Bringing Sanity to the Health Care Wars

In my youth, my uncle Elliott, an insurance man, drummed into me that insurance was designed to protect against catastrophe, against those losses that our household asset base could not absorb without risking insolvency. (I recognize that businesses may use insurance for somewhat different purposes from time time. I'm focusing on non-business households.) I was always puzzled at the way the insurance industry had taken over healthcare, starting with servicing the billing and payment process. The whole system seemed to promote the attitude that we were entitled to have our healthcare bills paid by a third party, that there was something wrong with us if we had to pay medical bills out of our own pocket.

Consequently, I was recently struck by a recent column by David Brooks, Let’s Get Fundamental, and, as is frequently my wont, I decided to read a couple of the essays to which Brooks had referred. I have been getting progressively more frustrated by the so-called "health-care debate," which has been giving off huge amounts of heat but very little light. Brooks has been a steady voice in favor of reform of the system, and has focused on the perversity of the incentives in America's delivery of health care, which have driven the country to the brink of bankruptcy.

One of the essays Brooks commended appeared in September's The Atlantic and was authored by David Goldhill. In How American Health Care Killed My Father, Goldhill summarizes the situation in this way:

"A wasteful insurance system; distorted incentives; a bias toward treatment; moral hazard; hidden costs and a lack of transparency; curbed competition; service to the wrong customer. These are the problems at the foundation of our health-care system, resulting in a slow rot and requiring more and more money just to keep the system from collapsing."

Of course, his prescription is not limited to increased access to the exisitng system. In his view, with which I agree, we need to wrest the system away from the insurance middleman, and retake responsibility for our health.

A report by the Brookings Institution, Bending the Curve: Effective Steps to Address Long-Term Health Care Spending Growth, also cited by Brooks, reaches conclusions similar to Goldhill about how to move forward:

This strategy consists of four interrelated pillars. First, as a foundation for improving value, all stakeholders in the system need better information and tools to be more effective. Second, provider payments should be redirected toward rewarding improvements in quality and reductions in cost growth, providing support for health care delivery reforms that save money while emphasizing disease prevention and better coordination of care. Third, health insurance markets should be reformed and government subsidies restructured to create competition and improve incentives around value improvement rather than risk selection. This step requires near-universal participation in insurance markets to succeed. Finally, individual patients should be given greater support for improving their health and lowering overall health care costs, including incentives for achieving measurable health goals.

It will be interesting to see what the President's prescription is. Has he allowed the dysfunctional legislative train to get too far down the track? There's no question in my mind that he and his people understand the perverse incentives emmbedded in the current system. Does he have the courage to put on the brakes and stake out a new direction? We'll see.

SPDRs and Jack Russells

I have no idea what Jack Russells have to do with SPDRs, but it's a great commercial!

Chaos in Teheran

Pretty amazing footage from the BBC, here.

What is going to happen? While part of me wishes for chaos and collapse, this will likely not solve anything. The Obama Administration's job of dealing with Iran just got immensely more difficult.

I guess no matter how a people pat themselves on the back for their successful demonstration of democratic institutions, the specter of fraud and vote manipulation will always rear its head. Consider Florida 2000.

More footage from the AP:

Another view, reported in the NY Times News Blog holds that Moussavi's lead or strength in the polls was all an exercise in Western wishful thinking, that his support was principally among a narrow educated elite who tended to be much more approachable by Western media. Makes some considerable sense to me. This is another case in which we really need more "humint" when it comes to the Middle East, or anywhere else that American culture does not hold sway.

Or another explanation: "The regime use democratic tools (elections) as a means to show off its legitimacy. It does not believe at all to democracy. It says democracy is a Western and not Islamic value and in fact it fight all western values."

I find this all very hard to watch. I am a sentimental old democrat, I guess.

PIMCO's Common Sense

I never thought that PIMCO would vote for an inflationary Fed policy and monetizing long-term Treasury Debt. But Paul McCulley, in his "Global Central Bank Focus," has just done so, in a very perceptive and balanced speech to the Money Marketeers Club. McCulley points out the policy paradox we find ourselves in, with a need to greatly expand the nation's balance sheet through borrowing while the private economy is deleveraging with a vengeance. This has the Republicans and traditional conservatives predictably frothing at the mouth. The policy prescription also calls for vastly expanded temporary federal spending to fill the demand gap, again causing the GOP leadership to pull out what's left of their hair. As McCulley puts it, the Fed has placed itself at the service of fiscal policy, normally the province of the Congress.

He also deftly points out the difficulty of the Euro Zone, where the ECB has the power to conduct a unified monetary policy, but no unified political authority exists to exercise fiscal policy. As he puts it,

To be sure, the ECB (European Central Bank) has difficulty with the concept of QE [quantitative easing], in part because Euroland represents monetary union without political union and, thus, fiscal policy union. Put differently, if the ECB wants to be accommodative of more Keynesian fiscal policy stimulus, de facto monetizing it, what fiscal authority does the ECB call to cut the deal?

I thought this was great stuff. I have been a recent convert to reading Bill Gross, but I think I will start following Paul McCulley as well. We're all Keynesians now!

Anne Boleyn

One of my very favorite "ballads," in a rendition by Stanley Holloway: "With Her Head Tucked Underneath Her Arm."

Here are the words:

In the Tower of London, large as life,
The ghost of Ann Boleyn walks, they declare.
Poor Ann Boleyn was once King Henry's wife -
Until he made the Headsman bob her hair!
Ah yes! he did her wrong long years ago,
And she comes up at night to tell him so.

With her head tucked underneath her arm
She walks the Bloody Tower!
With her head tucked underneath her arm
At the Midnight hour -

She comes to haunt King Henry, she means giving him 'what for',
Gad Zooks, she's going to tell him off for having spilt her gore.
And just in case the Headsman wants to give her an encore
She has her head tucked underneath her arm!

With her head tucked underneath her arm
She walks the Bloody Tower!
With her head tucked underneath her arm
At the Midnight hour.

Along the draughty corridors for miles and miles she goes,
She often catches cold, poor thing, it's cold there when it blows,
And it's awfully awkward for the Queen to have to blow her nose
With her head tucked underneath her arm!

Sometimes gay King Henry gives a spread
For all his pals and gals - a ghostly crew.
The headsman carves the joint and cuts the bread,
Then in comes Ann Boleyn to 'queer' the 'do';
She holds her head up with a wild war whoop,
And Henry cries 'Don't drop it in the soup!'

With her head tucked underneath her arm
She walks the Bloody Tower!
With her head tucked underneath her arm
At the Midnight hour.

The sentries think that it's a football that she carries in,
And when they've had a few they shout 'Is Ars'nal going to win?'
They think it's Alec James, instead of poor old Ann Boleyn
With her head tucked underneath her arm!

With her head tucked underneath her arm
She walks the Bloody Tower!
With her head tucked underneath her arm
At the Midnight hour.

One night she caught King Henry, he was in the Canteen Bar.
Said he 'Are you Jane Seymour, Ann Boleyn or Cath'rine Parr?
For how the sweet san fairy ann do I know who you are
With your head tucked underneath your arm!'

Moderates Unite (cont'd)

I was searching madly earlier for support for the view with which I agree that are no backups for the propeller-heads, particularly the Props-in-Chief, Tim Geithner and Larry Summers. Well, Deborah Solomon in the WSJ has it nailed. While lack of staff is a problem throughout the Administration, it is especially tough on Treasury, which is bearing the brunt of the bailouts.

And Solomon's piece lays the blame on the difficulty vetting prospective candidates in light of the post-Daschle standards.

Moderates Unite

Again, I find that this morning David Brooks speaks to my sense of unease with the new administration's early moves. About all I can say for our President is that he is within the first 45 days. As I emailed to my friend Prince Charles of Birmingham yesterday, What choice do we have?

I am struck by Brooks' observation that, "The only thing more scary than Obama's experiment is the thought that it might fail and the political power will swing over to a Republican Party that is currently unfit to wield it." So we are kind of stuck, and the quandary Brooks and I (and no doubt many others) find themselves is that we have no home.

As I said to Birmingham Charlie yesterday, I am a lifelong Republican, but of the Rockefeller variety. Somewhere along the way, my party got hijacked by a bunch of ideological "whack-jobs" with whom I find I share no values whatsoever. I long for a return to a Hamiltonian view of government, with a Constitutional mission to "promote the general welfare," in such a way that all the people benefit.

I do agree that the need to save the economy should not necessarily sweep aside the addressing of important goals, such as health care and education reform. But fiscal discipline has always been part of the Hamiltonian credo.

My faith in our new President has not entirely dissipated. But I would like to see some backup to the propeller-heads that Obama has assembled. Geithner needs an Assistant Secretary for Tax Policy, for Debt Management, for Economic Policy, and I am sure other key posts. Neel Kashkari, a Paulson holdover, is still running TARP. How long does it take to sort out the Plum Book? Probably too many casualties to the no-lobbyist, no "tax cheats" Puritanism of the new guys. As the Washington Post reported many in Washington (and in Bedminster) feel that the problems of the markets and the economy are too complex to be left to Larry Summers and Tim Geithner.

So what's my course? I am tempted to fall back on the mantra of Julian of Norwich -- "All will be well; all will be well; and all manner of thinge will be well." But she was a Anchorite and lived in a box! What did she know about credit default swaps and CMOs?