Health Insurance Is Not The Same As Healthcare

“Half the harm that is done in this world is due to people who want to feel important. They don't mean to do harm; but the harm does not interest them. Or they do not see it, or they justify it because they are absorbed in the endless struggle to think well of themselves.”  ― T.S. Eliot

For more years than I have been writing this, politicians have been ranting about the cost of healthcare and how to fix it. Unfortunately, the conversation does not center on healthcare, instead they keep talking about insurance. The reason is simple: Insurance is much easier to fix; just throw money at it. Healthcare itself is a complex mechanism with many moving parts. But fixing insurance does not change the underlying issues. In some cases it makes them worse.

 

People often talk about how healthcare was good, but not great, back in the 1960s; and it was affordable. Some doctors still made house calls. They yearn for the good old days. Along these lines, an interesting comparison occurred to me.

 

Back in 1960 a typical television looked like this.

Just over half the population owned a black & white tube television, and you were lucky if you could get five channels.  The TV had no remote, and there was no cable, so you needed an outside antenna or an inside antenna known as "Rabbit Ears".  In 1960 an RCA black & white 21 inch console TV cost $268, most people financed this for about $10 a month.

Today the equivalent of $268, adjusted for inflation is about $2400, and here is what you can buy for a little more than half that!

But the costs of medicine and the education moved in the opposite direction. Today we live longer and healthier due to medical advances, but the price has increased faster than inflation. The cost of becoming a medical professional has likewise soared.

One reason for both, ironically, is government interference: low cost insurance on one hand and student loans on the other. This greatly reduced competition. Make it easier for citizens to pay for something, and the people who sell it have no incentive to control costs.

 

The only way to control cost, any cost, is to focus on the reasons behind the high cost. Politicians are silent about these underlying reasons for soaring healthcare costs, and have made no plans to deal with them. The primary reasons for the high cost of healthcare are summarized below. (A thorough explanation was given back in the spring of 2012.) 

• Insurance Design:  Insurance companies separate the provider from the patient. 
• Innovation: New medical technology and treatments save lives but add cost. 
• Lack of open competition.
• Over-testing.
• Billing and coordination issues.
• Regulations and Restrictions: Rules vary from state to state. 
• Liability: The high cost of malpractice insurance affects all patients' bills.
• Lax eligibility rules and outright fraud.

Unless someone comes up with a plan and makes a serious effort to address these issues, all the insurance or Medicare-for-all schemes will not succeed. The alternative would be for the government to fix a price on everything and see how many drug companies continue to innovate, how many doctors stay in business and how many students chose to get a medical degree.

But politicians will continue to promise the easy non-solution to give the appearance that they care about fixing the problem.

Flashback – (Mis)understanding Insurance

If they learn economics in journalism school, they must quickly forget everything upon graduation. Furthermore, when the facts don't make a compelling story, they resort to the usual tactic of trying to make stories fit their worldview or make things look scarier than they are. Here is a prime example I gave in December 2016.

[As I was reading the transcript of Scott Pelley’s "60 Minutes" interview with House Speaker Paul Ryan, I noticed that he seemed uninterested in hard news or in-depth information so much as he was interested in tripping up the Speaker, trying to put him in a position of disagreeing with his new boss, making one or the other of them look bad, or uncovering something potentially embarrassing.

He asked how often the two speak on the phone and who initiates the conversation. The answers were almost daily and both. No news there. How does he answer the phone? “He doesn’t say, ‘This is the president-elect?’” No. “Have you told him being president is not being CEO of the United States, that the Congress is going to have a say?” 

Instead of asking how the two got together after a contentious election, he asked, “Who apologized to whom?” It’s clear by now that Pelley has no liking or respect for Donald Trump, thinks he is a bully and a racist, and is searching for evidence to back up his views. Better yet, he would like to get Ryan to agree on any point that might make it seem he is of the same opinion.

The silliness and self-serving finally comes to a close, and Pelley asks a number of questions about policy issues. Soon he gets to the details about possible changes to Obamacare and the sniping continues. At one point Pelley says “And women will pay the same as men? That didn’t used to be the case.” This is a question designed to get an answer that will incite outrage. He is trying to get some admission of Republican bias against women, but showing in the process that he does not understand how insurance works and counting on the fact that many Americans don’t either.

Insurance usually works by assessing the risk and charging premiums accordingly. If you have homeowner’s insurance you expect a discount for having a working alarm system. Teen drivers are generally less safe than more experienced drivers, but boys have more accidents than girls. Auto insurance for a young man 16-25 is higher. There is no outrage there. It’s not unusual for companies to charge smokers more for their health insurance benefits. Owners of cars with higher repair costs pay higher premiums. Older cars are cheaper to insure due to the lower replacement cost. Those who don’t drive as many miles sometimes pay lower premiums. Costs of auto and homeowners insurance vary by what part of the country and by the size of the town or city you live in. And since women outlive men and take fewer chances, they pay less for life insurance. Older people pay more, as do those who participate in dangerous hobbies like skydiving or juggling chainsaws.

This all happens without a stir. Everyone seems to understand that certain classes of people are at a higher risk for either the frequency or the size of insurance claims. Hence they should pay more. The ones in the classes with higher premiums don’t like it, but they pay. So why would people be upset that some women, especially those of childbearing age, might have to pay more? That “used to be the case” and it didn’t have anything to do with prejudice or victimization.

Apparently the government and some group of citizens have now decided that charging women more for health insurance can be explained only by prejudice. Everyone must purchase the same insurance for the same cost or there will be an uproar. And Scott Pelley and others in his profession are more than happy to incite and later fan the flames of that uproar, because it makes their job of reporting the news so much easier. Their job is not to inform or to educate; their job is to attract views and clicks. Nothing does that better than a good demonstration or protest, even those grounded in fundamental misunderstanding.]

P.S. I have often said that problems with healthcare costs must be solved on the basis of costs, not by tinkering with health insurance, but that’s for another discussion.

Flashback – Robbing Peter to Pay Paul

[Here, from over seven years ago, are some examples of government actions showing how failures in economic understanding lead to bad outcomes. Politicians will never change their tactics and sales pitch until voters wise up. In many cases we have to lead the people we elected  away from senseless legislation with hidden, but predictable, consequences.]

When I call for economic understanding by saying that there is no magic money tree, here is what I mean. When corporations incur added costs, whether it be shoplifting, a utility rate increase, wage increases or higher taxes, they find a way to pass the cost along to their customers, usually as higher prices. When governments decide to spend more money, they either raise taxes or borrow, leaving the taxpayers to absorb the cost directly or pay the interest now and leave the principle repayment to future generations.  No magic money tree means that the funds must come from somewhere, not out of thin air, and that somewhere is usually from our wallets, directly or indirectly.  The consumer/taxpayer is the bottom of the economic food chain.

As 2013 begins, the Affordable Care Act (ObamaCare) requires manufacturers of medical devices to pay an excise tax, 2.3% of sales. Besides the possibility of reducing costs by outsourcing to other countries and reducing development budgets, the industry also hints that the added costs will result in a price increase. As this article points out:  “Recent surveys show that medical technology executives are examining a host of other options that will have negative consequences, including passing along the added costs through price increases.” (Emphasis added) Those of us who don’t believe in a magic money tree are not at all surprised.

But look at how circular this situation becomes. The government adds a tax to help offset the cost of healthcare. The companies pay the tax by raising prices. Healthcare providers, doctors and hospitals, raise their prices to account for their now higher costs. Insurance companies raise their premiums or co-pays to account for their now higher costs. The government uses the tax money to subsidize health insurance that is now more expensive due to the tax itself! If anything, the cost of the whole system increases due to the added administration associated with paying and collecting a new tax.

In an economy such as ours, this concept of punishing greedy companies with taxes or penalties doesn’t seem to work very well, and why would we even want to punish someone who provides us with a product or service that we want or need? In general, magic-money-tree thinking leads to a host of unintended consequences.  

As citizens and voters we can solve this, but not until we stop thinking this way ourselves. This type of logic drives decisions by both parties at all levels. They tell us that most of a project will be paid for by a federal government grant, as if that's not our money too.  They try to make us believe that corporations pay taxes by just reducing their profits or paying their CEO less. They spend as if the bills will never have to be paid, as if there is some magic money tree or secret treasury to make it all right.  

Appropriately Skeptical

From time to time I see an ad from a local doctor promoting stem cell therapy for pain. It includes one endorsement telling how the office was so easy to work with and how the pain went away. For some time now I have been skeptical about the validity of this promotion. I thought stem cell research was not yet in the mainstream of medical practice, and I know that endorsements are not reliable evidence. It seemed suspicious, so I decided to look into it.

The promotional material on line states in part: “Stem cell therapy uses your body’s most powerful and flexible cells to promote natural regeneration in damaged joints.” It claims to be effective for a list of conditions: surgical wounds, tendon damage, severe muscle strain, arthritis, damaged cartilage, torn meniscus and many other joint and soft tissue injuries and conditions.

“The stem cells … come from your own body … a small quantity of bone marrow from your large hip bone.” (Using the recipient’s own stem cells avoids the need for FDA approval.) The on-site lab processes the harvested cells. The doctor then can “precisely inject your stem cell mixture where you need it … where they morph into new cell types” and provide “long-lasting relief” for “many [but not all] patients.”

My first stop was WebMD with a sub-headline reading: “Unproven, Risky Treatments Mislead Patients to Seek Cutting-Edge Therapy.” International Society for Stem Cell Research (ISSCR) “advises patients to seek only stem cell treatments being tested in clinical trials approved by the FDA”… or some approved smaller studies.

There is a lot of information on the site but it is summarized like this: “Every treatment has some risks. So the question comes down to whether the benefits outweigh the risks. And those studies haven't been done yet.” 

This Healthline report from about 18 months ago says that stem cell therapies are being promoted for a wide variety of conditions, but “very few of these applications have any scientific backing, [however] stem cell therapy for knees has been the subject of quite a few promising studies.” It would be a big improvement over knee replacement, but promising studies hardly qualify a procedure for routine outpatient application. They list the cost of this treatment at “approximately $3,000 to $5,000 per knee, depending largely on geographical location.” 

The FDA gives much of the same information. “Stem cell products have the potential to treat many medical conditions and diseases. But for almost all of these products, it is not yet known whether the product has any benefit—or if the product is safe to use.”

Consumer Reports chimes in with a sub-headline: “A new industry is booming. But critics worry that the treatments are ineffective and dangerous.” Here is a very brief summary: “Stem cells are special cells with the potential to repair damaged tissue and organs.” But “not all of them are possessed of equal power.” According to the current scientific consensus, the therapeutic potential of stem cells taken from fully developed tissues, adult cells, is believed to be much more limited. (Does this include marrow from hipbones? I wonder.)

That Consumer Reports piece is a long article with many warnings about the confusion in the field and the inability of regulators to keep up with the proliferation of clinics, both legitimate and otherwise.

Another reason I am skeptical is that the same doctor offers many other questionable services including platelet-rich plasma (PRP), calling it “one of the most powerful natural healing methods available today.” Some conditions include dry eyes, hair loss and erectile dysfunction.

The Pain Science website opinion published earlier this year describes it this way: “injections bathe troubled cells in a concentrated mixture made from your own blood. Hopefully this stimulates healing where it is otherwise failing … but no one really knows for sure yet.” Regardless, it’s not hard to find someone willing to do it for you, but it’s not cheap. “Without any clear evidence of benefit beyond placebo, PRP is now being marketed aggressively as a cure-all for sports injuries.”

I did this research not because I would consider going to a pain specialist unless I was referred by my primary care doctor. I did it just to show how careful we need to be to avoid spending a lot of money on dubious treatments. 

I didn't name this doctor because I'm sure there are similar ads running all over the country. I am not demonizing any doctor who may truly believe in such treatments, but it is a warning to patients everywhere. 

It is nearly always better and safer to be appropriately skeptical.

Different Cultures, Different Rules

A story about an incident in 2006 is suddenly getting a lot of attention on social media. An American woman temporarily working in Iceland “went from feeling a lump in her breast to getting checked out and assured that it was benign in the space of a single day, and for $3.” She posted the story of her experience on Twitter.

This gets many people stirred up, asking: Why can’t we do this in the United States? Some politicians think we can and are promising changes, but the comparisons are not as straightforward as we’d like them to be.

Iceland is a small, island nation in the North Atlantic with a population of about 350,000. For comparison, the city of Minneapolis has a population about 425,000. The entire country is smaller than many American cities. 

But it’s not just a matter of scale. Taking it a step further, that population is very homogenous. About 91% of the residents of Iceland are Icelandic citizens and only 16% are foreign-born. Unlike the US, the population is concentrated. Ninety-nine percent live in urban areas and 60% live very close to the capital. Furthermore, about 72% belonged to the same religion, the state Evangelical Lutheran Church of Iceland.

Back to our comparison example – where Iceland has homogeneity, Minneapolis has diversity. Its population is approximately 64% white from various heritages, 19% African American, 10% Hispanic and 7% various other ethnicities. It is the home of more than 50 denominations and religions.

How important is this homogeneity in the smooth operation of a more socially oriented society? Denmark believes it is vital to maintain the order and necessary shared values. “Beginning at the age of 1, [mostly Muslim immigrant] ‘ghetto children’ must be separated from their ‘ghetto parents’ for 25 hours per week for mandatory instruction in so-called ‘Danish values,’ which includes learning about the language and the traditions of Christmas and Easter, The New York Times reported in July 2018.”

(Again for comparison Denmark is about 35% larger than Maryland in area with about 5% fewer people. These are much smaller countries whose people share a common background and history.)

But there is no free lunch and no $3 health service without a huge subsidy. Here is a simplified comparison to make the point.

After a $5,145 deduction, Icelanders pay 36.94% of income up to about $85,000 and 46.24% on income above that. On top of that is a value added tax (VAT) of 24% on most goods and services, but a few categories are subject to a reduced rate of 11% (e.g. food, hotels, newspapers, books, and utilities).

Everyone in Iceland pays at least at the same level as the highest tax bracket in the US, 36.94% compared to 37%. They don’t “soak the rich;” they take it from everyone. On the other hand, their corporate tax rate is among the lowest.

In Minneapolis a single taxpayer owes no more than 17% on the first $85,000 after a standard deduction of $12,200 and pays about 8% sales tax, but not on food. (Sales tax and VAT are not identical, but the economic burden of VAT falls on the final consumer.)

Using those numbers, a single taxpayer earning only $20,000 in the US pays $780, whereas for the same situation in Iceland the tax bill would be roughly $5,500. When the money is spent, it is taxed again at a rate up to 16% more.

On another point, access to doctors is slightly better. Iceland has a physician ratio of 3.62 doctors per 1000. In the US it’s 2.3 doctors per 1000.

These and many other considerations are ignored by those who want to make simplistic comparisons, comparisons that in reality are light-years away from apples to apples. It would be nice to have all the benefits and not have to make any of the sacrifices, not have to adapt to an entire new set of values and expectations, not have to live within a completely different culture. (The US cannot even agree to have one official language!) But there are no simple answers.

Flashback - Health Insurance

[My argument back in July 2011 was that people needed to better understand how health insurance works to keep from getting fooled by advertisers and politicians. Here is the entry in full.]

A flyer in the newspaper today reminded me how naïve consumers are about understanding the economic process, business and insurance, or at least how naïve advertisers think we are.

An ad from AARP promoting their Medicare supplemental insurance plan states that Medicare pays only about 80% of Part B (non-hospital) expenses and the other 20% is up to you.  (True.)  Right below is the statement that a supplemental insurance plan could save you up to thousands of dollars in out of pocket costs. That looks like a great deal, but where do those thousands of dollars come from, the AARP magic money tree? Perhaps the insurance company, out of the goodness of its heart, is going to make up the difference? – of course not.

The insurance company is going to collect premiums from everyone.  (Since premiums are not out-of-pocket costs in insurance language, maybe they are ignored when counting up the thousands in savings.)  The first thing the insurance company must do if it intends to stay in business is to pay its expenses (including the costs of the “free” brochure and of paying for all the people who work there and of other operating costs).  They also want to make a profit.  So already the total amount paid by everyone must be more than the total amount paid back to everyone (or to their doctor).

There will be winners and losers. The (financial) winners will be the people with high medical expenses for doctor visits, tests, etc. The losers will be the healthy ones. This may fluctuate, so in some years you come out ahead and in other years you may be part of the healthy bunch subsidizing the sickies – paying more in premiums than you receive in return.  Except for people who are chronically ill, this amounts to little more than a smooth-monthly-payment program similar to the installment plans offered by some electric and gas utilities. It is often a good budgeting tool to trade unknown payments for smooth, predictable ones, but you are hardly getting thousands of dollars for nothing as the flyer suggests.

This is a common tactic. It implies that the money is coming from somewhere else - but there is no money except our money. Companies and governments handle it, allocate it, and sometimes waste it, but their only source is to get it from us. Americans must listen to advertisers, news media and politicians with this always in mind to avoid getting tricked by this common something-for-nothing sales pitch that is really a smokescreen to disguise redistribution.

[Note that two and a half years after this posted, Jonathan Gruber, a professor at MIT and an architect of Obamacare said publicly: "And basically, call it the stupidity of the American voter or whatever, but basically [an intentional lack of transparency] was really really critical to get for the thing to pass." According to Snopes, the video footage of his remarks was deleted from the Internet in an attempt to hide it.]

Medicare For All?

People who are excited about the idea of “Medicare for all” obviously have as meager an understanding of Medicare as they do of Social Security. In fact Medicare is much more complicated than Social Security. It’s not a matter of walking into the doctor’s office, showing an ID card, receiving services and leaving without a bill.

When Medicare was passed in 1965, the government tried to follow a private insurance model. As a result they came up with two parts. Generally speaking, Part A covers hospitalization, and Part B covers regular visits to the doctor. But just like private insurance there are many details about what is covered and what is not.

In most cases Part A has no premium, but it does have a deductible of $1,364 for the first 60 days of Medicare-covered inpatient hospital care. Note that it’s the same for one day as it is for 60 days, so several short hospital stays can become quite expensive. From the 61^st through the 90^th day a $341 per day charge applies. 

The standard monthly premium for Medicare Part B enrollees is $135.50 for 2019. Some pay less and some pay more depending on an income scale. The annual deductible for all Medicare Part B beneficiaries is $185.

This government website gives more details of both parts, but it is clearly not free healthcare with the government picking up the tab.

But there is more. “With Part B coinsurance you typically pay 20% of the Medicare-approved cost of most services, after your deductible is met.” The bill comes from the provider showing the standard charge, Medicare reduces it to the Medicare-approved charge and pays 80%, then the remaining 20% is the patient's responsibility.

But there are also three classes of doctors. The 20% applies to participating doctors. “Non-participating doctors have not signed an agreement with Medicare and therefore might not ‘accept assignment’ for all of their services. A non-participating doctor may take the payment…for 80% of Medicare’s approved cost. But he or she can charge you 15% of the approved cost on top of the 20%.” Doctors who do not accept Medicare assignment can charge in full at the time of the visit.

Part D was added early in this century to cover prescription costs. It is a nightmare of private insurance options, premiums and differing formularies (a list of what drugs are and aren’t covered at different levels by each insurer). And what is available differs by location.

Because Medicare doesn’t cover everything, private companies sell supplemental insurance, sometimes called Medigap plans. There are 10 plans available in most states. “These plans are labeled Plan A, B, C, D, F, G, K, L, M and N, and each plan covers a different set of basic benefits.” How’s that for an additional headache?

Besides the complexity and added costs, two additional problems arise: reimbursement levels and funding.

The Medicare reimbursement to doctors and hospitals is typically lower than private health insurance and much lower than the actual billed rate. (One of my recent bills for a simple annual checkup came in at 60% of the billed rate.) This can discourage providers, who must cover their costs. This source, for example, is not as current as I’d like but “a Kaiser Family Foundation analysis found that 93 percent of non-pediatric primary care physicians were participating providers with Medicare in 2015, but only 72 percent were accepting new Medicare patients.” In addition, a recent change to a flat rate payment program may discourage doctors from accepting Medicare for more challenging medical conditions. Will it soon become difficult, even under the current system, to find a participating doctor? Will fewer young people be inclined to study medicine if the program is expanded, further squeezing doctors' ability to earn an adequate living? All the insurance in the world does not help if you can't find a doctor.

Finally, there is the problem of funding. The money taken from each paycheck (with a matching amount from the employer) pays 88% of the cost of Part A, but the Part A trust fund is projected to be depleted in 2026. This may result in the institution of premiums for Part A. Premiums paid for Part B contribute only 26% to the cost with the rest covered by general government tax revenue. “Medicare spending was 15 percent of total federal spending in 2018, and is projected to rise to 18 percent by 2029.” (This website has some excellent graphs showing current and projected costs with no change to the system, particularly in Figures 6 and 7.)

As it is today the system is complex, and anything but free. It has many of the drawbacks of private insurance systems including waiting months for the paperwork to arrive. Already, many wonder how the government can afford to keep it up. 

This rather long explanation only scratches the surface. “Medicare for all” is easy to promise, but extremely difficult to explain. And, as I wrote years ago, the only way to reduce the cost of healthcare is to address the cost directly in ways that introduce transparency and competition, not by making it easier to pay ever-increasing prices.

Keeping an Eye on the Doctors

Over the past few weeks a number of shady healthcare situations have come up. There is often not a lot patients can do about doctors with bad intentions or to recognize their illegal behavior, but there are usually clues.

The first case involves medical fraud. A cardiologist was convicted on two counts of fraud for double billing insurance companies and using a procedure to treat problems it was not designed for.

The doctor administered an outpatient treatment known as External Counter Pulsation (ECP). “ECP involves the use of a specialized bed equipped with pressure cuffs, which exert pressure upon patients’ lower extremities as a means to increase blood flow to the heart.” Insurers only reimbursed doctors when this treatment is given to patients with angina and only when a physician is present.

The doctor operated 25 beds at numerous locations in three states where, in many instances, no doctor was supervising. Even for his patients who never experienced chest pain, he “instructed his employees to indicate that every patient had disabling angina on billing sheets that were used to support false insurance claims.”

Although they couldn’t do anything about the billing, the patients should have been very suspicious. It came out at the trial that in order to acquire new patients he advertised the procedure “as ‘the Fountain of Youth,’ claimed that it made patients ‘younger and smarter,’ and offered the treatment for a range of ailments other than disabling angina, including obesity, migraines, high blood pressure, low blood pressure, diabetes, and erectile dysfunction.” When a single medicine or procedure is advertised as curing so many unrelated ailments and uses come-ons like Fountain of Youth, patients should smell fraud miles away – not insurance fraud, but someone definitely trying to sell them snake oil.

In another case at the behest of the FDA, a judge issued a permanent injunction against a stem cell company “to stop...illegal behavior after several attempts to provide the clinic and the individual defendants the opportunity to work with the agency to come into compliance with FDA regulations and protect patients from harm.” In an inspection the government  found “significant deviations from current good manufacturing practice requirements” including failure to establish and follow procedures to prevent microbiological contamination. “The FDA has not approved any biological products manufactured by [the company] for any use.”

Again the patients cannot know all the details, but the products were being administered “to treat a variety of serious diseases or conditions, including Parkinson’s disease, amyotrophic lateral sclerosis (ALS), chronic obstructive pulmonary disease (COPD), heart disease and pulmonary fibrosis.” [Emphasis added.] 

These too-good-to-be-true qualifications should be a warning signal to everyone seeking medical help, even the most desperate. For every two that the authorities catch up with and go through the long, legal process of shutting down, there are probably two hundred still operating and advertising. As long as this kind of outrageous advertising continues to attract patients, the practice will continue.

It is not surprising that insurance companies cause frustration by being as careful/fussy as they are even about reasonable practices. Some healthy skepticism and critical thinking on the part of patients are our best, and sometimes only defense against fraud.

Opinions, Opinions…

It happened at the beginning of this week. James Holzhauer broke a 32-game winning streak on Jeopardy after winning nearly $2.5 million. 

Many people were puzzled and suspicious by his totally explainable final wager. Some thought he threw the game. Some neighbors agreed with and passed along an idea being circulated on Facebook that another win would move him into a higher tax bracket.

First, his wager in Final Jeopardy made perfect sense. Since he had not hit any of the Daily Doubles, he was unable to risk large amounts at a time, a tactic that led to insurmountable leads on previous shows. This was a bit of bad luck. His opponent was quick on the button, hit the Daily Doubles and managed to have a small lead going into the final question – 26,600 to 23,400. She only needed to risk enough to finish one dollar ahead of him in case he risked everything, which is what she did. He understood that his only chance to win was for her to get the answer wrong. If they both got it wrong, he needed to risk enough to still be ahead in case the third place contestant got it right and doubled his score of $11,000. That is exactly what he did – 23,400 minus his “conservative” wager of 1, 399 would have been 22,001. The amount he bet, conservative or not, was the best decision.

People who didn’t understand this jumped right to a subject they likewise don’t understand, tax brackets!

The US has a progressive income tax; the tax rate increases as the taxable amount increases. The tax rate on the first taxable dollar is the same for everyone whether you make one dollar or $2.5 million. The tax on the first $100,000 is exactly the same for everyone $13,874. That is about 14%. Anyone making another dollar pays 22% of that additional dollar. Anyone who makes $110,000, for example, pays the same as everyone else on the first $100,000 and then pays 22% on the additional $10,000. That’s how it works as the brackets change. The rate goes to 24% at $165,000, to 32% at $315,000. The highest bracket under the current system is 37% from $600,000 on up. (All examples are for the status of Married Filing Jointly.)

There is no bracket issue in the $2.5 million range. Taxes would be 37% for every additional dollar.

Note how this misunderstanding lets politicians get away with something that is not quite a lie, but is at least a misrepresentation. As the system works, if they lower the rate for the middle class, it lowers the rate for everyone who makes under $100,000, but it also lowers the rate on the first $100,000 for everyone else who makes more than that – even those evil rich people. Fiddling with the lower tax rates to help the middle class, helps everybody, the rich too. It can’t be helped. It’s how the system is set up! 

Now those same politicians have the power to change the system and make it work differently, but they don’t, they just propagandize.

But the biggest takeaway from the Jeopardy story is not the wager or the tax implications. The biggest take away is how inclined people are to form an opinion, defend that opinion, post it on line and spread the word on subjects they don’t understand and apparently are too lazy to do a little bit of research to find the truth. They are so confident that their opinions are right, because they have been constantly reinforced by others with the same degree of ignorance. Bad information spreads like the plague.

Everyone pretends to understand taxes, but they are too complicated for most people to do themselves, which allows politicians to demonize opponents and tax preparation companies to stay in business. But many other more important and complex subjects fall into this same category of confidently held opinions grounded in a woeful lack of understanding: Social Security, Medicare, the healthcare system, economics in general – such as minimum wage and the comparative virtues of socialism vs. capitalism, government spending and the National Debt and the proliferation of deceptive advertising and junk science.

Many Americans can’t even figure out Jeopardy wagers, yet on issues vital to their personal and to the national success they participate in protests and demonstrations, post nasty comments and cartoons on social media and go to the polls to vote for politicians who are often equally mistaken about how the world works.

No Vaccinations = No School

That’s the law in California since July of last year. If the kids are not current with the required vaccinations, they do not get to attend public schools. 

Is this an attack on our freedom?  Is this the nanny state overruling decisions that should belong to parents?  I don’t think so - and I’m an advocate of freedom.

Upon signing the bill into law the governor released a statement saying, "The science is clear that vaccines dramatically protect against a number of infectious and dangerous diseases.  While it's true that no medical intervention is without risk, the evidence shows that immunization powerfully benefits and protects the community.”  This is absolutely true, yet people continue to fear vaccinating their kids based on fraudulent science by a British doctor who wanted to show a relationship between vaccinations and autism so badly that he falsified results to reach that conclusion.

Wikipedia gives a good summary of the history.  “Andrew Jeremy Wakefield (born 1957, Eton, England) is a British former gastroenterologist and medical researcher who was struck off the UK medical register for his fraudulent 1998 research paper and other misconduct in support of the now-discredited claim that there was a link between the administration of the measles, mumps and rubella (MMR) vaccine, and the appearance of autism and bowel disease.” [Emphasis added.]  The next two paragraphs of the article give more information about financial conflicts of interest, ethical problems and withdrawal of support by reputable organizations.

The New York Times archives for Wakefield contains many telling entries including:  “Anti-vaccine film pulled from Tribeca Festival; A measles outbreak in Britain would never have occurred if parents had respected the proven safety record of vaccine; Autism Fraud and Why some still won’t accept that Andrew Wakefield is wrong.”

Yet an NBC report not too many weeks ago was headlined:  “Vaccine Skeptic Message Gets Bolder,”  and going on to say, “The skeptics have taken on a brasher, bolder tone in recent months.”  Once only demanding safer vaccines, “an increasing number now say most or all vaccines are dangerous, and some accuse the federal government, physicians and the mainstream media of colluding with drug companies to deliberately poison children using vaccines.”  Do they believe that saying it longer and louder will make their arguments true?  This is behavior that was once associated with crazy people. 

Do they trust information from a discredited former doctor, celebrities with no medical training and a Facebook support group over that from medical experts?  Do they think raising the ante from unsafe vaccines to intentionally poisoning children to line corporate pockets will make a faulty argument more powerful?  Apparently so.

But these people in their naïve acceptance of a scientific fraud are putting everyone else’s children at risk.  One or two kids in a classroom of vaccinated children may not be a problem.  Who are they going to catch the diseases from if everyone else is vaccinated?  But as the number grows so does the possibility of an outbreak – vaccines are not one hundred percent effective.

This is not an issue of freedom, so much as one of responsibility and critical thinking.  From dangerous behavior comes potentially fatal consequences, and unfortunately, at some point the authorities are forced to step in.

Chiropractic - Handle With Care

Several months ago I noticed a couple of friends going to the chiropractor on a regular basis and tried to talk them into trying a yoga class instead.  They said they were too old and stiff for yoga, a typical response, and besides, Medicare paid for the chiropractor.  I wasn’t sure this was correct, but let it go.

Recently though, I ran across a fact sheet from the government and learned the following: “Spinal manipulation is a covered service under Medicare. However, maintenance care is not considered by Medicare to be medically reasonable and necessary, and is not reimbursable by Medicare. Only acute and chronic spinal manipulation services are considered active care and may, therefore, be reimbursable.”  It went on to define maintenance therapy, which sounded exactly like what my friends were getting.  Of course, I don’t have all the information and may be wrong, or the chiropractor may be violating the law.

From what I have read most chiropractors are honest and sincere.  They and their patients believe that treatment of subluxations in the spine provides relief from pain and other back problems.  Likewise Medicare recognizes subluxation as a problem that calls for medical attention.  But this in itself may be a problem.

One of many skeptical sources shares a different view.  “According to classical chiropractic, a ‘subluxation’ is a misalignment of the spine that allegedly interferes with nerve signals from the brain. However, there is no scientific evidence for spinal subluxations and none have ever been observed by medical practitioners such as orthopedic surgeons, neurosurgeons, or radiologists. On May 25, 2010, The General Chiropractic Council (GCC), a UK-wide statutory body with regulatory powers, issued the following statement:  The chiropractic vertebral subluxation complex is an historical concept but it remains a theoretical model. It is not supported by any clinical research evidence that would allow claims to be made that it is the cause of disease or health concerns.”  It’s like a metaphor that American professionals and  their patients take seriously.

Besides proper coding and billing, chiropractors must also be careful about the results they promise.  Some have advertised that spinal manipulation can improve general health, cure many different diseases, cure children of earaches, autism, and asthma, and prevent spinal degeneration.  None of these claims have any scientific backing.

Then there are the cases of unethical behavior like this one in Utah where the doctor was disciplined for financially abusing two patients and failing to cooperate with board investigations among other offenses.  But ethical failings happen in every profession.

In short, it is smart to be skeptical about the benefits of a visit to the chiropractor.  Maybe yoga, physical therapy or some other stretching routine will yield the same benefits.  Maybe most of the effect is placebo, based on a belief it will work.  All I know is that when I do a weekly review of medical articles, information about an investigation of problems with one chiropractor or another – ethics, false claims, and other problems – appears quite often.

(For a comprehensive scientific critique of the practice, see this YouTube video.  But I know many will read this or even view the video and still ignore facts that don't agree with a worldview they don't want to change.)