Tag Archives: healthcare

Why Warren Buffett pays 0% social security tax

Social Security is billed along with Medicare (health care for the poor) as an anti-flat tax called FICA where middle class workers pay 7.65 -15.3%, and rich people pay essentially 0%. The reason that Warren Buffet and other rich people pay 0%, on a percentage basis, far less than their secretaries, is that there is a FICA cap of $127,200 currently, and he earns far more than $127,200. Buffett’s secretaries pays 7.65%, or which 6% approximately is social-security payment, and the rest Medicare. Buffett’s company then matches the 7.65% — a situation that applies to virtually every employee in the US.

A self employed person though, a gardener say, pays both the employee and employer portion or 15.3%. The same $127,200 cap applies, but since few gardeners make more than this amount, they are likely to pay 15.3% on all earnings, with no deductions. FICA really socks the poor and middle class, and barely touches a rich man like Buffett. This is the tax-inequality that most needs addressing, in my opinion, and one I have not heard discussed.

A short history of FICA

A visual history of FICA rates (right), and of the salary cap (left). Medicare contributions were added in 1966.

As I write this, there is a debate about tax reform that mostly involves income tax, but not at all FICA. Income tax could be improved, in my opinion, and should be. We could remove some exemptions that are being abused, and we should lower the general rates, especially for foreign-earnings, but the current income tax isn’t that bad, in my opinion. Buffett likes to brag about the high rate he pays, but it’s not a bad rate compared to the rest of the world. And Buffett benefits from a lot of things we don’t. His income is taxed at a lower rate than a worker’s would be since most of it is unearned. And, like most rich folks, he has exemptions and deductions that do not apply to most. He can deduct cars, private airplanes, and interest; most folks don’t deduct these things since they don’t spend enough to exceed the “standard deduction”. I’m happy to say these issues are being addressed in the current tax re-write.

The current, House version of the GOP tax proposal includes a raise in the standard deduction and a cap on interest and other deductions. There is a general decrease in the tax rate for earnings, and a decrease for earnings made abroad and repatriated. I’d like to see tariffs, too but they do not appear in the versions I’ve seen. And I’ve very much like to see a decrease in the FICA rate coupled with a removal of the salary cap. Pick a rate, 4% say, where we collect the same amount, but spread the burden uniformly. Why should 7.65%-15.3% or the workmanship wages got to the window, the orphan, and healthcare of the poor, while 0% of Buffett’s go for this?

Some other tax ideas: I’d like to see shorter criminal sentences, especially for drugs, and I’d like to see healthcare addressed to reduce the administrative burden.

Robert E. Buxbaum, November 17, 2017. In the news today, the senate version puts back the tax exemption on private jets. The opposite of progress, they say, is congress.

Health vs health administration

One of the great patterns of government is that it continually expands adding overseers over overseers to guarantee that those on the bottom do their work honestly. There are overseers who check that folks don’t overcharge, or take bribes, or under-pay. There are overseers to check shirking, and prevent the hiring of friends, to check that paperwork is done, and to come up with the paperwork, and lots of paperwork to assert that no one is wasting money or time in any way at all. There have been repeated calls for regulation reform, but little action. Reform would require agreement from the overseers, and courage from our politicians. Bureaucracy always wins.

The number of health administrators has risen dramatically; doctors, not so much.

By 2009 the number of health administrators was rising dramatically faster than the number of doctors; it’s currently about 20:1.

The call for reform is particularly strong in healthcare and the current, Obamacare rules are again under debate. As of 2009 we’d already reached the stage where there were fourteen healthcare administrators for every doctor (Harvard Business Review), and that was before Obamacare. By 2013, early in the Obamacare era, the healthcare workforce had increased by 75%, but 95 percent of those new hires were administrators: we added 19 administrators per doctor. Some of those administrators were in government oversight, some worked in hospitals filling out forms, some were in doctors offices, and some were in the government, writing the new rules and checking that the rules were followed. A lot of new employment with no new productivity. Even if these fellows were all honest and alert, there are so many of them, that there seems no way they do not absorb more resources than the old group of moderately supervised doctors would by laziness and cheating.

Overseers fill ever-larger buildings, hold ever-more meetings, and create ever-more rules and paperwork. For those paying out of pocket, the average price of healthcare has risen to $25,826 a year for a family of four. That’s nearly half of the typical family income. As a result people rarely buy healthcare insurance (Obamacare) until after they are too sick to work. Administering the system take so much doctor time that a Meritt Hawkins study finds a sharp decline in service. The hope is that Congress will move to reverse this — somehow.

With more administrators than workers, disagreements among management becomes the new normal.

With more administrators than workers, disagreements among management becomes the new normal. Doctors find themselves operating in “The Dilbert Zone”.

Both Democrats and Republicans have complained about Obamacare and campaigned to change or repeal it, but now that they are elected, most in congress seem content to do nothing and blame each other. If they can not come up with any other change, may I suggest a sharp decrease in the requirements for administrative oversight, with a return to colleague oversight, and a sharp decrease in the amount of computerized documentation. The suggestion of colleague oversight also appears here, Harvard Business Review. Colleague oversight with minimal paperwork works fine for plumbers, and electricians; lawyers and auto-mechanics. It should work fine for doctors too.

Robert Buxbaum, September 19, 2017. On a vaguely similar topic, I ask is ADHD is a real disease, or a disease of definition.

Skilled labor isn’t cheap; cheap labor isn’t skilled

Popular emblem for hard hats in the USA. The original quote is attributed to Sailor Jack, a famous tattoo artist.

Popular emblem for hard hats in the USA. The original quote is attributed to Sailor Jack, a famous tattoo artist.

The title for this post is a popular emblem on US hard-hats and was the motto of a famous, WWII era tattoo artist. It’s also at the heart of a divide between the skilled trade unions and the labor movement. Skilled laborers expect to be paid more than unskilled, while the labor movement tends to push for uniform pay, with distinctions based only on seniority or courses taken. Managers and customers prefer skilled work to not, and usually don’t mind paying the skilled worker more. It’s understand that, if the skilled workers are not rewarded, they’ll go elsewhere or quit. Management too tends to understand that the skilled laborer is effectively a manager, often more responsible for success than the manager himself/herself. In this environment, a skilled trade union is an advantage as they tend to keep out the incompetent, the addict, and the gold-brick, if only to raise the stature of the rest. They can also help by taking some burden of complaints. In the late 1800s, it was not uncommon for an owner to push for a trade union, like the Knights of Labor, or the AFL, but usually just for skilled trades for the reasons above.

An unskilled labor union, like the CIO is a different animal. The unskilled laborer would like the salary and respect of the skilled laborer without having to develop the hard-to-replace skills. Management objects to this, as do the skilled workers. A major problem with unions, as best I can tell, is a socialist bent that combines the skilled and unskilled worker to the disadvantage of the skilled trades.

Not all unionists harbor fondness for welfare or socialism.

Also popular. Few workers harbor a fondness for welfare or socialism. Mostly they want to keep their earnings.

Labor union management generally prefer a high minimum wage — and often favor high taxes too as a way of curing societal ills. This causes friction, both in wage-negotiation and in political party support. Skilled workers tend to want to be paid more than unskilled, and generally want to keep the majority of their earnings. As a result, skilled laborers tend to vote Republican. Unskilled workers tend to vote for Democrats. Generally, there are more unskilled workers than skilled, and the union management tends to favor Democrats. Many union leaders have gone further — to international socialism. They push for high welfare payments with no work requirement, and for aid the foreign socialist poor. The hard-hats themselves tend to be less than pleased with these socialist pushes.

During the hippie-60’s and 70’s the union split turned violent. It was not uncommon for unionized police and construction workers to hurl insults and bricks on the anti-war leftists and non-working students and welfare farmers. Teamster boss Jimmy Hoffa, supported Nixon, Vietnam, and the idea that his truckers should keep their high wages at the expense of unskilled. Rival teamster boss, Frank Fitzsimmons pushed for socialist unity with the non-working of the world, a split that broke the union and cost Hoffa his life in 1975. Eventually the split became moot. The war ended, US factories closed and jobs moved overseas, and even the unskilled labor and poor lost.

Skilled workers are, essentially managers, and like to be treated that way.

Skilled workers are, essentially managers, and like to be treated that way.

The Americans with Disability Act is another part of the union split. The act was designed to protect the sick, pregnant and older worker, but has come to protect the lazy, nasty, and slipshod, as well as the drug addict and thief. Any worker who’s censored for these unfortunate behaviors can claim a disability. If the claim is upheld the law requires that the company provide for them. The legal status of the union demands that the union support the worker in his or her claim of disability. In this, the union becomes obligated to the worker, and not to the employer, customer, or craft — something else that skilled workers tend to object to. Skilled workers do not like having their neighbors show them high-priced, badly made products from their assembly line. Citing the ADA doesn’t help, nor does it help to know that their union dues support Democrats, welfare, and legislation that takes money from the pocket of any one who takes pride in good work. We’ll have to hope this split in the union pans out better than in 1860.

Robert Buxbaum, June 5, 2016. I’m running for water commissioner. I’d like to see my skilled sewer workers rewarded for their work and skill. Currently experienced workers get only $18/hour and that’s too little for their expertise. If they took off, they’d be irreplaceable, and the city would likely fall to typhus or the plague.

Hormesis, Sunshine and Radioactivity

It is often the case that something is good for you in small amounts, but bad in large amounts. As expressed by Paracelsus, an early 16th century doctor, “There is no difference between a poison and a cure: everything depends on dose.”

Aereolis Bombastus von Hoenheim (Paracelcus)

Phillipus Aureolus Theophrastus Bombastus von Hoenheim (Dr. Paracelsus).

Some obvious examples involve foods: an apple a day may keep the doctor away. Fifteen will cause deep physical problems. Alcohol, something bad in high doses, and once banned in the US, tends to promote longevity and health when consumed in moderation, 1/2-2 glasses per day. This is called “hormesis”, where the dose vs benefit curve looks like an upside down U. While it may not apply to all foods, poisons, and insults, a view called “mitridatism,” it has been shown to apply to exercise, chocolate, coffee and (most recently) sunlight.

Up until recently, the advice was to avoid direct sun because of the risk of cancer. More recent studies show that the benefits of small amounts of sunlight outweigh the risks. Health is improved by lowering blood pressure and exciting the immune system, perhaps through release of nitric oxide. At low doses, these benefits far outweigh the small chance of skin cancer. Here’s a New York Times article reviewing the health benefits of 2-6 cups of coffee per day.

A hotly debated issue is whether radiation too has a hormetic dose range. In a previous post, I noted that thyroid cancer rates down-wind of the Chernobyl disaster are lower than in the US as a whole. I thought this was a curious statistical fluke, but apparently it is not. According to a review by The Harvard Medical School, apparent health improvements have been seen among the cleanup workers at Chernobyl, and among those exposed to low levels of radiation from the atomic bombs dropped on Hiroshima and Nagasaki. The health   improvements relative to the general population could be a fluke, but after a while several flukes become a pattern.

Among the comments on my post, came this link to this scholarly summary article of several studies showing that long-term exposure to nuclear radiation below 1 Sv appears to be beneficial. One study involved an incident where a highly radioactive, Co-60 source was accidentally melted into a batch of steel that was subsequently used in the construction of apartments in Taiwan. The mistake was not discovered for over a decade, and by then the tenants had received between 0.4 and 6 Sv (far more than US law would allow). On average, they were healthier than the norm and had significantly lower cancer death rates. Supporting this is the finding, in the US, that lung cancer death rates are 35% lower in the states with the highest average radon radiation levels (Colorado, North Dakota, and Iowa) than in those with the lowest levels (Delaware, Louisiana, and California). Note: SHORT-TERM exposure to 1 Sv is NOT good for you; it will give radiation sickness, and short-term exposure to 4.5 Sv is the 50% death level

Most people in the irradiated Taiwan apartments got .2 Sv/year or less, but the same health benefit has also been shown for people living on radioactive sites in China and India where the levels were as high as .6 Sv/year (normal US background radiation is .0024 Sv/year). Similarly, virtually all animal and plant studies show that radiation appears to improve life expectancy and fecundity (fruit production, number of offspring) at dose rates as high as 1 Sv/month.

I’m not recommending 1 Sv/month for healthy people, it’s a cancer treatment dose, and will make healthy people feel sick. A possible reason it works for plants and some animals is that the radiation may kill proto- cancer, harmful bacteria, and viruses — organisms that lack the repair mechanisms of larger, more sophisticated organisms. Alternately, it could kill non-productive, benign growths allowing the more-healthy growths to do their thing. This explanation is similar to that for the benefits farmers produce by pinching off unwanted leaves and pruning unwanted branches.

It is not conclusive radiation improved human health in any of these studies. It is possible that exposed people happened to choose healthier life-styles than non-exposed people, choosing to smoke less, do more exercise, or eat fewer cheeseburgers (that, more-or-less, was my original explanation). Or it may be purely psychological: people who think they have only a few years to live, live healthier. Then again, it’s possible that radiation is healthy in small doses and maybe cheeseburgers and cigarettes are too?! Here’s a scene from “Sleeper” a 1973, science fiction, comedy movie where Woody Allan, asleep for 200 years, finds that deep fat, chocolate, and cigarettes are the best things for your health. You may not want a cigarette or a radium necklace quite yet, but based on these studies, I’m inclined to reconsider the risk/ benefit balance in favor of nuclear power.

Note: my company, REB Research makes (among other things), hydrogen getters (used to reduce the risks of radioactive waste transportation) and hydrogen separation filters (useful for cleanup of tritium from radioactive water, for fusion reactors, and to reduce the likelihood of explosions in nuclear facilities.

by Dr. Robert E. Buxbaum June 9, 2013

How Theodore Roosevelt survived being shot

Two more pictures of Theodore Roosevelt. The first is an x-ray showing the bullet he received as he entered a hall to give a 90 minute speech in 1912. How he survived the shooting: he did nothing. He left the bullet stay where it was for the rest of his life. It seems that both McKinley and Garfield had died from infection of their shooting wounds after doctors poked around trying to extract the bullet. It’s quite possible that Lincoln died the same way (Lincoln’s doctor was the one who killed Garfield by poking around this way).X-ray of Teddy Roosevelt showing the bullet where he let it lie.

X-ray of Teddy Roosevelt showing the bullet where he let it lie. The stripes look like lead paint, used to mark the spot. 

Roosevelt knew from hunting that a shot animal could last for years with the bullet still inside him. Roosevelt (and his doctors) knew, or suspected, that his bullet had stopped in a place where it would be harmless unless someone tried to extract it.

T. Roosevelt with Rhino, 1909.

T. Roosevelt with Rhino, 1909. Teddy would be shot 3 years later, in 1912.

In the speech, Roosevelt said, “it takes more than that to stop a Bull Moose.” He ought to know. For more T. Roosevelt pictures, click here.

Healthcare thoughts

I offer healthcare to keep workers working for me — it’s an employee retention benefit that helps cover the cost of training. As it is now, if they quit, covered workers will have to pay for their own heathcare or find another company that’s willing to pay for it.

Perhaps that’s mean to think this way, but it’s really my only means to keep people from jumping shop at the first higher-paying opportunity. Anyway, that’s what I do/did. When congress gave free healthcare to everyone as of this year, they not only raised my taxes, and my company taxes, they also removed a key tool I have for keeping people on the job. In return, I suppose my healthcare fees are supposed to go down, but I have no faith they will, in part because I worked for the government and have no faith in their ability to be efficient or fast moving; in part because my ability to pay for healthcare comes from my ability to keep trained workers.

Though I’m not too happy about the change, I imagine (hope) that my employees are happy. Their  taxes will go up a bit, but they will be more free to jump ship at will. I imagine that the unemployed are especially thrilled, though I don’t know why that was not implemented through an increase in Medicare and Medicaid. In a sense I’m surprised it took congress this long to give everyone “free” healthcare without forcing them to work for it.