You’re spending way too much on health care. And you’re getting way too little. What’s the solution? Most folks in Washington, D.C. think they have one… and if you’re anything like us, we suspect that as per usual, it will be a disaster.
‘Medicare for All’... What It Really Means
Futuristic Robots: Today's Surgeons
A Conversation With Penn Jillette
I D E A S T H A T M A T T E R E D I T E D B Y P . J . O ’ R O U R K E AMERICAN CONSEQUENCES
SOMEBODY CALL A POLITICIAN! SEPTEMBER 2 0 1 8 HEALTH CARE EMERGENCY
CONTENTS
SEPTEMBER 2018 : ISSUE 14
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48
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6
AMERICAN CONSEQUENCES
4 Inside This Issue
48 The Rise of an Epidemic BY BILL McGILTON
BY STEVEN LONGENECKER
6 Letter From the Editor BY P.J. O'ROURKE
54 A Health Care Boom
Editor in Chief: P.J. O’Rourke Editorial Director: Carli Flippen Publisher: Steven Longenecker Contributing Editors: Michael Downs, Dr. David Eifrig, Björn Ekman, Stephanie Hare, Bill McGilton, Kerry D. Moynihan, Christian Olsen, Buck Sexton, Dr. Steve Sjuggerud, Anne-Marie Slaughter, Porter Stansberry Newswire Editors: Scott Garliss, John Gillin, Greg Diamond Assistant Editors: Cartoon Director: Frank Stansberry General Manager: Jamison Miller Advertising: Sam DeCroes, Jared Kelly, Jill Peterson Editorial feedback: feedback@ americanconsequences.com Chris Gaarde, Laura Greaver Creative Director: Erica Wood
BY DR. STEVE SJUGGERUD
12 What Moved the Market
58 Corporate America's Health Care Gambit BY BJÖRN EKMAN
14 What Could Possibly Go Wrong?
16 From Our Inbox
62 Cancer: A Pain in the... BY P.J. O'ROURKE
20 An Infinite Loop: The U.S. Health Care System BY KERRY D. MOYNIHAN
70 Our Bodies or Ourselves
BY ANNE-MARIE SLAUGHTER AND STEPHANIE HARE
26 PJ's Top 10 Health and Fitness Tips BY P.J. O'ROURKE
74 A Conversation With PENN JILLETTE
28 There Shall Be No Pain BY MICHAEL DOWNS
80 Read This
COMPILEDBYSTEVENLONGENECKER AND P.J. O'ROURKE
34 What’s Wrong With Medicine Today BY DR. DAVID EIFRIG
82 The Final Word
38 ‘Medicare for All’ Will Crash the Economy BY PORTER STANSBERRY
BY BUCK SEXTON
86 Featured Contributors
42 Futuristic Robots: Today's Surgeons BY CHRISTIAN OLSEN
American Consequences 3
INSIDE THIS ISSUE
Y ou’re spending way too much on health care. And you’re getting way too little. What’s the solution? Most folks in Washington, D.C., think they have one... and we suspect that as per usual, it will be a disaster. Kerry D. Moynihan shows that we’ve been stuck in a loop of tough questions and hard answers for years... and that everyone should realize the current system is in crisis. And our editor in chief P.J. O’Rourke takes the view that the hard questions of American health care really have easy answers... Plus, don’t miss P.J.’s top 10 tips on health and fitness – like putting your cigarette lighter in the attic and the Marlboros in the cellar . Dr. David Eifrig focuses on the one chart that explains what’s wrong with medicine today. And financial analyst Porter Stansberry shows how “Medicare for All” will crush the U.S. economy and the stock market. Plus... Innovations expert Christian Olsen talks about the upside in futuristic robot surgeons... Author Michael Downs writes about a discovery that revolutionized medicine’s approach to pain.
Litigation lawyer Bill McGilton shows why a “Big Opioid” settlement will weigh on one public company. And Dr. Steve Sjuggerud is back with the next phase of his “Melt Up” theory – this sector soared more than 15,000% with leverage in the past. And don’t miss P.J. O’Rourke’s funny but very personal essay about his brush with cancer a decade ago. Health economics professor Björn Ekman talks about the health care gambit from Amazon, Berkshire Hathaway, and JPMorgan Chase. And Anne-Marie Slaughter and Stephanie Hare detail the danger in biometric data when “presumed innocent” becomes “unconvicted persons.” Finally, magician Penn Jillette shares details from his time on “Celebrity Apprentice,” as well as how he came to a libertarian philosophy. And former CIA analyst Buck Sexton shows why the health care battle could determine the 2018 midterm election. Enjoy the issue. And tell us what you think at feedback@americanconsequences.com. Regards, Steven Longenecker Publisher, American Consequences
4 September 2018
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From Editor in Chief P.J. O’Rourke
6 September 2018
LETTER FROM THE EDITOR
P.J. MAKES A HOUSE CALL TO ANSWER YOUR HEALTH CARE QUERIES
Supposedly America is engaged in a “Health Care Debate.” I’d say that’s debatable. I’ve never heard much actual argument, disputation, or controversy on the subject of health care per se . When my son Buster falls out of a tree and breaks his arm, it’s not as if this results in strong differences of opinion about health care.
Buster’s mother: “Take him to the emergency room!”
Buster’s sister: “Take him to the funeral parlor!”
Yes, there are questions about American health care. But these aren’t really difficult questions, and they don’t rise to a level that deserves heated polemic. To begin with, let’s ask about “single-payer health care” (the current term for what used to be called “socialized medicine”).
because it’s stuck in 4WD creeper gear, and an agricultural equipment registration that makes it illegal on the highway. I have a splendid 1990 Porsche 911 that’s lots of fun except, due to some Götterdämmerung in the mysterious Teutonic electrical wiring, it’s dead as a smelt. And I have a beat-to-hell Chevy Suburban full to the rearview mirror with hay bales, fence posts, feed sacks, and other farm detritus. Some of the electric windows won’t go up. Others won’t go down. And the seat covers stink inexorably of wet dog. But I’d rather put my whole family in that private Suburban and drive from New Hampshire to Disney World than entrust my wife and kids to the public in the New York City subway system.
Q: Does America want a “private” health care system or a “public” health care system? This is easily answerable by a quick comparison of other examples of private versus public : Your bathroom vs. public restrooms Your backyard vs. public parks (especially after dark) Your car vs. public transportation Note that the favorability of the private option holds true even if your bathroom is a mess, your yard is a postage stamp, and you own a lousy car. I own several. I have an ancient Jeep with no roof or doors, a top speed of 25 mph
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American Consequences 7
LETTER FROM THE EDITOR
And I feel the same way about our family doctor in private practice. Although why our family doctor would be coming with us to Disney World, I have no idea. But you know what I mean. Q: Does America spend too much money on health care? Yes. No. Yes and no. America spends $3.3 trillion a year on health care. This is more than $10,000 per person and about 18% of GDP. Yes, this is too much health care spending – on you. You with your stupid toenail fungus. No, this is not enough health care spending – on me. Me with my terrible bad back. A mere $10,000 turns out to be not nearly enough to provide me with highly effective pain relief treatments. (Plus, to go with the highly effective pain relief treatments, I should receive the names and addresses of people selling opioids in my neighborhood in case I
run out on weekends. And a Narcan syringe. Or are those extra?) Also, consider the 18% of GDP. It seems like a lot, but the U.S. national debt is 105.4% of GDP. The 18% of GDP gets us health care. The 105.4% of GDP gets us... What? More debt. As if we didn’t have enough debt of our own. Like we need to get additional debt from the federal government – instead of highly effective pain relief treatment for my back. Q: Fine for you. But how come I’m paying a fortune for health care? You aren’t. According to the government’s National Health Expenditure Accounts, only 11% of health care spending is a direct out- of-pocket consumer expense. And according to figures from the U.S. Department of Labor’s Bureau of Labor Statistics, average household health care expenditures are only 6.2% of pre-tax income including health care insurance premiums. By comparison, average household combined expenditure on “food away from home” and “entertainment” is 8.2%. We all know what “food away from home” means – pizzas and Big Macs. They’re making you obese. And most entertainment these days is, frankly, sickening. No wonder you don’t feel so well. Q: Don’t tell me how I feel. You’re no doctor. I feel fine. Except when I pay those health care insurance premiums. Don’t you admit that the premiums are sky-high for those of us who don’t qualify for government subsidies? I do admit it. And we need to fix that. It’s not morally or politically wrong (even from
"We have a great health care plan. Well worth selling the house to pay for."
8 September 2018
a libertarian or conservative point of view) for a government to provide some kind of “catastrophic” health care insurance. But for this to be practical and affordable it needs to be based on simple and straightforward principles. Here’s one I’d suggest: “No one should lose the house because of medical bills. The boat?... Maybe. But not the house.” Q: However, all complaints aside, the huge amount of money that America spends on health care buys us the best health care system in the world, right? No one should lose the house because of medical bills. The boat?... Maybe. But not the house. Well... Not according to World Health Organization statistics. The WHO says that America ranks No. 31 in life expectancy, well behind countries such as Canada, Belgium, and Slovenia, and only just ahead of No. 32 Cuba. Of course, we don’t know if Cuba’s government is counting the life expectancy of the political dissidents it lines up in front of firing squads and shoots. And I have personally been to Canada, Belgium, and Slovenia. Do people live longer in those places, or does it just seem longer? The WHO also gives America’s health care system a poor ranking... (But, before we hear more of what the WHO has to say, let us recall that it is an agency of the United Nations and that the U.N. is
a feckless talking shop with a bureaucracy dominated by denizens of nations such as Potsandpania, Upper Revolta, Trashcanistan, etc., and that the U.N. stood around with its thumb up its... That the U.N. stood around giving a prostate exam to itself while ignoring lethal open wounds – the slaughter of tens of thousands of civilians – in Somalia, Rwanda, Bosnia, Kosovo, Liberia, Sudan, Syria... The list goes on. My point being that maybe information from a U.N. agency should be taken with a grain of that highly effective pain relief treatment for my back. And let us also note that when it comes to the most important kind of health care – caring for the health of America itself – we Americans have the privilege of consulting Dr. Army, Dr. Navy, Dr. Air Force, and Dr. Marines. They make house calls.) But, as I was saying... The WHO gives America’s health care system a low ranking, No. 37 in the world. This is below not only Switzerland, Japan, and the EU countries, but even below – I am not kidding – Oman (No. 8). Which of the following two scenarios do you consider most likely? A rich foreigner with cardiology problems gets in his private jet and tells the pilot: “Fly me to Cedars-Sinai Medical Center in Los Angeles, I’m getting a heart transplant.” “Fly me to Muscat in Oman, I’m getting a heart transplant – from a camel.” Q: These rich foreigners, they don’t stay rich (or alive) by being stupid, do they? I propose a toast: “Here’s to your health, America!”
“
American Consequences 9
LETTER FROM THE EDITOR
SHAMELESS PLUG FOR MY NEW BOOK A new book by me is available, right now, from Atlantic Monthly Press! And everyone should buy it because... Because I’ve got three kids to put through college. Plus, I hope you’ll enjoy it.
“How I Learned Economics by Watching People Try to Kill Each Other” in the Middle East, Albania, and Somalia. “The Digital Age and Which Digit It’s Giving Us” “Negative Interest Rates – Not Only Wrong but Evil” “A Blockhead Confronts the Blockchain” And dozens of other essays. As my publisher says on the dustcover of my book (and everyone knows that what publishers say on the dustcovers of books is always the plain and unvarnished truth): “P.J. O’Rourke takes forty-five years of experience making fun of terrible things in some of the world’s most awful places and applies it to a place that’s even worse – Wall Street.” Also, did I mention that I’ve got three kids to put through college?
NONE OF MY BUSINESS P.J. Explains Money, Banking, Debt, Equity, Assets, Liabilities, and Why He’s Not Rich and Neither Are You And I’ll stand by every word of that except for “Neither Are You.” This was inserted into the subtitle for the general public. You readers of American Consequences , especially if you also subscribe to some of the premium financial advisories of our advertisers like Stansberry Research, are either millionaires or you soon will be. Or, at the very least, you’re smarter than the average millionaire – to judge by the “Inbox” feedback we get here at AMC . In fact – to judge by the “Tesla Mess-La” – you’re smarter than the average billionaire . Anyway, you can afford a good laugh. And I do my best to provide one, writing about...
10 September 2018
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THE BIGGEST STORIES THAT MATTERED FOR THE MARKET LAST MONTH
WHAT MOVED THE MARKET
THE MARKETS TWIST ON TRADE TALKS The trade stand-off took some new twists and turns to begin September. We exited August with President Donald Trump stating the U.S. was ready to implement the next round of tariffs on Chinese imports as soon as possible. He said the European Union’s offer for zero tariffs on autos wasn’t good enough, comparing the EU’s treatment of the U.S. to China. He also stated he’s considering leaving the World Trade Organization (WTO) and made off- the-record comments that he would not compromise in talks with Canada. This, in turn, threw the trade picture into turmoil and rallied the dollar. Compounding matters, Trump announced the U.S. was prepared to levy another $267 billion in trade tariffs on China. But this past week, the tone took a turn for the better... The EU’s chief negotiator, Cecilia Malmstrom, met with the U.S. Trade Representative, Robert Lighthizer. Following the meeting, Lighthizer’s officer said that a partial trade agreement was possible by early November. A full trade deal could still be months (or more) away, but this shows signs of progress.
Freeland said talks continued to make good progress while Trump stated negotiations with Canada were coming along “very well.” But Canada offered limited access to dairy markets as a concession to rework NAFTA. And then there’s China. The WTO said China made a request to impose $7 billion worth of trade sanctions on the U.S. due to non- compliance with a 2016 ruling China won regarding “dumping duties,” a method of preventing China from pricing exports in a way that undercuts the U.S. markets. China claims it has cost them $7 billion annually. Not to be outdone, the U.S. said it was considering sanctions against Chinese officials for human rights violations, a first for the White House. On one hand, negotiations appear to be moving back in the direction the market is hoping. This is in addition to the EU and the U.K. reportedly moving closer to a Brexit deal. If all this were to play out, it would take some of the air out of the dollar and boost global markets. The markets came to view this as a negotiating tactic.
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On the other hand, if the market is going to break through the 3,000 level to the upside, we need to see real progress on trade negotiations with China... not just threats.
Meanwhile, Canada’s Foreign Minister, Chrystia Freeland, was back in the Nation’s Capital to continue NAFTA negotiations.
12 September 2018
EDITORS John Gillin Greg Diamond Scott Garliss
thinking. Powell struck a cautious tone for the first time since he became chair. The Fed looks to be reaching a point where it no longer needs to continue the current rate- hike path. Although two more rate hikes this year seem certain, if the Fed only requires one – possibly two – next year to achieve neutral, this would ease the case for owning the greenback. And, adding one more twist, this is what may take place at the European Central Bank (ECB) next year. When ECB chair Mario Draghi steps down in Fall 2019, the bank will need to select his replacement. With Spanish Economy Minister Luis de Guindos already selected as vice- president, the thinking is that the ECB will choose a chair from Northern Europe. This would better represent the entire continent when it comes to policy decisions. German Bundesbank head Jens Weidmann would fit that bill, and
A CHANGE IN TONE FROM THE FED This month, we also saw changing dialogue from the Federal Reserve. It began with comments from Dallas Fed president Robert Kaplan. Kaplan is hawkish (inclined to hike rates) in his tendencies and is not a voter on the FOMC this year, so he has limited direct influence on monetary policy. Kaplan cautioned the central bank was getting closer to a neutral policy (neither helps nor hurts economic growth). He said three or four more rate hikes of 25 basis points and we’re there. At that point he feels the Fed needs to reassess its course. The market has built in two more hikes this year. And next year, the Fed’s own dot plot forecasts three. So, based on the math laid out by Kaplan, the Fed only needs to hike one or two times in 2019. One theory making its way around Wall Street is that policy divergence – the Fed hiking rates while other central banks are neutral – is ending. Fed chair Jerome Powell’s Jackson Hole speech lent further credence to this
given his pragmatic nature and recent commentary regarding a pull back on stimulative measures, that could fuel a euro rally versus the dollar and prove to be a positive for global markets.
The Fed looks to be reaching a point where it no longer needs to continue the current rate-hike path...
American Consequences 13
WHAT COULD POSSIBLY GO WRONG?
Financial follies and disaster in the making
Stocks have broken out to new all- time highs... The bull market is officially back on track. More compelling, small-cap stocks typically give us a deeper understanding into what’s happening in the market. If the overall market is soaring but small caps aren’t, that’s cause for concern. It means only the biggest companies are succeeding... which means the boom could be ripe for collapse. Today, small-cap stocks remain near all-time highs, which means it’s not just the largest stocks pushing the overall market higher... In addition, you can look at the entire market to see how many stocks are moving higher versus how many are moving lower. It’s called the "advance/decline line." Today, we’re seeing a lot of stocks climbing. The advance/decline line has been hitting new highs, just like small-cap stocks. We know that eventually this bull market will end. But until then, the good times are rolling along. What could go wrong?
The trade dispute between the U.S. and China heats up... again... Last week, President Donald Trump warned that additional tariffs on nearly $270 billion in Chinese goods could be rolled out on short notice. Speaking aboard Air Force One, Trump said the tariffs would be in addition to the $200 billion in tariffs already announced. If this third round of tariffs eventually comes to pass, it would bring the administration’s total tariffs on China to nearly $520 billion. This is more than the total amount of goods the U.S. imported from China all last year, and it’s far more than China imports from the U.S. each year. In other words, it exceeds China’s ability to enact “tit for tat” tariffs as it has threatened in the past. But that didn’t stop China’s leaders from once again threatening retaliation. It’s not clear how China would respond to this latest round of tariffs, but it's clear why the country is motivated to act. This latest round targets China’s mobile-phone industry, which accounts for more imports to the U.S. than any other.
14 September 2018
unlikely to be large. But employment data, consumer spending, and manufacturing numbers may become difficult to analyze... especially if more storms reach land this hurricane season. In 2017, the effects of Hurricanes Harvey and Irma hindered activity in the third quarter of the year, but spurred rebuilding later and well into 2018. And when Harvey made landfall in the end of August, initial filings for unemployment benefits in the area surged in the following weeks... the most since 2012. Fortunately, despite Hurricane Florence’s record-breaking size and potential damages, analysts believe that any job losses will be temporary and of little concern. Consumer spending should see a spike due to pre- and post-storm purchasing in sectors like food, home improvement, but spending on discretionary items and entertainment are expected to take a hit. Automakers could also see a sudden but brief boost as Americans are forced to replace vehicles damaged or lost in the storm. (After Hurricane Harvey, auto sales soared to a 12- year high weeks later.) Oil production and new home starts could also take a hit, with the latter being the most likely if Florence continues on its current path. In short, analysts expect the overall economic effects of Florence to be minimal. Certain sectors will see spikes or lulls, but any major impact will likely be confined to local rebuilding and clean-up efforts.
Cryptos drop more than the dot- com crash...
This week, a leading cryptocurrency index fell by 80% from its most recent high in January. That’s worse than the 78% decline in the Nasdaq Composite Index after the dot-com bubble burst in 2000. And just like the dot-com boom, cryptocurrency investors who bet big on a seemingly revolutionary technology are taking a painful hit to their virtual wallets... particularly those in secondary tokens, also known as “alt-coins.” These losses were led by this ether, the second-largest crypto, contributing to a month-to-date 40% drop in the virtual currency. Crypto bulls are quick to note that the Nasdaq was hitting new highs only 15 years later... and that bitcoin has recovered from similar crashes. But an 80% plummet in an asset class worth nearly $200 billion is hardly a drop in the bucket. We’re still interested in this sector... but we’re keeping our rent money far away. As we go to press, Hurricane Florence is about to make landfall on the South Carolina coast. Forecast as the worst storm to hit the Carolinas in 64 years, with as much as 40 inches of rain, massive flooding, and wind as strong as 74 miles per hour. While it’s too soon to estimate the scope of property and infrastructure damage the storm will leave in its wake, the economic impact is The storm of the century?
American Consequences 15
FROM OUR INBOX
She didn’t ask me.
Re: Our Newest Readers Weigh In
Re: Back in Black: America’s New Energy Boom I’ve just finished reading the last issue of American Consequences ... Like most of your letter writers I also remember PJ from our (at least my) left-of-center days 40-plus years ago. Thank you for the energy article, our neighbors have convinced themselves that a plug-in Prius doesn’t pollute, while my diesel truck is the ruin of civilization. I’m going to give myself an extra ration of scotch tonight to celebrate PJ’s return, his incredible wit, intellect, and the launch of a truly fine online magazine. Life is good. – Greg E. P.J. O’Rourke comment: Thank you, Greg. And thank you for your diesel truck. Its energy efficiency of 45% is about half than that of a gasoline engine. And while electric cars can achieve energy efficiency of 60%, that’s only counting the energy as it comes off the electrical grid. The grid’s electricity had to be produced by another – probably inefficient – power source. But if that’s too complicated for your neighbors to understand, tell them: “Diesel may spread a little pollution in the neighborhood but electric cars spread liberals all over the place.” “Living in an Artificial World” was the funniest article I have read in a long time! Unfortunately, I can relate. I enjoy American Consequences very much. Great articles. Keep it up. – Steve F.
Mr. O, I have been a fan for many years and appreciate your rapier wit that spares no one. I was excited to run across your latest venture. How’s the liver holding out? – Paul A. D. I’m looking forward to reading these back issues. I’m a humorbean... humorbeing... human being that enjoys... uh, humor. Your new pal, Blake V. Read your Thrown Under the Omnibus book, and looking forward to more of your wit. – Stephen H. P.J. O’Rourke comment: Paul, Blake, and Stephan, I love you guys. Please don’t let on that it was my mother who talked you into writing these emails. (P.S., Paul, the liver is a muscle – mine is getting plenty of exercise.) PJ, your newest member is a 42-month tour Vietnam vet with a Purple Heart & eight confirmed kills... I hope to find a few good articles to read soon. – SSgt Luther L. P.J. O’Rourke comment: Sergeant Luther, Sir! We will endeavor to publish articles that do not cause you to take aim at us! Why in the Blue Blazes didn’t you do this before?! It is about time! – Nancy R. P.J. O’Rourke comment: I think so too, Nancy! But why I didn’t do it before is sort of like the question of why I didn’t marry a smart, beautiful, and loving woman until I was 47.
16 September 2018
Re: A Few Political E-Mails The woman who said Trump paid her for sex. How come she did not pay taxes on the bribe money? Contact the IRS for failure of declaring income! – Ruth L. P.J. O’Rourke comment: Ruth, let’s turn her in and see if we get a share. I mean, of the money. We sure don’t want a share of anything else that woman has. There seems to be an idea floating around American culture that taking sides is wrong or should be avoided for the sake of objectivity. It’s really impossible to avoid taking sides. In fact, not taking sides or trying to stay out of the discussion tends to favor the bad guys... I like the way Trump speaks. Even the crazy things that come out. It is what he actually does that makes the country better and not the speeches. – Harland M. P.J. O’Rourke comment: Harland, you bring up two excellent points. What the heck is the use of being “objective” if your objectivity doesn’t lead you to a conclusion? And not taking sides, does, just as you say, favor the bad guys. There is a quotation attributed to the great statesman and political philosopher Edmund Burke: “The only thing necessary for the triumph of evil is that good men should do nothing.” You and I may disagree somewhat about President Trump, but I trust our disagreement will be civil and rational and a useful part of the public debate. Send us a message, question, or criticism at feedback@americanconsequences.com
P.J. O’Rourke comment: Steve, I personally would have thought the article was a lot funnier if it hadn’t been so darn true. Re: Three Books That Aren’t About Investing I just signed up – and like what I see. Let me say up front that I identify as a liberal/ libertarian politically and lean toward Keynesian economics. That being said, I believe that it is essential to understand economic philosophies, and how they drive international and national events and consequences... I really enjoy the fresh perspective American Consequences offers. I just skimmed through the July issue and find that there are many things to agree on. I have added New Ideas From Dead Economists by Todd Buchholz to my reading list, thanks to you. I plan on reading previous issues and am eager to see August come to my inbox. – David F. Todd Buchholz comment: David, I'm delighted that you are taking PJ O'Rourke's timely advice and reading New Ideas from Dead Economists . President Trump's eclectic brand of tax-cutting, tariff-threatening, and Fed- nudging would spark economics textbooks to self-destruct like the opening to a Mission Impossible film. But economists have much to be humble about. Keynes himself said that if economists aspired merely to be "humble, competent people, on a level with dentists, that would be splendid."
American Consequences 17
FROM OUR INBOX
Scott Garliss
ASK AN EXPERT Re: The Certain Loser in November’s Congressional Elections February issue of American Consequences Ever since President Trump has brought up the matter of tariffs, I have been wondering what the disparity in tariffs are and where the problem exists. Can you enlighten? – Mahalo, John A.
However, today, the tide has turned. Unemployment has dropped as low 3.8% in May and underemployment has fallen to 7.6%. Recent GDP growth indicated domestic economic growth of 4.1%. That is the best quarterly data we’ve seen since 2014. If that type of number were to play out for the entire year, you’d have to go back to 2000. The White House sees the pick-up in economic growth. Administration officials realize last year’s tax cuts are likely stimulating this growth. They also see that the rest of the world is not experiencing the same acceleration. They feel they can strike better bargain dealing from a position of strength today. As an adage on Wall Street puts it, “ Sell when you can, not when you have to .” There are three main negotiations taking place – China, the European Union (EU), and the North American Free Trade Agreement (NAFTA). NAFTA is straightforward. The deal went into effect in January 1994. The administration feels it’s time to refresh the terms of the deal.
P.J. O’Rourke comment: Nope. I’m dumb as a box of rocks on the subject. If you don’t mind, John, let me bring an expert in to answer your question – Scott Garliss, who you may know from our What Moved the Market section each month... Scott Garliss comment: John, I wish the answer were simple... Let’s think about the angle the president is coming from. He believes deals with foreign entities were struck during times when the U.S. was not dealing from a position of strength. He’s focusing on the period coming out of the Great Recession 10 years ago. His concern is that the administration at the time was more of the mindset that they would do any deal for the sake of a deal and the economy. And at that time, we needed to keep the lights on and the capital flowing. The unemployment rate got as high as 10% and the underemployment rate (total unemployed plus people neither working nor seeking work) reached as high as 17.1% at the end of 2009.
18 September 2018
“Practical. Insightful. Helpful. Educational. Can’t ask for much more.” HHHHH –GAMECOCKS44
EU negotiations even the playing field. According to German think tank IFO, the unweighted EU customs duty on U.S. goods is 5.2% while the U.S. rate on EU goods is 3.5%. They would like to bring that average at least in line. Cars are a sticking point. U.S. imports of EU autos only pay a 2.5% duty while EU imports of U.S. cars pay a 10% duty. Again, the U.S. wants the playing field leveled. China gets even more complicated. But the main sticking point is the trade balance. In 2017, the U.S. ran a $375 billion trade deficit with China. Overall, the total U.S. trade deficit last year was $566 billion. In other words, China, our largest trading partner, was 66.3% of that deficit. Again, the administration would like to see that playing field leveled. Another way to look at the China fight is inevitability. Much like America wants to be the dominant global power, China sees itself in the same light. It has the largest global population by a factor – 1.4 billion of the 7.6 billion people globally live there versus 326 million in the U.S. At some point, push is going to come to shove. China wants to assert itself and garner
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respect as a dominant force. America wants to maintain that role. You can have this fight now or later, but it is coming...
American Consequences 19
HOW DIDWE GET HERE...
THE U.S. HEALTH CARE SYSTEM: an infinite loop of tough questions & hard answers
Almost no one can agree on anything in our fractured political landscape today. But just about everyone – policymakers, providers, patients, and third- party payers alike – realize that the American health care system is in crisis.
We spend far too much. And we get far too little. For the few Rip Van Winkles out there or for those who have, like our Congress, been ululating loudly and covering your ears when the topic comes up, a few facts worth considering...
The U.S. spends roughly 18% of its GDP on health care and the number keeps rising. That translates to $10,500 for every man, woman, and child. Contrast this with other wealthy countries in the Organisation for Economic Co-operation and Development (OECD), which spend an average of $4,100 per capita,
By Kerry D. Moynihan
20 September 2018
AND WHERE DOWE GO NOW?
half of U.S. expenditures. The next-highest percent of health care spending is Switzerland and France, and the U.S. is still 50% higher. Are we getting twice the value as other countries? Apparently not, as the U.S. ranked 31st in life expectancy by the World Health Organization, just below Costa Rica, whose
per-capita GDP is just 30% of ours. And the French live three years longer than the average American, so pass the escargots and Cotes Du Rhone, but hold the excessive stent implants, please. In business school nearly three decades ago, I took a class in health care economics. The
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American Consequences 21
professor, Bill Kissick, was a MD who also taught in the medical school at the University of Pennsylvania. He was extremely smart, knowledgeable, and engaging. He had been one of two physicians intimately involved in the drafting of the Medicare legislation and showed us pictures of himself shaking hands with President Lyndon B. Johnson. Unfortunately, the issues that we studied around 1990 are roughly 92% the same as the problems we face today, because, as Dr. Kissick admitted, “ We had the best intentions, transparency of pricing so you know what you will pay for something before you buy it, the ability to shop for alternatives, and ratings of the goods or services provided. None of those three things are included in American health care. The crazy patchwork of pricing on a typical hospital statement, often from providers you have no recollection of or direct contact with, is astonishingly opaque and complex. Compare the different rates for the same service or product among privately insured, government-paid, and the off-the-street “rack rate” patients. Woe to those in the last category. It is rather like the scene in Casablanca where Humphrey Bogart as Rick and Ingrid Bergman as Ilsa are in the souk and a merchant offers her some linens first for 700 francs, only to be willing to part with them “for a special friend of Rick’s” for 100. The creation of the Centers for Medicare & Medicaid Services (CMS) injected vast pools of government money into the health care system. Worse, it dissociated those paying and but no understanding of economics! ” The typical economic system includes
those receiving the service. When you do that, prices invariably rise. More dollars chasing goods and services leads to inflation, as any Econ 101 student can tell you. When offered the choice between a Rolls-Royce and a Yugo at the same price, everyone will opt for the burled wood and leather interior with serious horsepower over plastic and vinyl and hamsters running on a treadmill pickup. Wouldn’t you? We have a system of perverse incentives that leads to the delivery of more care that will be reimbursed, rather than the proper care, not to mention the practice of “cover-your-ass medicine” for fear of malpractice litigation. These factors combine to the common estimate that one in three health care dollars is spent in fraud, waste, or products that aren’t needed or have no demonstrable therapeutic benefit. My late father was once the inspector general for all Medicare and Medicaid fraud in the state of New York, so I have a feeling that the numbers may actually be higher. A 2017 study of 3,000 medical treatments in randomized controlled trials by BMJ Clinical Evidence found that just 35% were deemed to be “beneficial” or “likely to be beneficial.” I guess that is why it is called “the practice of medicine.” Yet while physicians are practicing, patients are charged what the insurer traffic will bear. Isn’t it time to just admit that doctors are also members of the genus Homo Economicus , and there is more than a distinct possibility that Adam Smith will trump Hippocrates on occasion, if not routinely.
22 September 2018
THE U.S. HEALTH CARE SYSTEM
crowd out almost all other forms of social welfare or indeed, goods and services of any kind, and soon after, lead to bankruptcy. President Eisenhower warned of the military- industrial complex. But today, health care spending is more than five times the entire U.S. defense budget. It is a far greater fiscal danger to our country. And the health care industry will not surrender lightly... So-called “special interest groups” like health care providers, insurers, and pharmaceutical companies are likely to rouse enough popular support to derail any attempts to muzzle the current vast machine for the transfer of wealth to the health care sector. Spending on political lobbying by health care providers, insurers, and product manufacturers as a group far outpaced any other industry by $7.5 billion, a factor of more than three times from 1998 to 2017, according to Open Secrets .
To quote George Bernard Shaw: Nobody supposes that doctors are less virtuous than judges; but a judge whose salary and reputation depended on whether the verdict was for plaintiff or defendant, prosecutor or prisoner, would be as little trusted as a general in the pay of the enemy. Surgeons are paid to operate, so where does their natural incentive lie? American health care finds itself at a crossroads... Mere tinkering will no longer work and basic assumptions must change. Part of our cultural heritage seems to be an unbridled optimism in expanding frontiers, yet we can no longer predicate our national health care policy (if such a thing truly exists) on the expectation of and demand for unlimited medical progress, maximum choice, perfect health outcomes, and rising profits and income. A monochrome standard of care such as in single-provider, socialized-medicine countries is unlikely to solve or service the needs and demands of our diverse populace. Accepting this as the norm would not only radically alter the way that we think of health care, but also the way that we think of ourselves as Americans. We have come to think of health care as a right, and to the finest available as no less so. Extreme economic measures or even violence are not difficult to imagine from citizens denied access to privileges and benefits they formerly enjoyed. Yet extending the highest standard of care that our society is capable of providing would
Mere tinkering will no longer work and basic assumptions must change.
I am reminded of a scene from Hemingway’s The Sun Also Rises , in which a character is asked “How did you go broke?” and he replies, in “Two ways, gradually and then suddenly.” It doesn’t take a PhD in actuarial science to figure that we are heading for a demographic time bomb. By 2050 there will be more people over the age of 80 than under the age of five. If the U.S. nationalized the health care
American Consequences 23
enterprise with the single-payer option, we can certainly bankrupt several heretofore major industries and replace the private sector’s function with that of the public sector. First slowly, then quickly. To do so in the name of Karl Marx would be one thing, but to do so in the name of efficiency is absurd. No municipal, state, or federal government has historically shown the ability to execute an undertaking so vast more efficiently than private markets could. It is the depth of naivete to rely on the benevolent wisdom of a state that has all too often demonstrated itself as neither good nor wise. As the profitability and international competitiveness of American industry is every day more impaired by escalating health costs, we must make a choice. Much like police or fire protection, public health has long been regarded as a public good – not an explicit right – and as such should be granted some exemption from the strictest market ideology. A purely socialist solution is inadequate, as is a purely capitalist solution. But today, it’s clear that a much greater degree of market forces is needed. There has already been progress in the marketplace in reaction to spiraling costs. For example, some far-sighted third-party administrators, pharmaceutical benefit managers, and other firms are harnessing the power of data to deliver genuine “managed care,” as opposed to just beating down the reimbursement rates for service providers. And giving employers true visibility into their health care costs – such as a dashboard of their top service providers, the most frequent and expensive procedures and morbidities,
and the delta among the providers for the latter – can provide powerful tools to bend down the cost curve and improve outcomes. Charles Silver and David Hyman recently wrote a thoughtful book, Overcharged: Why Americans Pay Too Much for Healthcare , which is in large part predicated on long-established economic data that more insurance leads to more consumption of health care, not less. They show how transparency and competition in the private pay sectors of the health care services market – such as LASIK and cosmetic surgery – resulted in decreasing prices and better outcomes. They propose an innovative approach to only purchase insurance for catastrophic occurrences. No one expects their auto insurer to pay for oil changes, the authors argue – only if a driver wraps a car around a telephone pole. Likewise, the health care market would respond to market forces if consumers were not acquiescing to a CAT scan every time they had a check-up if they knew they would be billed for it. This approach is well worth exploring. The old 80/20 Rule is nowhere more evident than in health care. For example, 25% of Medicare spending on seniors, which in 2016 was $672 billion, is spent on 5% of patients in their last year of life. This is roughly equivalent to the entire economy of the Rhineland in Germany or of New Zealand! And what for? Prolonging the inevitable end? Not to be confused with Jack Kevorkian, but I agree with Drs. Ezekiel Emanuel and Atul Gawande (authors of The Ends of Human Life and Being Mortal , respectively) that the indefinite extension of human life, by any means necessary and at any cost, presents a
24 September 2018
THE U.S. HEALTH CARE SYSTEM
Both the perfect collective goods of a low-cost, minimum- bureaucracy health system coupled with highest-quality, maximum-choice individual health care cannot coexist. It is self- delusion to think that it can be so.
the access to and equity of the system is, of course, the Holy Grail. That noble quest will take some time. What are the solutions in the meantime? Hell if I know... Pick your parents well. Make a lot of money. Save more than you need. Don’t get unlucky. Import your own pills from Canada or India (a legally gray area). Get dental work in Mexico or Thailand. Have surgery in Argentina, Costa Rica, or at home (the “suture self ” plan). Run, bike, lift weights, and eat oatmeal with blueberries. And if all else fails, choose to go with dignity and not saddle your kids and grandkids with the bill. A good life not prolonged at all costs and a “good death” should be the goal for the individual... And fiscal responsibility tempered with compassion should be the goal for the state and the health care system. Health care need not be the death of us all! Kerry D. Moynihan has had a long career in executive search consulting, specializing in working with leveraged buyout and venture capital funds, public companies undergoing dramatic growth or rapid change, and restructuring boards of directors. He also does executive coaching and connecting management teams with capital partners. Kerry is a graduate of the University of Virginia in English literature and holds an MBA in finance from the Wharton School. He has worked with clients on six continents and holds dual U.S. and EU citizenship.
moral conundrum that the medical profession and the general populace must face head on. And so you know that I am willing to eat my own cooking, I have specific advance medical directives in place for myself and my 94-year- old mother. Despite the frequent lamentations that typically begin with the phrase, “Why can’t the richest country in the world do...,” Americans must finally recognize that merely containing the incessant rate of cost increases is not enough. A value shift denying some citizens access to the finest care that modern science has to offer is not the answer, either. It is very difficult, if not impossible, to be both the lowest-cost producer as well as the highest-quality supplier. Both the perfect collective goods of a low-cost, minimum- bureaucracy health system coupled with highest-quality, maximum-choice individual health care cannot coexist. It is self-delusion to think that it can be so. A plan that will improve the quality of care, lower costs, cut bureaucracy, and improve
American Consequences 25
PJ’S TOP 10 TIPS
on Health
3. Buy a treadmill or other large, bulky fitness machine Fitness machines burn calories:
1. Drink six 12-ounce glasses of water a day Beer is 90% water. Wine is 80% water. Scotch is 60% water. Thus 7 beers, 14 glasses of wine, or 13 highballs should do it. 2. Cut down on salt Stick to beer, whiskey, and wine. Knock it off with the margaritas.
• Getting fitness machine from exercise equipment store into car trunk 150 calories • Getting fitness machine out of car trunk and into the house 175 calories • Assembling fitness machine 200 calories • Paying teenager next door to assemble fitness machine correctly 10 calories • Moving fitness machine from spare bedroom where it takes up too much space to rec room 140 calories • Dragging fitness machine from rec room where it also takes up too much space down to thebasement 560 calories • Getting fitness machine back up the basement stairs 1,480 calories • Hauling it to the dump 225 calories
26 September 2018
By P.J. O'Rourke
8. Eat green leafy vegetables There’s a new way to get more of them into your diet – let cows do it for you! Cows spend all day every day eating green leafy vegetables such as grass. Now have a steak. 9. See your doctor frequently I see mine every Saturday afternoon. Fore! 10. Get 8 hours of sleep every night Or 9 or 10 or 11 – see Health & Fitness tip #1 above. BONUS TIP: The Third World Miracle Diet Take one tablespoon of Cairo tap water with every meal and eat what you want! And never forget that Health and Fitness will add 10 years to your life. (Unfortunately they will add 10 years to the wrong end of your life. If Health and Fitness added 10 years to my life between ages 18 and 19, my Health and Fitness regime would make Tom Brady’s look like Rosanne Barr’s.)
4. Put your cigarette lighter in the attic and your Marlboros in the cellar Great exercise! If you have a pack-a-day habit you’ll climb 420 flights of stairs a week. 5. Go for a run Adopt a hungry pit bull. Don’t feed it. Put a raw steak in your pocket. Give yourself a 3-minute head start running down the block. Then have your spouse let the pit bull out the front door. 6. Do push-ups and pull-ups with weight attached At my house the weight is attached to me. I push myself up out of bed. I pull myself up after tying my shoes. Etc.
7. Eliminate between-meal snacks Eat only at mealtimes. Mealtimes are
as follows: • Breakfast • Brunch • Elevenses • Lunch • Tiffin • Tea • Canapes • Dinner • Dessert • Hors d’oeuvres
• Supper • Dessert • Savory • Midnight raid on the refrigerator
American Consequences 27
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