I first remember running into the concept of the “elegant solution” in connection with computer programs. The most “elegant solution” in such cases is the one with the simplest approach, the fewest steps, the quickest answer, and the least demand on computing power and memory. A graduate school friend with whom I took my first FORTRAN course and with whom I recently re-connected through this blog always seemed to be able to come up with the most elegant solutions. I found the following elegant explanation at elsol.org.

In dance or martial arts, elegance is minimum motion with maximum effect. In a mathematical proof or a computer program, elegance is the minimum number of steps to achieve the solution with maximum clarity. Engineers strive to use the least amount of material and minimize the number of moving parts; duct tape is not an elegant solution, except for taping ducts. Like an elegant theory, an elegant solution is recognized by its parsimony of definition and power of explanation. The most complex games have the fewest rules, as do the most dynamic societies.

A designer knows he has achieved perfection not when there is nothing left to add, but when there is nothing left to take away. Letters, 1656--Antoine de Saint-Exup'ery

The present letter is a very long one, simply because I had no leisure to make it shorter. --Blaise Pascal in Provincial

The current senate and house health care bills are the antithesis of elegance. They are hard to understand or even see because of the prevalence of duct tape. We know they were constructed by senators and representatives unashamedly getting things they wanted into the bills in return for their promises of support. And the message President Obama gave Republicans recently sounded to me like this: The democrats have worked hard to get the stuff they wanted into these bills. Why don’t you guys come up with some things you want and we will stick them in also and then we can all support the bill.” I hope no Republicans buy that approach because what the bill needs is not more stuff but less stuff.

Lest somebody accuse me of being a no-sayer and a person without ideas, here is my vision of the key elements of an elegant solution to the health care insurance mess (I still believe our actual health care is the best.):

1. Physicians are free to offer routine screening for health problems at competitive prices with no insurance filing or paperwork involved. Any kind of price fixing or discussion of pricing among health care providers is illegal and subject to anti-trust prosecution.

2. Government funded health clinics with fees based on income are available in each county to cover routine and preventive care for those who cannot afford the fees of private practice physicians. Availability is limited to those with incomes at or below two times the poverty level.

3. Physicians, hospitals, and other providers are not allowed to negotiate separate deals with insurance companies that give them special low prices in return for volume business. In business parlance, individual purchasers of health care are granted a “most favored nation” status whether paying from their own resources or being reimbursed by their insurance company.

4. Employer owned and paid insurance is not legal. Premiums for individual policies may be paid by payroll deduction, but the policies are the property of the individual policy holders and are not dependent on continued employment.

5. Insurance companies are free to do business anywhere within the United States, are subject to all anti-trust regulations, and must offer insurance policies that are guaranteed non-cancelable as long as premiums are paid. Premiums will increase with age. Payout of benefits for insurance companies as a percent of premiums collected must be reported quarterly and must equal or exceed 80% of premiums collected. Insurance companies compete partially on the basis of their payout ratios.

6. No insurance claims may be filed during any year until the patient has documentation of at least $2,500 of medical expense for that year. As a result, the paperwork burden of insurers and providers is greatly diminished.

7. All insurance policies are all-inclusive covering drugs, physician care, hospitalization, and long term care. In other words, people need only one policy instead of four.

8. Insurance companies can limit maximum payouts but must offer benefits of at least $100,000 per year and $1,000,000 per lifetime, in 2010 dollars, to policy holders. Patients are responsible for working out affordable treatment options with health care providers given the personal assets and insurance coverage they have. Charges must be pre-approved by the patient who is responsible for any negotiation with the insurance company. There will be rationing, but it will be the responsibility of the patient and worked out in negotiation between the patient and the physician and not between the government or insurance company and the physician.

9. Denial of coverage due to pre-existing conditions is not allowed for anyone under the age of 35. Over age 35, any who have not already purchased non-cancelable policies may be denied coverage or provided with restricted coverage in case of pre-existing conditions. There is assigned risk coverage available at considerably higher premiums for those over 35 who cannot purchase regular insurance. For those who fail to be insured and go broke due to medical bills, see items 2 and 12.

10. Hospitals may not use detailed billing for each and every service and/or provider involved in a patient’s care but must use “all costs included” transparent billing based on procedures with broad scope and/or duration of treatment. Accurate costs estimates must be presented to the patient or other responsible person at the time treatment is agreed to. Hospitals compete partially on the basis of advertised rates for various procedures and services.

11. Liability claims against health care providers and institutions are limited to actual damages and future actual costs to be incurred as a result of the damages plus legal fees of 10% of the total award. Plaintiffs keep 100% of the awards and the lawyers keep 100% of the legal fees (minus their taxes of course.)

12. A “Public Option” health insurance policy is available only to those at or below the poverty level. Benefits are defined only in terms of dollars available for reimbursement to the policy holder and not in terms of reimbursement rates directly to providers for procedures performed.

I believe adoption of this plan would result in a reduction of 50% in the total cost of health care in the United States by reducing un-necessary tests and procedures, eliminating jobs of many who are part of the health care bill but do not provide health care, reducing malpractice insurance costs, and allowing competition to drive down the costs of technology based procedures.  And it would protect the rights and privacy of individuals and the concept of personal responsibility.

It would also make basic health care available to every single citizen of the United States of America.

Just take a look at the history of the Defense Appropriations Bill: Taxpayers for Common Sense calculated that the 1970 Defense Appropriations Bill had a dozen earmarks; the 1980 bill had 62 earmarks; and by 2005, the defense bill had skyrocketed to 2,671 earmarks. The most recent bill spends money on anything from the eradication of brown tree snakes in Guam, to a virtual reality spray paint simulator system in Pine City, Minnesota. (And remember, this is the Defense Appropriations Bill. What do snakes and spray paint have to do with maintaining our nation’s security?)

The same story goes for the now notoriously larded-up Transportation Bill. When President Eisenhower proposed the first national highway bill a half century ago, there were two projects singled out for funding. Last August, when Congress passed the latest six year, $286.4 billion Transportation Bill, there were, by one estimate, 6,371 of these “special” projects, ranging from $200,000 for a deer avoidance system in Weedsport, N.Y., to $3 million for dust control mitigation on Arkansas’ rural roads.

Used throughout the University, the acronym ETOB stands for "Every Tub on its Own Bottom." This axiom, coined in the early nineteenth century, is the bedrock of a highly decentralized system of financial management.


In Harvard parlance, a tub is a high-level institutional unit—one of the 10 faculties, for example, or the central administration. All told, there are 52 tubs and countless sub-tubs. Each tub is expected to be self-financing: to prepare its own budgets, raise its own funds, and keep itself solvent.

When we renew the Elementary and Secondary Education Act, we will work with Congress to expand these reforms to all fifty states. Still, in this economy, a high school diploma no longer guarantees a good job. I urge the Senate to follow the House and pass a bill that will revitalize our community colleges, which are a career pathway to the children of so many working families.

To make college more affordable, this bill will finally end the unwarranted taxpayer-subsidies that go to banks for student loans. Instead, let's take that money and give families a $10,000 tax credit for four years of college and increase Pell Grants. And let's tell another one million students that when they graduate, they will be required to pay only ten percent of their income on student loans, and all of their debt will be forgiven after twenty years - and forgiven after ten years if they choose a career in public service. Because in the United States of America, no one should go broke because they chose to go to college. And it's time for colleges and universities to get serious about cutting their own costs - because they too have a responsibility to help solve this problem.     – President Barack Obama

Here is a brief lesson in patient and conservative investing along with some questions about cozy relationships between business and government. May 30, 1975, my granddaddy bought 600 shares of PECO (Philadelphia Electric Co.) stock for $7,780 (about the price of a new car) and, when he died, left half of it to my daddy (Yes, that is what I called him). October, 2000, PECO merged with Unicom and became Exelon, and Daddy got 300 shares of Exelon in place of the 300 shares of PECO. When he died in 2003, he left it to my mother. By that time, the value had increased from the original $3,900 to around $17,000 and dividends were around $600 a year or 3.5%. In May, 2004, the stock split 2:1 so now, 35 years after the original $3,900 PECO investment, she has 600 shares of Exelon worth $29,000 (about the price of two new cars if all the shares were still together) and paying $1260 (4.3%) a year in dividends. That is pretty good, but of course my granddaddy would have been better off buying Wal-Mart or Intel. However, if he had bought one of those stocks he probably would have patted himself on the back and sold it as soon as it doubled or certainly when it tripled and would have put the money into a good dividend paying utility. Granddaddy was a pretty conservative guy…a Hoover Republican as a matter of fact in case you are old enough to know what that means.

Because that Exelon stock is in my mother’s account, a Fortune Magazine article about Exelon caught my eye. The focus of the article is on the huge bet Exelon, under CEO John Rowe, made on nuclear power which generates no carbon dioxide and how much the company stands to gain if “cap and trade” is passed and how much Exelon is lobbying to get “cap and trade” passed and how many cozy relationships there are between the company and the Obama administration which wants very much to pass ‘cap and trade.” According to the article, Rahm Emanuel earned $16.2M in two years of investment banking during which his biggest deal was the PECO - Unicom merger which established Exelon. I wonder if that generous compensation consisted of bonuses or just straight salary. Also David Axelrod worked as a consultant to Exelon. So, both Exelon and the Obama administration have a strong interest in “Cap and Trade” which would be devastating to some utilities and would result in significantly higher utility bills for consumers, and they are helping each other try to get it passed.  Hopefully, they will fail.

I don’t know that there is anything illegal or even unethical going on here, and I admire the fact that John Rowe, the Exelon CEO, made that huge bet on nuclear power which I think was and is the right thing to do. I just don’t like the idea of government meddling in ways that mess up the playing field and result in declarations of winners and losers based on artificially established prices. After all, that is what messed up the health care business…all those artificially established reimbursement rates for medical procedures which say clearly to hospitals and physicians that the way to get more money is to do more procedures. And it is also what messed up the residential real estate business…all those below market rate, nothing down, mortgages based on inflated appraisals being bought up by Fannie and Freddie so everybody could own their home.

I’d like to see a wall of separation between government and industry and between government and doctors like the one between government and church. Arms length regulation is fine, but it shouldn’t go any further than that and certainly not to the extent of driving strategy or declaring winners and losers. (By the way, I really doubt that corporations or unions or any other organizations have the absolute right of free speech as the Supreme Court decided yesterday. It seems to me that free speech is an absolute right that belongs to individual citizens and may be granted with limitations to corporations, unions, non-profits, political parties, and other legal entities.)

And finally, it seems like somebody in Washington has been trying to put up a wall of separation between government and the people, but the voters in Virginia, New Jersey, and Massachusetts have been taking chunks out of it even as construction continues.

The Exelon article is in the January 18, 2010, issue of Fortune in case you want the details. It doesn’t seem to be available on line yet.

(This was posted originally at my blog permanentfixes.com.)