## January 30, 2012

### Healthy Curiosity

PROBABILITIES OF LIFE
By Melvin J. Howard

Math a scary and boring subject for many but math given the right variables could give you a probable outcome to just about anything. Events can be quantitatively described as probable or improbable when compared to the total number of possible outcomes. But when the total number of outcomes cannot be specified, there are no grounds for calculation. Intuitively, it seems like a very improbable event that I would unexpectedly meet an old college girlfriend in a British airport. But how can I quantify this probability? Do I include all of the other people I have ever known and the total number of people in British airports? Improbable events and coincidences occur all the time even though they occur with low probability. Given a high number of possible improbable events, it is highly probable that some of them will occur. We only notice the "coincidences" that do occur, not the ones which do not occur. The occurrence of improbable events does not necessarily require paranormal or supernatural explanations.

Additionally, some coincidences are more probable than we might expect due to our lack of appreciation of actual probabilities. The probability of two people not having the same birthday is 364/365 (multilpying the 364 days remaining for the second person times the 1/365 probability of the birthday of the first person). 1 - 364/365 = 0.275% chance of having the same birthday. But for 23 people there is a greater than 50% chance that at least two of them will have the same birthday because
P(same birthday) = 1 - (364/365)(363/365)...(343/365)  0.5

Although flipping a coin or rolling dice are treated as random processes they are not. Whether a coin comes up heads or tails is determined by the trajectory of the coin, the speed of rotation, the angle of rotation, air resistance, material characteristics of the surface on which the coin is thrown, the force of gravity in the location, etc. The same can be said for a roll of dice. There are so many variables, the variables are so hard to measure and the interaction of the variables is so complex that the flipping of a coin or rolling of dice are practically speaking "random". Said another way, the processes can be treated epistemologically as being random although metaphysically they are not -- they are deterministic.

In 1961 a research meteorologist at MIT named Edward Lorenz was using a set of equations to model weather on a computer when he discovered that rounding his initial numbers to three decimal places produced dramatically different results from those obtained by using six decimal places. Systems so sensitive to small variations in initial conditions have been called "chaotic", but they are more accurately described as pseudo-random -- just as so-called random numbers generated by computer are called pseudo-random. Again, the phenomena are metaphysically deterministic, but their unpredictability renders them epistemologically random no different from rolling dices or flipping coins.

In arguing against the Copenhagen Interpretation of Quantum Mechanics Albert Einstein made the infamous remark, "God does not play dice with the universe." I call the remark not logical because it is usually quoted to display how irrational Einstein's beliefs were when it came to spookiness at a distance. Which Einstein could not get his head around when it came to quantum physics?  Neils Bohr, Werner Heisenberg and others in the Copenhagen School proposed that randomness is a metaphysical condition of subatomic particles, whereas Einstein argued that randomness as a phenomenon is an artifact of our ignorance of underlying deterministic processes and forces limitations on our knowledge. Probability bridges the gap between descriptive statistics (average, standard deviation, histograms, etc.) and inferential statistics (decision-making statistics).

Decision-making is based on the probability of an event occurring times the payoff of the event - a cost/benefit decision. More formally:

Expected value = probability X payoff It would seem advantageous to wager \$1 on the chance of winning \$10 by rolling a snake-eye (one) with a single die because the expected value is probability X payoff = (1/6) X \$10 = \$1.67 which is greater than the \$1 cost. But there is a 5/6 chance of losing the \$1, which could be critical if you need the money to buy bus-fare. Non-monetary factors are often important in cost/benefit calculations - with benefits more often being more difficult to quantify and calculate than costs. I believe that I have learned a great deal about myself  by observing the world around me I also believe that I have grown as a person in learning to control my impulsiveness and impatience. I have learned humility in the face of my many false forecasts.  Life survival is a process of risk management. I believe the universe is teaching me wisdom and good judgment that has helped me (and, hopefully, others) in managing many many areas of life. I still have lots to learn. The learning is on a very deep level of personality much deeper than factual knowledge because in many cases I already know the mistakes but have not gain enough mastery over myself so as to not make them. Which is what life is all about no matter the profession Doctor, Lawyer, Judge, Fireman, CEO, homemaker. We all make mistakes the question is do you learn from them?

## January 22, 2012

### China Gets A Shot In The Arm From Private Health Care

The New China’ Private Health Care System
By Melvin J. Howard

The U.S. Trade and Development Agency, the U.S. Department of Health and Human Services and the U.S. Department of Commerce joined with China‘s Ministries of Health and Commerce to announce their support for the establishment a new public-private partnership in the healthcare sector.

Twelve U.S. companies and six supporting organizations will participate in this partnership, alongside the supporting U.S. and Chinese government agencies. The partnership will be organized around U.S. healthcare industry strengths and government capabilities to foster long-term cooperation with China in the areas of research, training, regulation and the adoption of an environment that will increase accessibility to healthcare services in China.

Through programs supported by the initiative, Chinese participants will gain greater access to U.S. private sector expertise and ingenuity and better awareness of new technologies and results-oriented regulatory processes, U.S. officials said.

One of the supporting organizations, the Alliance for Healthcare Competitiveness, which represents both for-profit and non-profit U.S. healthcare employers, and whose stated mission is to open global markets to U.S. healthcare exports, has provided an outline of China’s healthcare market and potential.

With the growth of China the government is actively encouraging private capital to enter the health care industry. China will give preferential tax incentives to help ensure everyone had equal access to health care. The government of China has announced that it is to encourage the development of the private healthcare sector in the country. The news paves the way for foreign firms to gain greater access to the Chinese private healthcare market in a bid to meet the growing demand for healthcare services in the country. The new policy will provide overseas healthcare companies, with more flexibility in establishing a new business within the private health sector.

The move by the Chinese government is designed to encourage investment from overseas business to meet the increasing demand for private healthcare services in the country stemming from its rapidly expanded economy. Economic expansion has brought increased affluence among the population of China, which in return has led to a growth in demand for private healthcare. Currently Chinese regulations only allows foreign firms to enter the private healthcare sector in China through a joint venture with a Chinese partner, together with a cap on the level of capital which may be held in a Chinese operation. However, the recent announcement by the central government in China will mean a gradual easing on the level of investment permitted by a foreign firm in the private healthcare sector. The new policy also supports the use of social funds to participate in government hospital reforms, with the conversion of some government run hospitals into private medical facilities.

The Chinese authority’s decision to cut the red tape in the planning process for foreign companies engaged in the provision of healthcare in China is intended to ensure that the country’s healthcare needs are met partly by easing some the pressure on the Chinese public healthcare system. As constraints are eliminated, the intention is for foreign healthcare providers to establish larger-scale hospitals throughout China – to be run alongside smaller healthcare facilities – leading to an overall improvement in medical services across the country. Also the provision of foreign-run hospitals is planned to play an important role in meeting the needs of patients seeking higher standards of healthcare services.

As the new policy is implemented and a positive effect on the Chinese healthcare sector is delivered, patients will be rewarded with a better choice of medical care, with benefits to be gained from overseas expertise.

The proposed policy reforms – enabling increased foreign investment in the private healthcare system in China – will mean more competition and an improvement in medical standards through overseas firms looking to capitalize on the opportunities being implemented by the Chinese authorities.

BUT ALL IS NOT SO WELL IN THE LAND OF THE RISING SUN

Unfortunately, the record on support for private healthcare is spotty. As China began to loosen healthcare restrictions at the beginning of the past decade, a decision was made to allow the sale of selected hospitals to private investors. Health authorities hoped this would allow local health bureaus to offload underperforming facilities and provide an opportunity for state-owned enterprises (SOEs) to divest non-core assets while at the same time seeding a private medical system that would alleviate strain on crowded public hospitals. Over the next several years, significant numbers of mid-size/county hospitals and SOE hospitals were privatized. In some cases, facilities were granted to the staff, with all employees receiving shares, but in many instances, hospitals were sold to real-estate developers with no prior experience in healthcare. Many hospitals, once privatized, placed significant emphasis on short-term profits, often at the expense of service quality (and, in some cases, medical ethics). Sales of medicines were a key source of those profits and there was a built-in incentive to overprescribe and charge high premiums to patients.

In China, physicians are licensed to practice at a single facility. According to regulations, doctors choosing to practice at private hospitals had to forfeit affiliation with their government facility thus exiting the path for promotion through physician ranks as well as ending the process of academic advancement. Top-ranked physicians such as department chairs and recognized experts, already comfortable with their position were understandably reluctant to leave their posts. Moreover, physicians in the middle of their careers and even talented younger practitioners the rising stars were similarly disinclined to enter private practice and render stagnant their careers.

Leaving some to say China's first attempt at private healthcare can be seen as a complete failure a system comprised of poorly managed facilities staffed by medical personnel whom the vast majority of patients had no interest in patronizing. By taking a portion of public hospitals "offline" and creating private hospitals which Chinese medical consumers actively shunned, a plan to create a private sector of medical facilities to ease demand on public resources had in fact resulted in just the opposite: more patients now crowded into even fewer facilities. Burdened with poor management and staffed by physicians with no reputation, private healthcare in China quickly earned a dismal reputation among medical consumers one that it has yet to successfully shrug off. High drug prices also tainted the public's association with private healthcare and reflected poorly on the industry image.

Many have speculated about the role of private healthcare, including foreign-invested private healthcare, under this new medical system. Although the original language of the healthcare reforms does mention private healthcare (and commercial insurance), it is only within the past several months that regulators have begun to more fully articulate their position on private medical facilities. At this juncture, there are strong signs that the government is preparing for a re-boot of private healthcare and this time, they intend to get it right.

Opinions on further lifting restrictions to private hospitals," co-authored by the National Development and Reform Commission (NDRC), Ministry of Health (MOH), Ministry of Finance (MOF), Ministry of Commerce (MOC), and Ministry of Human Resources and Social Security (MHRSS). The opinion offers a number of regulatory enticements to encourage private investment in healthcare facilities including the opportunity to participate in basic medical insurance reimbursement systems and favorable tax policies. It also paves the way for 100 percent foreign-owned healthcare facilities.

GETTING PHYSICIANS ON BOARD

Allowing top-level physicians to retain their positions and standing in government hospitals while practicing part time in private settings is the key to the future of private healthcare in China.  Going forward, physicians will likely be required to spend a certain portion of their time in grassroots settings, but they may also be allowed to enjoy some of their newfound freedom practicing in private clinics and hospitals. The most recent and significant development in this vein comes from the Beijing Municipal Health Bureau, which has allowed licensed physicians to work simultaneously at a maximum of three hospitals.

Healthcare authorities are no doubt hoping that an upper-tier private health system will emerge to lure more affluent medical consumers away from public institutions, thus freeing more resources for patients relying solely on basic government insurance programs. The MOH and other government agencies have repeatedly mentioned their intention to encourage commercial health insurance. This will also ease the burden on public/government medical institutions, and may well enable a larger population to access private healthcare

## January 01, 2012

### The Constant Dependence On Fossil Fuel And The Hidden Cost To Public Health

And The Insurance Industry As Well As Society That Will Eventually Pay

It’s not easy being green

By Melvin J. Howard

Let’s discuss the relationship between fossil fuels, the future of the world's most powerful cartel, the changing climate and the powerful industry that loses big bucks on changing weather patterns. Many of the environmental problems we face today result from our fossil fuel dependence. These impacts include global warming, air quality deterioration, oil spills, and acid rain. Can we touch on that ever important "oil price range" that target price range per barrel of oil within which both producers and consumers are happy to continue "business as usual". But we can't discuss that without also talking about that thing at the heart of the oil markets so despised in all our free market teachings the cartel in this case, the OPEC cartel, of course. Given what's happened in Iraq with Iran not too far behind and continuing US policy towards OPEC countries, we might see where OPEC might be headed in the future. Indications are predicting that the OPEC cartel may face tough times ahead and the outlook for the fossil fuel industry in general.

Despite skepticism, the huge global insurers and reinsurers accept climate change as fact. Furthermore, they accept that climate change is induced by human activity. And, climate change is costing them big bucks. As powerful advocates of the Kyoto Protocol and with Trillions of dollars to vote with in the capital markets, the insurance industry has both the motive and the power to do something about climate change for the first time in history. Let's define what a cartel is a cartel is formed when a dominant group of suppliers or producers of a product conspire to keep prices artificially high. Basically, they conspire to hold back supply so that prices are held above where they would fall if you allowed full competition between these producers. The most powerful cartel in the world is, of course, OPEC the Organization of Petroleum Exporting Countries. It consists of 11 countries altogether and they are Saudi Arabia, Iran, Iraq, Qatar, UAE, Kuwait, Nigeria, Algeria, Lybia, Indonesia and Venezuela. For various reasons, OPEC does not want the price of oil to get too high, either. And so the price of oil ends up being managed within a certain magical price range.  What will happen to it now that America the world’s largest oil consumer is at the table?" Isn't it bizarre that, for the first time ever in the history of big cartels, the biggest customer of the cartel, the United States, actually has a seat at the table of the cartel?

These days, it's not just the environmental movement and the health care industry and some concerned shareholders that are going into battle against the oil giants. Another set of equally formidable industry giants the global reinsurance companies are starting to flex their muscles in this global battle for green fuels over fossil fuels. Reinsurance companies basically provide insurance to the direct insurance companies that we are more familiar with, who insure our houses, cars and businesses. The two biggest of these the European based Swiss Re and Munich Re - provide insurance to insurance companies all over the world, to limit the losses of those insurance companies, just like we limit out losses by buying insurance on our house.  Just like you have to go to Texas to talk oil, you have to go to Switzerland and Germany to talk about important worldly insurance issues. Apparently, not all insurers are quite so active in this mission to stem climate change, and it seems that some of the US insurance companies are not so serious about slaying the fossil fuel dragon.

The Future

Quite undeterred by the finding of the UN Panel on Climate Change and the 30 years of study at the big reinsurers, some consultants and researchers in the oil industry are determined to believe that fossil fuels do not cause climate change. Many oil industry analysts see the demand for, and use of, oil continuing to increase for decades to come and can't see how transportation can get away from the fossil fuels. But, then again, so people with wood chip cars and buses early in the twentieth century might have once thought about their dependence on chopping down trees for transport. Where is the status of renewable energy to some people's amazement, the environmental community is starting to work more with the investment community in the battle against global warming.

The method of allowing the market to cut emissions quickly where it is cheapest and easiest to do will presumably have the least detrimental effect on the health of the economy and people. I am very mindful of the our environment but I am also an advocate of using the market and science to solve society most complex issues. I am an advocate for Clean Development Mechanisms which means funding "clean energy" projects in developing nations. Many people fear that credit accumulation or emissions offsets gained under some market methods may be the most wide open for abuse and therefore may not bring about real change in the battle to stem the release of greenhouse gases into the atmosphere.

Back in 2000 working with the State of New South Wales Forestry Department and also closely with the forest investment divisions of global financial institutions such as US-based John Hancock Insurance Company, the stage was set for the first international market in carbon futures, backed by the trees in new and growing forests in Australia. These carbon-based instruments were to be based on the quite controversial provision in the Kyoto Protocol whereby "Carbon Sinks" such as certain forests and forest management practices, can be used to accumulate credits in carbon emissions trading programs. However, this world-first futures market collapsed, mainly due to the controversial nature and uncertainties surrounding the definition of Kyoto Forests and Carbon Sinks. A senior research scientist at the National Oceanic and Atmospheric Administration (NOAA) Geophysical Fluid Dynamics Laboratory, and more marked effects are likely to come, according to models developed by climate scientists around the world. Projected effects of global warming on precipitation throughout the world can be summarized in a single sentence, areas that already get a lot of rainfall such as the equatorial and subpolar rain belts will get more, and areas that get little such as the subtropical dry zones will get less.

# The Hidden Cost

Fossil fuels, coal, oil, and natural gas are America's primary source of energy, accounting for 85 percent of current US fuel use. Some of the costs of using these fuels are obvious, such as the cost of labor to mine for coal or drill for oil, of labor and materials to build energy-generating plants, and of transportation of coal and oil to the plants. These costs are included in electricity bills or in the purchase price of gasoline for cars. But some energy costs are not included in consumer utility or gas bills, nor are they paid for by the companies that produce or sell the energy. These include human health problems caused by air pollution from the burning of coal and oil; damage to land from coal mining and to miners from black lung disease; environmental degradation caused by global warming, acid rain, and water pollution; and national security costs, such as protecting foreign sources of oil. Since such costs are indirect and difficult to determine, they have traditionally remained external to the energy pricing system, and are thus often referred to as externalities. And since the producers and the users of energy do not pay for these costs, society as a whole must pay for them. But this pricing system masks the true costs of fossil fuels and results in damage to human health, the environment, and the economy.