American "Enterprise" Institute?

Up is down. Enterprise is...stasis?

I've seen a couple of quotes on the order of the one at the end of this article. They remind me of the "nobody saw this coming" quotes about the mortgage/housing bubble (e.g.--of course several people, including the author and economist Bob Shiller, already well known for calling the stock market bubble previously, saw the housing bubble and sounded the alarm). So here is another iteration of "nobody knows."

“Nobody has ideas that are going to fly off the page and go into effect very quickly that are really going to reduce total health spending as opposed to shifting it around so the federal cost is lower,” said Joe Antos of the conservative American Enterprise Institute.

I suggest, at least in this instance, we are hearing an opinion that should not be associated with the word "enterprise."

To get widespread innovation and change, with results within just a few years, create a real marketplace. In a real marketplace, buyers are able to realistically compare products and their prices. Buyers are able to actually compare apples to other apples.

Consider what this proposal by Senator Wyden would do for creating a real market in health insurance. When offering a better form or value of health insurance becomes visible to more of the people looking for health insurance, then innovation pays off more quickly since more customers arrive at the front door. What could fit into the current Senate Finance bill? How about this proposal, being considered now.

What happens when people get more transparency, so that they can see the prices they are paying? It would be a change, compared to a market in which actual prices have been hidden by having employers pay premiums without their employees knowing the full cost of those premiums, which replace a part of their take-home pay and replace much of their would-be pay raises.

In a market where individuals can actually see prices, they begin to compare more, and shop around. When certain sets of benefits become standard -- "bronze," "silver," etc. -- it becomes possible to compare policies like apples to apples. People begin to know what they are buying, and what it costs. That's called a market. Dynamic (active) markets create innovation. That's part of how enterprise pays off for everyone.

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Update: I've got some good company in my view, of course.

10/2 update: Wyden's proposal in the Senate Finance Committee is ruled out of order by the chair. But I doubt we have heard the last of this idea of opening the exchanges to more people.

The Ultimate Social Issue (Health Care), Wealth, and "Socialism"

Over the last few weeks, I've thought several times of how health care itself is the ultimate social issue.

Health care is one of the most profound ways we mutually cooperate to help individuals when great need strikes. Every insurance is a form of this mutual safety net, which we establish together. But health insurance has some of the most dramatic outcomes -- its effectiveness, or lack thereof, will often determine whether a family can live in its home (or be forced to sell or go bankrupt), whether a family can buy clothes for their kids, whether a parent or a child...lives or dies.

For a nation, the question of whether to include everyone in a health insurance system is, more than any single other issue that will ever arise, the ultimate social/political issue.

...

None of us should be surprised (or offended) that many people want to include everyone in their social group, and in their health insurance safety net.

None of us should be surprised that many people want to exclude a lot of people from their personal group and have their own exclusive association, and exclusive health insurance.

Both of these impulses, community inclusiveness and community exclusiveness, are human.

The nature of being a human being is that we want to join together in groups and cooperate, but learned prejudices make many of us feel we don't want to associate with just everyone. We usually prefer familiar faces. Fear of the unknown, of difference, can lead to exclusivity even when it violates our avowed ideals.

In the past, and still today, many would like to exclude those of a different economic status, and sometimes those of different ethnicity or of a different culture or lifestyle.

The degree of preferred inclusiveness varies by individual. While most agree with the ideal that there should be some way to allow everyone at least some health care at times, such as in the emergency room of hospitals, there are questions for many about just how inclusive we should be as a society with health care.

...

Generally, in America, you have the right to associate with whom you like, but...you do not have the right to refuse to participate in the national community in several distinct ways.

As Americans, we don't currently have the right to choose whether or not the tax dollars that we individually pay can be used to conduct wars that we personally do not agree with.

It is a fact that some Christians believe, genuinely and fully, that Christ specifically commands them to love their enemies and not to try to kill them.

That is a fact.

But, in America, we do not allow a legal choice for these or any other pacifists to refuse to pay some part of their taxes that support wars they believe are wrong, even sinful. We allow them to refuse to fight, but we don't allow anyone to refuse to help pay for the fight.

Around the world, states compel citizens to participate in certain activities, such as paying for defense, for education, for police and courts, for roads. States compel citizens to purchase auto insurance.

While the state can compel you or me to pay for a war to kill its enemies, regardless of our beliefs and values, what if the nation might begin to compel us to buy health insurance?

This is the so-called "mandate" to purchase health insurance of a certain basic minimum level or better. The mandate follows as a logical necessity when the state requires insurers to accept everyone, to insure preexisting conditions, to price premiums independently of preexisting conditions, and not to drop anyone.

The logic is immutable. If preexisting conditions cannot be excluded and insurers are required to accept all applicants, then with no mandate the economically rational thing for healthy people to do would be to immediately drop their comprehensive health insurance.

If a serious illness arose, they could rely on quickly obtaining comprehensive health insurance without preexisting exclusions. Healthy people in large numbers would therefore choose to drop comprehensive insurance and have only cheap accident insurance (ER and hospitalization) for injuries. This would then leave mostly sick people on the comprehensive coverage, driving these insurance premiums into the sky, and this would induce the remaining healthy people to drop comprehensive coverage also.

It's similar to a situation where life insurance could be bought after a person is clearly dying.

Thus requiring insurers to cover any applicant and cover preexisting conditions requires an individual mandate, otherwise the health insurance system would simply collapse, nationwide.
----------------------------------------

Update 10/12: Here's a brief interlude. I just saw that CBS evening news does a decent job on covering the flap on Monday the 12th over insurance company projections in response to the much lower mandate "penalty" or "tax" now being proposed (in the Baucus version of reform):

Watch CBS News Videos Online
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post continues....

It's understandable some feel they should not have to buy health insurance, or auto insurance, or pay taxes to help fund wars.

But...among the evils that the world imposes on people, the purchase of health insurance must surely be one of the lesser evils.

After all, if you have no health insurance and suffer a bad accident or serious illness and you are taken to the local Emergency Room, you will receive help, health care, by law. And if you are unable to pay, you will get that care at the expense of other people. You will receive care regardless, and since ER charges are often high, this type of care is significantly subsidized by taxpayers and by health insurance policy holders. This cost is about $1100/year per family policy or $400/year per individual policy. Those with insurance are paying for those without insurance.

This phenomena is referred to as the "free rider" cost, where an uninsured individual gets a form of expensive ER health care/insurance for nothing.

It's similar to serious auto accidents caused by uninsured drivers, where the large costs are born ultimately by all those who buy insurance.

The proposed health reform requires that those who choose not to buy health insurance will at least pay to offset a part of the value of the free-rider benefit they get by paying an "excise tax."

...

Yet, I think those who oppose health insurance reform are not only those who want to be free riders and plan to rely on subsidized ER care.

Nor are those opposing health insurance reform only individuals who wish to be in ethnically exclusive or culturally exclusive groups.

It is likely that many of those who oppose health insurance reform do indeed wish to be part of an exclusive economic group, where their own wealth is reserved as much as possible for themselves and their families alone. Part of the motivation for this is exactly that health insurance costs have risen so high that families feel they have less money left over for discretionary spending. A political perception has been manufactured that people with middle class incomes would begin subsidizing health care for lower-income people.

They already are. They have been doing so for years via the free rider cost.

So, for most people this political rhetoric has no basis in the facts. But the rhetoric against "higher taxes" for health care reform is actually true if you are in a group where the net health care costs and taxes would be higher, which in the House version of reform is for individuals making over $500,000/year, and in the Senate version would include those with unusually generous health care plans that have premiums more than about 50% higher than average. But even those relatively well-off people may feel they would like that the total health care plus tax cost of health care reform not in any way subsidize those that have lower incomes and therefore could not afford even basic health insurance without loopholes.

This opens an interesting moral question. In the case of Health Insurance and Care, should we be able to choose exclusive economic groups and avoid subsidizing others? ... (Note that this is partially about exclusivity, not only about cost. Currently those in high-cost policies do already pay subsidies to help pay for the care of non-group members. It's natural that most caregivers -- doctors in Emergency Rooms -- will choose to help lower-income patients suffering from such as a strep throat or dying from the lack of straightforward care when the Emergency Room facilities are not in full use already. Doctors have a certain natural tendency to want to actually heal. Current law requires treatment, but without law...there would still be treatment. Even without this law, there would still be an effective subsidy, a social cost sharing. In contrast, in a national universal insurance grouping the subsidy happens ahead of time, and these low-income individuals would be insured and would likely go to cheaper clinics instead of Emergency Rooms for many ailments, lowering the actual subsidy cost. So the opposition is not about cost alone.)

So this moral question arises.

Should we all help pay for the cost of insurance for everyone?

And it is an important question, because...part of the way anyone becomes wealthy in this nation is by virtue of the other people of the nation.

As people everywhere work and create more goods and services, the entire economy grows, and thus the potential for real wealth -- the ability to buy more with the proceeds of your own work and investment -- also grows. Individuals also gain extra wealth, typically (though not always) through offering greater value to their fellow citizens. Bill Gates worked hard to bring software to market that ultimately increased the productivity of hundreds of millions of software users. He was rewarded proportionately. But, of course, if there are more people that can buy his software -- if there are more workers -- then he makes more sales, more profit. It's hard (impossible) to get wealthy without other people!

The source of individual wealth is thus a mixture -- it comes both from the individual and also from the entire work force, including everyone who supports workers directly (such as homemakers) and indirectly (such as artists.) Wealth is not an Either/Or, but a Both/And.

Further, the real value of our wealth is enhanced by the work of others.

When a chip designer makes a better computer chip design, this eventually causes the dollars in your checking or savings account to have a greater real value in the quality of computer those dollars can purchase. This is one of a multitude of examples of how the efforts of other people increase your wealth.

If that same chip designer looses his job in a layoff due to a deep recession, but then gets a serious illness, his COBRA insurance will run out after 18 months, if he is even able to pay it that long. After COBRA expires...he is a person with a preexisting condition, and no means to pay for his needed health care unless he can find another job with good insurance.

In spite of the fact that he already contributed to the wealth of everyone in society.

Workers in lower wage jobs also contribute to building everyone's wealth. They help create goods and services, such as preparing the food which facilitates other workers' labor. Their work enables our dollars to buy more in real terms.


Therefore, the moral basis for refusing to help subsidize the cost of health insurance on principle is...questionable.

If someone gives you $100 as a gift, and later desperately needs $20 and you refuse to give it, well...that kind of ethics (or lack thereof) would lead to having few friends and a miserable life.

...

So the question of whether we should cooperate to mutually insure each other, everyone in the nation, is a profound social question.

It is the ultimate social question.

It should not surprise us that there is much strong feeling on this question.

We have agreed to defend each other, everyone, against foreign invasion. We have agreed to work together as a nation and as cities and states to defend against petty thieves and robbery and fraud and other violations of property and person. Not everyone, not 100% of the citizens of the United States would like to have our current style of mutual defense -- a multi-hundreds-of-billions-of-dollar Defense Department -- even though defense is one of the most basic responsibilities of government. Some libertarians, for instance, even advocate private armies, an idea that leads at times to serious problems in the real world where it is in effect.

We agree as a nation to require everyone with income participate in paying for mutual defense.

We agree that everyone driving a car should buy insurance to pay for the damage they may very well cause in an accident some day.

We agree, as a group, a nation, on many things that not all individuals agree to.

The Constitution specifically limits the imposition on the rights of in the individual, but it does not in an unlimited way grant the individual rights at the expense of the rest of the nation.

Wealth created under the umbrella of protections of our laws, courts, police and national defense is compelled to help pay for those same public services that enabled its accumulation.

While some would like to dissolve the state, areas of the world in which the state does not function, such as Somalia, suggest the quality of life without a functioning state is quite low, quite dangerous, in spite of private defense forces under private control (aka warlords).

...

We have heard the word "socialism" used to refer to mutual health insurance of a nationally inclusive character (with subsidies for lower income people), even when it would still include a great deal of choice such as levels of coverage, choice of insurer, and networks.

At first, the use of the word "socialism" for this subsidy seems rather overblown, like calling a cat an elephant, or even calling an individual cat a vast ecological area like The Serengeti Plain.

But there is a "socialism," in a vague sense, at issue. (Forgive me for acceding to this new usage for this old word, which has previously always meant the wholesale nationalization of most of an economy or most of its main industries. But the politically-driven redefinition of "socialism" away from the longtime meaning of the word is already an accomplished fact, unfortunately.)

On one hand, there is the "socialism" of being bound together in a group with the whole nation, even when you don't want to participate.

While I can point out this kind of "socialism" has always been with us -- consider national defense, where everyone gets protected, but the cost is borne according to income -- there is a more abstract definition of "socialism" I think it will be enlightening to consider.

...

Let me illustrate by bringing in the gist of another post I've been working on about a new insight on "What is Health Insurance" I mentioned in Coming Topics. I'll just incorporate that post into this one.

Consider this system:

A) From each according to their risk-class-grouping and their chosen value to protect, to each according to their defined payout in time of need.

now...consider this system (some will recognize the phrasing):

B) From each according to their ability, to each according to their need.

...

Many will recognize A as insurance, and B as one definition of socialism. But, putting them near each other, an interesting quality jumps out at us.

That's right, insurance itself, fundamentally, is a voluntary form of contractual socialism.

It's a pooling together, as a group, of resources from everyone, in order to help any member of the group in time of need, according to need.

Some of those who are more ideological may wish to try to separate A and B more sharply, and make them seem very dissimilar.

Consider these ways one might try to make A seem unlike B:

1) In system A, individuals pay according to their chosen protection conditions, and according to their personal risk grouping, and also choose their payout levels, and thus influence their own costs.

2) Membership in system A is voluntary, whereas membership in system B in other nations in the world many times has been coerced.

Point #2 is answered though by the fact that a mandate (required coverage) is necessary if preexisting conditions are covered, and insurance issue guaranteed. In other words, for health insurance, A is like B in regards to choice about participation. If preexisting conditions can be excluded, then you cannot even have the needed health insurance unless you've already locked it in from earlier by joining and paying. It's an all-or-nothing thing, by nature. You don't have a choice about whether to participate, either way, whether preexisting conditions are excluded or not. Lack of broad, universal coverage leads to a downhill slope effect on insurance that in turn endangers everyone eventually. We currently see far less of this consequence than we would see without the powerful reality of Medicare. Medicare is of course a universal insurance that does not exclude preexisting conditions, and...we all pay for it....see? Without a universal coverage, you yourself, no matter how good your current insurance or even if you have considerable savings, would be only a layoff and/or a preexisting condition away from non-insurance and eventual health costs bankruptcy. Only Medicare saves millions of older Americans from exactly that inevitable, logical outcome.

Point #1 seems more substantial, and seems to separate A and B fundamentally.

But does it?

...

In health insurance, the chosen payout level isn't so arbitrary as in most types of insurance.

While you could live with a significant dent in your car, forgo "comprehensive" auto insurance, and think nothing of it, each and every person would find it difficult, impossible really, to live with a significant spreading infection or aggressive cancer.

The human body is not like an auto in certain crucial ways. There are many "downhill slope" conditions for the human body, where lack of treatment usually means death. A car might smoke for years, being driven occasionally. A human body must be inhabited, and a progressive condition cannot lead to the option to simply buy a new model.

We cannot live with many medical conditions, and those tend to be precisely things that cost a great deal to treat, and thus require health insurance to treat.

So what health insurance covers, or not, is not so arbitrary -- many coverage benefits are not a matter of individually different tastes, unlike the benefits choices in other types of insurance, but instead are necessities where the choice is to treat the condition or die.

Therefore the "payout levels" in system A also are not truly arbitrary. Instead, they amount to a list of "essential" benefits, on top of which some optional benefits can be added. But a significant list of essential benefits are not optional if the health insurance is to be effective.

So the "chosen value to protect" is in fact, most often, life itself. Not a very mutable value. Not flexible in regard to covered benefits.

Let's fully reflect this reality in system A in the case of Health Insurance:

A) From each according to their risk-class-grouping, to each according to their needs (essential benefits) when needed.

Already, system A, for the case of Health Insurance, is looking much closer to system B.

Next, consider the "risk class grouping." This is the "risk pool" for insurance. Just as risky drivers typically pay more for auto insurance, people with health risks typically pay more for private health insurance.

Some health risks are avoidable of course, and some are not. Some risks are hard to assign to these categories of avoidable or unavoidable, such as living in a city with pollution. Pollutants impose health costs such as asthma, some cancers, and more.

Ideally, the total health costs caused by pollutants in the air and water would be paid by those causing the pollution. That is, we would fully end pollution free-rider costs by assigning those costs back to the pollution emitters in full.

In general, it is a good idea to connect the costs to those that cause the costs. We could as a society require as many individuals and companies as possible who impose health costs upon others to pay the full costs they create. That's fair and right. Activities such as manufacturing that emits toxins that impose health costs then would become re-priced in their markets to reflect their true full costs, instead of being subsidized by everyone else through taxes and undifferentiated insurance.

Many health costs are caused by individuals through their personal choices, such as smoking.

I think these costs, to the extent they can be identified, should indeed be fully repatriated. In practice, cigarette taxes are a good method of doing this for second-hand smoke effects, and insurance premiums are a good method for first-hand smoke effects. But since insurance premiums for lower-income individuals will likely be subsidized, it makes sense for cigarette taxes to include that amount needed to pay the share of health subsidy costs created by smoking for lower-income individuals (if that tax doesn't already). In this way most of the costs due to smoking would be paid for by smokers. That's fair.

As you can see, I am recommending people pay their own way to the full extent possible.

But...it is not possible for some to pay 100% of the cost of American-quality health insurance, even if they work full time. Insurance costs for even the minimum set of essential benefits will be unaffordable for some people.

So, should an older, low-income person who has higher health costs on average due to age have their health insurance costs subsidized?

In the proposed health insurance reform, class grouping by age is maintained at least partially (for instance, in the Senate Finance Committee the current proposal (9/23) allows premium costs to be up to 5 times higher for older policy holders versus the young).

Since age-groupings are maintained, with premiums increasing with age, then system A (newly reformed health insurance) would not perfectly equal B (socialism) in the proposed health insurance reform.

But one effect of proposed reforms would nevertheless be that within a class-grouping (by age) there would effectively be subsidies from those that can afford to pay more to those that can't afford the minimal level of health insurance.

One of the most obvious points then is that if there is to be a subsidy, that it not pay for non-essential benefits. The proposed health care reform follows this principle, and focuses on essential benefits.

So, finally we are left with the question: should those who are most able to pay more help to subsidize the cost of health insurance within their class-groupings for those not able to meet these minimum policy costs for essential (life-saving) benefits?

I say yes. Why? Because of the fact that the greater wealth and income some have is made possible by and is increased in both quantity and real value exactly by the efforts of all working people, including those unable to pay the full cost of insurance without help.

...

This leaves only the practical, pragmatic questions of health care cost itself, and of health care inflation.

Those are questions on which this blog has focused extensively (click here).

-- Hal Horvath

(Update) Mayo Likes a "Public Option"...But America Is Beginning to Want Something Real (65% Favor...)

Update: Mayo's own Health Policy Blog lays out the Mayo Position. See link at the end of this post.
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Searching for video of Senators talking about the markup of the Baucus bill today, I blundered into this, and don't have another source yet, but...

Senator Ron Wyden of Oregon at about 11:30 in the video: "...The Mayo Clinic, for example, said it was okay if you did the Public Option with an approach like members of Congress want...."

Now, I've always considered the "Public Option" (as normally meant, a competing, federally-run insurance plan as an option for insurance shoppers) to be a way to accelerate reform. When a big insurer, federal or private, has more incentive to find ways to innovate such as incrementally beginning a pay-for-outcome-over-time system, then needed change will happen sooner. Note that a public plan (aka public option) should be on a level playing field with private plans, and Senators say such a plan would be -- that is, it gets no subsidy at all and therefore must support itself only from premiums. The low-income subsidies to people to help them purchase insurance can be used to purchase either the public plan or a private plan. So the playing field really would be level.

But...it is not perfectly clear whether the "public option" Mayo is said to support is actually a government-run insurance plan (aka "public plan") or is instead simply a government-run exchange with private plans alone where plan evaluation tools help policy buyers choose between clear options, and none of the plans are tricky plans with clever loopholes and traps meant to fool policyholders. This kind of friendly exchange with reliable plans would be like the Federal Employees Health Benefits Program (explained here by NPR.)

Senator Wyden (who by the way is also offering a great amendment to open the new exchanges to everyone) appears at 10 minutes into the video:

Visit msnbc.com for Breaking News, World News, and News about the Economy

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Here's an NPR interview with Dr. Cortese on 9/22. He likes the idea of a "public plan" being like the government-run Federal Employees Health Benefit Program (FEHBP).


Until I read or hear otherwise, so far as I know, the "public option" Mayo supports is a friendly exchange (marketplace) like the FEHBP. (Update: See this link for Mayo's own statement on this.)

Mayo is concerned that there not be imposed price controls. That is, price cuts that are across the board, indiscriminate to the relative value of one treatment over another. As some types of treatment offer much greater value (better quality for their price), cutting reimbursement indiscriminately is un-marketlike, that is such indiscriminate pricing would sometimes throw the baby out with the bathwater.

All this said, few in Washington, or that have a household income above $90K/year may realize that there is a public groundswell just beginning (the real thing, not the fringe "teabagger" type)...because the "middle class squeeze" has been greatly intensified by rising health insurance costs, and the greater majority of Americans simply will begin to demand that there be some kind of genuine cost control on health care, of some sort or another.

If 5-10 million Americans are tea-baggers and their sympathizers, that's one thing.

If 50-60 million Americans have distrusted Government in general, that's another.

If there have been 80-120 million Americans that wanted Single Payer system, that's another.

But...

But if 140-180 million Americans start to become more restless about cost-of-living squeezes and want there to be a profound change in health costs, and start to demand some kind of major government intervention, that's another thing altogether. An animal of a whole different size.

Washington has limited time to be ineffective I think

We've lived in a bubble in a sense, since World War II. We've been a privileged nation. Now that certain of our advantages have been leveled with the rest of the world, Americans are entering into another kind of universe than the one they are accustomed to.

The old political games that the parties have played are coming to an end. A forced end.

We will become more like the rest of the world, by necessity. Or we will live in the fading glow of past glory days, looking backward in stagnation.

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Update 9-25:

A CBS/NYTimes poll finds 65% of Americans favor the Public Option (!):

...the Times/CBS poll asked: Would you favor or oppose the government offering everyone a government-administered health insurance plan — something like the Medicare coverage that people 65 and older get — that would compete with private insurance plans? The poll question was phrased generally so that it could be asked in repeated surveys over time regardless of any specific legislative proposal.
With the question asked that way, most respondents supported the idea, with 65 percent in favor, 26 percent opposed and 9 percent offering no position.

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Update 9-27:

Mayo lays out its position more clearly. Essentially the position I've surmised above. Granted this is Mayo's position, and should be accorded much weight....

But the best of good alternatives for the insurance part of a "public plan" (after we have the even more important, invaluable insurance exchanges, and these made open to everyone, as Wyden proposes) is a true Public Option (a government-owned insurance plan supported by premiums from policy holders alone (no other subsidies), that competes with private plans on a level playing field where the subsidies for low-income insurance buyers can be used to purchase any plan, public or private.) And, just as Mayo prefers, that this Public Plan not use a "price control" approach, but instead solicit bids as I suggest and institute paying for value as I suggest here in my description of the best way to run any insurance plan, public or private.

We are getting there. We are so close now. We have exchanges proposed. Wyden suggests we make them open to everyone, just exactly as they should be. And, finally, the most seemingly challenging part of reform -- paying for value (paying for outcome) -- itself can be done incrementally, in a way that everyone can embrace....

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Update 10-3:

Mayo lays out its version of good health care reform.

The Chinese Side of the Credit Bubble

This video offers an eyes-on view of the real picture of the other side of the American credit bubble deflation. China is now trying a credit-boom domestically (a bank-driven building boom), as stimulus, which has an indeterminate economic outcome -- a roll of the dice on the global economy. But I think the primary Chinese stimulus effort should have been focused on powerful social safety-net stimulus and other incentives that would more dramatically increase paltry Chinese consumer demand to help drive its internal economy (see link just below.) The Sino-American economic relationship is representative of several aspects of the global economy I've been reading and thinking about for quite a while now. What could save China is one piece, but there are more.

(Update) Wyden Answers Paul Krugman, OR Let The People In

Senator Ron Wyden of Oregon proposes in a NYTimes op-ed that the proposed new health insurance exchanges be open to all comers instead of being restricted to only a small subset of Americans.

The effect of having more people in an exchange is that an insurer that offers a better value policy would win more new customers than they would if far fewer people were allowed into the exchange (as currently proposed.) Having more people in an exchange would drive down costs for health care across the spectrum compared to the outcome without enough people in an exchange, and help decrease health care cost inflation.

But previous to these proposed reforms Paul Krugman pointed out, for good reasons, that health care can't operate well as a simple free market. For instance, if one insurance company avoids insuring an individual more likely to have expensive claims, then its competitor that takes on people with less discrimination has higher costs, and thus must charge higher premiums, driving its own customers away except for the sickest. Because of this effect, adverse selection, no private company wants to insure anyone that really needs insurance badly. Thus the market fails to provide meaningful insurance -- insurance that works.

Here's the reason Paul Krugman's previous generalization that health insurance can't work well in a simple free market would not apply to these new exchanges as proposed: First, according to the proposed reform, acceptance (policy issue to all that apply) is required, preexisting exclusions are eliminated, the dropping of sick policy holders is eliminated, and provisions would be made for risk pool sharing (when one insurer has proportionally more sick people, it gets help from a risk pool all insurers pay into.) Thus adverse selection disappears. Second, and just as important, this proposed reform would result in a market with a special kind of disclosure. As proposed, in the exchanges, health care policies would be offered with defined packages of benefits -- "bronze," "silver," etc. This would actually allow insurance buyers to compare policies much easier than before. Insurers would have to compete on a more clear playing field -- price, service, and networks, all of which are far easier to evaluate (internet sites already are available that compare doctors and hospitals for instance.)

This is a very good idea, and if combined with other good ideas such as these, many but not all of which are now in proposed legislation, we'd have very beneficial structural reform, much better than most people imagine possible.

The NYTimes mentions Wyden tries to sympathize with a seeming political problem Obama might face:

I understand the president’s fear of overreaching. Past reform efforts have failed in part because of the public’s distaste for government-imposed change. But walling off most of the health care system from choice and competition could create greater problems — enough to doom health care reform.

Democrats may miss an easy point here. Allowing anyone to purchase health insurance (private, public, co-op, all types) on the coming exchanges would be less government imposition on the market. Restricting who can buy, and excluding many people, constitutes more imposition, more control.

Wyden is proposing a liberalization -- less control, more personal choice and freedom -- in a way that would pay off quite well.

There is no reason any Senator should oppose this idea, except if they are truly in the pocket of lobbyists.

This opening of the exchange needn't be sold as anything other than what it is -- a market with disclosure and a shared risk pool (or reinsurance) added.

The exchanges themselves are exactly like a modern American food marketplace with required food labeling and safety laws -- the ingredients being sold must be disclosed fully on the package labeling, poison can't be sold as food, the nutritional values must be disclosed, etc. In general, this is a very American market proposal.

The Return of Yellow Journalism

Just a few quick thoughts late in the evening.

In the 1970s, American History texts included a brief section on the "yellow journalism" of the nineteenth century. I wonder what today's textbooks have.

Tonight, I thought on how we have yellow journalism once again.

I've thought of this a few times lately, but tonight it hit me that sensationalism is really the norm, the way things naturally would be in most times and places.

The exceptional period was a time those of us over 35 knew when mainstream news was studied, careful. Then, yellow journalism was the fringe, and not more than a small fringe. Unlike today. But not so long ago.

I remember when I was exhaustively reading The Economist, The New York Times, The Atlantic, etc., in my early 20s, that there were plenty of slow stories, that when I needed a break, something more lively and entertaining, I read novels.

I think much of America, even if it got its fill of thinking with only the Evening News, looked to fiction for entertainment.

But that isn't necessary now for many people.

Even when I perused the local papers of many cities I visited in my 20s, I saw little or no sensationalism. In these papers I found more parochial, pedestrian concerns, yes, some lack of perspective, narrowness, etc., but not suggestive headlines that played with paranoid ideas such as "government takeover" to capture attention.

Sure, there were the standard American fringe elements worried about "socialism"/"government takeover"/etc., but they had societies or newsletters or odd books. They didn't color the headlines of any mainstream news organization.

There were mainstream strains of thought worried about government expansion, poverty, war, etc., but they were expressed in what was clearly commentary or a viewpoint, or a book. William F. Buckley, Jr., whom I read around age 12, appeared as commentary, and seemed reasoned...or at least rational.

In those days, the 70s through the 90s, the days without much yellow journalism, I think it was economically viable to focus news reporting on a sensible, careful view.

Making a mistake was actually a big deal, then.

If a mainstream news organization had made a major mistake about any report that had political consequences, it would have been a very big deal, and resulted in a major examination. In fact, such public examinations happened.

...

In the days of nineteenth century America, when publishing was cheap, it was economically inevitable to have yellow journalism I think. You could offer sensational, attention grabbing stuff, with little real effort -- just by applying the same ideas, a single broad narrative, over and over and over.

Just apply the same ideas over and over, no matter what's going on the world.

Use the same narrative, regardless of whether the new characters fit the molds at all.

Force them into the old molds and spin the same old story, over and over.

This style flourishes today.

This lack of investigation lowers costs. Barriers to entry are low.

....

Is cost the whole story? It is much of the story. Advertising, revenue, is the rest.

Sure, there were 1980s era yellow journals, such as the National Enquirer, but most people choose to buy and peruse the local city newspaper. The TV networks were major capital investments, gigantic, with limited competition.

I think that uncrowded field is one key.

For a long while the conditions were of this set:

a) Publishing and broadcasting were moderately expensive
b) Services like AP and syndication allowed local papers to print many national stories without the resources to do the first-hand work
c) Advertisers wished to reach a wide audience, and in most cities only the main local paper could reach the broad audience, so most of the money flowed to a main paper in most cities
d) Local competition was quite low in most places, in part due to overhead expenses

In short, yellow journalism in the 1980s had a limited economic niche where it could survive due to high costs and advertising concentration. Just a few magazines like National Enquirer were enough to fill much of that niche.

The mainstream networks were a competition among giants to be the most insightful yet comforting.

But the broad background conditions have changed.

a) Publishing and distributing is now quite cheap again -- witness online-only papers/sites
b) Advertising is dispersed
c) Competition for readers/viewers is intense

Once again, sensationalism can make ends meet, or even be profitable.

That's why it will be no real surprise to me if tomorrow I learn the President is purported to be an actual extraterrestrial, that your family are mobsters, everything about the sex life of another governor, that the administration is going to unleash terrorists in our backyards or local parks, that communists control the government, that a cabal runs the world economy, that secret plans are in motion...

How to Lower the Immediate Cost of Reform, and...Republicans "trapped in a cul-de-sac of their own making"

(Note: this is not the coming-topic post I mentioned a couple of days back, but this is a post on exactly where Congress should go right now.)
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Republicans have driven themselves into a cul de sac. They agree on the basics of insurance reform, and they should.

Consider the people they represent (Bloomberg poll):

Americans overwhelmingly approve of President Barack Obama’s goals for remaking the U.S. health- care system even as they express skepticism he can achieve them, according to a Bloomberg News poll.
More than 8 out of 10 people support covering the uninsured, curbing costs, creating an insurance-purchasing exchange, and preventing insurers from dropping coverage or refusing to accept people with preexisting medical conditions. Majorities say employers should have to offer insurance and individuals should be required to have coverage.

NPR offers a good summary of the political situation in health care reform.

In brief, if you prevent insurance companies from excluding preexisting conditions without also creating a requirement for individuals to have health insurance (a mandate), then you have an overwhelming problem: people could simply wait until they get sick and then buy insurance, only when their claims would be high. This, in turn, would cause the premiums to rise sharply, which in turn would cause those who are not sick to drop coverage and wait until they get sick, etc.

Therefore it is necessary to require everyone to buy insurance -- a mandate. Because otherwise health insurance doesn't work.

Unlike life insurance or home insurance or auto insurance, an illness (medical loss) doesn't always happen in seconds or minutes, and the expenses are not all incurred within a day. They continue.

There's no way around the conclusion that an individual mandate is a necessity if you outlaw the exclusion of preexisting conditions.

The whole purpose of health care is to treat the sick, not to keep insurers profits higher or avoid costs by refusing the sick.

And health care costs require insurance -- very few can afford to pay for good health care for non-routine illness or accidents out of pocket.

Very few could afford, say, $50,000 or $140,000 out of pocket.

Thus health insurance is a reasonable idea, a good idea, but...it cannot work for sick people without laws. For instance, at an absolute minimum, laws about enforcement of contract -- that the insurer cannot drop coverage on whatever pretext when a person has an expensive condition.

Once we outlaw excluding preexisting conditions -- in other words we require insurers pay to care for sick people -- then individual mandates become necessary.

But the cost of comprehensive health insurance today with reasonable deductibles (that a household could actually pay off in a year) is higher than lower income households are able to pay.

Thus the individual mandate requires subsidies to allow lower-income households to be able to afford to purchase the required insurance.

As Republicans generally are opposed to higher taxes and/or deficit spending, they end up in a trap -- a political cul-de-sac of their own making.

...

I and others have proposed specific ideas to make health insurance less expensive, both in terms of holding down long term health care inflation (read this,) and in terms of immediate cost by carefully outlining what is a reasonable "basic" required health insurance policy that would be mandated for young, currently healthy people as their minimum required insurance.

These proposals are not partisan in any fashion. It does not make sense to think that a 25-year old should be required by law to have a health insurance policy that costs $6,000 or $7,000/year regardless of their own preferences.

Most 25-yr-olds would prefer a policy that provides for routine checkups and some basic coverage -- their minimum requirement could be a policy that would provide inexpensive clinic care for occasional need such as infections, and of course coverage for the unlikely expensive condition such as cancer or an accident.

Such coverage for a 25-yr-old need not cost $7,000/yr, nor should a 25-yr-old be required by law to help subsidize in a large way the average health care costs of a 50-yr old. Proposals to allow significant variations in policy cost by age are entirely appropriate. Older people have on average more earning power, and higher health care expenses.

The mandated minimum "basic" policy should truly be basic. It should be no-frills health care.

Anyone could choose, as in other marketplaces, whether to go economy-class or to go first-class -- whether to get their routine and occasional care in a low-cost clinic or in an upscale doctor's office, according to the policy they choose.

If such no-frills policies were available, most lower-income households would choose such a basic policy, which would neither be especially generous nor would it contain tricky loopholes or caps meant to fool the policy holder or avoid paying for reasonable care. Such basic policies would be considerably less expensive.

That lower cost would in turn reduce the need for and total cost of subsidies a great deal.

The most common failure we see in the thinking in Congress, year in and year out, is an appreciation of scale and cost that corresponds to the actual means of the average American household. Congress should not mandate expensive health insurance. It should mandate very basic health insurance that is sound and reliable.

What is an example of "basic" insurance? In the past, some instances of less expensive care got a bad reputation. Consider the old-style, unpopular HMOs (Health Maintenance Organizations), or "managed care", which were carefully structured to reduce expenses and costs. HMOs were popular initially due to lower cost, but became less popular since they offered less choice and stories spread of long waits and denied care, creating an impression of not enough quality. But, some HMOs provided and provide health outcomes of quality as good as that of more expensive plans.

But a better version of managed care is offered by isolated providers here and there -- coordinated or cooperative or "integrated" care. This managed care actually offers superior quality at lower costs.

Consider Mayo Clinic for instance. Mayo is one of the best providers in the world, and...Mayo costs less than most of its competitors. Superior systems like cooperative care spread slowly since the structure of health care payment does not reward their cost-effective quality. When a health care provider heals someone faster with less proceedures, they get less compensation under most of American health care delivery structures. (See link below for a better way to pay for care. )

There are yet more ways to cut costs while maintaining quality in a basic plan. A plan could specifically require doctors follow "best practices," make extensive use of nurse practitioners in clinics, and other cost saving features. When value (quality/price) itself becomes a goal, organizations are able to respond and create new innovations and efficiencies. They only need a reimbursement structure that encourages quality, value, and effectiveness.

Ambrose Evans-Pritchard Warns of Credit Deflation...

Ambrose Evans-Pritchard warns of deflation:

Professor Tim Congdon from International Monetary Research said US bank loans have fallen at an annual pace of almost 14pc in the three months to August (from $7,147bn to $6,886bn).

"There has been nothing like this in the USA since the 1930s," he said. "The rapid destruction of money balances is madness."

The M3 "broad" money supply, watched as an early warning signal for the economy a year or so later, has been falling at a 5pc annual rate.

Similar concerns have been raised by David Rosenberg, chief strategist at Gluskin Sheff, who said that over the four weeks up to August 24, bank credit shrank at an "epic" 9pc annual pace, the M2 money supply shrank at 12.2pc and M1 shrank at 6.5pc.

"For the first time in the post-WW2 [Second World War] era, we have deflation in credit, wages and rents...

more here.

I suspect the cause of credit deflation is not choice on the part of banks, so much as the desire of Americans in their peak earning years (40-70) to put away more savings against retirement, since the stock market and home values made clear they had less real savings than they believed. While banks pulling back credit here and there matters some, the greater force is the overall contraction of demand -- people have less desire to spend and rack up debt.

Coming Topics

I'm thinking on What is Insurance. No, it's not about the worthwhile insight which broadly ranging readers may have already seen -- that 'insurance' normally covers large expenses, and one problem with health insurance is that it is used to cover routine expenses; nor is the subject the all-you-can-eat-buffet syndrome health insurance provokes. Yes, that's important, but I have something even more interesting on the burner about the nature of health insurance....

I'm also thinking on political narratives -- just how far from the ground of reality can political narratives float? A ways, obviously, but there are some interesting insights to be had now....

There are some other thoughts, which belong in the book I'm editing now....but I have the feeling there are several more topics floating up that don't really fit in that book and which I'd like to present on the blog.

Obama Delivers Clear, Convincing Speech -- Outlines Sensible Goals

CSpan video here.
New York Times video here.

"Our predecessors understood that government could not, and should not, solve every problem. They understood that there are instances when the gains in security from government action are not worth the added constraints on our freedom. But they also understood that the danger of too much government is matched by the perils of too little..."

Text of speech from NYTimes here.

Outline of Obama's reform goals (Congress is vested with the power to create the health care reform law.)

...

Let me point out that no plan, nor any principle nor system will quickly fix all the difficulties in Health Care (though paying for outcomes would set us on a much better path).

For instance, one serious problem is that, unlike houses or stocks, the extra inflation in health care prices during the Credit Bubble doesn't quickly correct (disinflate) as the Credit Bubble deflates, due to insurance as the means of payment. I'm saying the degree of extra health care inflation during the Credit Bubble was large, not small. The combination of how health care is paid for along with easy credit together pushed health care inflation, leading to today's overwhelming prices (while some providers offer relative bargains, many get very high prices.)

This is no small problem. Without Government interference there would be massive, widespread bankruptcies of hospitals, doctors offices, and of course of many, many individual patients.

By intervening, the Government will reduce this Credit Bubble fallout, but will also then appear to be partly responsible for the difficulties that were always coming.

At worst, we could have Government as Bagholder.

Since few people study economics, a mass of Americans could blame Government for the effects of the collapsing Credit Bubble in Health Care, as they do for the other credit-collapse effects such as the costly effort to avert a generalized bank run in 2008, and the efforts to help the automakers.

While I'd guess a modest majority of Americans can genuinely understand the idea that house prices became inflated due to easy credit, and are now correcting back to more normal prices... many other Americans simply will never fully understand this as it does require at least some mathematical thinking.

Therefore, it would be helpful for the administration to point out explicitly that a significant part of health care inflation occurred because of the availability of very easy credit, so that current health care prices are higher than they would have been without easy credit.

This would increase understanding among 30-60% of Americans of just exactly where we are in health care -- at the end of a credit bubble of higher prices.

But...some sizable minority in the country will not truly understand anything involving such concepts as inflation through easy consumer credit.

Reforms and a very low rate of health care inflation for years could create a transistion back to a more normal price level (vs. incomes), as the current capacity of the health care system treats more patients, but this remains to be seen. Will reform encourage providers to treat more patients? (Note I say more patients, not more per patient.) It could.

I will write more on this and other fundamental issues that seem to be largely absent in the popular dialogue.

Death Panels -- Considering and Answering Palin's Real Fears

Sarah Palin just expounded further on her fears about "death panels." Let me first show her letter (below), then I will recommend a specific way to respond to the main fear Palin pinpoints.

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Senator Reverend Ruben Diaz Chair, New York Senate Aging Committee Legislative Office Building Room 307 Albany, NY 12247
September 8, 2009

RE: H.R. 3200: America's Affordable Health Choices Act of 2009 and Its Impact on Senior Citizens

Dear Senator Diaz,

Thank you for asking me to participate in the New York State Senate Aging Committee's hearing regarding H.R. 3200, "America's Affordable Health Choices Act of 2009." You and I share a commitment to ensuring that our health care system is not "reformed" at the expense of America's senior citizens.

I have been vocal in my opposition to Section 1233 of H.R.3200, entitled "Advance Care Planning Consultation."[1] Proponents of the bill have described this section as an entirely voluntary provision that simply increases the information offered to Medicare recipients. That is misleading. The issue is the context in which that information is provided and the coercive effect these consultations will have in that context.

Section 1233 authorizes advanced care planning consultations for senior citizens on Medicare every five years, and more often "if there is a significant change in the health condition of the individual ... or upon admission to a skilled nursing facility, a long-term care facility... or a hospice program."[2] During those consultations, practitioners are to explain "the continuum of end-of-life services and supports available, including palliative care and hospice," and the government benefits available to pay for such services.[3]

To understand this provision fully, it must be read in context. These consultations are authorized whenever a Medicare recipient's health changes significantly or when they enter a nursing home, and they are part of a bill whose stated purpose is "to reduce the growth in health care spending."[4] Is it any wonder that senior citizens might view such consultations as attempts to convince them to help reduce health care costs by accepting minimal end-of-life care? As one commentator has noted, Section 1233 "addresses compassionate goals in disconcerting proximity to fiscal ones.... If it's all about obviating suffering, emotional or physical, what's it doing in a measure to 'bend the curve' on health-care costs?"[5]

As you stated in your letter to Congressman Henry Waxman of California:
Section 1233 of House Resolution 3200 puts our senior citizens on a slippery slope and may diminish respect for the inherent dignity of each of their lives.... It is egregious to consider that any senior citizen ... should be placed in a situation where he or she would feel pressured to save the government money by dying a little sooner than he or she otherwise would, be required to be counseled about the supposed benefits of killing oneself, or be encouraged to sign any end of life directives that they would not otherwise sign.[6]

It is unclear whether section 1233 or a provision like it will remain part of any final health care bill. Regardless of its fate, the larger issue of rationed health care remains.
A great deal of attention was given to my use of the phrase "death panel" in discussing such rationing.[7] Despite repeated attempts by many in the media to dismiss this phrase as a "myth", its accuracy has been vindicated. In the face of a nationwide public outcry, the Senate Finance Committee agreed to "drop end-of-life provisions from consideration entirely because of the way they could be misinterpreted and implemented incorrectly."[8] Jim Towey, the former head of the White House Office of Faith-Based Initiatives, then called attention to what's already occurring at the Department of Veteran's Affairs, where "government bureaucrats are greasing the slippery slope that can start with cost containment but quickly become a systematic denial of care."[9] Even Washington Post columnist Eugene Robinson, a strong supporter of President Obama, agreed that "if the government says it has to control health care costs and then offers to pay doctors to give advice about hospice care, citizens are not delusional to conclude that the goal is to reduce end-of-life spending."[10] And of course President Obama has not backed away from his support for the creation of an unelected, largely unaccountable Independent Medicare Advisory Council to help control Medicare costs; he had previously suggested that such a group should guide decisions regarding "that huge driver of cost . . . the chronically ill and those toward the end of their lives...."[11]

The fact is that any group of government bureaucrats that makes decisions affecting life or death is essentially a "death panel." The work of Dr. Ezekiel Emanuel, President Obama's health policy advisor and the brother of his chief of staff, is particularly disturbing on this score. Dr. Emanuel has written extensively on the topic of rationed health care, describing a "Complete Lives System" for allotting medical care based on "a priority curve on which individuals aged between roughly 15 and 40 years get the most chance, whereas the youngest and oldest people get chances that are attenuated."[12]

He also has written that some medical services should not be guaranteed to those "who are irreversibly prevented from being or becoming participating citizens.... An obvious example is not guaranteeing health services to patients with dementia."[13]

Such ideas are shocking, but they could ultimately be used by government bureaucrats to help determine the treatment of our loved ones. We must ensure that human dignity remains at the center of any proposed health care reform. Real health care reform would also follow free market principles, including the encouragement of health savings accounts; would remove the barriers to purchasing health insurance across state lines; and would include tort reform so as to potentially save billions each year in wasteful spending connected to the filing of frivolous lawsuits. H.R. 3200 is not the reform we are looking for.

Thank you for calling attention to this important matter. I look forward to working with you again to ensure that we keep the dignity of our senior citizens foremost in any health care discussion.

Sincerely,

Governor Sarah Palin

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I just had a further insight on exactly what Palin and many people actually do fear when they speak of "death panels."

A real, actual fear.

First, let me point out I myself will likely take advantage eventually of any possible consultations about what kinds of treatment and care I could receive in old age in varied situations, so as to lay out under what conditions I would like what kind of care, and under what conditions I would not want certain kinds of treatments.

But part of the reason such a consultation with my doctor will someday be valuable to me personally is that I do not have an overwhelming fear of death. Instead, I am more afraid of having a lingering, uncomfortable hospital intervention where the outcome of dying is clearly inevitable.

Like Senator Kennedy recently, I'd rather be sailing, sitting at home, eating ice cream, and spending quality time with friends and family as the end approaches.

Sure I have some ordinary fear of dying, but not a strong, active fear that takes over and dominates when I think on dying. My life experiences have moved me past that.

So I actually see that kind of consultation as a positive -- it will give me more control of my own going, in my own way, according to what I like and value....

But...if I did have a strong, powerful fear of death -- which is a very commonplace human condition -- I'd have an entirely different feeling about such a consultation.

I'd dread and fear even the consultation, and it would discomfort me greatly to contemplate even the consultation.

I'd feel that even the suggestion of such a consultation was ominous and threatening.

Then I'd likely feel that it would be wrong, horrible, to subject people to such a consultation if they were not ready for it.

So I'd want such consultations to be entirely voluntary.

Just like they were written in the proposed legislation -- voluntary.

But there's more to this....

I think I can vaguely appreciate Palin's own feeling that some people would feel pressured even by talking with their own doctor -- as if just the options where they could opt for less heroic care would create a kind of social pressure to choose other than what they would really want.

Now...to feel that way myself -- pressured -- I'd have to feel less autonomous, less able to form my own opinions and know what I think and feel independently of others.

But there are people who feel swayed and pressured by others' opinions quite easily I understand.

So I'm guessing at how they would feel....

They might feel pressured enough just by a suggestion alone to actually ignore their own preferences, in a instance where a doctor communicates incompetently or oddly enough to not phrase options in a neutral way.

Therefore, it would make sense for any such consultation initiation to also be voluntary -- only initiated by the patient themselves, and not by suggestion of their doctor. This would avoid some instances where an individual that has little sense of self-determination could end up choosing wrongly for themselves.

Though I expect this was indeed the original intent behind the proposal -- that such consultations be genuinely 100% voluntary in *every* sense -- it could be made explicitly clear in any such proposal that only a patient could initiate even the option of having such a consultation.

There could be no phone call or letter from any provider or insurer to ask whether the patient wanted such a consultation.

Therefore, by that standard, no entity other than the patient, or their family or friends or social groups, or articles they read, could suggest having such a consultation.

Each person wanting such a consultation would have to come upon even the information about the availability of such a consultation as an Medicare or insurance benefit from independent sources other than their insurer or health care provider.

This would adequately address the fear I believe. To address Palin's fears adequately requires that the option for such a consultation never be mentioned to a patient by their doctor or insurer unless the patient brings up that they want such a consultation.

Highly Recommended Town Hall

Let me recommend again this particular town hall (click here), as worth time for anyone deeply interested in the national debate in town halls. I found that most of this town hall is quite interesting, even in the quieter moments.

Palin's Death Panels Revisited

Anyone interested in how death panels got started should read this piece.

When will we take the political spin out of life and death? Maybe never.

Just Better Than Town Hall News Is...

If you are like me, you want highlights from interesting town halls, and not 15 or 38 seconds of highlights.

Mark Warner's town hall is mostly highlight. It's just more interesting than anything you'll read or see or hear in major media about town halls.

Senator Mark Warner (D-VA) spoke to constituents at a town hall meeting in Fredericksburg, VA to discuss health care reform.

Video here.

A Non-Partisan Health Reform Plan

This is not a bad plan. It would appeal across the political spectrum, if given publicity:

The plan, known as the Healthy Americans Act, would:

* guarantee private health care coverage for all Americans and allow them to choose the health insurance that is right for them;
* provide health benefits equal to those that Members of Congress now enjoy;
* modernize the employer-employee relationship regarding health care benefits making health care portable from job to job and even allow Americans to keep it between jobs;
* provide incentives for individuals and insurers to focus on prevention, wellness and disease management rewarding Americans for maintaining healthy lifestyles;
* establish tough cost containment measures that save $1.48 trillion over 10 years;
* as demonstrated by the Congressional Budget Office, the plan would pay for itself once the act is up and running by eliminating administrative costs and changing the outdated tax code that gives businesses write-offs for even the most lavish designer health plans; and
* return surpluses to the government after the first two years of implementation.

The Healthy Americans Act modernizes the employer-employee relationship...
...by putting the worker in the driver's seat. Employers can continue to provide exclusive health insurance to their employees and employees who are happy with their current health benefits can keep them. What's new is that Americans will have options. They will also have guaranteed, portable health insurance they can keep as they move from job to job. Under the Healthy Americans Act, even if an individual is laid off, leaves their job voluntarily, or develops a serious illness, he or she would continue have affordable, high quality health insurance just as good as what members of Congress have.

The Healthy Americans Act will make quality health care affordable for individuals families and employers.
All employers, along with individuals and the government, will share the responsibility of financing health care. Employers who provide employee health benefits would be required to convert their workers' health care premiums into higher wages for two years after the bill is enacted.

Employees, in turn, would be required to purchase private health coverage with their higher wages. To ensure that health care coverage is affordable, the plan would fully subsidize the premiums for those who live below the poverty line. Those people earning between 100 percent and 400 percent of the federal poverty line ($10,400 annually per person) would also receive subsidies on a sliding scale to help pay their premiums. The bill also creates a generous standard deduction to help Americans pay for health coverage regardless of whether they get coverage on their own or through their employers.

Employers who don't currently offer health benefits would have to make phased-in "Employer Shared Responsibility Payments," which would be used to provide financial assistance to individuals and families of modest income.

After two years, all employers would make "Employer Shared Responsibility Payments" to the Federal government. These payments are relative to the size of the employer and their revenues.

The Healthy Americans Act will expand Americans' health care choices, while making sign-up hassle-free.
Individuals will choose from a variety of private plans offered in their state, including any employer-based option that may be available to them. Sign-up will be as simple as checking a box on a tax form. Consumers will get help and advice on choosing the best coverage for them from state-based Health Help Agencies (HHAs) and Human Resource departments. They will provide consumers with unbiased information about competing private health plans and determine premium subsidies that will ensure every American can afford their health plan. HHAs will have lower administrative costs by coordinating payments from employers, individuals and the government.

Americans will finally have the information they need to make informed decisions about the best health coverage for them and its cost. They will be able to use their wage increase to shop around for plans that provide just the right level of coverage to match their health and financial needs. Employees who find cheaper policies that work for them will be able to pocket the difference between their salary increase and the cost of the new plan and use that money however they see fit.

The Healthy Americans Act gives every American control over their health care choices and their budgets, with a transition to the new system that will be seamless for many people. Premiums will be paid from a deduction on their paychecks just like many other deductions currently withheld. The only change many people will notice is that they can see how much their health care costs them. And any costs incurred for health care will be balanced out by the raise they get from their employer to pay for it.

The Healthy Americans Act will reform the private insurance market.
Insurance companies will no longer be allowed to "cherry pick" their customers. Under the current system, in most states, insurance companies can pick and choose which customers they sign up. They typically choose the healthy ones and send those in fragile health to government programs more fragile than they are.

Under the Healthy Americans Act, insurance companies will have to enroll every individual who signs up and insurers will be prohibited from raising prices or denying coverage if individuals are sick or are at risk of becoming sick. Previous and existing health problems, occupation, genetic information, gender and age could no longer be used to determine eligibility or the price paid for insurance. Insurance companies will be forced to compete to keep their subscribers healthy.

The Healthy Americans Act focuses on preventive care...
...and provides insurance companies with incentives to keep their subscribers healthy. Individuals would not be charged co-pays for preventive services or chronic disease management. Insurers would be able to offer discounts and other incentives based on participation in wellness programs, like nutrition counseling, tobacco cessation and exercise.

Unlike under the current system where doctors only get paid for treating patients when they are sick, primary care doctors will be reimbursed under the Healthy Americans Act for investing time in chronic disease management and prevention. And with HHAs publishing consumer-oriented information on every plan's success in prevention and disease management, insurance companies would ultimately be competing to keep Americans healthy. Because of strong Federal market reforms, insurance company profits would come from keeping their customers healthy-- instead of making profits by denying claims or limiting coverage only to the healthiest people.

The Healthy Americans Act proves that health reform can be cost-effective.
Currently, health care costs in the United States are growing at an unsustainable rate. In 2006, Americans spent more than $2.2 trillion on health care.

The Congressional Budget Office recently disproved decades of conventional wisdom that said our nation can't afford to fix health care. They conducted an analysis of the Healthy Americans Act along with the Joint Committee on Taxation that showed the Act would pay for itself once it's up and running and would return surpluses after the first two years of implementation.

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This plan would address many of the structural problems in American health care, and still allow for the possibility of private insurers finding ways to implement paying-for-outcomes (as explained on this blog), or "accountable" or "cooperative" care or "networks" -- finding ways to spread models like the Mayo Clinic -- instead of the inflationary fee-for-service model that is most commonplace.

A plan such as this one above would require a mechanism to address the situation of a seriously-ill individual trying to change to a plan that has lower out-of-pocket costs -- it must define under what conditions an ill patient can switch plans and what the rules of cost-sharing of would then be between the old and new plans in that situation of ongoing treatment. But designing such rules is only engineering, and not that complicated.

The Right Way to Structure Cash For Clunkers and Other Incentives

I should have written this post back when I first had the thought a month or two ago.

Any buyer-incentive program from the Federal Government will work much better for the market, buyers, and businesses, and for the general economy, if it attenuates gradually over time.

So for example, in the Cash for Clunkers program, the correct structure would be:

A) Begin with a more modest rebate, which would be used more slowly; and

B) Attenuate the rebate gradually.

Why attenuate gradually?

The program as structured, with a huge incentive, will pull forward in time sales that would have happened in the next year or two, and thus will rob sales from the future. But it won't last long enough on the other hand to build strong economic momentum.

Instead of this structure that fails to create real economic momentum -- we could instead accomplish actual economic stimulus with simply a better structure.

Specifically, for Cash for Clunkers, the maximum rebate should have operated as follows:

$2500 (instead of $4500), set to last until an initial $1bn is used up, and then stepping down to $1500 for an additional $1bn, and finally, to $1000 which would be set to last for a defined period of time of 3-5 months.

The effect is to stretch out the program, and sustain the increase in sales, so that economic momentum begins to build over time through secondary economic effects.

It is not too late to fix the mistaken structure of Cash for Clunkers.

The correct continuation should be to offer another $1bn in Cash for Clunkers Part II at a lower level, such as $1500, followed by a final a final level of $1000 that should last a defined time period, such as 4 months.

This could be done now.

This same principle should be used for any kind of buyer-incentive stimulus program, such as the First-Time Homebuyer Credit.

Consider this sequence: First, in 2008, was a $7500 credit which was a %0 interest, 15-yr loan, which must be paid back; Next followed a simple grant in 2009 for $8000. (Remember how the 2009 "credit" was initially proposed to be an over-the-top $15000? The proposal for a $15,000 credit showed a lack of common, middle-class sense.)

So instead of attenuation we had the opposite. If you bought or sold a home in 2008 during the first incentive program, you got cheated in a sense -- you have to pay back your credit, but you also have to help foot the tax bill for the far better "credit" in 2009 other home-buyers will receive.

If you buy or sell your home after this second program ends, you get cheated since you will help pay the taxpayer cost of the 2009 credit but receive no credit yourself. (update -- an extension of the credit at a new grant level of $6500 until April 2010 was created a couple of months after this post was written.)

The program as it is now is bringing future home buyers forward in time, and when the current program ends....we will see dropping sales. The market will not have bottomed -- the temporary uptick now from the 2009 credit will suddenly disappear.

The program should have started with a grant open to all homestead home buyers, and be set to attenuate gradually, lasting through 2011 or 2012.

Again, it is possible to fix the bad structure we have now.

The correct structure now would be to extend the program as a $4000 credit for 2010 (or December 2009-December 2010), and include *all* homestead home buyers (who live in the home they buy) for fairness, followed by a $2500 credit for 2011 and a $1500 credit for 2012.

This would have an effect of actually helping the housing market to bottom out, which will take considerable time, and being more equitable to buyers of homes in 2010-2012.

Economic momentum from the program could build, and the effect of simply bringing sales forward in time would be greatly reduced.

...

What is striking about the these existing programs is how they could have been improved by soliciting and taking advice from an experienced business person who has a broad outlook.

Congressional staffs working on such legislation should invariably hire outside help from someone who has managed a small business and who has long experience and can talk about what will work for the middle class customer (there are thousands, tens of thousands of successful small business people who could and would offer good advice). Such a person would bring a superior, real-world sense of how to actually get the desired result. Such a person knows what it takes to appeal to middle-class families.

For instance, the congressional staff working on legislation could ask:
"If we run this program Cash for Clunkers at $4500 per car for say 250,000-350,000 cars, would that be about right to kickstart some circular effects of auto jobs and people buying cars and some stimulus for the general economy?"

To which the advisor would answer: "A little, but that's a poor structure."

"Why not?"

"Because that is so much money that it will only bring a rush to buy by everyone that is able to buy and wanted to sometime in the next year or two. Then, you have a let down."

"But won't more total buys happen on net, say over 4 years, than would have happened otherwise?"

"A little, yeah. But for the same federal money or a bit more, you could have instead a much larger number of sales over next few years. And that would mean more middle class jobs and a stronger economy."

"How?"

"Look, if you live in a neighborhood and your neighbor bought a Cash For Clunkers car, and you didn't buy one then you think something like: 'Oh well, I missed out,' and you adjust psychologically, and you go on being the new frugal, as you were already. But....if your neighbor gets a Cash For Clunkers new car with a $2500 or $1500 credit, and in the meantime the $1000 level is still available, you've got weeks to see that new car next door and think about that $1000 that is still available a while longer.... It's an entirely different psychology altogether. An entirely different outcome. More people will decide a new car is the way to go.

"You need something that makes people feel like the next three or four or six months is a good time to buy a car, not that only the next 8 days. You need to spread the money out, make it gradual, like a steady pull. And it has to be well-defined and clear. So that you know that if you miss the $2500 level, you can get the $1500 level. Stuff like that. Like if you miss out on the $2500 or $1500, you can still get a nice $1000 bonus for buying a fuel-efficient car, and that last chance level has to last, like months."

I for one would be glad to help correctly structure such future legislation, which I think may once again be on the table someday, once the current programs are seen to have failed.

While general confidence is the main determinate of whether we will skirt and escape a second great depression, even the recent uptick in confidence isn't yet enough to assure the outcome. As Ambrose Evans-Pritchard points out, the world is still awash in over-capacity. This moment of skirting the edge is not over yet.

Lies Do Work For a While

So the vast lying campaign has worked, sort of....

While 60% think Health Care in America needs either a "complete overhaul" or "major reform" (instead of only "minor reform" or less), a WallStreetJournal/NBC poll shows majorities of Americans believe current proposals for health care reform "likely":

Will give health insurance coverage to illegal immigrants ......... 55%

Will lead to a government takeover of the health care system .... 54%

Will use taxpayer dollars to pay for women to have abortions .... 50%

and even a large group believes:

Will allow the government to make decisions about
when to stop providing medical care to the elderly ...................... 45%

But...there is an additional interesting result that shows up in several polls.

While a slim majority, 53%, "favor" "strongly" or "somewhat" the "Obama" health reform plan when it is summarized (and contrast this to the only 36% who thought the Obama plan was a "good idea" before seeing this brief summary):

"The plan requires that health insurance companies cover people with pre-existing medical conditions. It also requires all but the smallest employers to provide health coverage for their employees, or pay a percentage of their payroll to help fund coverage for the uninsured. Families and individuals with lower- and middle-incomes would receive tax credits to help them afford insurance coverage. Some of the funding for this plan would come from raising taxes on wealthier Americans."

...and while only 41% "approve" of "the job Obama is doing in handling the issue of health care reform"...

for Republicans, on the other hand, the effects of certain over-the-top rhetoric are already starting to come home to roost for the entire party:

Do you generally approve or disapprove of the way that Republicans in Congress are handling the issue of health care reform?

Approve ............................................ 21%

Disapprove ....................................... 62%


Ouch!

But...what exactly did certain Republicans expect to be the consequences of their rhetoric? Do they think they can just make any assertion, however distorted, or even use outright fabrications, and not have consequences?

Believe me, there are consequences for making up dramatic distortions.

We are starting to see a some part of those outcomes I think.

This is a good thing I believe for the Republican Party. It would be good for those who stretch the truth to be ousted, and allow better thinkers to take their places.

The worst possible outcome for the Republican Party would be for those that lie to then win elections and carry part of the GOP farther down the worst kind of path a political party can take -- one based on big lies, fear, intimidation and deception. The best possible outcome the GOP would be for the worst offenders to be defeated, so that better representatives could take their places.