bertrand Zobrist, moved this light summer reading into my more day to day realm with a vengeance. While in the story, Zobrist embraces the writings of Robert Malthus, a famous 18th century economist and demographer as justification that society’s successes in effect will lead to its own downfall, during my research on The History and Evolution of Healthcare in America, I saw similar trend lines due to the current methods and practices we have in healthcare focused on the persistent and increasing drive for unlimited extension of life spans. It is now quite obvious that we are becoming weaker as a species, while at the same time the pathogens that pray on us are becoming quite a bit stronger. Infertility rates in our population are increasing. Deadly super-resistant strains of bacteria like Methicillin Resistant Staphylococcus Aureus (MRSA), Streptococcus Fasciitis (Flesh Eating Bacteria),  E.Coli, Carbapenem-Resistant Enterobacteriaceae (CRE),  Klebsiella Pneumonia. Pseudomonas Aeruginosa, Clostridium Difficile, Salmonella, Mycobacterium Tuberculosis, Neisseria Gonorrhoeae and many others have evolved over the past seventy years and are now testing the limits of our antibiotic defenses. Any recent read of articles in the paper about people having multiple limbs amputated, spending months in the hospital post-surgery recovering from hospital acquired infections and of those who have died due to highly resistant new infections show that these microbes are often winning the battles. Further, it is also quite clear that the cause of both trends are the mechanisms—bio-chemical warfare; antibiotics, antibacterial creams, fertility medications and other drugs—we use to treat disease, stay alive longer and reproduce.

So I found it interesting that Zobrist chose his prime advisory as Dr. Elizabeth Sinskey, the head of the WHO. He chose her, and the WHO, because he came to the conclusion that it was the artificial methods of modern medicine that has so skewed the population’s mathematics that in order to offset its “negative” effects on the species due to unlimited growth, he would have to effect his diabolical plan to ultimately save mankind. I also realized that many, if not most, who read this book will simply believe it is completely a work of fantasy. Most will believe this is neither a risk nor is it possible.  Yet, it is likely both possible and probable. I also wonder if we are already seeing the kinds of population controls as predicted by Robert Malthus’s theory come into effect.

Mathematics of Thomas Robert Malthus

Wikipedia notes, “The Reverend (Thomas) Robert Malthus FRS (13 February 1766 – 23 December 1834) was a British cleric and scholar, influential in the fields of political economy and demography. Malthus himself used only his middle name Robert.

Malthus became widely known for his theories about change in population. His An Essay on the Principle of Population observed that sooner or later population will be checked by famine and disease. He wrote in opposition to the popular view in 18th-century Europe that saw society as improving and in principle as perfectible. He thought that the dangers of population growth precluded progress towards a utopian society: “The power of population is indefinitely greater than the power in the earth to produce subsistence for man”. As a cleric, Malthus saw this situation as divinely imposed to teach virtuous behavior. Malthus wrote:

That the increase of population is necessarily limited by the means of subsistence,

That population does invariably increase when the means of subsistence increase, and,

That the superior power of population is repressed, and the actual population kept equal to the means of subsistence, by misery and vice.

Malthus placed the longer-term stability of the economy above short-term expediency. He criticized the Poor Laws, and (alone among important contemporary economists) supported the Corn Laws, which introduced a system of taxes on British imports of wheat. His views became influential, and controversial, across economic, political, social and scientific thought. Pioneers of evolutionary biology read him, notably Charles Darwin and Alfred Russel Wallace. He remains a much-debated writer.

Malthus argued in his Essay (1798) that population growth generally expanded in times and in regions of plenty until the size of the population relative to the primary resources caused distress:

“Yet in all societies, even those that are most vicious, the tendency to a virtuous attachment is so strong that there is a constant effort towards an increase of population. This constant effort as constantly tends to subject the lower classes of the society to distress and to prevent any great permanent amelioration of their condition”. —Malthus T.R. 1798. An Essay on the Principle of Population. Chapter II, p 18 in Oxford World’s Classics reprint.

Malthus argued that two types of checks hold population within resource limits: positive checks, which raise the death rate; and preventive ones, which lower the birth rate. The positive checks include hunger, disease and war; the preventive checks, abortion, birth control, prostitution, postponement of marriage, homosexuality and celibacy. In later editions of his essay, Malthus clarified his view that if society relied on human misery to limit population growth, then sources of misery (e.g., hunger, disease, and war) would inevitably afflict society, as would volatile economic cycles. On the other hand, “preventive checks” to population that limited birthrates, such as later marriages, could ensure a higher standard of living for all, while also increasing economic stability. Regarding possibilities for freeing man from these limits, Malthus argued against a variety of imaginable solutions, such as the notion that agricultural improvements could expand without limit.

Of the relationship between population and economics, Malthus wrote that when the population of laborers grows faster than the production of food, real wages fall because the growing population causes the cost of living (i.e., the cost of food) to go up. Difficulties of raising a family eventually reduce the rate of population growth, until the falling population again leads to higher real wages.”

Clearly, the esteemed Reverend Malthus was probably the life at parties!  He was controversial during his life and many have debated his work for centuries. Still, many questions remain and empirical observations during our own lifespans should also raise many questions. We have been most recently focused on the popular question as to mankind’s direct impact on global warming. This is may be very relevant and highly important but it is by no means likely to be the most relevant or important factor of our potential demise. We are spending a great deal of time debating whether or not a significant part of global warming is due to our activities. But, it is very likely that while our activities are having some measurable effect, this could be, in the long run, something over which we have the least amount of control!

Is this possible?

In Inferno, Mr. Brown includes a chart of a number of activities and trends. He attributed the chart in the story to WHO. I can’t find any specific chart at the WHO website , or on the internet, as displayed but I can find a number of studies, by WHO and other organizations, that show similar trend-lines for the data compiled in the chart. Of course the message is clear and startling.  In the story, Zobrist, points out that demand for clean water, global surface temperatures, ozone depletion, consumption of oceans resources, species extinctions, CO2 concentration, deforestation, and global sea levels have been on the rise for over the last century and now are accelerating at terrifying rates.  He uses this data to bolster his argument as to why, as he says later in the story,

“Dante’s hell is not fiction … its prophecy! Wretched misery. Torturous woe. This is the landscape of tomorrow. Mankind, if unchecked, functions like a plague, a cancer … our numbers intensifying with each successive generation until the earthly comforts that once nourished our virtue and brotherhood dwindled to nothing … unveiling the monsters within us … fighting to the death to feed our young.”

Another character in the story, a brilliant physician, scientist and mathematician named Dr. Sienna Brooks, tells Robert Langdon,

“Robert, look, I’m not saying Zobrist is correct that a plague that kills half the world’s people is the answer to overpopulation. Nor am I saying we should stop curing the sick. What I am saying is that our current path is a pretty simple formula for destruction. Population growth is an exponential progression occurring within a system of finite space and limited resources. The end will arrive abruptly. Our experience will not be that of slowly running out of gas … it will be more like driving off a cliff.”

Zobrist believes that the path to our own destruction due to the efforts to cure the sick, to allow more infertile to have children and efforts to stop the rise of population thinning epidemics like the plague of old have already pushed the world beyond the tipping point and only some drastic action will reset our destiny. This may seem exaggerated but there is a lot of reality buried in this work of fiction.

Possible and likely

Having been focused on the issues of population dynamics and more particularly the role of the current system, protocols, practices and therapies in the continual rising cost of care, there may be much more reality here than we want to admit. Driving much of our increases in cost of healthcare are the following factors:

  1. Our continual drive to live longer is increasing the average life span – currently between seventy-five and eighty-three years old depending on the study
  2. Increasing levels of infertility, driving increased use of therapies and artificial means to artificially facilitate conception is expanding the incidence of infertility
  3. Widespread use of antibiotics and other therapies are increasing our susceptibility to infections and diseases due to increasing sensitivity to infection
  4. Continued use of stronger and stronger therapies to treat pathogenic diseases have created stronger and stronger generations of pathogens to infect us
  5. The expansion of our average life span has moved our lives into a framework where we are more susceptible to diseases and much less able to fight them off, easily recover and strengthen our immune system. This is increasing our dependence on technologies and artificial means to maintain quality of life in our later years, drastically increasing the cost of survival and cost to maintain the desired quality of life in these years.
  6. New medications now come with increasingly sever and more prevalent side effects. The low hanging fruit of drug discovery has been picked. Now we have more potent and more deadly drugs with significant and severe side effects. Increasing the cost of treatment under these new medications. It will not be long until we will need full genotype and phenotype profiles for a pharmacists to dispense a therapeutic for fear of adverse reaction. Again increasing costs often with less efficacious treatments.
  7. Recent gains in technology and medical advances have led to the perception that we now have cures for almost everything. This has created a significant reality gap between expected outcomes and what can be delivered. As such, our demands for unrealistic outcomes have fostered expectations of near limitless costs of treatment.

Overall, what this means is that therapies will become less effective, and more expensive as we become weaker as a species, subject to a wider array of deadly pathogens, and less able to reproduce without expensive technology and interventions. This is one of the big reasons healthcare costs are rising. Further exacerbating the problem is that during the same period that the earlier wonder drugs and technologies were coming on the market, we began to expect much more in terms of care. We have had a drastic cultural shift from simply hoping for survival to expecting an uninterrupted and near infinitely sustainable quality of life.

At the same time we have exponentially compounded these effects by becoming more conditioned to expect to get more, and more, stuff that we desire but, that is not necessarily geared for our survival. We now expect to have multiple telephones, multiple televisions, multiple automobiles, fine foods, expensive drink, sweets, vacations, drugs, entertainments, and many other non-essential items our grandparents and great-grandparents would have scoffed at.  We now have convinced ourselves that these prior luxuries are now not luxuries at all but are in fact integral to our survival. We believe this now so strongly that we have demanded government programs that all but guarantee the provision of many of these items to people that can’t earn enough to pay for them themselves—like programs to provide free cell phones. This is not to start an argument as to why someone simply must have a phone or, why it is an unfair society that allows for one person to be able to afford the phone and another not! This is to begin a dialog about why these superfluous arguments may be diverting our critical attention from the difference between paying for free cell phones of paying for our own survival.

In the end, the premise of Mr. Brown’s Inferno, is not only possible it is likely already happening.  Many recent events are already showing us strong indicators that such mathematical problems are here at our doorstep.

The needed difficult discussion

The healthcare data today is overwhelming that we have reached a tipping point in our pursuit of increased life span.  Today, we already see that the cost to pay for care in our later years is quickly predatory on most of our earlier years of life and increasingly predatory on all the succeeding generations that will follow us.  In a nut shell, we are now in a position that if we expect to pay for the technologies, therapies and medications we will need to survive in our last few years, we will have to save most of our money throughout our earlier years.  Given the current numbers as to our health expenses in the last years, we really need to work in those earlier years not to save for retirement, or to save to put children through college, or to provide a basic inheritance to our children or grandchildren. We need to work all of those earlier years just to save enough money to pay for the goods and services we will need to survive the onslaught of diseases and illnesses we will face if we want to live that last five or ten years.

The numbers in today’s world work this way. On average we are spending about $8,233 per year of our lives on healthcare related expenses.  We are living, we will use the more conservative estimates here, to an average of seventy-five years old. We will spend about 80% of all the money we will spend in our lifetimes on healthcare related items just in the last five years of our lives. So using these governmental statistics, validated by a number of other organizations, we will spend on average $98,796.00 from our birth to the age of seventy in healthcare services, we will spend an additional $493,980 from the age of seventy to seventy-five, for a total average lifetime healthcare expenditure of $617,475. No matter how you look at this from an individual perspective, it is a staggering number being spent in order to gain five more years! Who among us really wants to do a fiscal calculation on time with our Grandmother Mable, or Grandfather George? Do we really want to have a discussion about how much we would be left with if mom or dad died at seventy? How our kid’s college could be paid for if? Of course not! None of us want to have this discussion.  Instead, as these intrinsic pressures have begun to build, we have developed societal methods to offset these rising expenses and forestall such discussions.

There is little disagreement that we all want good healthcare, even though we can’t agree on what healthcare is let alone what good healthcare is composed of. There is also no disagreement that we want a safety net to provide care for the helpless and the most fragile among us. There is also no disagreement that we want to filter out the clueless and the worthless (fraudsters) but, there is a great deal of discussion as to where we should draw the line for covering the helpless. There is a lot of debate about what we expect from care. Many of our expectations are unattainable, and driven by pervasive and popular myths of what healthcare and modern medicine can deliver. In the end, these are to a great extent superfluous. They becomes irrelevant to the more important determination of where basic ‘Life Care’ (that which we need for survival) stops and ‘Quality of Life Care’ (that which we want) begins.  If the totality of the mathematics are so tilted by the equation of end of life costs, another key question soon will become who should get free coverage and who shouldn’t. How much would we save in provision of care if we made a determination that all safety nets have a hard stop point based on societal value as opposed to personal and family values? Do we make determinations as to the extent of care that is provided in certain age ranges? If we do, then how do we establish the limits?

These are horrible, heart wrenching and personally scary questions to consider! None of us want to contemplate saving money with not keeping a loved one alive longer. Yet, as Robert Malthus found out, the discussion gets know easier when you begin to contemplate the societal benefits and costs.  If the individual calculations are staggering, the societal calculations are mind altering. We have about 37 million Americans over the age of seventy-five. In their last five years these citizens will cost America $7.3 trillion, $ 1.4 trillion per year, in healthcare to keep them alive. I say America, because regardless of whether the money is spent by the government or by the individual it will come from somewhere in America, either through years of savings by the individual, years of paying insurance premiums, or years of taxes. And ultimately, as we keep pushing the trend line of average life span longer, and longer, and a larger and larger part of the population become elderly, the percent spent in the last few years will continue to rise. In a way, it is Robert Malthus’ theory in practice and Bertrand Zobrist’s worst nightmare.  It portends an outcome that even the famed iconographer Robert Langdon can’t unravel.

So how did the aforementioned antagonist Bertrand Zobrist plan to rebalance the societal, biological and economic situation?  Well you will need to read the book to find out. Suffice to say it was a horrific, diabolical, and deliciously evil. It was also, at least in the context of the story, a potentially effective action. Additionally, in light of the other real-world complications, it was not a viable solution. You see, it is not simply the rising population that is affecting us. It is the entirety of how we are dealing with the myriad issues, biological, medical, and economic in the first place. The fixes will take many, increasingly difficult, discussions. Discussions that we still do not seem inclined to begin.

Zobrist’s solution, while horrific, was relatively simple and effective. So what did you expect me to say; that the action that was described in the story was immoral, and unethical?  Unethical and immoral it may be but, it is in the dichotomy of this completely immoral and unethical set of actions, by our current mores, and the pragmatic discussions of the solutions we may need in order to change the Malthusian prediction that we will likely begin to find the answers we will need. All this in the context of a discussion we just do not want to have!

(Thomas W. Loker is a contributor to California Political Review.)

Medicare Trustee Warns Against State Expansion of Medicaid

With the passage of the Affordable Care Act, California is well on its way with the expansion of Medicaid. Gov. Jerry Brown stated in a release June of last year that the Supreme Court ruling “removes the last roadblock to fulfilling President Obama’s historic plan to bring health care to millions of uninsured citizens.” But Californians should be wary of the governor’s open embrace towards expanding Medicaid.

Jason Hart discusses in an excellent article how Charles Blahous, a Medicare Trustee, warned states of the dangers of expanding Medicaid.  Blahous concluded that states “all appear to face one common, powerful incentive arising from the court’s ruling: to decline to cover childless adults at or above the FPL [federal poverty line] under Medicaid.” He makes many of the same arguments that I have been making for quite a while, but his warning, as a Medicare Trustee, may finally cut through the background noise and get some people to actually pay attention. The full report by Mr. Blahous can be found here.

Mr. Blahous reminds me of Wilbur Mills, who was the recognized congressional expert on Social Security during the administration of President Lyndon Johnson in 1964.  Mills initially strongly opposed the expansion of Social Security proposed by Johnson and warned that optimistic cost estimates fell short of realistic expectations. He believed that, in the long run, the cost of such programs could not be contained and would eventually bankrupt Social Security, a program he also felt was not sustainable.

Mills soon bowed to political pressure. As the Chairman of the powerful Ways and Means Committee, Mills eventually delivered the bills expanding Social Security to include Medicare and Medicaid to Johnson.  In a recorded call to President Johnson, Mills, then-House Speaker Carl Albert and Wilbur Cohen (architect of much of Social Security and Medicare legislation) said,

“…I think we’ve got you something that we won’t only run on in ’66, but we’ll run on from hereafter.”

Mills continued to warn about the risks to the economy of the program, but in the end, he rationalized that it would be good for the Democratic Party. He argued that Social Security itself was not sustainable and that the expansions would bankrupt the country.  Mills was correct in his analysis, although his time frame was optimistic.  He projected that Social Security, Medicare and Medicaid would cost only $12 billion by 1979.  But by 1979, the total federal cost of the Social Security Acts (including Medicare and Medicaid) topped $1 trillion (in 2010 dollars). And it is important to note that Medicaid is both a federal and state program, and federal costs represent only about one-half of actual expenditures.

The rest, as they say, is history!

(Thomas W. Loker served as the Chief Operating Officer of Ramsell Holding Corporation. Prior to joining Ramsell, Mr. Loker was the founder and senior partner of Wild Tiger Holding Company and Thomas Loker Consulting. Visit his website at and his blog at

The President’s Plan — and What It Means for You

In the State of the Union speech, President Obama offered a real plethora of programs, benefits, stimulus, taxes and other things that he believes will improve the lives of Americans — or, at least, some Americans. But the sheer breadth and depth of the items the president wants to spend money on is appalling. He offered programs for immigrants, college students, environmentalists, women, minorities, the elderly, the sick, the middle class, teachers, the unions, the poor, the underserved, the military and just about every constituent he could think of, with the exception of two main classes: evil corporations and evil rich people. While not offering a “chicken in every pot”, he offered just about everything else to someone or something.

Though there were many incongruities in this speech relative to our current economy, at one point, President Obama said he wanted to attract private capital.  And this is perhaps one of the best areas to discuss relative to this plan and its promise of prosperity for most, but not all Americans. The president was clear; he said he wanted to attract private capital to invest in America. Throughout his speech, Obama spoke of America and its need to grow the economy, and specifically, manufacturing.  He spoke at one point like an entrepreneur on “Shark Tank” pitching America: The Business. But, few, if any, investors would invest in a business where costs are many multiples of the norm for production in other businesses and where the amount of debt, cumulative interest and liabilities far outweigh the businesses’ ability to pay the investments back.

The problem with all the items he presented in his speech lies not in the heart of President Obama. Clearly, his heart is the ruling body of his being. He desperately wants to “give” certain American’s equality. But he does not equate this “giving,” under his concept of redistribution to the effect of his plan’s “taking” from others. His view of the American dream seems to be different than that of the view of at least half of other Americans and perhaps now–if instant polling during the speech is any indication–after last nights speech his view may be different than even more than half the nation.

America’s issues are not that it does not tax enough, nor are they that there are people in need who don’t have what others have. Americans are starting to understand that the solution is not in trying to redistribute the wealth to those who don’t have it. We are starting to get an inkling that there is a fundamental economic problems which neither of these methods will solve.

It might work to redistribute wealth if our “Business” (America) was growing, productive and profitable, but it’s not. We really don’t have the wealth any more in the first place. We live on borrowed money, and that which we have not borrowed has been created from the printing press we keep in the back room(Federal Reserve & Banks). We have created many new industries and technologies in the past 70 years, but despite this creativity we have, as a nation, purchased in excess of $13 trillion more than we have created and sold to the world. In effect, our wealth is not only non-existent, it has been buried under a huge amount of false valued cash and debt, with interest now accumulating on top of that.

What investor would put their hard earned money into a business that pays its employees higher wages than it can generate in cash from its sales? What investor would put money into a business who offers mortgage assistance to its employees while making no profit nor a foreseeable one anytime in the future or, who bases the value of its business on the very debt the un-payable mortgages create in the first place? What investor would invest in a business, who continues to increase the salary and benefits to its workers and lets almost 15% of them stay at home and not work? What investor would invest in a business who spends money it doesn’t have to send people to unlimited education when what is needed is skilled labor for more manufacturing or raw materials production?  What investor would watch a business who made its economic engine sing because for years it successfully “tracked” its youth into either technical skill education or college based on aptitude, then abandoned this practice because it was not seen as “fair” forced the closure of its tech and trade schools, and now wants to invest to recreate the very system it abandoned? What investor would invest in a business that has significant internal materials and energy assets it refuses to use to generate revenues or power its “Business” because a minority of the employees (citizens) don’t want to use them?

The answer is, none! One can’t fault the president’s heart. It is in his head that it seems to be where the problem lies. Cognitively, it is likely that he really does understand that his speech was littered with fiscally conflicting statements. He has to know that we can’t regain our prosperous manufacturing base with costs that are so out of control. He does know we are now in a one world economy.  He has embraced this concept and helped tie us even further to this mechanism. The president even announced in his speech last evening an initiative to help other countries where the poor workers are only earning $1.00 a day. Yet he does not equally understand the problem facing us, in trying to regain our prominence in manufacturing, is that these very same workers will work for only 1 dollar a day while our workers cost on average $85.00 per hour all in.

While I applaud the President’s heart, he needs to go back and engage his head–we all do!

The Story of Sam

I have said this before many times, but it needs to be said again. The middle class is being crushed, not by the avarice and greed of the rich, but by the economic and political system we have evolved into. As more money is printed out of thin air to pay for increased entitlements, the poor get subsidies that help them keep pace, the rich have excess assets to hedge against the reduction in buying power, and the middle class get neither the subsidies nor the hedge. They just get screwed.

Increasing the amount of people who get subsidies doesn’t help because it increases our national (“our Business“) costs higher than those of others in the world who are more than willing to survive without the benefits that we demand. Welcome to the one world economy! So, they will manufacture the widgets we want at significantly less cost and lower prices than we are willing to do.  We will buy their widgets and they don’t buy ours. And finally, as the government spends more, and more, of the newly printed or borrowed cash directly in entitlements like; Social Security, Medicare and Medicaid, or other subsidies, the positive increases to the economy are more than offset by the loss in buying power. Further, an increasing part of this cash never shows up in our accounts so our apparent wages decline over time as the government directly subsidizes the costs.

Sam’s Simple Math

Let’s say you (Sam) have 160 ounces of gold and, for the moment, let’s say that you can’t get any more gold. You only have 160 ounces and that’s it. You and your neighbors have agreed that instead of carrying around the heavy gold, you can each print paper that you can use to pay your bills. They recommend that you print one piece of paper (Sam’s Dollars) for every ounce of gold you have. You can print more if you want to but, the face value has to be equal to the number of paper bills you print divided into the ounces of gold you have. So if you have 160 Sam’s then each will be worth one ounce of gold. If you print 320 Sam’s then they are worth only a half-ounce of gold each. Wisely, you initially follow others and print 160 Sam’s.

After a few years your family wanted more stuff, and you decided to print more Sam’s to help them get what they want. You give your wife four extra Sam’s because she is a good wife and keeps a good house. You give your son four extra Sam’s because he takes out the trash and mows the lawn every week, and you give your daughter four more Sam’s because she makes the beds and helps with the dishes. No one is really using the gold anymore, so who cares. Your family looks up to you and they deserve the things they want. So you print sixteen more Sam’s and give them to your family. They go out, buy their stuff, and you can also argue this is good for the neighborhood economy. Soon though the vendors begin to notice there are more Sam’s in the market and they raise their prices 10% to capture them. You now need more Sam’s to support the stuff your family bought with the new Sam’s you printed, so you print 16 more Sam’s. Again the vendors catch on and raise their prices 10%. Then, the same cycle again, you print more Sam’s, they raise prices and then again, and again.

Your wife has been accumulating more stuff than the other wives, and she wants to invite them over to see it and have a party. But to do this she won’t be able to clean the house and make the food. Since she has saved some of her extra Sam’s, she hires a cook and a maid. This is going to cost more than she has saved but each month or so she has been getting more Sam’s anyway. So she reaches what she thinks is the logical conclusion that the increases in Sam’s she sees will keep growing—so there is really no problem with the extra expenses. Her income will rise faster than the expenses come online.

Your son, always more frugal, has saved some of his Sam’s and is paying the neighbor’s kid to cut the grass and take out the trash because he wants to spend more time playing on his new big screen TV’s video games. And your beautiful daughter is now more beautiful from the tanning salon she goes to and the hair extensions and new clothes that the additional Sam’s she is gaining each month pay for. She simply doesn’t have enough time to make the beds and do the dishes and stay beautiful so when she asks you for more Sam’s to increase the maid’s hours to do her chores as well, you oblige because you want her to see you as a good dad and because you do not want her to lose her self-esteem by being embarrassed in front of her friends. So you just print more Sam’s and everyone stays happy…

But soon, the market has a whole bunch of Sam’s and its getting more costly just to buy the things you really need to live. Your Sam’s are worth so little you don’t even have enough to buy the paper to print more Sam’s. Fortunately, the paper vendor will sell to you on credit so you can buy more paper and print more Sam’s but in exchange for the credit he wants one Sam’s in interest for every ten Sam’s of credit he extends. So now, instead of printing sixteen more Sam’s you just print seventeen Sam’s and he gets the extra Sam’s. But each month you have to pay him  one Sam’s. And you really have to print a lot of Sam’s just to keep up with the rising prices. The more Sam’s your family has gotten for the basic things they want, the less they are willing to do the things they used to do to get them in the first place. Your wife doesn’t do any work, your son plays all the time and your daughter spends all her extra Sam’s on going out with her friends.

You can’t stop printing the Sam’s or they will get upset with you and you will be a bad father because they will lose all the things they really love, TVs, nice food, hair extensions etc. And if you’re seen as a bad father by your neighbors, or you can’t p[ay your accumulating debts as you have had to get other vendors to give you credit, your own self esteem will suffer, and that you just can’t have. You’re spending so much time printing Sam’s you don’t have much time for anything else. There are so many Sam’s in the town now that others are equating the value of their own currency to Sam’s. Fred down the street now says he will give you one Fred for seventeen Sam’s. Last month you could get one Fred for just ten Sam’s. Your son, always the bright one, starts trading his Sam’s for Fred’s because in a week he can buy more with the Fred’s as the Sam’s devalue.

Soon, you have so many Sam’s printed you spend more to print the Sam’s than the original gold was worth. And since you keep having to buy more paper from the paper vendor to keep pace, and the Sam’s keep devaluing, you now owe the paper vendor more than you even have if you add up all the Sam’s you have ever printed. And since you have been printing just enough extra Sam’s to pay the interest, you can’t even borrow enough to buy the paper to print the Sam’s you need to pay the paper vendor.

What are you, Sam, going to do?

You, Sam, are clearly in a pickle! What are you going to do? You thought about going and getting a job working for Fred, but you need to get paid 16 Fred’s for every hour you work in order to keep your family happy and just pay your bills, not including what you owes to the paper vendor others on your spiraling credit lines. But when you make your offer to Fred, pointing out that you are the best printer in the neighborhood, Fred laughs at you and says, thanks but no thanks. Jim, Bob, Mary, and Eustis, down the street will work for one half of a Fred per hour—by now that’s equal to thirty-five Sam’s–and while they may not be the best, I just can’t afford you and your high falutin’ ways.

So all along while you thought you were just printing Sam’s in effect you were taxing your family.  You gave them more money but they just bought less.  And the interest was building behind the scene as was the principal of the debt you were creating.  Printing more money did not equate to any more gold (value).  And your effect on the neighborhood was not positive as you originally thought, you have gone a long way to destroying their fortunes as well as you now will default on their bills, in the end devaluing their own, Fred’s, Jim’s, Mary’s and Eustis’s as well.

Sam’s dilemma

Sam realizes he has a big problem. What is poor Sam to do? He can’t sell anything to anyone else because his costs are too high. He can’t stop printing Sam’s or his wife will leave him, his son will go on a rampage and is daughter will get depressed and loose self-esteem and his neighbors will likely come and lynch him, make his family pay off the debts, or if he is lucky or otherwise very persuasive, perhaps they will just take away all his stuff in partial payment and outlaw the creation of Sam’s.

It’s a big pickle, don’t you know!

(Thomas W. Loker served as the Chief Operating Officer of Ramsell Holding Corporation. Prior to joining Ramsell, Mr. Loker was the founder and senior partner of Wild Tiger Holding Company and Thomas Loker Consulting. Visit his website at and his blog at