Sunday, March 31, 2013

Health Care Reform, Not Revolution

Readers, I find myself again in a state of outrage.  Screed to follow.  The subject is once again healthcare.  The frustration is that Obamacare, and now Medicare reform, is totally reform, and not at all revolution.  Not even mini-mini-revolution.  What I mean by that is, the power that be are the powers that will be.

The Institute of Medicine has listed areas of potential savings in health care.  Here they are:

Unnecessary services $210 billion
Inefficiently delivered services $130 billion
Excess administrative costs $190 billion
Prices that are too high $105 billion
Missed prevention opportunities  $55 billion
Fraud $75 billion

To me, this list is interesting because of the categories.  Notice – you can’t say from this list just who is responsible for all this.  It is a list asking for technical fixes.  It underplays just who is doing what.

When you’re not talking revolution, you’re saying that them that has is them that gets.  And them that has gotten is them that keeps getting.  Where is the power?  In hospitals, in academic medical centers, in procedural specialists, in pharma, in technical equipment companies.  Where is it not?  In patients and primary care doctors.  I’d also say that the power is with the emerging power of community health centers, and probably nurses, because they are organized interests, the nurses as a powerful union that has for years constrained entry to their ranks and now holds the hospitals hostage, and in the case of CHC’s a government-friendly socialistic movement with a strong lobby.

Where is the fabled AMA, you might ask?  Nowhere.  The AMA doesn’t count anymore.  Doctors are totally fragmented.

So, where are we going with health care reform?  I have to refer you to my previous post on High Deductible Health Plans, which are the fastest growing plans in the country.  A recent report says that 15% of large companies are going to offer only HDHPs this year!  I think the most popular plans on the Health Insurance Exchanges will be the bronze plans, and they will probably be basically HDHPs.  Who do these plans screw?  Patients – more out of pocket – and primary care doctors.

The ideologues of the right wing, without relevant experience in health care, think Americans have too little insurance, not too much, which leads patients to indulge themselves in the “moral hazard” of overutilization.  That’s just ideology.  Patients are the least powerful element in the equation – they are the cause of over-utilization of, say, back surgery, when orthopods and hospitals profit enormously from these usually useless procedures?  Give me a break. 

The problem of overutilization is too much primary care?  Again, give me a break.  It just doesn’t make sense.  Yet that is the cause prosecuted by HDHPs.

What does make sense is this: if you don’t think about rationality in health care, if you don’t think about equity, if all you think about is protecting your turf and decreasing costs without decreasing your own profit, and if you have the power – then you will increase deductibles, so patients pay more, and primary care takes it on the chin.  And that’s what is happening.

So – and here’s the outrage – what does the Obama Administration start to offer as a concession to the Republicans in trying to reach a budget agreement?  You know what it is, if you have been reading this screed with even minimal attention.  They are proposing to consider the Republican proposal, from that icon of disinterested intelligence Eric Cantor, that parts A and B of Medicare be combined, so that there is one (large) deductible, and patients get to pay more.  So the pressure builds again to reduce primary care visits, just what the doctor of rational reform didn’t order, but which was instead ordered by the political gods, the hospitals, and the procedural specialists.

Obama is basically a health care illiterate, and the people around him are obviously just conventional politicos.  Or they figure there is nothing to be done with the basic powers that be, and they have to just bow down to power.  There is no deep thought, there is everything about obeying the powers that be – the ones responsible for the state we are in.  That’s why I’m thinking that the Obama years will be regarded as a benefit mostly because of the worse outrages they prevented, rather than what they actually did.

God help us.

Budd Shenkin

Sunday, March 17, 2013

Banks - Too Big to Fail? Policy Choices.

More and more information is coming out about the JP Morgan London Whale debacle.  As always, the wonderful Gretchen Morgenson illuminates it with opinion and bite in today’s NYT.

(Of course, I have to admit, since I am not a financial professional and insider, I could always be wrong in my Gretchen Morgenson opinion.  I have great faith in the media.  As far as I can see, they are almost always right.  The only exception appears to be in things that I know a whole lot about.  In those cases, the media often gets it wrong.  But with that small exception, I think they are very reliable.)

Anyway, the gist of the argument is summed up by Morgenson at the end:

“We already know that banks of JPMorgan’s size are also too big to be allowed to fail and too big to prosecute. Such banks are too big to regulate and apparently too big to manage. So how much more evidence do we need that banks like JPMorgan are simply too big a risk for taxpayers to bear?”

Very, very interestingly, the WSJ editorial page comes to … the same conclusion!  They start from a different place – they say, banks are a private business, why is the government poking its nose into the workings of a private enterprise?  Why is the Senate concerned with JP Morgan, and why hold those awful hearings? 

(Morgenson’s take is: “…let’s congratulate the Permanent Subcommittee on Investigations, led by Senator Carl Levin, a Michigan Democrat. This is the second time in recent history that this subcommittee and its staff have served the public by illuminating the dark corners of the financial world — the first being the riveting hearings and reports on the causes of the 2008 financial crisis, which dove deep on Washington Mutual, Goldman Sachs and the credit ratings agencies.”)

But then the WSJ takes a left turn, blessedly.  They say, the Senate is concerned because of the potential of bailouts.  It happened once and it sure could happen again.  So the Senate is right to be concerned.

Therefore – and here is where the WSJ takes a surprising plunge, if I remember correctly – the banks are too big to fail, and consequently, they should be broken up!  Only then can the government not worry about the state of any individual company, and not micromanage, and not fear that the economy is at risk.

Of course, and the WSJ doesn’t go here, a whole industry can go down the wrong track – see mortgages, and Countrywide and friends – and there is ample reason for government to survey and regulate at the industry level.  But let’s leave that alone for now.  Enough to say, it seems that when the “best” bank, JP Morgan, is shown to be completely derelict, the argument for bigness in banks seems to go out the window.

On the other hand, even though the London Whale and his overlords went awry, overall there was really no cause for panic.  Even in the time period in question with $6 billion down the drain (and let’s not forget, what JPM lost, others gained), JPM still made a profit.  So you could say that bigness actually was a blessing.  You could say that the market could and should and actually did exert its pressure on the stock, and the market will work its magic – aided by the revelations of the government investigation, which shows also how poor JPM’s internal investigation was.  You could say that the biggest lesson, actually, is that pusillanimous regulators are the problem, and as long as there is very big money on the bank side, and very small wages on the government side, the risk-adverse and under-intellected (or maybe just under-cajonied) feds will always be captured by the industry. 

Where are we then?  If we can’t regulate, and the bank can’t self-regulate well, should we enforce the Buffet Rule, so banks can’t bet with their own money?  Also, a separate question, should we go with bigness, or smallness?

My own opinion is that we should look closely at societal gains.  Does society gain by allocating resources well, as banks can do by betting money on emerging industries, say?  Yes.  Does society benefit by betting on derivatives, as an example of pure trading risks?  Probably not, I’d say.  It seems pretty clear that there is a lot more betting going on, and a lot less hedging of bets than advocates will admit.  That being the case, I think we have to deemphasize trading as a major source of profits, and that will take governmental regulation – not micromanagement, but just a prohibition of certain courses of business.  That would be, the Buffet Rule.  You can’t just indulge in betting.

But what about size?  Should we regulate size?  If we mandate a limit to size, would that inhibit the ambition of banks, and make them less effective?  The reward for good bets on industries and other allocation decisions, after all, is profit and thus increased size.  Would a limit on size inhibit a single institution’s having enough resources to take good business risks in allocating capital?  That is, if you want to bet on an industry, but if you’re wrong you don’t want to have the whole firm go down the drain, you have to have large resources to withstand a bet gone wrong.  This is precisely the situation that JPM faced – they were able to withstand the London Whale debacle because they were very big.  Think not trading risk, but capital allocation risk, and being big takes on a completely different complexion.

So, although I hate the idea of big size, and I hate the model of Wall Street where these guys make so much money just because they are handling lots of money, I’m going to come down on the side of not regulating size.  But I’m also coming down on the side of implementing the Buffet Rule, hard as it may be to accomplish.

Now that I have made my decision, let’s see how the markets react….

Budd Shenkin

Tuesday, March 12, 2013

Put Regulating Miscreants in Jail

I posted last month about financial miscreants, and how fines to companies only makes the shareholders liable for the actions of company officials.  It reminds me of the PGE gas pipe inspectors who faked reports for decades, letting unsafe pipes to go undetected.  When their deceptions were detected the were -- fired!  Is that really all we can do?

Back to the world of cowboy finance.  Goddess Elizabeth Warren got on the backs of regulators last month and showed them to be pusillanimous paper pushers.  Today we hear more of this.  They take no action whatsoever against banks and officials who launder money for the drug cartels.  Warren contrasts their inaction with the draconian police and court actions against small time pushers and users.  Here it is:

Which leads me to follow up my post with a new wrinkle.  What are we going to do with these non-acting regulators?  Firing them would be too gentle.  I say, put them in jail!  (As I observed before, that prospect would serve to concentrate their attention.)

Budd Shenkin

Saturday, March 9, 2013

Working at Home

In response to the Yahoo directive that working at home be discontinued, and the responses to that directive from proponents of working at home:


“Hi, Colette, how are you?”

“Oh, hi.  Fine.  Jared!  Get out of that cupboard!  Now!  I told you before!  Sorry, it gets a little chaotic sometimes.”

“That’s OK.  I was just wondering about that point you were making on the epidemiology of dyslipidemia.  Do you think it really is worse in boys and earlier than in girls, from the statistics?”

“Oh, what was that?  Sorry, I was just a little distracted for a second.  (Whisper)  Emily, get over there and finish, or I’m going to get really mad!”

“About the dyslipidemia distribution.”

“Oh, yes, that.  Well, it’s hard to tell, I guess.  I’m going to have to look at those numbers more closely.”

“Well, right.  It’s just that our chapter is due next week and I was hoping to get the draft for everyone’s comment by tomorrow.”

“Tomorrow?  Does it really have to be then?  I was hoping to go through it one more time and get the delta coefficients more precisely.”

“Yes, I know.  We talked about that when you stopped by the office last week.  I don’t mean to push, but I was just hoping we could.”

“Excuse me one minute.  (Emphatic)  Jared, could you just let Emily do that for one minute?  I’ll be right there. … Well, Richard, you know, I think I can get that to you maybe by the end of tomorrow.  Clayton will be back this evening and I’m sure I’ll be able to get to it.”

“OK, Colette.  If we get it tomorrow, then I could do my bit on Saturday and we could come in on time.  There was one other thing.”

“OK, Richard, what was that?”

“Fred was trying to redo the schedules for the second half, and he was wondering if you could do the clinic on Tuesdays instead of Wednesday.”

“What??!!  Is he serious?  That would jut be the worse thing, I just couldn’t do that!  It would completely upset my schedule.  My work at home days are Monday, Tuesday, and Thursday, and if I had to work in the clinic on Tuesdays I couldn’t possibly switch my child care.”

“Well, this is Fred’s idea.  He thought that if you’re working, it shouldn’t really make any difference if you’re at home or at the office, and the switch would really make our clinic schedules doable for everyone.”

“Well, Richard, Fred might think that, but I need to be at home to concentrate on my writing.  (Whisper)  Emily, good, can you just work with Jared just for a second, and I’ll help you both in a minute?  Richard, I can’t possibly change my schedule.  I would become completely non-productive.  Changing schedules just completely devastates my concentration.  Completely!”

“OK, I just told Fred I’d bring it up.  I know he wanted to be able for us to sit down and talk about the departmental issues during the day, too.”

“Well, the telephone does just fine, I think.  And we trade ideas on email anytime we want.  I think better that way, anyway.”

“OK, Colette.  I’ll let him know.  Hey, I know I’m intruding.  I’ll talk to you when I see you at the reception.”

“OK, that’ll be fine.  Is that in two weeks?”

There is a loud scream in the background.

“Bye, Richard.  Gotta go.”

Budd Shenkin

Sunday, March 3, 2013

I'm Not Handy

I’m not “handy.” 

I think I was in high school when my mother took a private moment to speak seriously to me.  She said, “You are smart enough to be anything you want to be.  Well, maybe not a mechanic.”

I didn’t know quite what to say, because my mother and I didn’t seem to communicate easily.  So I said, “I could be a mechanic if I wanted to be, I think.”  She could have gone on to explain some more what was on her mind, which I can imagine now what I think it was, but she didn’t know quite what to say, so she said, “Well, maybe.”

I thought that if I really wanted to be something, I could do it.  At least at that time, I was pretty confident.  I guess I was doing well.

But in fact, I don’t think I could have been a mechanic.  In fact, I don’t think I could have been that good a handyman – although, if I had really wanted to do it, I think I could have done it.  I still think that.  It would just take some work.  But I get pretty impatient.

In fact, one of the things I really didn’t want to be was an obstetrician.  Can you imagine what to do when the baby is stuck halfway in and halfway out?  OBs deal with it.  They don’t like it, but they deal with it.  That’s what they’re good at.  The neurosurgeon who devised the operation I had two years ago, Charlie Wilson, now he had a genius.  I imagine him watching his hands do the things they needed to do.  That sure wouldn’t be me.

Not that I can’t do anything.  In 1975 I installed a Radio Shack AM-FM-tape deck player with a rear speaker in my Duster, and my father said, “I’m impressed!”  My father, of course, was a neurosurgeon who did “carpentry” in the body and brain all the time and devised new procedures.  Being an essentially kind soul when it came to his eldest, he no doubt reflected the deed as opposed to the capability.  Not becoming a neurosurgeon was one of my better decisions.

But help springs eternal.  Today I came into the house from out back in my study and announced to my wife, “I have my triumph for the day!”  Some weeks ago my computer speaker had gone on the fritz.  It wouldn’t come on.  This had happened a few months ago and who fixed it?  Lola, the three year old.  She loves to bang on the computer, and somehow she just fixed it.  But I figure it had just happened again.  I couldn’t impose on her to use her talents again.

So, last week I was at Costco and I sprang for a $44 set of speakers, tiny things.  Still, I wasn’t sure I could get them to work.  But I did it!  I figured out how to set them up, I plugged them into the computer, and they worked!  For me, it was a triumph.  I felt good.  My wife knows how this goes for me, so she congratulated me, sincerely.

Then, later today, I went back out to the study and got a little fancy.  I had had the little speakers on the floor under the desk near all the wires and plugs from the computer.  So I grabbed them and put them up on a little ledge under the desk where paper used to be placed for a dot-matrix printer.  Pretty neat, if I did say so myself.

Since I was there, I looked down at the floor again and noticed that there was a free plug not plugged into the surge protector.  There was an open receptacle, so I plugged it in.  Hmmm, I thought, I wonder….  So I turned on the old, broken speaker and guess what?  On it went!

I’m much handier than I thought!  I fixed two problems in one day!

Still probably a good idea I didn’t go into neurosurgery.

Budd Shenkin