Relevant and even prescient commentary on news, politics and the economy.

Medicare Claim Costs Growth Under 1% in 2013??? Why?

All nine of S&P Healthcare Economic Indices showed slower annual growth rates for February 2013 compared to January 2013. As measured by the S&P Healthcare Economic Commercial Index, healthcare costs covered by commercial insurance plans rose by 4.62% in February, down from +5.41% reported for January. Annual growth rates in Medicare claim costs increased by 0.78%, according to the S&P Healthcare Economic Medicare Index, down from +1.40% recorded last month.” Annual Growth Rates Decelerate in February 2013;  https://www.spice-indices.com/idpfiles/spice-assets/resources/public/documents/11477_sphealthcare-press-release.pdf?force_download=true

heathcare

When economists such as Tyler Cowen and Congressional leaders such as Ryan and McConnell are calling for cuts in Medicare, and Medicaid;  one has to wonder what the basis is for doing so. Medicare and its associated programs have dropped below 1% cost claims growth in 2013. According to Glen LaFollette and Louise Sheiner, healthcare in the US is sustainable at 1% growth and will not crowd out the other necessities. “An Examination of Health-Spending Growth in the United States: Past Trends and Future Prospects”  http://www.bancaditalia.it/studiricerche/convegni/atti/fiscal_sustainability/session_3/Follette%20Sheiner.pdf

 

What gives?

For partisan and give-Barrack Obama-no-quarter-reasoning, politicians claim the PPACA will have no or little impact on healthcare costs. Hoping for pie-in-the sky universal health care today, some rather reasonable writers and blogs have also joined the bandwagon of claims against the PPACA (or Barrack Obama) and are advocating the same lack of impact. Train-wreck Baucus successfully scuttled single payer healthcare insurance (with the help of Lieberman) and kept prominent advocates away from the bargaining table having  protestors arrested. Baucus now advocates backing away from the PPACA. Then what has made government healthcare programs decrease in cost? Maybe the last couple of years of decreasing cost growth are the result of the healthcare industry and the healthcare insurance companies taking heed to the needs of the population and developing a heart??? Naaaawwwwwww, I don’t think so. It is still the same industry; but as a result of the PPACA, the industry is rapidly preparing for the implementation of the PPACA.  Some answers PPACA:

hard times or recession, accounted for only about 1/3 (37 percent) of slower growth in the nation’s health care bill.  My guess is that most of the effect was felt in the private sector.

“During 2009–11 per capita national health spending grew about 3 percent annually, compared to an average of 5.9 percent annually during the previous ten years. job loss and benefit changes that shifted more costs to insured people. We found that these enrollees’ out-of-pocket costs increased as the benefit design of their employer-provided coverage became less generous in this period. We conclude that such benefit design changes accounted for about one-fifth of the observed decrease in the rate of growth. However, we also observed a slowdown in spending growth even when we held benefit generosity constant, which suggests that other factors, such as a reduction in the rate of introduction of new technology, were also at work.” The Independent Payment Advisory Board and Medicare Spending: New Research Suggests a Change in Our Medical Culture; Maggie Mahar, Healthbeat Blog, http://www.healthbeatblog.com/2013/05/the-independent-payment-advisory-board-and-medicare-spending-new-research-suggests-a-change-in-our-medical-culture/

and the chief Actuary for Medicare?

“Paul Spitalnic, sees the recent past as prologue – at least to the near future. On April 30, he sent a letter to Marilyn Tavenner, acting Medicare administrator, saying that based on the most recent numbers, the projected 5-year average growth in Medicare per capita spending ia 1.15% , and the 5-year average growth target is 3.03 percent.” As a result, he advised Tavenner that we won’t need the IPAB until 2016—at the earliest.”  The Independent Payment Advisory Board and Medicare Spending: New Research Suggests a Change in Our Medical Culture

If Spitalnic’s and the S&P Healthcare Indice projections prove true over the next few years; Medicare will not be growing faster than GDP and healthcare costs would not be adding to the deficit or crowding out spending on education, infrastructure or the environment as predicted. There is no evidence the trend will not continue and Medicare cost growth is at the lowest level since its beginnings.

Health Beat Blog: “Michael Chernew, a Harvard health policy professor and co-author of the paper, told Modern Healthcare that slower growth was due to more than the weak economy or increases in out-of-pocket spending as employers shifted costs to employees. Instead, the results appear to point to a shift in culture and physicians who have who have grown more focused on greater efficiency in the last five years.” Economy Less of a Factor for Healthcare Spending, New Studies Say“; Melanie Evans; Modern Healthcare;  May 6, 2013

Or perhaps it is what many have said with the advent of the PPACA, a change has and is being brought about in how we are being treated. The overall cost model is moving from a services for fees treatment scenario to a better outcomes and efficiencies for fees scenario.

“The cost saving measures within the PPACA appear to be keeping medical expenses flat during the implementation of efficiencies. For example, in 2012, the average price paid for medical care, doctor visits, operations, glasses, etc. rose at about the same rate as other prices in the economy or less than 2%. Healthcare share of the economy in 2011 shrank from 17.12% to 17.04% due to other aspects of the economy growing faster. BEA Analysis; USA Today; Health Care Spending is Transferred Out of ICU

“‘Until now, the government has paid on volume. Now, it’s trying to pay more on quality,’ says Person, a doctor of internal medicine, as well as CEO of Essentia, which has 18 hospitals and 68 clinics.” For example: “Essentia now provides 300 of the sickest congestive heart failure patients with electronic home scales that relay information, such as weight and symptoms, to a nurse several times a week. The steady monitoring of small things has cut 30-day admissions to less than one-tenth of the national average and saved millions of dollars.”  Health Care Spending is Transferred Out of ICU; USA Today; March 4, 2013;  http://www.usatoday.com/story/news/health/2013/03/04/health-care-spending-growth-slows/1963165/

This is precisely what was provided to me by the Great Lakes Home care nurses. Each morning I would weigh in and take my blood pressure three weeks after my open-heart surgery. The nurse would come once per week to my home to which I was confined and check on me. These type of visits by nurses also gave me an early exit from the hospital initially even though the visits were 2-3 times per week and at a far lower cost than keeping me confined to the hospital (I was bouncing off the walls and wanted out).

“One big change is the government’s revived push toward managed care. The government wants to pay a lump sum for a patient or diagnosis, demand higher standards and expect the medical provider to get the job done for that cost. Rather than cutting reimbursement rates, the government is raising the bar for what it expects for every dollar it spends.” Health Care Spending is Transferred Out of ICU

says Person, the hospital chief: It is now the law, and it has teeth. We’re getting paid less,” he says. “We have to be more productive and efficient.” Health Care Spending is Transferred Out of ICU. USA Today; March 4, 2013

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Health Care Thoughts: Welcome to The Matrix

by Tom aka Rusty Rustbelt    from a commentary I am writing……

Health Care Thoughts: Welcome to The Matrix

Big Data, Data Mining, Data Analytics

Health care providers create and store massive amounts of data generated by clinical and business functions. This hot new term for this mass of data is “big data.”

Until recently, the sheer bulk of the data prevented regular analysis, with summaries of key data sets being the most efficient use of executive and IT resources.

Huge leaps forward in data storage, data processing speeds and data analysis algorithms will allow the analysis of massive amounts of data, while health care reform will require the analysis of massive amounts of data.

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Health Care Thoughts: This is a little strange

by Tom aka Rusty Rustbelt

Health Care Thoughts: This is a little strange

California’s health care exchange is often cited as being as the forefront of complying with the letter and spirit of Obamacare.

So it seems a little strange that California has exempted most exchange information from the public records laws, including information about the contractors doing most of the set-up and operations.

There seems to no indication why this would make sense or be necessary, but questions are being raised.

For more: http://www.huffingtonpost.com/2013/05/09/california-health-exchange-secrecy_n_3247617.html

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In the Short Run, We Are All Dead. At Least According to That New Oregon Medicaid Study.

Well, we AB types–readers and writers, alike–are familiar with John Maynard Keynes’s famous line that “In the long run, we are all dead.”  By which he either meant that economists, if they are to be useful, must try to predict and recommend short-term government policies that avoid or help end current, severe economic downturns, rather than just predicting long-term economic results, or instead he meant that since he was gay and had no children, he didn’t care about the long-term economy and wanted economic policy to concern itself only with the here-and-now and never with the long run.

It’s a fielder’s choice, if you ask me.  Which is why you shouldn’t ask me.  And you shouldn’t ask Niall Ferguson either.

Conveniently, in the very same week in which high-profile economists are debating what Keynes meant, we learned that a study of the effects of access to healthcare insurance (in that case, through Medicaid) shows that access to healthcare does not reduce cholesterol levels, blood pressure, or blood-sugar levels, over a two-year period among people who have elevated levels of one of another of these ailments and who were not previously receiving medical treatment for them because they had no insurance. At least it did not in Oregon, where the study took place, for the sampling involved.

The study is being widely interpreted as showing that healthcare insurance does not improve actual health, and has lead some people to suggest that this means that we should not have healthcare insurance at all, whether publicly or privately financed.

But that’s ridiculous. Or at least it’s insufficient as a response.  What the study obviously shows is not simply that we shouldn’t have healthcare insurance but that we shouldn’t have healthcare. We should not have medical care.  At all.  No doctors, no hospitals, no prescription drugs, no medical devices.  None of it.  We’re spending huge amounts of money on healthcare, and now we know that it doesn’t improve health!

In the long run, we are all dead.  And if you have no access to healthcare and have, say, a heart attack, a stroke, cancer, a diabetic coma, or a serious physical injury, you may well die without medical attention even if you would have lived if you’d had medical attention. In the long run, we are all dead, and in the short run those who have a life-threatening illness or injury and no access to medical care may be too, even if access to medical treatment might have lengthened that run quite a bit.*

So we need to end the medical-industrial complex, because, after all, how much difference is there, really, between the long run and the short run?  Lipitor, insulin, and blood pressure medications are okay, I guess, if you have nothing better to spend your money on.

But even if you don’t, why throw your money away on stuff like that, when those things don’t even improve your health?  And, as for the government and Medicaid, and Obamacare, and Medicare, and all that: Well, what’s that line about, families are tightening their belts, so the government should, too?

At least now we’ve finally found the way to stop healthcare inflation.  End healthcare itself.

*Paragraph rephrased and clarified after initial posting, to avoid possible misinterpretation.

___

UPDATE:  This post, though obviously satire targeted at the rightwing’s conclusions about the study, also is intended to raise what seems to me a critical medical question that, to my knowledge, no one else has asked: Does the study indicate that the treatments for high cholesterol, high blood pressure, and early-stage diabetes are ineffectual?

It may be that the diet recommendations given to these new Medicaid patients–less salt, low sugar, lower-cholesterol diets, respectively–weren’t adhered to by most of the patients.  Or it might mean that, once diagnosed with one or another of these illnesses, those in the study who did not get Medicaid nonetheless changed their diet somewhat in light of the diagnosis.  Or it might mean that the medications that were prescribed for the Medicaid recipients who did obtain medical treatment are less effective than thought–which strikes me as something that should have been the headline takeaway, but obviously was not.

If there’s some other possible meaning to the study’s results, what is it?  Seriously.  If these treatments are medically ineffective, isn’t that something that the public should be told?  And if the treatments are effective in the general population, then why would these very same treatments–specifically, the medications–not work with the Medicaid recipients in the study? And, why aren’t these the questions that the pundits are asking?

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What Is The Out of Pocket Maximum You Will Pay Under the PPACA?

There are quite a few blogs in the blogosphere who tend to get the PPACA wrong and conflate the issues of it well beyond what is reasonable and truthful. Maybe they just do not know what the facts are and miss the benefits of the PPACA to dwell on the negatives exclusively.  Many  tend to dwell  on the amount of money one has to pay out in insurance and deductibles,  what the PPACA does not do, and why we should go back to  . . . ahh nothing? For the record, the PPACA is not single payer nor is it even universal healthcare. It is a convenient compromise which has many positives which did not exist previously. Some thoughts for those who think differently .  .    .

Maggie Mahar at The Health Beat Blog: “Even if you do not qualify for a subsidy, your out of pocket spending is capped at about $5,500 for an individual; $12,000 for a couple. (That includes deductible and co-pays under a Bronze plan–or any other plan). 

A couple earning $65,000 joint might not have $12,000 lying around –especially if they were young. But they could work out a payment plan with the hospital or surgeon– paying, say $5,000 up front as a sign of good faith, and $7,000 over time. If they had to, they could borrow the $5,000 from relatives or friends or a credit card.(These days it’s pretty easy to get a credit card that charges 0% interests on cash withdrawals for 6 months to a year). 

Bottom line: they don’t lose their house, and they don’t go bankrupt. A $12,000 bill is the worst that can happen to them, even if they’re in a horrible accident and in the hospital for 3 months. 

There will also be no annual limit or lifetime limit on how much the policy will pay out. 

This is why the ACA is a boon—even for people who don’t qualify for subsidies. You can’t be ruined by medical bills, and they can stop paying even if you have a very expensive chronic disease.   

As for poor people –if they’re below 133% of poverty, they’ll be on Medicaid (once all of the states expand Medicaid which, eventually, they will).If they’re above 133% of poverty, the subsidies are rich enough to make insurance comprehensive  affordable.”  Maggie Mahar in an email.

Families USA Foundation:  Worry Less, Spend Less: Out-of-Pocket Spending Caps Protect America’s Families;  “The Affordable Care Act initially sets the level of these new caps by referencing an existing definition—the annual out-of-pocket spending limits for high-deductible health plans that are associated with Health Savings Accounts (HSAs). If these caps went into effect in 2011,they would be $5,950 for individuals and $11,900 for families.http://www.familiesusa2.org/assets/pdfs/health-reform/out-of-pocket-spending-caps/National-Report.pdf “Worry Less, Spend Less: Out-of-Pocket Spending Caps Protect America’s Families”

I am not a big fan of Barack Obama who wanders down the double yellow, weaving from one side to the other in attempts to secure his place in presidential history; but in the end, we are better off with the PPAC than what we had before “nothing.”

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Is Margaret Thatcher Responsible for Silicon Valley, As David Brooks Claimed Recently?

[T]he myth of the welfare state fostering a lazy citizenry just doesn’t hold water. A group of small nations (combined population: about 25 million) that came up with Linux, Skype, Ikea, H&M, and Lego — to say nothing of well-written television shows and mystery novels, innovative designers and brilliant architects from Alvar Aalto to Bjarke Ingels — can’t be that lazy.

— George Blecher, participant in today’s New York Times’ Room for Debate discussion about Denmark’s welfare state, apparently the most generous in the Western world.

The New York Times has been running a sequence of pieces in the last month about Denmark’s uniquely generous public-welfare laws, a categorization that includes tax laws and spending programs that apply to all that country’s citizens, not just certain economic classes of citizens.  I hadn’t read the articles until today, when the Times made them (and their subject) the topic of its Room for Debate discussion.

Which reminded me that last month, in a column paying his respects to Margaret Thatcher after she died, David Brooks attributed the existence of Google, Facebook, Twitter, and all those other successful Silicon Valley companies started since the Thatcher/Reagan revolution began, to … Margaret Thatcher.  To whom he expressed gratitude for saving the Western democracies from adopting Swedish-style welfare-state policies, and–he said, in his trademark unexplained ergo-conclusory-declaration fashion–therefore preventing the end of technological innovation of the Silicon Valley variety.

Yes, Brooks really made that claim, if I understood him correctly.  And I think I did.

My immediate reaction upon reading that column was: Well, maybe some other prominent journalist will pick up that gauntlet and go right to the horses’ mouths, and ask some of these tech innovators whether a few of those Swedish-style benefits would in fact have caused them to forego inventing what they invented, and starting their startups or continuing to innovate and invent through their ongoing companies.

Steve Jobs is gone, so he can’t be asked whether he would have ditched the idea for the iPhone a decade ago, had this country had universal single-payer healthcare insurance, access to quality preschools, and guaranteed decent pensions.  But still alive and active are Andy Grove, Bill Gates, Marc Andreessen, Jerry Yang, David Filo, Sergey Brin, Larry Page, Sean Parker, Jack Dorsey, Mark Zuckerberg, Kevin Systrom, Mike Krieger, and almost all of the inventors of all those apps available to anyone with a computer or a smartphone.

Brooks could have asked a few of them before he made his claim, except that he, well, doesn’t do fact vetting before he makes representations of fact. He just uses his perch as a tenured New York Times columnist to make ever-more-outlandish declarations of what he represents as fact. And receives a huge salary, as per his unquestioningly-renewed contracts.  At a time when his own paper, and most others that continue to practice this pundit-star brand of commentary journalism, are dramatically reducing or outright decimating their actual newsroom staffs, because of severely declining revenues.

I keep wondering whether these folks actually bring in substantial revenues, or whether instead they simply continue indefinitely because, y’know, that’s they way it’s always been.  If the latter, it shouldn’t matter any more than that having good-sized staffs of actual professional reporters and editors was the way it had always been, too, at most mainstream newspapers–until it no longer was.  So, why does it, if it does?

Brooks’ Thatcher-Saved-Us-From-the Fate-of-Sweden column was titled “The Vigorous Virtues.” A headline writer, not Brooks himself, titled the column.  The headline writer, a journalist who had enough vigor to read the column and enough virtue to sum up its claim accurately–and who as of a month ago remained employed at the Times albeit at a salary surely a small fraction of Brooks’s–might also have some refreshing takes on government fiscal policies. Thoughts that aren’t mindless statements of ideology transparently masquerading as fact.  But no matter.  He or she, after all, is not a star.

Much better to have Brooks, who is one, reiterate generically yet again that central and northern Europe are innovation wastelands than to require tangible fact as foundation for declarations inferentially based upon supposed fact. There is a difference between opinion and fact (actual fact and false fact, both), although you can routinely switch out opinion for false fact if you’re a big-name pundit under recurring contract with a big-name media organization.

Poetic license is fine when limited to art, but when published in the New York Times as fact–and these statements, by their nature, are, notwithstanding that they’re made in op-ed pieces–they should come with an explicit disclaimer.  They really should.

—–

UPDATE: Reader Jack posted a comment saying:

Why do intelligent people waste their time and attention discussing anything about David Brooks. Look in the dictionary under either toady or sycophant and you will likely find a picture of Mr. Brooks. As to why he is paid by the NY Times, or any other media company, to regurgitate his gruel? I can only suggest that is easily controlled by those who sign the checks and will produce what he is directed to do so.

I wasn’t sure he was referring to me, since he did specifically reference intelligent people, but I responded nonetheless, explaining:

My intended point wasn’t just about Brooks, or even just about the NYT, Jack. It was about these venerable media companies.  Their finances are really stretched, and they keep sacrificing actual news gathering by relentlessly cutting reportorial and editorial staff.  Yet they keep these big-name pundits under contract, paying them outsized compensation, without giving any apparent thought to whether these people, as individuals, often say anything enlightening or informative.  Mostly, their columns read like Facebook pages.

This isn’t to say that any of these people never has anything insightful or genuinely informative to say.  Thomas Friedman, for example, after years of writing columns that were so clearly just “phoned in” thoughtlessly, became a joke; people started doing hilarious parodies of his columns.  But he’s an actual expert on something important–the Middle East–and his columns on that subject are worth reading because they do provide information and some semblance of insight on that topic, irrespective of whether the actual opinion he advances in one or another column, based on that specialized knowledge, is convincing.

And I do NOT mean to suggest that it is a matter of the age or generation of the columnist.  By far the most important pundit right now is Paul Krugman, because of WHAT he writes, based on his extensive specialized knowledge coupled with his his political leanings. Former Slate writer Tim Noah, who wrote a well-received book called “The Great Divergence,” on the reasons for the rapidly escalating inequality in this country, and to a much lesser extent in Western Europe, detailing his own extensive research for the book, is in his mid-50s.  He was fired recently from the New Republic.  He’s a thoughtful analyst of important socioeconomic issues, and I’d love to see him write periodically for the Times.  He’s unemployed now probably because of his age, yet Brooks and Ron Fournier, both of them baby boomers, have regular gigs and get actual attention–lots of it, apparently–for the truly mindless things they keep saying and saying and saying.

There just doesn’t seem to be any filter through which the people who run these media entities sift what–actually, who–they publish in their oped pages.  It appears to be on autopilot.

I do think the issue of whose political and economic commentary gets fairly widespread attention is important.

 

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Medicaid Austin Frakt, Aaron Carroll and Kevin Drum are Good for the USA

by Robert Waldmann

An important study of the effect of Medicaid on health was published in the New England Journal of Medicine.  The study was based on a genuine experiment where some people were given Medicaid and other people weren’t based on a lottery.  Unfortunately, the results were communicated with a NEJM  press release and not just the published article.  The results as received by the press is that Medicaid did not cause significant effect on recipients’ health (except for significantly lower depression) which was interpreted as the study providing evidence that Medicaid does not improve health.

This means that somehow someone rejected the alternative.

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“The messenger wore a skirt,” says Marna Tucker, “Could Alan Greenspan take that?”*

by run75411

Re-posted from New Agenda April 2009, Bill reminds us of some of the history leading up to today:

Editor’s note: We are pleased to present this guest post by Bill H, who’s known around the internet as run75441, and who can usually be found writing in his area of expertise: finance.

Recently, Stanford Magazine did a nice article on one of the University’s former law review presidents who graduated at the top of the 1964 class. The first female to hold either distinction of graduating first in her class and also as president of the school’s Law Review. “Prophet and Loss.” April 2009.

“Well, you probably will always believe there should be laws against fraud, and I don’t think there is any need for a law against fraud,” Alan Greenspan

“I thought it was counterproductive. If you want to move forward . . . you engage with parties in a constructive way,” Rubin told the Washington Post.

“My recollection was . . . this was done in a more strident way” … “characterized as being abrasive.” Arthur Levitt

It would seem these three, coupled with Larry Summers’s push back in Congress on the regulation of derivatives, had the problem and not Brooksley Born. Since then, all three men have suggested there should have been more regulation of the derivatives market that Greenspan has called its recent collapse a “once in-a-century credit tsunami.” Called a modern day Cassandra by Stanford Magazine, one could only wonder where we would be today if the economic and financial wizards had heeded her words.

Short histories on CDO/CDS . . . Collateral Debt Obligations (CDO) were invented by Drexel Burnham Lambert (Milken) as a way to package asset based securities. The CDO was tranched into similar asset backed securities of the same rating allowing investors to concentrate on the rating rather than the issuer of the bond. Ten years later, JP Morgan invented Credit Default Swaps (CDS) was used as a mechanism to bet on a 3rd party default. In 2000, CDS were made legal with the passage of the Commodity Futures Modernization Act and any regulation of them was stymied with this bills passage. Later on, an investment firm decided to team CDS and CDO together, transferring the risk from the CDO to the issuer of the CDS, and creating a synthetic CDO.

It was 1994, that Bankers Trust lost ~$800 million from various derivative investments. The chief losers were P&G and Gibson Greetings. Bankers Trust was formed by a consortium of banks, shedding the loan image for conducting trades. Bankers Trust was successfully sued by P&G for its losses by claiming racketeering and fraud. Bankers Trust also became known for its remarks about Gibson Greetings not knowing what Bankers Trust was doing. In 1998, Bankers Trust pled guilty to institutional fraud due to the failure of certain members of senior management to escheat abandoned property to the State of New York and other states. Again in 1998, LCTM was struck by a downturn in the market when Russia defaulted on government bonds, a security LCTM was holding. To make a significant profit on small differences in value, the hedge fund took high-leveraged positions. At the start of 1998, the fund had assets of about $5 billion and had borrowed about $125 billion. When investors panicked and sold Japanese and European bonds and bought US treasuries, the spreads between LCTM holdings increased, resulting in a loss of ~$1.8 billion by August 1998. LCTM was saved by an orchestrated Fed bailout utilizing private investors.

It was in 1998 and Brooksley Born testified to Congress about the dangers of the unregulated derivatives market referencing the LCTM losses as a recent example. It was also then that deputy Treasurer Larry Summers testified to Congress that Born’s desire to regulate is “casting a shadow of regulatory uncertainty over an otherwise thriving market.” Larry’s testimony set the stage for Congress to rein in the power of the Brooksley Born’s CFTC and the passage of Phil Gramm’s Financial Service Modernization Act of 1999 prohibiting the regulation of the derivatives market (In 2005, the revised bankruptcy laws would place derivatives outside of the laws also making it the first to receive compensation). W$ and banks had clear unregulated sailing in the sea of laissez faire in 2000 with a closing of the door for debtors in 2005. It was little better than a roach motel, you could check in but you can not check out.

Again in 1999 and in the Senate that opposition arose to the passage of the Financial Services in the form of Senator Dorgan of North Dakota. An excerpt from the Senator’s speech that day before the bill was passed:

“I, obviously, am in a minority here. We have people who dressed in their best suits and they just think this is the greatest piece of legislation that has ever been given to Congress. We have choruses of folks standing outside this Chamber who spent their lifetimes working to get this done, to say: Would you just forget all that nonsense back in the 1930s about bank failures and Glass-Steagall and the requirement to separate risk from banking enterprises; just forget all that. Time has moved on. Let’s understand that. Change with the time. 

We have folks outside who have worked on this very hard and who very much want this to happen. We have a lot of folks in here who are very compliant to say: Absolutely, let me be the lead singer. And here we are. We have this bill, which I will bet, in 5, 10, 15 years from now, we will be back thinking of this bill like we thought of the bill passed in the late 1970s and early 1980s, in which this Congress unhitched the savings and loans so some sleepy little Texas institution could gather brokered deposits from all around America and, like a giant rocket, become a huge enterprise. And guess what. With all the speculation in the S&Ls and brokered deposits and all the things that went with it that this Congress allowed, what did it cost the American taxpayer to bail out that bunch of failures? What did it cost? Hundreds of billions of dollars. I will bet one day somebody is going to look back at this and they are going to say: How on Earth could we have thought it made sense to allow the banking industry to concentrate, through merger and acquisition, to become bigger and bigger and bigger; far more firms in the category of too big to fail?

Senator Dorgan’s Speech, November 4, 1999 on “Gramm-Leach-Bliley Act” also known as the Financial Services Modernization Act

Larry Summers has been present throughout much of this change, supporting it, denigrating the opposition, and now claiming his experience at D. E Shaw gives him an insider’ knowledge as to how the derivatives market works. While President of Harvard University; Larry received a letter (May 12, 2002) from Iris Mack, a new employee of the Harvard Management Company managing Harvard’s endowment funds. A Doctorate in Mathematics from Harvard and a former employee of Enron who dealt in derivative trades, she expressed concerns about the trades (swaps and other complex financial instruments) being made by the funds and the lack of understanding of the trades by the traders. On July 1, Iris was called into the office of Jack Meyer, the chief manager of Harvard Management. On July 2, Iris was fired for making what Harvard Management termed as: “baseless allegations against HMC to individuals outside of HMC.” “Ex-Employee Says She Warned Harvard of Risky Moves” Boston Globe, April 3, 2009. While Harvard Management Company claims above normal returns on its endowment funds, it has spent much of last year selling off private equity and investments to raise cash.

The attitude expressed by our head of the Economic Council is one of “trust me now” as I have all of the experience necessary to fix the current economic and financial problems even though he has helped to initiate today’s issues by denigrating Brooksley Born’s request for regulatory power to Congress, even though he ignored the advice of Iris Mack at Harvard University, even though he consulted to D.E. Shaw, a hedge fund, and making ~$5.2 million while being the financial engineer’s engineer, and even though he has been repeatedly wrong in his direction and advice to Congress and Industry. In the name of deregulation and global efficiency, Larry was its cheer leader while signing off on a letter encouraging the dumping of toxic wastes in Asia at the World Bank. He helped to shepherd China into the WTO claiming:

“’The agreement with China is a one-way street,’ Summers said. ‘China opens its markets to an unprecedented degree, while in return the United States simply maintains its current market access policies,’ he said. ‘It is difficult’, Summers added, ‘to discern any disadvantage to the United States in passing this legislation.’”

— Robert Waldman, Economist, Angry Bear blog.

Personality, ego, and a blind belief in the ability of the market place to dictate the proper path and the correction has gotten in front of common sense. Maybe it is time to sideline Summers and his protégé Geithner in favor of Born, Mack, and Dorgan. Each has shown more foresight into how today’s problems and issues were created and how to resolve them.

“I certainly am not pleased with the results,” she adds. “I think the market grew so enormously, with so little oversight and regulation, that it made the financial crisis much deeper and more pervasive than it otherwise would have been.”   

Brooksley Born, Stanford Magazine, April 2009

*“The messenger wore a skirt,” says Marna Tucker, a Washington lawyer and a longtime friend of Born. “Could Alan Greenspan take that?”

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The Age Rating Game

Maggie Mahar Health Care Blog discusses some of the rhetoric employed in media on how to pay for health insurance.

In other words, when costs are distributed over a large group, older adults save more than younger adults lose.

Still, many believe that older Boomers can and should pick up the higher tab for their own care. After all, throughout their financial lives, they have been luckier than most: they enjoyed first crack at the employment market when jobs were plentiful, and first dibs on housing when homes were affordable.

Yet in recent years, the economy has not been kind to the rock ‘n roll generation. One in six is now unemployed, and from 2000 to 2011, the average (mean) after-tax income of Americans age 45 to 54 (who are now in their 50s and early 60s) plunged by 13.3 percent.

By that measure, the recession has hit them harder than other age groups except Americans aged 15 to 24. Over those years, this cohort should have been enjoying their peak earning years. But as the chart below reveals, they didn’t.

Yet there’s a trade off: if age rating were abolished, younger adults would be charged more, and some would decide they can’t afford insurance. Bottom line: “the number of uninsured older Americans would be roughly offset by increases in the number of uninsured adults in the two younger age groups (18-34 and 34-44).”

This worries policymakers for two reasons. First, we need young, healthy Americans in the pool to keep insurance costs down. Secondly, if young families decide to forego insurance, many won’t buy separate policies for the children.
How do we choose between children and their grandparents?

If we don’t want to ration care, the only rational solution is to bring down the cost by trimming waste in our health care system. This will be difficult. Most of the fat isn’t hanging out on the edges of the steak – it’s marbled throughout in the form of unnecessary treatments and over-priced products. It needs to be removed carefully, with a scalpel. But it can be done.

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Geithner’s Baa Humbug to Jobs and Labor

Dan here…Taking a look back to 2009:

Geithner’s Baa Humbug to Jobs and Labor 12/25/2009

(h/t Run75441)

“Ebenezer: Since you ask me what I wish sir, that is my answer. I help to support the establishments I have named; those who are badly off must go there.”

Daniel Gross at Slate interviews Tim Geithner here: “We Will Be Judged on How We Dealt with the Things that were Broken” Some rather revealing statements by Tim Geithner to Daniel Gross’s questions:

GROSS: There’s a perception that you regard your portfolio narrowly, as primarily focused on the health of Wall Street, with Main Street a distant second.

GEITHNER: “My first and essential responsibility was to fix and reform the financial system. That was necessarily going to be the principal part of what people saw. About half my time from the beginning has been spent on the design of the broader economic strategy. The idea that we did not do much for the broader challenges facing the country is completely unjustified. The Recovery Act itself was not just a sweeping, essential force for growth but included a bunch of targeted investments in education, energy, environment, health care that will have huge long-term benefits.”

(Run here: Geithner misses the point or makes the point that finance is the number one concern over Main Street, even though Main Street is financing the rescue of W$. The constituency doesn’t want charity in targeted investments in education, energy, education, and environment when it can pay for those investments itself if they are working. Main Street wants jobs? Main street is still waiting for that tsunami of job creation which is one of the broader challenges of any administration and no administration has put into play any package to stimuli it or companies to do more. Jobs are left to free market influences which is content with investing profits elsewhere other than job creating infrastructure.)

GROSS: So you don’t think the bailouts were too friendly to Wall Street?

GEITHNER: “The idea that the strategy was unfair and has principally benefited a small number of institutions in New York is a mischaracterization of the design and result of the strategy. I thought people would have understood this after the failure of Lehman Bros. But when you do too little and you leave the system with real fear that everything is going to fall apart, like any financial crisis, it hurts the poorest most. A just and fair strategy, even if it is politically hardest to explain and justify, is to use well-designed but massive force to stabilize the system.“

(Run here: Over at Naked Capitalism, they are debating whether Goldman Sachs drove the collapse of AIG by calling for the mark down of CDO by companies holding too many of them thereby forcing AIG to raise collateral after it was downgraded and eventually paying off on CDO that never were expected to payoff. While AIG is at fault for seeing too many pie in the sky dollars in risk and having too little collateral to cover it, one has to wonder why Goldman Sachs should have received 100% on the dollar on its CDS for its risk with AIG and not knowing how over leveraged AIG was at the time. Goldman Sachs certainly benefited by Geithner’s negotiated settlement of AIG’s liabilities at 100% on the dollar.)

GROSS: The biggest downside surprise?
 
GEITHNER: “The [high] level of unemployment relative to what was happening in the economy as a whole. I’m not an economist, but almost all forecasters missed that. And that’s hugely consequential, because it’s the prism through which most people view basic economic health.”

(Run here:He is kidding right? During every economic downturn, it has consistently been Main Street that has been shown the street from their jobs or homes.)

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