Author: bill

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Occam’s Razor meets the Patient Protection and Affordable Act(ACA)

One of the more interesting gambits that played out in the health care debate was the ardent support for the Patient Protection and Affordable Care Act (ACA) by unions and large companies. Despite the fact that these organizations are particularly at risk from rising health care costs, the focus of the debate centered around the issue of expanding health care to the uninsured rather than reducing health care costs. Although the health care reform act is extraordinarily complex with many different cost containment ideas, the dominant idea is that we can lower health care costs by compelling all people to purchase health insurance. The crux of the argument is that by adding a few more health insurance customers the health care cost problem will magically go away.

I have a simple theory about controlling the rising health care costs. Although it is possible that a portion of the rising health care costs can be attributed to the uninsured, the majority of the health care costs for many years has been paid for by unions, large companies, and governments. Since these groups are the largest payers into the system, it follows that the actions and inactions by these organizations are the most likely causes of the increasing health care costs. Since they have the "gold" they are the group with most leverage to make rules to control costs. Although the health care reform act does attempt to reform this issue by taxing high cost plans and placing a cap on the tax benefit of employer-based health care insurance, these reforms have largely been offset by exemptions and delayed implementation.

The Patient Protection and Affordable Care Act (ACA) is a complex and controversial bill. There is no disagreement that this bill expands health care but the way we pay for the increased health care services is ambiguous. The polls in 2010 show that the average man and woman are skeptical that the cost containment ideas included in the bill will work. The elderly think the bill takes money away from them to expand services to the poor. The courts are skeptical that compelling an individual to purchase health insurance is constitutional. We are left with a bill that has a lot of ideas we may agree with in theory but not in practice. Maybe we need to heed to advice of  Occam’s razor and replace this complex bill with a set of smaller, simpler bills that will stand up to the scrutiny of a town hall meeting.

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Delicious Irony

While Congress and most of the nation was caught in the melodrama of whether or not to extend the tax cuts this week, another drama was playing out. Politifact chose to announce, PolitiFact’s Lie of the Year: ‘A government takeover of health care’, at the same time Judge Roger Vinson was hearing the case just down the road in Pensacola in which 20 states are challenging the constitutionality of ObamaCare’s mandate that individuals buy health insurance. I suspect that there were lawyers in that court arguing that the biggest lie of the year was the belief that the individual mandate was constitutional. To be fair to Politifact they chose to argue that the government take over of health care was the biggest lie. They are correct that Obamacare does not take over hospitals or provide a public option but once again their choice of this lie over some other whoppers is puzzling. I seem to remember that Social Security was sold to the American people as insurance. It did not take the American people too long to figure out that it was not insurance. Then it was described as a trust plan and that explanation didn’t work with the people either. It is interesting to note that the facts and lies about the Social Security plan really didn’t matter in the overall debate as long as we were wealthy enough to push the responsibility to pay for Social Security benefits to the next generation. In 2010  the American people panicked about the deficit and the likelihood that Obamacare would cost a lot more that advertised. Paul Krugman and others didn’t help the situation when they argued that  the solution to spiraling health costs was to go to a single payer system. According to him the key to Obamacare was to create the entitlement. Following the path blazed by Social Security the health care entitlement would evolve into a single payer government system when the original version of Obamacare threatened to bankrupt the country. Unfortunately for him the real risk as perceived by the American people is that both the original version of Obamacare and its replacement might be overcome with fraud and inefficiency. Why would anyone think that this new federal agency will be any more efficient an organization than Medicaid, the Post Office, or Amtrak? The likely scenario is that it will fail like TennCare did in Tennessee. When TennCare threatened to bankrupt the state, Tennessee chose to dramatically cut back on TennCare. For the American people this is a sorry plan to fix spiraling health care costs. They wanted a plan to control spiraling health care costs and the got a plan to dramatically expand free or heavily subsidized health care coverage. So although Politifact may have been technically correct about the government take over of health care, the American people saw a more important lie playing out in the health care debate. Considering how they voted last November it looks like they were far more concerned with the lies that Obamacare would keep their health insurance costs from rising and would not increase the budget deficit. Maybe the people are not as dumb as some journalists and former elected officials would like to believe.

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PolitiFact | Fact-checking attacks on the DREAM Act

One of my pet peeves with Politifact is that they generally debunk trivial facts and completely ignore the significant issues. I view them as a Snopes competitor. Here is an example of them ignoring major issues.

  1. Congress is voting on the DREAM Act and Politifact says there are several versions in Congress. Did Politifact just flunk Journalism 101? Does Congress know what is in the DREAM Act?
  2. When did a thirty five year old person become a minor? Don’t you think that age limit opens the door to fraud and is the key complaint by the conservatives?

The Development, Relief, and Education for Alien Minors (DREAM) Act would allow children brought to the United States illegally to obtain permanent legal status if they complete two years of college or in the military.

There are currently several versions of the DREAM Act kicking around in Congress, but under the version introduced in March 2009, people under 35 who arrived in the United States before the age of 16 and have lived here at least the last five years would be able to apply for legal permanent resident status on a conditional basis if they have obtained a U.S. high school diploma or GED.

PolitiFact | Fact-checking attacks on the DREAM Act

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Do Tax Cuts for the Wealthy Create Jobs? – Megan McArdle – Business – The Atlantic

In the article, Do Tax Cuts for the Wealthy Create Jobs? – Megan McArdle – Business – The Atlantic, Megan makes some good points about the economic impact of extending the tax cuts.

We’ve got a massive fiscal problem ahead of us, and extending all these tax cuts until 2012 will simply mean that both parties will be vying with each other to bust the budget ahead of the election. But it seems ludicrous to me to claim that tax cuts for the middle class are affordable, excellent stimulus, while the much smaller tax cuts for the wealthy cost too much relative to the stimulus they deliver. The differences are really pretty marginal, and not particularly well measured.

I think she wandered off of the question, “Do Tax Cuts for the Wealthy Create Jobs?”, and attempted to answer the question what is the impact on jobs by extending tax cuts. The differences between the two questions are very apparent when you focus on the psychology of spending. In the first case the question is whether the wealthy will spend or save their incremental income when their taxes are cut. Unfortunately that is not our situation. In the second case the question is what will the wealthy do if their income stays the same or is reduced. That is the question we are facing when we look at extending existing tax cuts. If the tax cuts are extended then it is generally assumed that the wealthy will not change their spending habits. No new jobs will be created but we will not lose any existing jobs. If the tax cuts are not extended it is generally assumed that the wealthy will cut back their spending and this will likely result in jobs lost. So we are confronted with a lose-lose proposition. If we extend the tax cuts on the wealthy we will expand the deficit but will keep our existing jobs. If we do not extend the tax cuts we will likely lose some unknown number of existing jobs. Depending on your estimate of job losses and your guess at whether past economic data is relevant in this situation, the impact on the deficit could be good or bad.

The fascinating question that this situation brings up is where do people cut spending when tax cuts are taken away? As an example a person receiving a tax cut might purchase an automobile or an appliance. Will that same person sell their car or appliance when the tax cut is taken away? I don’t think so. The cuts will likely come from reduced discretionary spending? This logic is probably appropriate for both the middle class and the wealthy tax cuts. Removing tax cuts probably has a larger effect on consumer spending that granting tax cuts.

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Small-Biz Killers – Michelle Malkin – National Review Online

Michelle Malkin in the article, Small-Biz Killers – Michelle Malkin – National Review Online, says:

State unemployment benefits last up to 26 weeks. Bipartisan-supported Washington mandates have raised that to 99 weeks. The current proposal would raise the total to 155 weeks

In this article, Calculated Risk: Tax Negotiations: No help for 99ers, the author says:

Just to be clear, the "extension of the unemployment benefits" is an extension of the qualifying dates for the various tiers of benefits, and not additional weeks of benefits. There is no additional help for the so-called "99ers".

Who’s right?

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A Good Deal for Democrats on Tax Cuts and a Missed Opportunity to Stop Emergency Legislating

This would have been a great time for Democrats and Republicans to come together and forge a "budget neutral" compromise of spending cuts to offset lower tax revenues. For two years we have been living under “emergency” exemptions from the PAYGO law. I think the voters showed they are equally concerned about the jobs and the deficit issues. It is about time we get a pledge from Congress to stop using “emergency” exemptions from the PAYGO rules. Extending the Bush tax cuts and unemployment benefits are issues with enough political leverage to force legislators to make hard compromises on spending cuts. There is probably the easiest political opportunity our legislators will find to cut spending.

I’m puzzled on both counts.  Let me get the personal stuff out of the way: I think this is a terrible deal.  I was rooting for gridlock to cause the tax cuts to expire entirely, which would probably have a moderately negative impact on the economy, but would at least somewhat forestall a devastating fiscal crisis down the road.  If it was politically necessary to do tax cuts, I wanted them to be as small as possible, not $900 billion over two years.

A Good Deal for Democrats on Tax Cuts – Megan McArdle – Business – The Atlantic

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Laymen’s Guide to the Truth about California

For the average person it is hard to figure out the ruckus over government deficits. Everyone seems to be an expert who has their favorite facts that support their conclusion. The biggest problem I have with experts is that there are so many of them and they all come up with different conclusions. Recently I was amused to read Is California’s Decline Just More Right-Wing Propaganda? by Tim Cavanaugh  which he wrote in response to the article, The truth about California by Brett Arends. So many experts, so little consensus. For a person in Ohio who finds it very hard to figure out what the local governments are doing, it seems foolish to compete with these experts but it may be reasonable to develop a laymen’s guide to the Truth about California. Even though I live in Ohio I understand that the importance of California to Ohio and the rest of the country. It is hard to ignore the plight of the eighth largest economy in the world and naively assume that the problems on the west coast will stay there. So I decided to back off from the more esoteric economic facts and dwell on the simple facts that the average person can understand.

  1. Late Payment Fact: Is California issuing IOUs or paying its vendors over 90 days late?
  2. Selling the Family Jewels Fact: Is California is selling off state assets or laying off people in some of its politically favored programs?
  3. Can We Tell the Truth Fact: Is California calling special sessions for legislators to rework the budget they just passed?
  4. Civil Unrest Fact: Are they rioting in the streets?

Although some may argue that this overly simplifies California’s issues we can express some faint praise about California’s plight since it has not issued IOUs this year. On the other hand the latest budget appears to be selling some family jewels and antagonizing some politically well connected constituencies. Despite these revenue raising and cost cutting measures, Governor Schwarzenegger recently asked for a special legislative session to rework the budget. This sounds like more layoffs to politically well connected constituencies. Although it would be premature to expect to see demonstrations against the recent budget cuts, none of this bodes well for the United States as California cranks up its austerity program.

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Things that make me go hmm… Going Green

I found it curious that my electric company was very insistent that I accept their offer for a free case of CFL lights. A small popup window would appear every time I tried to pay my electric bill. I didn’t need the bulbs since I already had replaced my lights and I had extra bulbs in the closet. To get rid of the nagging I told them to send me the bulbs. I guess this is emblematic of what going green really means. I sure wish my electric company put their efforts into something useful like reducing my electrical bill or better handling of coal ash.

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With Medicaid waiver, California dives into health care reform

I think it is admirable that California is attempting some innovative health care solutions and wish them the best of luck.  If I understand their proposal correctly they will be billing the federal government the same amount but the spending will not follow standard Medicaid rules. With the waiver they will be using the savings from stream-lined health services to expand Medicaid. Since expanding Medicaid and streamlining care sound like two independent projects, my fear is that they will expand health care and fall short at getting the cost savings. History has shown that efforts like this are much better at expanding health care than cutting costs. If the cost savings do not appear, California or Medicaid is in the hole for an extra $2 billion per year.

The plan, which the state calls a “bridge to reform,” is also designed to bolster the state’s safety-net hospitals, as well as lower overall health care costs. Under the Nov. 2 agreement ”” a waiver of standard Medicaid rules aimed at allowing states to test innovative new programs ”” California promised to shave $2 billion per year from its existing Medicaid bill by streamlining care for its highest-cost recipients: seniors, adults with disabilities and children with severe illnesses. The federal government agreed to give California $2 billion per year in return.

With Medicaid waiver, California dives into health care reform