Wonks Anonymous

Useless Moralizing

Chris Martin — Sun, 07 Mar 2010 17:25:00 GMT

Marilyn Geewax who appears to be NPR economics editor weighs in on the problem of low interest rates on Weekend Edition today:

Interest rates have been at very low levels ever since the financial crisis hit in the fall of 2008. The shock caused the stock market to plunge, credit markets to freeze up and housing sales to stall. To help bolster the economy, the Federal Reserve decided to drive down interest rates.
Low-cost loans helped make housing more affordable, and made it easier for businesses and consumers to get loans. But the strategy of propping up borrowers came with a cost — and savers had to pay it.
When borrowers are paying low interest rates, the banks that lend them money aren't getting much in return. So in late 2008, savers who put money into financial institutions in the form of CDs did something good for the economy: They helped make cash available for loans. But they did not get much of a reward in the form of interest payments.

In the radio story this is followed by much pissing and moaning about how it was the evil borrowers who got us in to this mess in the first place and how the virtuous savers are being punished now.

The villain in this drama is the Fed which has lowered rates and robbed savers of their due rewards. The implied solution: Now that the economy has stopped shedding jobs - well almost stopped shedding jobs - and the financial sector is doing just fine we need to raise interest rates.

Now Wonks Anonymous is a saver himself and feels the pain, particularly since everyone is telling him that he should start putting his assets in investments that are heavy on the bonds, certificates of deposit and so on.

Wonks Anonymous also believes that the Treasury and the Fed are showing a disturbing lack of imagination and good sense in their handling of the whole recovery thing.

What we have here is a failure of capital markets. Everyone, particularly banks, wants to hold cash or extremely liquid assets - that would be short term Certificates of Deposit such as Marilyn Geewax herself recommends. We have considerable savings - in Wonks Anonymous humble opinion we could use more - the problem here is that our financial markets are not doing their job.

Although the bonuses continue and New York City is just fine, the financial markets are not moving savings to investors who would spend them on profitable projects that would produce high returns to reward savers.

As a result we have a slow economy, low returns to savings and high unemployment. All that the Fed and the Treasury can think to do in this situation is to cram even more money down the throats of the banks in the hopes that some of it will pass through.

Wonks Anonymous has a better idea which he originally proposed here. Someone needs to use the savings that are piling up as cash. We cannot just take our money and bury it in the fields as someone in the New Testament did. if no one else will do it, there are plenty of worthwhile public investment projects that the Government can undertake.

Of course the administration allowed itself to weigh in with an absolutely anemic stimulus package, mainly to satisfy the likes of Senator Gregg and others who suddenly developed a fear of deficits caused by Democrats. We can't run a deficit because that will put us in the debt of Chinese.

Guess what.We have plenty of savings. We do not need to borrow from China. All we need to do is sell government bonds directly to the public. We need small denomination, long term bonds that offer say 3% real return which would probably be a better deal than most of us are getting with our current retirement savings.

Or we could just raise interest rates and idle more workers and factories. That will return us to prosperity for sure.

Making Dollars Out Of Yuan

Chris Martin — Sat, 06 Mar 2010 17:31:00 GMT

Alan Tonelson and Kevin L. Kearns, representing small manufacturers in the US provide an interesting, if incomplete critique of our recent prosperity and productivity growth:

In reality, though, wage gains for the average worker have lagged behind productivity since the early 1980s, a situation that free-traders usually attribute to workers failing to retrain themselves after seeing their jobs outsourced.
But what if wages lag because productivity itself is being grossly overstated, especially in the nation’s manufacturing sector? Then, suddenly, a cornerstone of American economic policy would begin to crumble.
Productivity measures how many worker hours are needed for a given unit of output during a given time period; when hours fall relative to output, labor productivity increases. In 2009, the data show, Americans needed 40 percent fewer hours to produce the same unit of output as in 1980.
But there’s a problem: labor productivity figures, which are calculated by the Labor Department, count only worker hours in America, even though American-owned factories and labs have been steadily transplanted overseas, and foreign workers have contributed significantly to the final products counted in productivity measures.
The result is an apparent drop in the number of worker hours required to produce goods — and thus increased productivity. But actually, the total number of worker hours does not necessarily change.

Which is actually an interesting insight, although they have not got the economics quite right. Productivity is measured by the difference between the value of inputs and the value of the output. Right now we buy cheap inputs, mostly goods ready for market or goods that need only a small amount of final manufacturing. After some processing - mainly taking the goods off the ship and getting them on the store shelves - our corporations sell them for considerably more than they paid.

The difference between the price of the inputs and the final sale price, divided by the amount of labor employed, is productivity.

Which means that the driver of this productivity is actually buying cheap and selling dear which requires control of a national and international supply chain as well a sophisticated financial network and a great deal of capital. Rewards go to those who are in control of these things while workers wait for something to trickle down.

Wonks Anonymous supposes that this would all be wonderful if it were built on a sustainable international financial system and on international prices that reflected the true scarcity of inputs.

This is not sustainable. We buy cheap because the Capitalist-Stalinist government of China keeps its currency at a low value. Effectively the Chinese government is forcing its manufacturers to sell their output at a discount on international markets. Ultimately this means that the Chinese government is forcing its workers to sell their labor at a discount.

This can only be sustained by continuing Chinese purchases of dollars. Any amount of dollars will buy more goods if the dollars are converted to Yuan. Our current international trade consists of buying Yuan with dollars, buying Chinese goods, selling them for more dollars and then buying more Yuan.

In ordinary circumstances this would increase the demand for Yuan and eventually increase the price of the Yuan in terms of dollars. As the price of the Yuan increased the profits to be made by buying Yuan would drop and manufacturing elsewhere in the world would revive.

Instead the Chinese government has held the price of the Yuan low by buying dollars which it ultimately converted to US debt. We collaborated with this, allowing ourselves to be seduced by unrealistic estimates of the value of our assets, but this illusion has been shattered along with most of our financial markets. We save and world demand declines.

Meanwhile the rulers of China still seem to think that they can find someone, anyone but their own citizens, to borrow from them and buy their output.

Time for an intervention.

Tough Love

Chris Martin — Sat, 06 Mar 2010 16:57:00 GMT

It is always sad to see a prominent public figure taken down by our festering homophobia. Which seems to be happening right now in Sacramento according to Wyatt Buchanan of the SF Comical:

Republican state Sen. Roy Ashburn of Bakersfield has taken leave from his elected position until at least Monday after his arrest on suspicion of drunken driving started a firestorm over his sexual orientation.

Ashburn, 55, has served in the Legislature since 1996 and consistently has voted against bills that would expand legal protections for gay, lesbian, bisexual and transgender Californians. The single father of four is among lawmakers with the staunchest records against those issues.

Ashburn was arrested and booked into Sacramento County jail on suspicion of driving under the influence of alcohol just after 2 a.m. Wednesday. A Sacramento television station cited unnamed sources in reporting that Ashburn had spent the evening at Faces, a large gay dance club a few blocks from where police stopped him. Ashburn was driving his state-issued vehicle. Sacramento station KOVR reported there was another man in the car with Ashburn.
There has been no confirmation of Ashburn being at the club that night, which drew large crowds for a Miss Gay Latina Sacramento competition. But, three sources have told The Chronicle that they have seen Ashburn regularly at gay clubs and bars near Faces. Capitol staffers say it is an open secret that Ashburn frequently visits Sacramento's gay establishments.

Still Wonks Anonymous is laughing through his tears because there is some justice here when a man who has spent his career trying to force others back into the closet suddenly has his own closet explode in a big hot mess. It would seem that the powers that be have decided that it is time for Senator Ashburn to experience a little tough love. Wonks Anonymous prays that it does not drive him to one of those ministries that "cure" gay people.

Of course this all gives the lie to the supporters of Proposition H8 who argued that gays are accepted and powerful and not subject to discrimination particularly by the folks who supported Proposition H8.

Hide yourselves and we will agree not to hunt you down and persecute you. What more do you want?

You Know That You Are Really Over The Hill When

Chris Martin — Thu, 04 Mar 2010 23:12:00 GMT

Tom Brokaw does a documentary series on your generation.

Lies, Damned Lies and Casey B Mulligan

Chris Martin — Sun, 28 Feb 2010 19:40:00 GMT

But alas Economix continues to publish the musings of Casey B Mulligan who is taking up the defense of the youth of America against us disgusting wrinkly old people.

The good professor waxes indignant over the fact that we now spend about $40,000 per year per geezer. That would be $21,000 average Social Security payment plus $12,000 Medicare spending - note to Casey B. at least part of this spending goes to younger people with disabilities - and $7,000 by the good professor's estimates on Medicaid and other need based medical programs.

He graciously declines to count government cheese distributed through senior centers.

All told this means that we spend a lot on the old and, in the professor's little world, this means that the old are much better off than the young. Because if a stay in a nursing home costs as much as a cruise to the Bahamas then it must generate at least as much psychic satisfaction.

As Wonks Anonymous languishes in a nursing home in the final stages of dementia he will try to remember that.

Now Wonks Anonymous is the first to acknowledge that there are cheaper and more humane ways to deal with the problems caused by terminal debilitating illnesses. Wonks Anonymous has asked his family to make arrangements for a humane overdose of an appropriate drug. These arrangements are, however, incompatible with our Judeo-Christian traditions, and should be strictly voluntary at any rate.

But Wonks Anonymous supposes that Professor Mulligan is not in favor of organized death panels. He would simply cut off most health spending on the old and let old people and their families make the decisions themselves. And then maybe the young could step in with the new income that they enjoyed from tax cuts to fund private charity to provide a safety net for indigent seniors like the one that Medicaid currently provides.

Mother Teresa comes to America.

The Kids Are Alright

Chris Martin — Sun, 28 Feb 2010 19:19:00 GMT

Catherine Rampell reports in Economix that young people are not avoiding health insurance out of a desire to avoid paying for immoral old sick people but because insurance provided by the individual insurance market is simply too expensive. They can and do choose jobs that provide them with cheaper group insurance when such jobs are available and they would probably choose individual insurance if it were cheaper.

Now only a part of the pricing of individual insurance plans reflects genuine risk. The rest is a result of the market power of our large national health insurance companies and the general fear, on the part of health insurers of actually paying benefits to sick people. If we could eliminate these, through regulation or a public option, we might well see a significant rise in the number insured and a decrease in average costs per insured.

The sort of regulation that Wonks Anonymous has in mind is enforcement of anti-trust laws, mandatory issue of insurance with well defined comprehensive benefits and pricing based on community medical costs.

In this case mandates and subsidies would also make sense. If everyone gets health care - and they do thanks to EMTALA which forces hospitals to care for all regardless of their ability to pay - we need to make everyone pay what they can for this care.

The Preventative Care Myth

Chris Martin — Sun, 28 Feb 2010 17:26:00 GMT

Reader Lynn comments on High Deductible Health Plans:

Would not preventive care available at zero deductible cover the problem of under utilization of preventive care with high deductible insurance?

Which seems about right if you are speaking English and adhering to the rules of common sense. Alas, things are quite different in health insurance land.

To a health insurer preventative care is limited to diagnostic testing and checkups for people who have no symptoms. A woman with normal breasts can get a mammogram for free on a schedule determined by her health plan or some learned body of medical research. Tests and so on are only preventative if there is no diagnosis that would indicate that tests are needed. If the patient or doctor has any reason to suspect disease then the tests are diagnostic and not covered under the preventative benefit.

If that woman finds a lump during self examination or even if she has a family history of breast cancer then she has a diagnosis and a mammogram becomes a diagnostic test so she pays.

Huge areas of health care - for example diabetic education, dietary programs and blood sugar monitoring, asthma treatment, cancer follow ups and so on - that the lay person would consider preventative are not, thanks to the magic of health insurance contract writers.

Besides, Wonks Anonymous can think of many areas where seemingly minor symptoms or "lifestyle" problems are signs of serious conditions. When we keep parents from taking their children to a pediatrician for a bad case of the flu we increase the chance that they will show up in the ER with a dying child.

Early signs of many diseases, tiredness, headache, even impotence seem trivial to those who sit in judgment of our medical utilization. They often are trivial and can be cured by simple lifestyle changes but you never can be sure of that until you actually seek professional advice.

The Finest Minds That Money Can Buy

Chris Martin — Sat, 27 Feb 2010 02:07:00 GMT

Victoria Colliver continues to document health insurance price hikes here in California, this time for small businesses and her latest story gives us two things to think about:

Small businesses are just as vulnerable as individuals to screening, selection and high prices for health insurance. In fact most small businesses are experience rated. Their premiums are based on their past use of insurance. They are also subject to various discriminatory tests. For example health insurers regularly refused insurance to florists for fear that one of their employees might get HIV.

If we are worried about the individual health insurance market we should also be worried about the small business market. The Senate Bill does nothing for them unless you count taxing their payments for insurance if they exceed a certain level.

Second, the current insurance pricing structure is flawed:

Those who reported the highest rate increases appeared to have a high deductible Blue Shield policy paired with a savings account.

These policies, known as health savings accounts, or HSAs, were created by the Bush administration in 2003 as way to trim health costs. The policies are supported as a market solution to rising health costs because they require members to pay more of their medical expenses out of pocket to use fewer services.

Blue Shield officials said the company's lack of experience with these types of plans combined with the poor economy compelled them to raise rates, primarily affecting three HSAs.

'Paying out more'

"We were paying out more in claims than we were collecting in premiums," said Aron Ezra, spokesman for Blue Shield, which is a nonprofit insurer based in San Francisco. Ezra said he didn't know how large the increases were or how many customers were affected.

High deductible plans are cheap on the individual market because sick people avoid them if they can. If your competitors are not offering similar plans you get the healthiest consumers. They also save the insurance company money because it does not pay for the first $6,000 of medical expenses.

When people with high deductible insurance get really sick medical bills are the same as they would be with low deductible plans. Somehow all thought of money leaves your mind as you enter the ER.

After the insurance company subtracts the substantial deductible, it should price a High Deductible small business plan like any other plan.

The employer picks the plan so you do not get healthier consumers and, even though you escape $6,000 of payments, you get no consumer cost control on the really expensive cases. But pricing actuaries - including those at Wonks Anonymous fine organization - are not capable of following such a complex train of thought. They get lost with a figure eight layout that has a tunnel,

And, frankly, it is the people who get really sick who rack up the most of the medical bills under our current fee for service system and drive health care costs.

Too Much From The Peanut Gallery

Chris Martin — Wed, 24 Feb 2010 02:08:00 GMT

It now turns out that David Brooks and Ross Douthat really liked the part about the Senate Health Reform bill where there would be a tax on employer provided health care. That because simply every economist - or at least all the folks at Brookings - thinks that taxing health benefits is the just the only way that we are going to reduce health care costs. And it will make simply everybody happier.

Now Wonks Anonymous has been extremely vocal in his doubts about this plan. If you tax health benefits employers will drop health benefits or they will put employees on plans that have higher deductibles and out of pocket requirements. Even the evidence presented by Jason Furman of Brookings indicates that this will be bad for low income sick people. Furthermore Wonks Anonymous suspects that this is all about raising taxes on working folks to help maintain the light tax burdens of the rich.

Let this pass. There is another point here.

It turns out that both these guys thought that parts of the Health Reform were pretty peachy - as well they should because taxation of health benefits is an idea left over from the previous administration and pushed by the defeated presidential candidate - but, as the Health Reform was dragging its way through the Senate, they could not be bothered to express support for it.

Instead they kept mum while their friends in the Tea Party movement, among others, slagged the reform because, among other things, it would tax peoples health benefits.

Wonks Anonymous supposes that they hoped that they could secure even more concessions - aside from super lite regulation of the insurance industry and no real public option.

He also suspects that they wanted to see the tax increase passed with only Democratic votes so as to avoid the blame for the consequences.

Now that a maybe, kind of, sort of liberal bill might just pass these guys crawl off the bleachers and try to join the huddle. In order to secure cooperation you need to punish people who do not cooperate. The time to put in your two cents was last year guys.

Who Is John Galt?

Chris Martin — Wed, 24 Feb 2010 01:46:00 GMT

And why does he keep calling with fantastic deals on stuff that Wonks Anonymous doesn't want.

There used to be a do not call registry and Wonks Anonymous was one of the first to get on it. Lately, however, the answering machine picks up to silence a couple dozen times a day. More in the morning and the evening.

It can't all be calls from the Tea Party folks complaining about the birth certificate.

And it isn't, as proven by a recorded carpet cleaning pitch received just last night. So Wonks Anonymous visited the do not call web site last night but that too appears to be defunct.

At least the callers have not taken an interest in Wonks Anonymous penis.

A Threat To PG&E

Chris Martin — Wed, 24 Feb 2010 01:28:00 GMT

Megan comments on my last post:

Two-thirds voter approval is the standard for local General Obligation bonds for non-school related infrastructure and for local special taxes.

A vote requirement will ensure a decision by local government leaders to use public dollars or incur public debt to go into the retail electricity business gets the public discussion it deserves.

Megan Has clearly not visited this blog much. In Wonks Anonymous humble opinion we should have a simple majority requirement for all measures. We went to war in Iraq so that 1/3 of the population - that would be the Sunnis - did not run the lives of the rest of the population.

As things now stand 1/3 of the population of California - that would be of the gold hugging market worshippers - can run the the lives of the rest of us.

This is not about public discussion. It is about public obstruction of stuff that Megan and her employers do not approve of. Pretty much like the filibusters and all of the other blocking tactics now being employed at a national level.

For a further discussion see here.

Readers should note that the URL attached to this comment is owned by the campaign for this initiative.

At last the blog has a Troll!

Initiative Abuse

Chris Martin — Tue, 23 Feb 2010 02:33:00 GMT

Readers of the NY Times from the State of California will no doubt be seeing ads for The Taxpayers Right to Vote Initiative. This initiative would require a special plebiscite any time a local government wanted to enter into competition with our local utility, that would be Pacific Gas and Electric. if the local government's bid did not get a two thirds majority it would lose.

So Democracy requires that we not only have a majority of our elected representatives who we elected by a majority of our votes approve an important issue, we then have to persuade two thirds of the electorate to go along with the change.

The taxpayers right to vote all of the time about all sorts of things many of which they thought were settled.

Kumbaya 3: Tax Increases

Chris Martin — Mon, 22 Feb 2010 22:42:00 GMT

And, since Paul Ryan is a good Republican he thinks that we should make our tax system more efficient:

Tax Provisions
In 2011, the Roadmap would repeal the current exclusion of employment-based health insurance from income and payroll taxes. Also in 2011, a refundable tax credit would be available that could be used to purchase coverage through an employer or on an individual basis.
The tax credit initially would be $2,300 per adult and $1,700 per child, not to exceed $5,700 per tax-filing unit. CBO assumed that 35 percent of the total cost of the tax credit would be refundable and would be treated as an outlay.
CBO did not model tax revenues explicitly. Instead, Congressman Ryan’s staff specified that total federal tax revenues would follow revenues in the alternative fiscal scenario until they reached 19 percent of GDP in 2030 and would remain at that level thereafter.

Because we are not paying these fine economists to analyze Republican proposals but only to praise them we get no solid analysis of Ryan's proposed tax increases and no detailed explanation of how the tax credits would work. A graph provided in the analysis of Social Security does start to provide some clues:

Here we see a sudden climb in Social Security income equal to more than half of a percent of GDP in 2011. Call it half a percent and it comes to about $10 billion per year over the next decade - using the CBO GDP forecasts. This would be a $1 trillion dollar tax increase over the next decade, without even mentioning the income tax increases.

But this would be a good tax increase.

Kumbaya 3: Fixing Social Security

Chris Martin — Mon, 22 Feb 2010 21:26:00 GMT

So the established belief around Washington is that you can't do anything about the deficit unless you cut social insurance and, of course, that means sending Social Security off to Iowa Beef Packing for some serious weight reduction surgery. Paul Ryan has a plan:

The Roadmap specifies reductions in traditional retirement benefits through progressive price indexing for many workers who are age 55 or younger in 2011. Under current law, the benefit formula has three replacement factors: 90 percent, 32 percent, and 15 percent. The replacement factors are lower for higher levels of earnings. The two dollar levels at which the rates change are called bend points. Under the Roadmap, an additional bend point would be introduced to the benefit formula. It would be set initially at the 30th percentile of earners, or 25 percent of the way between the original first and second bend points. The replacement factor above that new bend point initially would be 32 percent.

Beginning in 2018, new Social Security recipients with average monthly lifetime earnings above the new bend point would face benefit reductions. Benefits for “maximum earners” (people with high earnings over their lifetime who have made maximum contributions to Social Security) would be determined by price increases since 2010 rather than by earnings increases (which are projected to be higher) during that period. Benefits for other new beneficiaries with lifetime earnings above the new bend point would grow with a mix of price and wage increases. Because the change would not take effect until 2018, it would not affect people who are age 55 or older in 2010. The change would be applied to the two replacement factors for higher earnings, causing them to gradually decline after 2018. Those factors would fall to zero in 2064, when benefits for a worker with earnings at the second bend point (which would have grown at the rate of earnings) would reach the benefits of the maximum earners (which would have grown at the rate of prices). Thereafter, scheduled benefits for all newly retired beneficiaries would grow with earnings, but no one would receive higher benefits than the worker with earnings at the second bend point.

Now if you can understand this you probably read Finnegan's Wake for pleasure. Nevertheless the reality seems fairly simple. Social Security currently replaces about 32% of income for most people and 90% of income for very low earners. Ryan's proposal sets a new upper limit on Social Security income. Take the top earnings of the most highly paid member of the bottom 30% of the population. Ultimately Security will be capped at 32% of that value.

In 2007 the 30th percentile for income was somewhere between $15,000 and $25,000 per year - let's call it $20,000 - which leaves Social Security benefits capped for all time at about $6,400 per year. People on the verge of retirement will be urged to invest in a large mini van and explore our national parks where they will be able to shoot possums with their handguns and make a fine living.

Clearly this will reduce the deficit and, if we are to believe the graphs, eventually bring the Social Security fund into a state of permanent surplus. it will once more be the cash cow that God and Alan Greenspan intended it to be.

Now the fact that any earnings above $25,000 per year would serve only to increase a citizens tax payments without bringing any further benefits is sure to cause some discontent. But there is a solution to this. High earners will be able to take one to three percent of their earnings away from Social Security and place them in individual retirement accounts which will be used to purchase annuities upon retirement.

If this sounds a lot like the plan proposed by President Bush in 2004 and rejected then, well it is.

But cheer up. There is an innovation here. Individual retirement accounts will be guaranteed by the Federal Government and will never earn less than the rate of inflation. The CBO seems to be at a loss to estimate the impact of this guarantee. Again we note that the director of the CBO, Elmendorff, is not our friend.

Wonks Anonymous has a suggestion for the CBO on this issue: Run a scenario where 40% of the people who qualified for Social Security this year - the top 40% of earners - had deposited about 3% of their earnings in an assortment of mutual funds, like the ones now available to Federal employees. How much would it cost to make these folks whole in our current depressed asset markets?

Social Insurance is a clunky durable way to assure minimal retirement income for everyone. It works like an old Volkswagen. not fast or flashy but reliable. These reforms are a like a Jetta. You can't rely on them to get you there and they will spend a lot of time in the shop.

You Can't Get There From Here

Chris Martin — Mon, 22 Feb 2010 20:15:00 GMT

So the NY Times Has gathered a fine group of oxymorons - that would be Republican thinkers - on its editorial page to discussion future biPartisan steps to health reform.

Mark McClellen, now at Brookings does not want to see the whole thing financed by bad taxes - increases in income and payroll taxes - but would be O.K. with an excise tax on employer provided health insurance. Which tax has "been proven to reduce health care costs" by forcing employers to adopt plans that cover nothing which then lead people to avoid medical care. This is a moderate stance when compared to Charles Kolb who says:

Congress should also end the current tax exemption for employer-sponsored insurance coverage. This change would encourage people to pay more attention to the price of their health insurance. And it would provide the money that will be needed to help underwrite coverage for the uninsured.

Again, not a huge departure from the worst features of the current bill.

In addition to this Mark McClellen would like to see insurance exchanges. Um. weren't these part of the bill that all of the Republicans hated? Weren't they also part of the dread Hillarycare? But these would be different because they probably would not impose serious regulations and companies could offer us whatever they wanted to. We would all get mail from the government telling us that we should carefully read the fine print on our health plans. Maybe we would even get nifty tee shirts that said "Caveat Emptor".

In addition McClellen, and others want Medicare to gather more data on quality and outcomes and they would like to see some system of risk adjustment where the government paid health insurers subsidies to take on people with health problems. No ballooning Federal Bureaucracy here folks.

Bill Frist - heart transplant surgeon - wants to pay teams of Doctors, Nurses and so on for outcomes:

This is not rocket science. You simply need to pay people to do a good job, demand measurable outcomes and adopt proven standards of practice and information technology. Reward value, not volume.

Medicare and private insurance companies should reimburse providers not for each discrete service they provide but for managing a patient’s condition over an entire episode of care. In my own field, transplantation, for example, a payer should not separately reimburse 56 different nurses, doctors, pharmacies, imaging centers and hospitals. Instead, it should pay a heart transplant team a fixed sum (adjusted for risk) based on the diagnosis of “heart failure requiring transplantation.” The disbursement of that payment would then be made at the local level, where value can be most accurately determined, and waste most likely eliminated.

This wonderful payment system would be well administered by the accountants and actuaries in the insurance companies and the government. We know this to be a fact since we have seen how well they performed before in the glorious experiment with insurance company managed health care.

To round out the analysis, Newt Gingrich wants us regulate malpractice lawsuits - one imagines we need a system like California's which restricts pain and suffering awards and does not a lot of good. James Pinkerton represents the aluminum foil deflector beanie set with a call for more and better health for everyone without gummit interference and, presumably, without cost to the general public.

Which all pretty much leaves us right where we are now. Little or no regulation of health insurers who steadily increase the prices that they charge individuals and businesses. A continuing erosion of the coverage actually offered through steadily increasing deductibles and other out of pocket charges as well as limits on payments for each illness and accident.

This will all lead to more medical bankruptcies and unreimbursed care as consumers find that they cannot pay their deductibles. Fewer individuals will be covered as the young and healthy are allowed to exempt themselves from paying for the old and unattractive. Rates will continue to rise.

And, despite the pious noises that are made against fee for service medicine, the billing and coding industry will need to remain intact to make sure that we measure how much sick people use the health care system and punish them appropriately for their decision to get old and sick.

On the plus side, it is highly probable that the law can be written so that the new insurance exchanges will be controlled by biPartisan boards which will create new employment opportunities for Republican health economists and unemployed Republican politicians. Risk adjustment payments will provide a new source of income for suffering health insurers and the various studies and research projects proposed will provide years of income for the health economists at Brookings.

We all win, except for the we part.

Public Servants

Chris Martin — Mon, 22 Feb 2010 19:01:00 GMT

Wonks Anonymous is a true child of the sixties and therefore allergic to forms, rule, regulations and deadlines, which does not help now that it is time to enroll his dippy daughter - the youngest offspring - in kindergarten.

So this morning he packed her off to preschool and sat down for a fine few hours of filling out forms, during the course of which he called the school for information and to schedule an appointment to enroll the child. To his mild amazement the secretary said: "Bring what you have in here and we can start the process now."

Which we did, with Wonks Anonymous leaving the school with a little check list of stuff that was still pending.

All of this happened at a public school, run by the Alameda Unified School District.

That would be Washington School, Elyse Belanger principle. Way to go, you have a good team there.

Now Wonks Anonymous has seen a lot of "service" in his life. Far too much of it is given by bored, uncaring people who are forced to follow scripts written by grasping, penny pinching, uncaring weasels.

That would be service in the sacred private sector. Service given by banks, health insurers and internet service providers.

So here he was sitting in the office of an underfunded school which is contemplating yet another round of layoffs, getting help from someone who is also fielding calls from parents and helping kids with boo boos that they just got on the play yard thinking that sometime today he will read some vile screed written by some right wing nut job or other about failing public schools and lousy teachers and soulless bureaucrats.

And there will be a good chance that the nut job will actually have a full time, paid media position writing such vile screeds.

And then Wonks Anonymous thinks of his own experience with expensive private education - that would be at the ever so chi chi School of the Madeline in North Berkeley yet. Which school his elder children attended for some years before asking their mother to be sent to public schools. Which school turned out to be a hotbed of bullying where the first grade teacher was not even capable of teaching high intelligent and verbal children how to read.

But we really do need to reduce taxes for rich people - all of those bankers are suffering, not to mention poor Paris Hilton - and the only way we can do that is to destroy trust in the government. So folks like Debra J Saunders need to keep up their output of anti-government drivel and of course their unthinking disciples like James McPhail need to repeat it all over the web.

The English follow the principle that when one lies, one should lie big, and stick to it. They keep up their lies, even at the risk of looking ridiculous.

Goebbels, quoted in Wikipedia.

Blame The Doctors

Chris Martin — Sun, 21 Feb 2010 16:25:00 GMT

Victoria Colliver of the SF Comical has been doing some excellent reporting on insurance rate hikes that has manged to call politicians like Diane Feinstein into something almost but not entirely unlike real action.

Well, no good deed goes unpunished and she has now been assigned to work with the Comical's beltway maven, Carolyn Lochhead, to bring us the real story: The huge nationwide insurance companies had to raise their rates by 30% to 40% because cartels of doctors and hospitals managed to raise their rates by something like 6% over the last year. Insurance companies are just passing on the costs.

Wonks Anonymous would dearly like to provide a link to this article and encourage people to hit the Comical's web site and bring in ad revenue. Unfortunately it is currently a dead tree exclusive. Memo to the Comical: I would work on making my website more user friendly. Better comment utilities would be a good start.

Doctors can do this because medical pricing is not transparent - there is no well established fee schedule for all of the various components of a coronary bypass operation and nobody posts their price lists on the web.

Plus we all need high deductible health plans because:

Consumers have almost no control over costs, no ability to shop and little incentive to do so because most patients neither buy their own insurance not pay their medical bills directly. But they foot the bill in skyrocketing premiums, deductibles and co-pays.

Next we hear from Keith Smith " an anesthesiologist and co-founder of the Oklahoma Surgery Center in Oklahoma city", who "posts his prices online." He feels aggrieved because Preferred Provider Organizations have become cartels who force insurers to avoid his fine institution.

Memo the Keith Smith and Carolyn Lochhead: A Preferred Provider Organization is a list of doctors who are all preferred because they will accept whatever it is that an insurance company is willing to pay them. Usually they belong to more than one medical group.

No mention is made of the fact that Dr. Smith can offer low rates for surgery because his facility has no emergency room and is therefore free to refuse service to all but paying customers. No muss, no fuss, no unpaid medical bills.

Yes medical pricing is a mess and some medical groups have power to set prices. When you are sick a doctor can have his way with you.

Posting all the details of pricing on the web and making us pay the bills directly is not going to make it all better. We are not in the market for cardiac testing, stents and surgeries. We are seeking care for our ailing hearts. Any pricing system that breaks this care down into component parts is pure fiction. It is like breaking down a muffin into its component parts - flour, sugar, blueberries lard and so on and presenting an itemized bill.

Besides, if nationwide health insurers are not powerful enough to bargain down rates for these medical groups how are individual patients supposed to do it?

If hospitals and medical groups have become so powerful then we need to pay them for comprehensive care. This means that everyone pays a fixed fee to an organized group practice. For example, the doctors of Brown and Tolland work together with say Sutter Health to form an accountable care organization. We pay a premium and they give us medical care with little or no out of pocket payment demanded.

If a medical group increases the services they provide they still get the same fee.

This creates two problems. First, large medical groups are effectively offering health insurance which leaves no room for fine health insurance providers like Anthem. Second, if we do not carefully measure and price the medical services consumed by patients then we have no way be sure that sick old people pay for to support the medical system in proportion to their illnesses.

And we would not want to make the golden youth, who will never be old or sick enough to use medical care, pay for such a thing.

Kumbaya Interlude: Health Reform

Chris Martin — Tue, 16 Feb 2010 15:36:00 GMT

So the bubbly and irrepressible Ross Douthat has some biPartisan idea to contribute to the general quest for peace and progress. These apply to the health Care debate where he feels that the Democrats should compromise and pass a set of policies that the Republican superminority wants. If the Democrats give on this one he assures us that there will be at least some Republicans who will be willing to take.

The policies involve the usual suspects. Federal limits on medical malpractice awards because the states cannot be trusted to regulate their own courts. At the same time Federal deregulation of the sale of health insurance across state lines because some forward looking red states are the laboratories of democracy and will lead the way to a brave new world of health insurance.

Then he gets interesting, bringing up a proposal by Senator Judd Gregg. Remember the guy Obama made a fool of himself over last Fall:

What kind of legislation might this (admittedly Utopian) summit scenario produce? One possibility is a less expensive, less intrusive version of the current Senate bill. This is what Senator Judd Gregg, the New Hampshire Republican, was pushing last week. Like the Democratic bills, his proposal would mandate that everyone buy health insurance — but it would emphasize catastrophic coverage, rather than comprehensive plans. This would reduce both the weight of regulation and the bill’s overall price tag, freeing up money for immediate deficit reduction.

So we all get a mandate to buy health insurance which is a good regulation because it forces individuals to contribute to the support of fine American Health Insurers. At the same time there are no regulations that determine what sort of product Health Insurers offer or even force health insurers to issue similar policies to everyone at the same rates which is bad, intrusive regulation because it forces fine corporation to alter well thought out business practices that we should know by now are for our own good.

Wonks Anonymous is still wondering where the money that will be freed up for deficit reduction will come from. Presumably Gregg's version of the bill would retain the glorious excise tax on employer provided "luxury" plans in full. Since subsidies would be lower we could spend the additional revenue to cover other needs like fighting wars to save Islam from itself and bailing out bankers while decreasing the deficit.

Please don't call it a tax increase. We are just putting the lucky duckies who have employer provided health insurance on the same footing as the honest folks whose employers don't choose to insure them.

Still can't buy insurance because of pre-existing conditions. We can use "better funded risk pools" to pour more money to the health Insurance industry. We are sure that they will help you out then.

Kumbaya 2: Fixing Medicare

Chris Martin — Mon, 15 Feb 2010 18:43:00 GMT

So here is the analysis of the new bipartisan plan as it applies to Medicare. Remember, here at Wonks Anonymous we read it so that you don't have to.

First the good news: The Plan will save a butt load of money: that would be $650 billion by Krugman's estimate. Far more than the paltry $500 billion in cuts proposed by the late Democrat Health Reform proposal. And the money would not be used to pay for health insurance or other fripperies. Lower deficits and lower taxes for overworked lawyers and stockbrokers everywhere.

More good news: Wonks Anonymous and people born before 1955 will get regular Medicare. The younger readers cannot imagine how refreshing it is to be transformed from an evil grasping Boomer who is about to ruin the nation and should be voted off the island to a sweet cuddly senior who needs to make a hard patriotic decision and vote all those other evil grasping Boomers off the island.

There would be minor increases in income related premiums charged to the likes of Wonks Anonymous and there might be cuts but the Congressional Budget Office and Ryan are coy about this. With friends like the CBO the Democrats do not need enemies.

The real savings come from younger folks. Sorry about that Kimberly, Monica, Catherine and Sean. Age for Medicare eligibility will gradually increase to 69 years and six months - It's not really 70 folks just like $9.95 is not really $10 - and after 2021 everybody gets vouchers which they can use to buy private insurance on the individual market.

Vouchers would start at $5,900 in 2010 dollars for 65 year olds - that would be about $491 per month which is just a bit shy of the premiums charged by the insurance industry for individual plans for folks in their late fifties and sixties. Vouchers would be risk and age adjusted. Allowing for this adjustment the average voucher would be worth $11,000 per year.

That would be less than the current per person medicare spending.

Vouchers would rise in value at a rate somewhere between the increase in medical costs and the consumer price index. The CBO estimates that the dollar value of vouchers will rise by about one to two percent per year.

Everybody would get the same voucher, regardless of income. Millionaires like Paris Hilton and Brittany Spears could use their vouchers to pay for plans that offer cosmetic surgery. The rest of us you could ask your kids for financial help to finance a decent health plan. Which is very progressive because. Um . . .

But savings should not be all that painful because the plans will be administered by private sector health insurers. Sure these fine companies will need to spend a lot of money on each individual to evaluate their likely health costs and the government will need to spend more money to make sure that it gets the risk adjustments for the vouchers right. Meanwhile states will all need to increase their regulatory staff to monitor all the new private insurance contracts.

But this will all be fine because we can expect that all of the new Medicare voucher policies will be the ultra modern, super efficient high deductible policies which Jason Furman assures us will save lots of money without reducing anyone's health.

When they did a limited study they found that everyone was just as healthy in five years as they were when the study started. Except for people who had limited financial resources and serious chronic health conditions. These pesky folks tended to try to save money on meds and visits to the doctor and get sicker. But seniors nowadays are all rich as trolls and healthy as horses.

Besides, we are also going to give poor seniors Medical Savings Accounts. Provided that they are poor enough to qualify for Medicaid.

Kumbaya 1: Paul Ryan

Chris Martin — Mon, 15 Feb 2010 18:34:00 GMT

Now that the Senate Republicans have a super minority of 41 and can block anything that Obama wants to do, it seems that it is time for the House Republicans to step in and try to help craft a bipartisan solution to the problems that face to the nation.

Time for Paul Ryan to step in to the interrogation room, turn down the lights, offer us all a smoke and see if we can't work something out.

Now we all know that Ryan is a serious intellectual - he has read Atlas Shrugged which is a long book with no pictures. He also understands economics, after all he has read Atlas Shrugged. And unlike Alan Greenspan - who also based his life on Atlas Shrugged - Ryan is concerned with the deficit. Also he wants to cut benefits to people who have done rather well working for a living and raise them slightly for those who have not done so well. This makes his proposals progressive so liberals really ought to love them.

Ryan will show us the way out with a Roadmap For America's Future which has been analyzed in a rather fawning letter from the CBO. Memo to Congressional Democrats: Fire Elmendorf. He is not your friend.

Here at Wonks Anonymous we read this stuff so that you won't have to and, over the next few days, we will try to see our way down this roadmap to Potterville.