Monthly Archives: April 2012

One Thing a Flat Income Tax Will Not Solve

Every income tax, progressive or flat, has a problem that shifts the burden unfairly to those subject to paycheck withholding.  Most employees cannot avoid automatic deduction from their paycheck.  Others though enjoy the luxury of voluntarily reporting their income to the government for purposes of taxation.  Millions of self-employed, especially in largely cash businesses as well as those who derive their income from the so-called underground economy or illegal activity, choose to report only a portion of what is owed by law or even none at all and the effect of this is quite significant.

Years ago, maybe 2002 or 2003, when the United States had annual deficits of only around $400 Billion, Barron’s ran a story claiming that if all taxes actually owed by law were paid the entire deficit would vanish overnight and flip us into surplus.  Since it is not possible to track down all this unreported income those subject to paycheck withholding necessarily must pick up the slack.  It can be no other way.

Of course, this is where the advantage of a sales tax comes in.  Everyone becomes a contributor, even those who obtain 100% of their income through illegal means.  Criminals now contribute to the process of their eventual arrest and conviction.  Folks running legitimate cash businesses no longer have to face the temptation to not report all their income.  Everyone pays closer to their fair share and complete avoidance becomes nearly impossible.  Huge compliance costs are eliminated along with far fewer points of enforcement.  In theory the Federal Government could collect all its needed revenue through a sales tax without the complication of competition that faces states or municipalities in this regard, with the threat of losing sales and tax revenue to neighboring jurisdictions.

So while lowering rates, removing deductions, and broadening the base through a flat income tax is preferable to a highly progressive tax with many deductions and armies of lobbyists attempting to create even more loopholes, it can never solve the problem of folks, in a position to do so, under-reporting their income at the considerable expense of those who cannot.  Since the majority of citizens are subject to withholding and this unfair burden placed upon them, it can only be their failure to recognize this that has prevented their demand to end it once and for all.

Cost Shifting, Defensive Medicine, or Simply Waste, Fraud, and Abuse?

My father died in September of 2009 from Alzheimer dementia.  In the last year of his life there were three separate occurrences of others cashing in on Medicare by virtue of his situation, that I contend would not have happened under different circumstances.

Let’s look at these situations starting with September 2008 when my father still had a year to live.  The assisted living facility where he resided called me one morning to say that dad was really in poor shape, not responding well and should go see his doctor as soon as possible and I should take him there.

They were certainly right.  I found him unable to walk on his own.  Wheelchair to the car to wheelchair to the doctor’s office, I got him there.  The doctor examined the old man and concluded that the end was fast approaching and I should get hospice involved.  He added that all medications would be stopped and he would not be seeing him again, that the end would come quickly.   OK, so I returned dad to the facility and contacted hospice as instructed.

Four days later and having been off all medication something amazing happened.  There my father was, able to carry on a conversation and better than I had seen him in at least 6 months.  It sure looked like the medications were to blame, and in itself, is another story.  This vastly improved condition lasted several more months and it quickly became apparent that he was not about to die anytime soon.

The problem is that hospice, now engaged and entitled to six months worth of payments from Medicare did not remove themselves from the equation.  They still sent staff around but largely were not needed.  This continued for the entire six month period.

Time went on and as dad’s condition deteriorated toward the real end of his life the connection between the brain and the muscles weakened and he became a fall risk.  Since government regulation forbids strapping him into his wheelchair, he fell.  Twice when he fell he must have said “ouch” and he was whisked off to a local hospital and I was notified and met him there.

On each of these two occasions, upon examination, no reaction of pain whatever could be found.  The man was clearly not injured but highly stressed due to the deepening dementia and the strange surroundings.  Yet each time, with no discussion whatever, dad was wheeled down the hall for an MRI for which the hospital collected $1150 from Medicare.

So there it is, the first instance being rather clear, but what about those last two?  Cost shifting, defensive medicine, or simply waste, fraud, and abuse?  I’ve wondered about that since, but I do know the one thing that would have gotten in the way of any of the nonsense I witnessed.  And that would be paying directly rather than through a third-party.  Questions of necessity would have been asked.  Would a simple x-ray be sufficient for the circumstances?  A requirement to check off on declined services may have occurred, but they would not have happened.  This is just one example of the waste via overuse caused by unnecessary third-party payment.  With the illusion of free, no one was asking questions.  No one cared.

The lack of scrutiny on the part of Medicare is also a question.  Does it matter that claims may be processed cheaper if the eyes are shut?  Indeed it is the  profit motive itself that serves to apply the brakes to such behavior in the private sector.  Fear of loss, the other side of the profit coin, demands forces for efficiency that are not there without it.  Three occurrences in one year with one patient begs the question, “how many times is this repeated day after day after day after dollar?”  Isolated instance?  Of course not.  Advocating for single payer government (Medicare for all) is a recipe for disaster.

Can Covering Preventative Healthcare Services WASTE Money?

As I study and think about the healthcare issue, I’ve had this feeling that one thing simply could not be right.  Proponents of Obamacare have argued, and many Americans seem convinced, that preventative medicine, those checkups, tests and procedures designed to find something wrong can save money by nipping problems in the bud, saving tons of money down the road after a situation has become more serious.  This thinking is so strong that even in high deductible health plans preventative services often do not conform to the deductible and are covered in full or part on a first dollar basis to encourage their use to save others lots of money and reduce premium costs in the long run.  Is this actually a fact or more fallacious nanny state thinking?

Let’s say a checkup does find something wrong, even in someone with no symptoms at the time.  Then what?  When available, treatments would be applied, medications or even surgery would be administered to address the issue.  Yet these treatments themselves are often very expensive and that cost must be spread across all insured.  Whereas, had the condition not been discovered early, by the time the patient experiences symptoms treatment may no longer be an option and expensive end of life treatments may be incurred followed by an early death.  Yet even in this situation, treatments (expenses) that could have prolonged life have not been incurred, and while expensive end of life treatment did occur, it occurs for everyone not experiencing a sudden death sooner or later.  Then too, at the moment of death (which none of us will escape), medical expenses for that individual immediately drop to zero forever.  This all makes avoiding preventative care seem like it could be the cheaper, if even fatal, option.

None of this is to suggest that we do anything to discourage preventative care either, as there isn’t much argument that such steps and discoveries can prolong life, even if at great expense over time.  The point, it seems to me, is that in a society that subscribes to individual liberty what business is it of mine what the next person decides is the right approach for them, especially if it turns out that encouraging greater use of preventative care does not in reality save money as is so often claimed.

Another consideration is that preventative services are at the lower end of what is affordable and as such should never be included in insurance at all.  Doing so defies the purpose of insurance to begin with, that being limiting the risk of encountering the otherwise unaffordable.  Additionally, in a truly free market, with prices mutually agreed by the provider and consumer, preventative services would be the most likely to be heavily discounted as they are gateway transactions.  Any discovery that would require further intervention would often take place at the point of the exam.  This has not been lost on Pep Boys or recently Meineke when they advertise they will diagnose that check engine light in your car for FREE!  Of course in our convoluted system any physician who accepts Medicare or Medicaid would be committing fraud for extending such an offer.

This then leads to the question of what about the poor who want preventative care but may not be able to afford it on their own.  Even here allowing market forces to work is a preferable approach.  Funding Health Savings Accounts to provide for normal health related expenses and allowing participants to eventually keep funds not used encourages wise spending and respects the poor’s discretion and dignity in making their own choices.

Of course the no cost preventative care of eating a balanced diet and exercising regularly is probably the most effective approach in reducing costs aside from direct payment and is not dependent at all on economic status or situation.  Yet here again respect for the liberty of others precludes requirements to exercise or eat a certain diet.  It is simply, although wise, not the business of others in a free society respectful of liberty.

Now you may and should ask if there exist any studies to support my thoughts presented here.  A Google search “does preventative medicine save money” says “yes”.  In fact there are so many sources in agreement that I will simply challenge you to do the search for yourself.  I’ll only note that sources include the New England Journal of Medicine, the Wall Street Journal, and ABC News among others.