# Karl Denninger On Health Care



## UncleJoe (Jan 11, 2009)

Karl Denninger of Market-Ticker.Org says both Romney and Obama are lying about health care reform. Denninger says drastic changes are coming no matter what, *". . . because the amount of money the federal government spends doubles every seven years . . . this is mathematically impossible." Denninger says, "We either fix this or the government collapses along with society."* Denninger contends, "You have to kill the monopoly protections that the medical system has that prevent the free market from working."

Think we can fix the economy of health care with Federal Reserve money printing or QE? Forget it! Denninger warns, *"It is a huge tax increase. . . . It acts by devaluing your purchasing power, and it falls disproportionately on the poor and lower middle class."*


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## Bobbb (Jan 7, 2012)

He's right about the system being unsustainable but he's wrong about the prescription needed to fix the system.

There's a free market in food, isn't there? Yes, there is. Ever notice how the quality of food in our diets change as we climb the income ladder. Poor students and poor young people live on Mac & Cheese and Ramen noodles. Then as they start earning more money their diet improves. At some point people begin to eat out more than they eat in because the value of their time is better spent earning money than it is on preparing food. This dynamic clearly signals to us that food is a superior good, which in economic terms means that demand for quality increases with income. A superior good is the opposite of an inferior good, a good where demand falls as income rises. Houses are a superior good. As we earn more we want bigger and better. Health care is also a superior good.

Denninger sets up a false choice between government rationing and free market splendor which can't come about because free market based decisions to forgo treatment are simply another form of rationing where the difference is focused on who is making the rationing decision. 

The more pertinent dynamic that's going to be in play is how individuals value the goods in their life when they pass through the necessity stages. Will they value having access to better health care where more tests, more equipment, better drugs, etc are at their disposal or will they instead prefer to spend their money on better food, a bigger house, two or more cars per family, cable tv, cell phones, etc.

The only solution that will work is for people to voluntarily choose to consume less health care resources but this is unlikely to come about because of health care being a superior good - people want more healthcare as they become wealthier in life.

The only part of the crisis which will really need to be addressed is the government spending on healthcare for that model is really broken - you can't have a system where every single person has the same ability to consume healthcare resources of the same quality and have other people paying for it. The free market can fix this but it will leave hundreds of millions of pissed off consumers who now have to make their own rationing choices and when push comes to shove they'll likely choose healthcare over cells phones, cable tv, etc, meaning that healthcare expenses will continue to rise as a percentage of GDP in relation to expenses for food, housing, transportation, etc. A cheaper car or an older car is easier to embrace than the option of foregoing the latest cancer drug and instead using the cancer drug that went off patent in 1984 and is now cheaper and sourced from Guatemala.

The free market can work to keep healthcare expenses in check if people decide that they want to use older drugs instead of newer drugs, they want to see the cheapest physician they can find instead of the best, and most expensive, that they will forgo getting surgery and suffer with an ailment in order to not spend the money and thus have it available to spend on the iphone contract.


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## BillS (May 30, 2011)

UncleJoe said:


> Think we can fix the economy of health care with Federal Reserve money printing or QE? Forget it! Denninger warns, *"It is a huge tax increase. . . . It acts by devaluing your purchasing power, and it falls disproportionately on the poor and lower middle class."*
> 
> He's wrong about that. The poor have very few dollars. They live from paycheck to paycheck or from government handout to government handout. The wealthy will be disproportionately affected by hyperinflation from QE3. If you have $300,000 in the bank you will be absolutely wiped out.


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## BillS (May 30, 2011)

Bobbb said:


> T*he free market can work to keep healthcare expenses in check if people decide that they want to use older drugs instead of newer drugs,* they want to see the cheapest physician they can find instead of the best, and most expensive, that they will forgo getting surgery and suffer with an ailment in order to not spend the money and thus have it available to spend on the iphone contract.


One of my diabetes medications is actos. It costs $300 a month. My copay is only $30. If I had to pay the full cost I wouldn't take it. That's an example where the free market isn't involved because the actual cost doesn't affect me.


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## machinist (Jul 4, 2012)

In the 1950's, local hospitals here were non-profit and operated by churches, notably Louisville Jewish, and seveeral Catholic hospitals. When virtually all hospitals became for-profit businesses, the cost of health care went nuts. This was predicted by churches and doctors alike at the time. 

I think the answer is to make health care a non-profit operation administered NOT by government, nor by any profit making entity. Choose your own group to operate them, but get them off the stock exchange and matters will clear up I think. 

If my hospital buys another a new MRI machine, I am sure that they WILL find business for it, whether it is legitimately needed or not. Think about it. If you take you car to the dealer and say it is making a funny noise, do you really think they wouldn't use every test they have an bill you accordingly?


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## partdeux (Aug 3, 2011)

machinist said:


> If my hospital buys another a new MRI machine, I am sure that they WILL find business for it, whether it is legitimately needed or not. Think about it. If you take you car to the dealer and say it is making a funny noise, do you really think they wouldn't use every test they have an bill you accordingly?


My father in law has gold plated insurance coverage in retirement... the amount of testing that is done is absolutely nuts. Hangnail gets an MRI. If had to pay for it, he'd use his pocket knife, alcohol (for medicinal purposes), and a band aid.


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## Marcus (May 13, 2012)

BillS said:


> He's wrong about that. The poor have very few dollars. They live from paycheck to paycheck or from government handout to government handout. The wealthy will be disproportionately affected by hyperinflation from QE3. If you have $300,000 in the bank you will be absolutely wiped out.


Actually he isn't.
The working poor have fewer choices (less money = fewer choices) and less freedom (less ability to purchase goods and services.)
The wealthy OTOH can afford to purchase advice from financial professionals on how to preserve their wealth. They can afford to move it offshore, invest in hard assets, etc. In other words, they have more choices. BTW, $300K isn't wealthy.

So how does it play out if hyperinflation begins?
The wealthy will use their wealth to buy assets that do well in hyperinflationary cycles. So while they may be damaged, they'll easily survive (barring civil unrest.)
The poor will get squeezed as their meager paychecks and any extra they're able to save no longer buys needed essentials (food, shelter, clothing, etc.) So at some point, they go on the public dole just to survive another day.

Meanwhile, the wealthy are able to buy distressed assets at pennies on the dollar from highly motivated sellers who are cash poor.

So the smart wealthy folks end up richer (in assets) when the hyperinflation ends.


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