Belmont Club

Poor In a Cave of Wonders

The Center for American Progress notes without embarassment that in an age where stuff made by the greedy people has gotten cheap, the services provided by the well-intentioned are driving everyone to the poorhouse. The AP writes: “A study by the Center for American Progress shows just … for a typical married couple with two children, the combined cost of child care, housing, health care and savings for college and retirement jumped 32 percent from 2000 to 2012 — and that’s after adjusting for inflation.”

What’s interesting is that prices have been diverging over time.  Many things have gotten cheaper with the years while some have gotten ruinously expensive.

The figures help explain why many Americans feel stressed even as the economy has strengthened — and why some feel bewildered to hear that overall inflation in the United States is, if anything, too low.

From TVs, computers and cellphones to clothing and cars, many goods have dropped in price in the past decade. Those declining prices have helped keep overall inflation historically low — even lower than the 2 percent the Federal Reserve thinks is ideal.

Yet when you consider that average health care and college costs rocketed more than 80 percent from 2000 to 2012, it’s easier to understand why many families feel they are struggling.

Computed inflation has been depressed  by measuring the items that have cheapened, even though the total cost burden is disproportionately increased because of services that can only be described as overpriced.  A professor divided the universe of living costs into the necessities and the luxuries and claims the luxuries have gotten cheap. “An overseas colleague characterized the situation well: America is a place where the luxuries are cheap and the necessities are expensive,” said Joseph Cohen, a sociology professor at Queens College in New York.” But that’s not quite true.  Nearly every physical object we buy today is so much more value for money than its counterpart 10 years ago.  It’s the services that have gone up in price.  The other way to divide the cost universe is between the competitive and the rigged.

Take health care for example. A hospital may be a place of healing but its accounting department is often a den of iniquity. Recently the newspapers ran with the story of $117,000 unforseen hospital bill.

An unexpected medical bill of whopping USD 117,000 came as an extremely unpleasant surprise for a New York City bank technology manager who has undergone a neck surgery to get his herniated disks repaired in December last year.

Being a banker, Peter Drier, had done a good homework on his insurance coverage and medical expenses prior to the surgery but a fat bill from an assistant surgeon was a big shock for him.

Drier was well-prepared for the medical bills from the surgeon, the anesthesiologist and the hospital as they all were covered under his insurance plan. Besides, all three would accept their negotiated charges. But the additional fees charged by the assistant surgeon were out of network of the insurance coverage.

Drier’s medical insurance firm, Anthem Blue Cross Blue Shield, had agreed to protect him for the unexpected out-of-network bill saying that it was not his fault and he is not liable to pay the assistant surgeon cost as they will cut a cheque for the total amount of the bill for him.

The moral of the story here is: have insurance because the insurer — or better yet the government — will pay the $117,000 so you don’t have to!  In reality, not even the government  knows what it is paying, even when it pays it. Take the case of Miami-Dade who will not be told what they are being billed for by their own insurance company.

Last year, Miami-Dade County employees, retirees and dependents cost the county’s health plan about $2.25 million for medical procedures that fell under an obscure-sounding category called “major joint replacement or reattachment of lower extremity,” according to AvMed Health Plans, manager of the county plan.

But even though at least eight hospitals provided the service — which could range from a hip replacement to reattachment of a foot — no two hospitals were paid the same amount.

The average payment varied widely — from $12,644 at Memorial Hospital West in Pembroke Pines up to $37,622 at Doctors Hospital in Coral Gables. Even among hospitals next door to each other, the average payment was significantly different: $29,978 at University of Miami Hospital but $13,475 at Jackson Memorial Hospital across the street. …

AvMed won’t divulge the rates on the grounds that they’re proprietary and confidential. That means Miami-Dade officials never get to see precisely how the insurance company spends more than $400 million a year to pay healthcare claims for nearly 60,000 employees, retirees and dependents.

“Propriety and confidential”. In other words, secret. As Doug Schoen at Forbes says, it’s a setup. “Fundamentally, what makes healthcare costly is a wildly unregulated and noncompetitive insurance and payment system that is rigged against the average American. ObamaCare and its regulations has only made the system less competitive and, in the process, even more obscure for the average person.”

Since the consumer doesn’t directly pay the hospital, only the vast insurance system, most transactions are between huge impersonal medical centers and equally cyclopean insurance companies. The patient is just the pretext for the transaction, the name on the document. That allows hospital billing departments to charge astronomical amounts from eyeless bureaucracies  for something that would be radically cheaper even at the hospital across the street.

When it isn’t the insurer paying, it’s the government who’s footing the bill. As John Merline of Investor’s Business Daily noted the government pays 46% of all medical bills.  A million here, a million there, so what?  In fairness to hospitals one reason they have to charge the insured patient all the freight will bear is they have to treat the other patients down the hall, some of them not even legal residents, whether they can pay or not.  Put it all down to fairness, social justice and SEIU.

To a certain extent that’s the way the educational system works too. The colleges are paid by borrowed money — say $100,000 to get a degree in gender studies — and nobody has to worry about paying for anything either, just as with the insurance company.

Until later.  Because what they never tell you is later always comes, whether in the shape of higher insurance premiums, or  student debt that never gets discharged, the calendar is a b***h.  Business Week headlines: “Student Debt Collections Are Leaving the Elderly in Poverty”, which would be funny if it weren’t so tragic.

We live in a world of cheap 21st century gadgets yet are in hock to expensive institutions run by people from the 19th century. That is why despite all the scientific and manufacturing progress people struggle to pay for their health care, children’s education and similar services.  All the dirty, rotten profiteering stuff has gotten dirt-inexpensive.  It’s the humanitarian stuff that’s killing everyone.

A survey by market research firm Penn Schoen Berland shows that Americans are missing the obvious solution. Why not let government pay for stuff like health care?

When asked, just 37 percent of people in the United States said that’s the government’s job.

While that was the top single answer, a total of 50 percent said that insurance is either the responsibility of “individuals” or of “corporations.”

In contrast, an average of 65 percent of people in other developed countries said health insurance should be provided by their governments.

And an even stronger majority gave that answer in countries with emerging economies—an average of 72 percent.

Unfortunately Penn Schoen Berland neglected to ask respondents: “where does government get the money to provide all that free health care?” The obvious alternatives are a) from the taxpayers; b) from the printing press and c) from China. If you say b) then congratulations.  You may, like Paul Krugman, apply for the Nobel Prize. Most of us are too dumb to figure it out.

One commenter on this site recalls that politicians in California were seriously hoping the government would pay for the proposed high-speed train so that taxpayers wouldn’t have to. It’s not as dumb as one might think. That is really the equivalent of being relieved that the $117,000 bill is going to be picked up by the insurance company. That way nobody has to pay for it.

The slums of the 21st century will be — already are — strange things: inhabited by enormously fat people surrounded by a clutter of magic gadgets none of which whose operation they can understand.   They can watch but can’t read. They can eat but unable to get their teeth fixed or unable to hire a skilled workman to fix anything.

We are poor in a cave of wonders. How come this tragedy never befell Ali Baba in the story? Because in the Ali Baba story there were only 40 Thieves.

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