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

Health Care Thoughts: Accountable Care "Smackdown"</

by Tom aka Rusty Rustbelt

Health Care Thoughts: Accountable Care “Smackdown”

The American Medical Group Association represents about 400 very large and sophisticated multi-specialty physicians groups, such as the Cleveland Clinic group and Intermountain (Utah) group.

The Obama administration had counted on these groups to be the first to create Accountable Care Organizations (ACOs), starting with Medicare ACOs in 2012 and then moving to full service ACOs. These groups were more likely to have the huge resources necessary to start an ACO.

On Wednesday the group announced 90% of its members would not participate, because the draft regulations issued March 31st were too prescriptive, too operationally complex, the move to risk sharing is too quick, the gatekeeper and risk management capabilities too much, and the time line too short. The AMGA consensus is the chance of success is close to zero, so why waste resources.

(see my post of 4/6/11:

Not to pat myself on the back, but I just finished two papers with essentially the same comments. I’m not that smart, the flaws are just so terribly obvious to anyone with operations or insurer/risk management experience.

If the big 400 cannot chew through this and come up with a workable plan, neither will other physician groups. Based on recent conference attendance many provider organizations are taking the slow down approach.

It appears today only very large very integrated systems owning all of the necessary providers will be in the first wave. This could change for the better, but I doubt it. This could change for the worse though.

Not enough ACOs, no significant cost savings with quality improvement, no deficit improvement, train wreck.

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Euro area GDP report: unbalanced

Today Eurostat released their estimate of Euro area growth for the first quarter of 2011. The economy grew smartly, or 0.8% on the quarter on a seasonally- and working day- adjusted basis. On the face of it, Euro area growth, which is 3.3% on an annualized basis, dwarfs the 1.8% seen in the US economy. Really, though, it’s joint German and French growth that tower US Q1 GDP growth.

Eurostat doesn’t explicitly highlight how inordinately unbalanced is growth across the region in their report . Germany and France alone accounted for roughly 72% 78% of the quarterly growth of Euro area GDP.

(As I highlight below, the Euro area quarterly growth rate in the chart is slightly different to that in the Eurostat report since some euro area members are missing. The cross-sectional contribution should be roughly unchanged during the revisions, though.)

Update: This chart has been re-posted with only slight modifications from the original. It does not change the article’s premise in any way. H/T to Philippe Waechter in comments below.


If final demand was growing so quickly in Germany, I would say that the Euro area is adjusting more healthily than I had expected. Spenders become savers and vice versa, and capital flows adjust current account balances (and trade) accordingly. Germany spends more at home and abroad, while the Periphery less so. This does seem to be occurring according to the Federal Statistical Agency:

In a quarter-on-quarter comparison (adjusted for price, seasonal and calendar variations), a positive contribution was made mainly by the domestic economy. Both capital formation in machinery and equipment and in construction and final consumption expenditure increased in part markedly. The growth of exports and imports continued, too. However, the balance of exports and imports had a smaller share in the strong GDP growth than domestic uses.

Euro area average growth is likely slow down a bit, as the global economy moves toward a tightening bias and fiscal austerity clenches demand further. However, the outlook for the Euro area as a whole does look increasingly reliant on the trajectory of German and French economic conditions. This is a risk, especially since Germany is an export-driven economy.

As a comparison, 2005 saw growth as broadly more balanced, where Germany and France contributed a smaller 50% to total Euro area growth.

The Q1 2011 growth trajectory (top chart) is entirely consistent with ECB targeted at the core countries.

Rebecca Wilder

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Random Notes on Economics, Music, and Death–and a Bleg

  1. Excess Rents Datapoint of the Day: Since the NYT doesn’t pay Paul Krugman for his blog posts, why should reading those count as part of the “20 free articles” non-subscribers are allowed?
  2. I want the Grapelli track, but not enough to pay for a six-CD set.
  3. This—built by government employees—is the greatest accomplishment in music since Alan Lomax.
  4. And, for fun, via my buddy Tom, the best obituary you’ll read today.
  5. Bleg of the Day: Anyone have a good source or sources on the structures, organizations, and operations of the old “Tea Companies”? Have been thinking about bubbles, and Tea Companies seems to be the Goldman Sachs of the pre-20th century: always in the middle of the problems, but treated reverentially in the histories.

    And, in the Posts I Plan to Write Soon category:

  6. This book is making me wonder if we’re asking the wrong question. Maybe it’s not “Is Economics a Science,” but rather “Is Economics a Discipline.” More to come on this.

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The Case is Made Clearly

The only time I personally owned MSFT stock was just after Thomas Penfield Jackson’s second break-up ruling, when there might have been an upside.

I sold it shortly after the Appeals Court nixed the only good idea—breakup—in favor of “let them pay a fine to be determined, and let them dawdle long enough that the incoming Administration decides the fine, just so they’re really disincented from making money by developing good products.”

Barry Ritholtz Explains It All to You.

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Florida State University and Koch Brothers…significant or not?

Via Alternet and the St. Petersberg Times:

A foundation bankrolled by Libertarian businessman Charles G. Koch has pledged $1.5 million for positions in Florida State University’s economics department. In return, his representatives get to screen and sign off on any hires for a new program promoting “political economy and free enterprise.”

The agreement is here.

Since readers include university professors, what is the deal? What is usual or setting a new bar for funding in a public institution?

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Courts and Affordable Care Act…Much Ado About Not Much

by Beverly Mann

Much Ado About Not Much

The big legal news today was the first appellate-court oral argument, this afternoon, on the constitutionality of the Affordable Care Act. The argument—arguments, actually; two separate cases were argued separately—were to a three-judge panel of the Court of Appeals for the Fourth Circuit, the regional federal appeals court for several mid-Atlantic and southern states, including Virginia.

In one of the two cases argued today, Virginia’s Tea Party attorney general, Ken Cuccinelli, had sued on behalf of the state, challenging the constitutionality of the ACA in total and, jointly and severally, the individual-mandate provision providing for a civil fine for failure to obtain health insurance. (OK, the use of the phrase “jointly and severally” is an inside joke among lawyer types; joint and several liability is a personal-injury-law term that means that each defendant found guilty of participating in causing the injury is liable individually for the whole amount of the monetary award if the other defendants can’t pay their fair share.) The lower-court judge held that individual-mandate provision, but not the rest of the statute, unconstitutional, so the state appealed. In the other case argued today, Liberty University and a few individuals challenged the law as unconstitutional on several grounds, including that, according to the university, the law would allow for federal funding of abortions.

In the State of Virginia case, a threshold issue is whether the state has legal “standing” to challenge the constitutionality of the statute, ostensibly on behalf of its residents, since the statute doesn’t affect the rights of the state itself. In the Liberty U. case, the federal-funding-of-abortions grounds for constitutional challenge is a non-starter, but at least the U. has standing to sue, since it’s an employer and parts of the ACA do affect employers, and the individuals who are suing along with the U. have standing because they’re, well, individuals and therefore subject to the individual-mandate provision..

Anyway … all three panel members, selected randomly from among the members of that court, are Dem appointees, one a Clinton appointee, the other two Obama appointees. The reports about the arguments can be summed up as: the panel will find that Virginia has not standing to sue to challenge the constitutionality of the law, and that the entire law, including the individual-mandate provision, is constitutional as “necessary and proper” (a term in the Constitution) legislation under Congress’s power to regulate commerce, a power specified in the Constitution.

One of the Obama appointees, Andre Davis, said that under the Commerce clause, Congress has broad power to regulate national markets—something that the Court has held unremittingly since the 1930s—including the health insurance market. The other two judges, Clinton appointee Diana Gribbon Motz and Obama appointee James A. Wynn, Jr., pointed out that regulating commerce includes regulating the effects of people’s decisions, individually or collectively, on commerce—on markets—and so, for Commerce clause purposes, if not independently, then at least via the necessary-and-proper clause, there is no distinction between the power to regulate “activity” and the power to regulate “inactivity.” This undercuts the crux of the challengers’ claim, which is that there is a constitutionally significant distinction between regulation of “activity” and regulation of “inactivity.” The judges kept pressing the Liberty U. lawyer to delineate a line between activity and inactivity, and to state whether a decision not to do something amounts to an action.

Apparently, he failed the activity test, at least as far as this panel is concerned.

Within the next few weeks, there will be three other appellate arguments, in other regional appeals courts, on the constitutionality of the ACA.

And all of these, and the opinions these panels will write, are sideshows. Normally, the persuasive strength of an appellate opinion in a case that clearly will be decided ultimately by the Supreme Court could matter, by persuading a justice or two or, in a high-profile case, by persuading the public and therefore, indirectly, a justice of two.

But these cases—this issue—has the feel of Bush v. Gore, at least in that each of the justices almost certainly already knows how he or she will vote. I’ve said here earlier, and I’ll repeat it, that I think the swing vote in this case is Scalia, not Kennedy, and that because Scalia has boxed himself in, in earlier, relatively recent opinions, on the basic commerce-clause/necessary-and-proper clause questions at issue in the ACA litigation, he will vote to uphold the statute as constitutional.

I’ve also said, though, that I’m probably wrong.

crossposted with The Annarborist

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Data Integrity Requires Personal Integrity and Vetting

Anyone who has ever worked with data knows that making certain the information is “clean” is much more important than what you do with it. Brilliant analysis of inaccurate data may make heroes (Chamley, Prescott, etc.), but it doesn’t make sensible policy. Witness the release of “public” data from the state of Texas.

Jeremy once commented that the transition from a public to a private university was the choice between everyone knowing your earnings(public data) and everyone knowing your student reviews.

What happens when (1) everyone knows your salary but (2) what they know isn’t true:

“My salary on the spreadsheet is $30,000 higher than my annual contract salary,” a lecturer in the University of Texas system wrote in an e-mail message. He did not want to be named because of his status as a non-tenure-track employee. “Other details are correct, but the number 99 percent of people will want to see is not. The spreadsheet says that it’s me, but it is not me.”

So why would this happen? Because public universities in Texas aren’t allowed to treat their data as if they are private companies:

System officials said the decision to release the data even though it was in draft form and included many gaps resulted from receiving multiple requests for it from news-media outlets under the state’s open-records laws. After noting the data’s shortcomings, in a disclaimer cautioning that the information was “incomplete and has not been fully verified or cross-referenced,” the system released it “in the spirit of openness and transparency” because much of the data was already public anyway, said Anthony P. de Bruyn, director of public affairs.

Except, of course, that the data wasn’t already public. Public data is vetted; this had not been. So why was it released?

Apparently, because no one asked what the legal consequences would be if they made certain it was accurate first:

Thomas Kelley, a spokesman for the Texas attorney general’s office, said in an e-mail that the state’s Public Information Act “applies to records available on the date of request,” even if the university system thought the records being requested were incomplete. Mr. Kelley said system officials had two options: release the data available at the time or request a ruling from the attorney general’s office about whether the incomplete data must be released.

And what was wrong? Well, almost anything:

Mr. de Bruyn said the data, which spans the system’s nine academic campuses, was collected mostly at the institutional level. Yet professors have noticed some mistakes in the data that seem to point to a more-distant process.

For instance, Renee Rubin, an associate professor in the department of language, literacy, and intercultural studies at the University of Texas at Brownsville, said she and her department chair were listed in the wrong department. “So then you begin to wonder what else is wrong,” Ms. Rubin says. [emphasis mine]

Is it more worrisome if Mr. de Bruyn is correct, or if he is not?

I’m think about this more intensely now in part because of the pending end of the publication of the invaluable Statistical Abstract of the United States. As Kieran Healy noted, “When it comes to the United States, the print and online versions of the SA are a peerless source of information for all your bullshit remediation needs.”

Unlike the Texas imbroglio, the Statistical Abstract has a 133 year publication history and well-established reputation for accuracy. Destroying that reputation would have taken only one major incident; will anyone ever trust public data released in Texas again?

But the Obama Administration’s “transparency initiatives” appear to be failing here as well, as an Unforced Error. (paging Brad DeLong) And the consequence will be something that more resembles the Texas debacle than accurate, independent policy analysis.

Unless the Administration considers providing peacemeal, unstandardized information to be a feature, it appears to be a substantive bug.

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