politics

The economics of insurance are poorly understood by most people -- especially politicians the media folks. Although, some politicians almost certainly understand it well, but play on the misunderstandings of others for political gain. Jonathan Chait has an insightful piece in a recent TNR article that looks at the differences between how Republicans have approached health care and how Democrats have.

Though I come down squarely on the philosophical approach of the Dems -- one of fairness and equal opportunity -- I like that Chait explains pretty fairly how Republicans approach it -- they prefer not to take from the winners to compensate the "losers."

Health insurance, if you think about it, is a redistribution scheme. It transfers money from the winners (people who don’t need much medical care) to the losers (people who do). It differs from other redistribution schemes because, unlike programs that redistribute from rich to poor, the winners and losers can’t be sure in advance which category they’ll be in. That’s why people enter into it voluntarily--today I might be healthy, tomorrow I may contract some horrible disease.

If you want to have a better idea of why Republicans are freaking out at an almost entirely private sector solution to a problem that would be better solved by greater public sector involvement (says me), read this article.

As a person who researches a lot of the crap I talk about (it may sounds like BS, but sometimes it isn't!), I am often flummoxed by those who take the position that the truth lies half way between the extremes:

I think that often where I am is just in the middle. The middle is often the commonsensical place to be. The notion that one side is right and one side is wrong is generally, as one finds in life, not the case.

Fortunately, Jonathan Chait offered a terrific response to this inane comment, starting with:

Roberts has a great point. The sensible position usually does lie halfway between two extremes. Just look at history. In the 1960s, the country was split between extremists who wanted to deny civil rights to African Americans, and extremists who insisted on completely equal rights everywhere. The dispute caused so much strife and anger because no sensible moderates could be found to stake out the middle ground between these equally radical positions--say, desegregating some institutions but not others, or letting black people vote in every other election.

The article makes good points, explaining why compromising for the sake of compromising is doomed to failure. Some situations require a 100% solution, not a 50% solution. Beyond that, we can often have sides where one side represents their position honestly and the flip side is totally full of shit - as often happens. What happens when a situation has more than 2 sides?

The idea that the truth is "in the middle" may work when it comes to subjective memories recalling some events when people are exaggerating but has little application elsewhere, and those that cling to it to avoid actually thinking about how to solve a problem are lazy.

If you believe Fox News or the Tea Baggers (to the extent one can differentiate), then we are on the verge of a massive socialist takeover. I just read this great comment to a news story about the public power company in Virginia ... it was attributed to Bill Meyer, but I don't know who that is.

I have inserted some additions in bold for funsies.

This morning I was awoken by my alarm clock powered by socialist electricity generated by the public power monopoly regulated by the US Department of Energy. I then took a shower in the socialist clean water provided by the municipal water utility. After that, I turned on the socialist radio to one of the FCC regulated channels to hear what the socialist National Weather Service of the National Oceanographic and Atmospheric Administration determined the weather was going to be like using socialist satellites designed, built, and launched by the National Aeronautics and Space Administration. I watched this while eating my breakfast of socialist US Department of Agriculture inspected food and taking the socialist drugs which have been determined as safe by the Food and Drug Administration.

At the appropriate time, as kept accurate by the socialist National Institute of Standards and Technology and the US Naval Observatory, I get into my socialist National Highway Traffic Safety Administration approved automobile and set out to work on the socialist roads build by the socialist local, state, and federal departments of transportation, possibly stopping to purchase additional fuel of a quality level determined by the socialist Environmental Protection Agency, using socialist legal tender issued by the Federal Reserve Bank. On the way out the door, I deposit any mail I have to be sent out via the socialist US Postal Service and drop the kids off at the socialist public school. I avoid numerous collisions due to socialist stop signs, signals, and other conventions established by the local government. If I get lost, I can use my socialist GPS navigation technology developed by the United States Department of Defense and made available to the public in 1996 by President Bill Clinton who issued a policy directive declaring socialist GPS to be a dual use military civilian system to be managed as a national socialist asset.

After spending another day not being maimed or killed at work thanks to the socialist workplace regulations imposed by the Department of Labor (which also mandates an eight hour day, no children working) and the Occupational Safety and Health Administration, enjoying another two meals which again do not kill me because of the socialist USDA, I drive my socialist NHTSA car back home on the socialist DOT roads, to my house which has not burned down in my absence because of the socialist state and local building codes and socialist fire marshal’s inspection, and which has not been plundered of all its valuables thanks to the socialist local police department. I take a deep breath of fresh air, thanks to the socialist Environmental Protection Agency that prevents the noble private companies from discharging all their pollutants in to the air.

I then get on my computer and use the socialist Internet which was developed by the Defense Advanced Research Projects Administration and browse the socialist World Wide Web using my graphical web browser, both made possible by Al Gore’s socialist High Performance Computing and Communication Act of 1991. Briefly, I consider how lucky I am that the socialist programs Medicare and Social Security have dramatically reduced elderly poverty, allowing me the freedom of not sharing the house with my parents.

I then post on freerepublic.com and fox news forums about how SOCIALISM in medicine is BAD because the government can’t do anything right.

Foreign Policy magazine has a special end of year issue chronicling the top 2009 global thinkers - someof whom did not necessarily have "good" ideas (says me). Nonetheless, I was intrigued by a short feature on Sayyid Imam al-Sharif:

How the prison writings of Sayyid Imam al-Sharif, one of al Qaeda's founders now labeled a turn coat, are doing more to expose the terrorist group's hypocrisy than anyone else.

This dude is now in prison in Egypt - after first writing books justifying al-Qaeda's butcherous activities, he suddenly decided it might not be in the best interests of God to kill everyone with which they disagree:

He claims he came to realize that the haphazard use of violence by Islamist groups causes more harm than good with respect to Islamic law, an idea he had been pondering since he left terrorism in the early 1990s.

So long as al-Qaeda keeps killing other Muslims, I think we can expect support for them to continue plummeting amongst those who used to support them as a check against the power of the West.

Jacob Weisberg's recent piece on slate.com asked, "Are Republicans Serious About Fixing Health Care?" The answer, unsurprisingly, is "no." What is more important about the article is that it reminds us who created the massive deficits and debt that the Republican cannot stop talking about (and blaming Dems for it, of course).

Jacob discusses the last time the Republicans tinkered with health care - changing the prescription-drug coverage under Medicare when Republicans controlled the Executive and Legislative branches. Republicans used so many low-down dirty tricks in getting that legislation through that they have absolutely no credibility when it comes to accusing the Dems of abusing their power currently.

Remember that they were also greatly cutting taxes on the rich at this point - so not only were the Republicans reducing revenue to the government, they were greatly increasing its expenditures while also still not providing quality health care reform! Weisberg sums it up nicely:

Thanks to something called the "doughnut hole," drug coverage disappears when out-of-pocket costs reach $2,400, returning only when they hit $3,850. Simply stated, the bill cost a fortune, wasn't paid for, is complicated as hell, and doesn't do all that much—though it does include coverage for end-of life-counseling, or what Grassley now calls "pulling the plug on grandma."

Read the rest of the article for more helpful context on just how much damage the Republican health care reform has done to the federal fiscal future.

In my lifetime, the vast majority of federal debt comes from Republican Administrations whereas Democratic Administrations are more responsible and tend to legislate within their means. As my friend James wrote awhile back, the Republicans are like arsonists that bitch about the fire department wasting water.

Left unmentioned, but worth bringing up is that Republicans have always hated Medicare and would prefer to let old people fend for themselves in the market to a functioning government program that has greatly reduced poverty amongst the elderly as well as reducing the load on people my age who might otherwise be saddled with the massively greater debt if my parents became ill after retiring (I hope they get to retire!)

If there is something that Americans love to do, it is bitch about taxes. I have to wonder if Republicans would have the support of any non-evangelical Christians were it not for them positioning themselves as the party of reducing taxes (irregardless of their reckless fiscal record, they certainly act like they are the party of reducing taxes).

In Minnesota, Pawlenty cites his record of not increasing taxes (which is bullshit, he renamed some taxes to fees and raised them and he avoided raising taxes by cutting funds to cities who then had to raise taxes to avoid laying off cops and firefighters) as his greatest accomplishment. Of course, he didn't really reduce spending, that might have been unpopular. He just refused to finance the spending bills he signed, compounding problems for the future.

Let's address this problem head-on ... are we overtaxed? Do tax increases kill businesses and hurt the economy? In MinnPost, Dane Smith smartly asks, "If taxes are bad for us, then how did we get so healthy, wealthy and wise?"

Since 1909, and with big spurts in the 1930s and 1970s, the federal-state-local government's share (anti-tax types like to call it "take") of income in Minnesota and the United States grew steadily and sharply, from about 5 percent to 35 percent.

A seven-fold increase in taxes should have left us a howling wasteland, if one subscribes to the anti-government theory of anti-tax zealots. We should have less wealth, no creativity, diminished entrepreneurialism, little technological innovation, and no incentives to do anything but seek or wait for the next government check.

The exact opposite happened as government grew.

I have to assume that the whole less-government-is-good-government approach is only possible in a culture that does not know its history. Our government grew in reaction to the "excesses" of the unregulated capitalism.

The EPA was not a liberal conspiracy to limit corporate profits, it was a reaction to the poison that many businesses spewed into the environment. And, despite what I believe to be overly lax enforcement, it has greatly improved the environment. From air pollution to previously dead lakes, the environment around us (and therefore us as well) is healthier than it was before government forced businesses to stop poisoning us (because it really is more profitable to poison us that to mitigate pollution - we even have a name for it: negative externality).

I was fortunate enough to go to college when I was 18 in part because I was not working in mines when I was 8. My parents were not bankrupted taking care of my grandparents in part because of social security.

Things certainly could be better. Health insurance providers should not be allowed to just drop people or refuse to fund necessary medical treatments because they want to maximize their shareholders' dividend.

I can just imagine that if anyone still reading this disagrees with me, they are fuming that I would choose to encourage policies that will just drive all the rich people out of the state or country or whatever. Fortunately, Daniel Gross just tackled this at Slate with "Who is Killing America's Millionaires?"

In May, the Wall Street Journal op-ed page argued that millionaires fled Maryland after the state legislature boosted the top marginal state income tax rate to 6.25 percent on the top 0.3 percent of filers. "In 2008 roughly 3,000 million-dollar income tax returns were filed by the end of April," the Journal notes. "This year there were 2,000, which the state comptroller's office concedes is a 'substantial decline.' " The Journal uses this small sample to warn the federal government and states with progressive tax structures and lots of rich people—New York, New Jersey, California—to heed the lesson. Tax the wealthy too much, and they'll leave.

Such logic makes sense to the Journal's op-ed page staffers, who inhabit an alternative universe in which people wake up in the morning and decide whether to go to work, innovate, or buy a bagel based on marginal tax rates. But if people were motivated to choose residences based solely on high state income taxes, then California and New York wouldn't have any wealthy entrepreneurs, venture capitalists, or investment bankers—and the several states that have no state income tax, which include South Dakota, Alaska, and Wyoming, would be really crowded with rich people.

He tackles the question from multiple angles, explaining how this particular argument (rich people move from tax increases) is based entirely on specious data and an extremely lazy approach to causality. Having debunked some right-wing stinktank reports myself, I am shocked at just how lazy they are. It is a truism that you can pretty much convince some journalists of any argument and once it is in print in a supposedly neutral source, it becomes fact.

However, if there is evidence that rich people move to avoid taxes, I have yet to see it. Moving takes a lot of effort and there are many variables to consider. I think it more likely that rich people will move to areas with rich cultural life and a high quality of living because they will want to enjoy their wealth rather than say, living in a state like Mississippi where they will have to ship their kids across the country to give them a decent education.

None of this is to suggest that taxes should be constantly increased - there is a point when increased government is not worth it. In the U.S., probably most of us that support a strong role for government in regulating things like pollution and providing health care are less supportive of continuing to spend more of the discretionary budget on the military than any other program. So we recognize tradeoffs. We would rather use our tax dollars to protect our citizens from Medica and Enron than protecting Exxon's business interests abroad.

Further, I believe in some deregulation. For instance, I believe that government deregulation of the airlines and trains (since the 1970's) has been positive on the whole. Again, there are clearly tradeoffs, but I prefer making it cheaper to fly than getting a meal on the flight. That said, there needs to be some regulation - ticket prices to many destinations are again approaching those high prices from the era of massive government regulation because of increasing concentration among the airlines (it is competition that keeps prices low, and competition flourishes from the right policies, not an absence of them).

However, we should be clear about who caused the problems we are currently attempting to resolve. Daniel Gross addressed this in "War on the Rich?.

The Bush team and congressional supporters had seven years to manage fiscal affairs in such a way that they would be able to extend the tax cuts in 2010. But they screwed it up. Instead of controlling spending and aligning tax revenues with outlays, the Bush administration and its congressional allies ramped up spending massively—on two wars, on a prescription drug benefit for Medicare, on earmarks, etc. Oh, and along the way, they so miserably mismanaged oversight of Wall Street and the financial sector that it required the passage of a hugely expensive bailout. Even before the passage of the TARP, the prospect of extending all the Bush tax cuts was a nonstarter. Once Bush signed the $700 billion bailout measure into law, extending tax cuts was really a nonstarter. The national debt nearly doubled during the Bush years. So if you want to blame someone for raising taxes back to where they were in 2001, don't blame Obama. Blame Bush, his feckless Office of Management and Budget directors, his economic advisers, and congressional appropriators like Trent Lott and Tom DeLay.

The Republicans (with some help from the Democrats, but clearly the R's deserve most of the responsibility) pushed the policies that have bankrupted the country.

F the Dems. It has taken me almost 8 months now to remember why I couldn't care less whether Al Gore beat Bush back in 2000. Last year, it was more difficult to remember owing to the havoc the fiscally irresponsible Republicans wreaked on the economy and the stupid war they drug us into.

But now I remember - it was because the Democrats are incapable of getting things done. I was getting frustrated, but this week knocked me over the edge when it started to become clear that the Dems are going to fuck up health care reform (not because the Republicans put the wants of the rich above the desires of the rest of us, but because the Dems cannot keep their own members in line).

Then I saw that some so-called Blue-Dog Dems are spreading some shit about how they aren't sure whether they will vote on Sotomayor. Are you serious? This is such incredible bullshit. Sotomayor is about as centrist as you can get - Obama had no hope of actually pushing a progressive onto the court.

On the stimulus, they caved and gutted the package by making it half tax-cut based to get 3 frigging Republicans to sign onto it. Great - that was worth it. Let's slow the recovery so the President can have the high ground of reaching out to Republicans who overwhelmingly refuse to reach back. Fuck, the mullahs of Iran are probably more willing to work with Obama than the fucking Christian Mullahs of Alabama or Georgia.

Having the Dems in power makes me feel like I am watching a retarded child get slowly tortured to death by a posse of sadist preachers who insists it is all part of God's plan.

The only solace I have is hoping that things have always been this fucked up and we tend to forget just how bad everything was. The Republicans certainly have no conception of history - they revere Reagan, a man who would be crucified by his own party today because of his socialist tax policies and willingness to talk to our enemies. I wonder if Jesus and Reagan are watching this shit while swearing and scarfing jelly beans.

Made it back this morning just fine. A bit tired at first, then more so throughout the day. Early to bed tonight, no doubt! But for right now, Michelle and I are watching an important interview - Bill Moyers interviewing medical insurance insider, Wendell Potter. The interview is about 30 minutes long - and important to understand why health care reform is so difficult.

This is what happens when health care insurance companies maximize profits:

There's a measure of profitability that investors look to, and it's called a medical loss ratio. And it's unique to the health insurance industry. And by medical loss ratio, I mean that it's a measure that tells investors or anyone else how much of a premium dollar is used by the insurance company to actually pay medical claims. And that has been shrinking, over the years, since the industry's been dominated by, or become dominated by for-profit insurance companies. Back in the early '90s, or back during the time that the Clinton plan was being debated, 95 cents out of every dollar was sent, you know, on average was used by the insurance companies to pay claims. Last year, it was down to just slightly above 80 percent.

So, investors want that to keep shrinking. And if they see that an insurance company has not done what they think meets their expectations with the medical loss ratio, they'll punish them. Investors will start leaving in droves.

I've seen a company stock price fall 20 percent in a single day, when it did not meet Wall Street's expectations with this medical loss ratio.

For example, if one company's medical loss ratio was 77.9 percent, for example, in one quarter, and the next quarter, it was 78.2 percent. It seems like a small movement. But investors will think that's ridiculous. And it's horrible.