Archive for February 2010

How Do People Figure?

February 28, 2010

Where do the America people stand on health care? Do they feel it is ok for two children, who both have a serious illness, where one is from a wealthy family and the other from a low earning working class family, to receive markedly different health care? Is that American?

How do Americans feel about someone being dropped by their insurance company due to some “pre-existing condition”, like diabetes, or high blood pressure, or breast cancer? Does this have the ring of American fairness?

How would Americans feel if they knew that their health care, if they have it, is the costliest in the world and is mediocre when compared to most other European Countries, Canada, and Japan? Does this offend Americans sense of pride?

Do you think it is ok for health care costs to increase each year at 2-3 times the rate of inflation and for 2010 and 2011 social security benefits will not increase at all? Do you wonder who is getting a good deal here?

If this panel of Americans listened to the Health Care Summit on Thurday, they would have heard Republican Congress members speak against any of these reforms.  They might have said this was unfortunate, but they preferred to start over.

Republicans did speak about costs but offered no comprehensive plan. Republicans declined to express any sensitivity towards these fairness issues. Instead, they said it was ok to keep these inequities, maybe forever, but surely not until health care costs were reduced.  Why should some Americans have coverage and others not?

Why could the Republicans not have offered their support in exchange for Democratic support for concrete steps to decrease health care costs and to introduce other measures measures designed cap the yearly run away health cost increases?

One is left with a purely political answer that “no way, no how” will Republicans help President Obama even, if necessary, at the expense of innocent children and less well off citizens.  The other possibility is even uglier, that Republicans simply believe this should be a country where the wealthy get health care and the less wealthy do not.

Democrats do not escape this quandary without some serious questioning about why they did not include more serious measures to significantly reduce health care costs. If the current bill does pass and its provisions to provide much broader coverage and to stop the predatory practices of health care insurers, Democrats will be duty bound to seriously engage in legislation that would bring health care costs in line with global standards and cap these costs (as a percent of GDP) at a level the country can afford.

Pelosi and Reid

February 27, 2010

If the Blair House was the headquarters of a vibrant American corporation and last Thursday’s Health Care Summit was a meeting of its senior executives, I think there would have been new jobs in line for Senate Leader Harry Reid and Speaker of the House Nancy Pelosi.

Their behaviors and rhetoric were far beneath the dignity of their positions and demeaned the importance of this meeting. Their performance clearly call into question their ability to lead.

Seniority and gender recognition are powerful reasons to consider in picking leaders but both have limits. Representatives Dingle and Rangel both added nothing of value in their comments and in effect detracted from the strength of President Obama’s proposals.

Thursday’s meeting was not that of a corporation but sadly it was a meeting of the senior leaders of our Country. It was inescapable that these four “leader” speak to the often overlooked wisdom of “term limits”.

Choice is Clear

February 26, 2010

Following yesterday’s “health care summit”, President Obama and Congressional Democrats have a clear cut choice to make. In a mostly positive manner Congressional Republicans laid out their position as clear as one could expect. Their position is “the current health care delivery system costs too much and so Republicans see no reason to add more people to the health care rolls”. They seem to not worry about anyone unfortunate enough to loose or not be have coverage, and chalk it up to “that’s life”.

Republicans dressed up their position with various claims such as:

  • Proposed bill will increase deficit. (CBO estimates are that deficit would decrease not increase.  Full disclosure is that doing nothing is projected increase the deficit, and this bill would make the increase a little less.)
  • Proposed bill would hurt older Americans by cutting Medicare. (Most experts agree that there is plenty of room in the current Medicare program to trim costs without taking away from necessary services, and with AARP aged citizens representing a huge voting block, it is difficult to see a reduction in Medicare services across the board.)
  • Proposed bill is not what Americans want, and that’s why Republicans are against it. (Actually almost all the provisions of the bill when polled separately are favored by a majority of Americans. With all the confusion created by Republicans and other conservatives, it is no wonder people are unsure the total bill is a good idea.

Democrats also did a disservice to Americans by not making a stronger case for reducing health care costs. With any dispassionate review of health care among modern industrialized countries, it is inescapable to see that the US has by far the most expensive health care (we spend the most), and a system that is not superior to these other countries.

So, America is left with the choice of continuing with a system that will increases in cost each year at rates 2-3 times the rate of inflation, will continue to generate a larger and larger number of people priced out of the market each year, will continue to deny coverage to people with “pre-existing conditions”, and will leave millions of working Americans (those earning more than Medicaid maximum incomes) uninsured (the very poor qualify for Medicaid and can get coverage), or we can take a first step in achieving fairness.

It is still murky whether Democrats can unite to pass President Obama’s plan. What is clear is that this plan is not enough to really tackle costs and that must come next. Once all Americans are covered, some of the Republican ideas (such as malpractice reform, buying insurance across State lines, and payment for illness incident, not for each service) bare serious consideration and then we will see if they really hold water.


February 25, 2010

Today, Washington DC goes on display. The occasion is the televised meeting between Congressional Republican and Democratic leaders and President Obama. It is very difficult to imagine this event as “purposeful” unless your definition of purpose is to upstage the other side.

The Republican pre-meeting points are,  start over, and work on costs step by step. And to add emphasis, they say that the American people are against President Obama’s proposals. The Democrats counter “unless the Country reigns in abusive private insurance companies practices and mandate every one to have coverage, there is no way to get control of costs”. And Democrats add, each part of President Obama’s plan polls very well and are favored by most Americans.


First, both of these positions are reasonably defensible (assuming Republicans would really work on cost control and then later move to include everyone, or that Democrats would eventually work to reign in costs). Second, a majority of Americans also favor a single payer system and that is not even on the table for discussion. Health care reform is a complex subject.   With so many people making so much money and so many other people depending upon health care services, fixing the health care ship, that is about to sink, is still a task Congress seems afraid to seriously address.

Some what lost in this confusing discussion is the simple question, “why do we need private, for profit, insurance companies anyway?” What value do they add? Could not non-profits provide the same service?

Think about this. You go to the doctor, present your insurance card, get seen, maybe pay a co-pay or deductible, and hopefully get better. What value add has the insurance company provided? Why could you not pay an annual fee (maybe supplemented by an employer or the government tax credit) and simply use a “credit” card to charge your doctor’s (or hospital’s or pharmacy’s) fees.  (The health care provider would then receive their payment from your health care account.)  Where is there anything other than a nominal book keeping and accounting value performed by private for profit insurance companies?

The Republicans do have a solid point (in my opinion) with malpractice limits. This type of reform coupled with a fee schedule that covers each incident and not per service would cut substantially into one of the causes for high health care cost.

Dreaming.  This won’t happen today but I wish it would. Agreement on moving to non-profit private insurance, significant malpractice limits, universal health insurance mandate, no exclusions or right to refuse coverage, and agreement to “global benchmarking” in order to ensure that Americans are receiving the highest quality of health care at world competitive prices.

I can dream, can’t I?


February 24, 2010

Balance of Payments is a term infrequently talked about these days. We are more likely to hear “government is too big” or “government has no place in health care” or “jobs, jobs, jobs”. Every so often the business section of your newspaper will report for the umpteenth time, “US exports lagged hopelessly behind imports”. In a time of high unemployment and a generally slow economy, it is mind boggling how that can be taking place. What is more mind boggling is why politicians do not jump on this as a route to putting people to work and reducing the size of the US budget deficit?

Unions and some politicians jump to tariffs and call for an end to “free trade” as the cure. In our global interconnected world, moving away from the notion of “free trade” seems foolish. But what else can we do?

I would suggest we read our history books and research the idea of “common wealth”. The role of government has been to invest in those undertakings that increases the common wealth, thereby making the private sector more innovative and more productive.  In essence, the government invests in order to raise all boats.

Over the years, government subsidies seem more to be direct rewards to certain sectors or industries, and not as a spring board for a broader slice of our economy.  Do you think special interests had anything to do with this?  Education, roads, harbors, energy grids, and research are examples of where the government could invest money that would return much broader paybacks.

Here are two important cautions. (1) It is not simply building any road, or dredging any harbor, or sponsoring any education subject, or building any type of energy grid, or any of these, at any cost. Choices need to be made and returns need to be considered. (2) We need congruent national policies. For example, seriously ending our dependence on fossil fuel (oil being first) cuts both a large part of our import cost as well as stimulates alternatives that can create many good new jobs. A sensible health care system, much like Europe, Canada, or Japan could free up a lot of personal discretionary consumer spending which in turn could lead to the creation of many private sector jobs. A compassionate as well as rational immigration and guest worker policy could provide American industry and service companies with good workers and good customers. (Those who want to close America’s doors or even to send back the estimated 11 million undocumented aliens would make matters much worse if they got their wish.)

The current economic slow down reflects deep mistakes and very bad habits of the last 20 years. Global savings (from exporters to the US) along with foreign wealth created by the US’ insatiable appetite for oil have both flooded back into the US looking for investments. Unfortunately those investments have been in collaterialized debt obligations, credit default swaps and other “get rich fast” schemes. The US’ common wealth has decreased and its time to go back to basics.

Serving with Pride

February 23, 2010

It is currently US Law to prohibit gay and lesbian citizens from serving in the US military. This law passed during the Clinton years by a Republican controlled Congress gives the military the right to discharge anyone they feel is gay or lesbian. The famous “don’t ask, don’t tell” presidential directive was suppose to offer a pragmatic solution by simply instructing the chain of command to not seek out gays and lesbians, and then discharge them. The military could discharge someone if the soldier openly displayed homosexual mannerisms or declared in public their sexual orientation. Despite this, gays and lesbians have and continue to serve in large numbers.   Most serve with pride and distinction.

President Obama has asked Congress to repeal the law and has the Department of Defense to prepare for no restrictions tied to a person’s sexual orientation. Most reports indicate that repeal would represents a “non-event” to service men and women. Their generation has grown up with positive gay and lesbian images and no amount of misinformation will fool them. For some senior officers it may be a slightly different matter since they are from a different generation.

Congressional posturing is another matter. The usual suspects who seek to cast anything the Obama Administration proposes in a poor light see red meat. Others less strident, however, hale from conservative districts and fear (or may even really feel) a religious based moral indignation about gay and lesbian life styles. These same individuals who on other days sing from the Constitution are now quite willing to support discrimination.

The numbers are simple. There are more straight votes than gay and lesbian votes.  So if you live in a very conservative district numbers count.  Hardly principled but easy to understand.

The gay and lesbian community has placed a lot of importance on this issue. For Democrats there is an implied “you owe us this one” for gay and lesbian support for President Obama. I wonder whether all parties can see beyond that.

There is about 11% of all Americans who are gay or lesbian. This is not a learned behavior, it is genetic and totally natural for those who are gay or lesbian. While there has been much progress in eliminating or minimizing discrimination in the general society, the military remains special. Opponents claim that “unit cohesion” will be hurt and as a result, unit effectiveness will decrease. Over the next months this will be argued in Congress and most likely, the law will be repealed.

The question I have is whether gays and lesbians will see this as part of a broader set of human rights issues or just a narrow case of discrimination. Will gays and lesbians turn their support to health care for all, or compassionate immigration and guest worker regulations, or the right of all women to decide on their own reproductive health?

EU, Wall Street, and ENRON

February 22, 2010

Today’s Wall Street Journal headlines that the EU is worrying about practices that some countries used to conceal the actual amount of debt they were carrying. By concealing the correct amount of debt, these countries (read Greece, Italy, Spain, Portugal and maybe Ireland) could avoid the politically unpopular actions of deceasing spending or increasing taxes. (Sound familiar?) These countries were essentially “cooking the books”.

We are now just emerging from a near global melt down of the world’s financial system because an awful lot of the large global banking and investment community cooked their books. They bought and sold collateralized debt obligations (CDOs) (making juicy profits in the process), and then many doubled down by laying off their risk by purchasing or selling credit default swaps (CDSs) (generating again fat juicy profits). CDSs are an unregulated form of insurance that is suppose to mitigate risk associated with contracts a bank or firm owns. Wall Street was clearly using them to artificially make their books look better so that they could leverage their actual assets even further. When the housing bubble burst and the economy soured, too many people began to default on their mortgage payments. This caused banks to have to lower their book’s CDO values (and therefore their overall asset value), try to raise more capital, and ultimately to call on their CDS partner to pay up. Surprise, surprise, these issuers of CDS did not have enough money to pay. In the midst of this chaos, in stepped Uncle Sam to help save the US banking and probably the world’s banking system (at tax payers’ expense).

ENRON played a game that also cooked the books. They created off shore corporations for the sole purpose of parking “debt” (that was being used to generate earnings), and claimed that these off shore entities did not need to be consolidated in the official ENRON books (even though they were consolidating the earnings!). No one called them on this practice and after much borrowing, ENRON imploded.

There is always the possibility that any business or firm can fail. Someone may build a better mouse trap or modernity may simply make something no longer necessary, and in both cases a company could fail.  Accordingly, debt and debt leveraging practices, long known, have been established with prudent limits to confine and minimize the occasion of failures. ENRON, Wall Street, and now the EU are examples where entities knowingly pushed limits, no one called them out, and found themselves way over the line.

All these examples contain the smell of seeking a free lunch, greed, and ineffective oversight. Government regulators failed, and private accounting and rating firms were complicit. The Obama Administration can learn from these three events and take steps to prevent a reoccurrence. Well, at least until some new greedy entrepreneur offers investors a “new” free lunch and regulators are fast asleep.