Mob rule not the way to go in Georgia or any other state

by Alton Drew

A group called the Citizens in Charge Foundation recently gave the state of Georgia a “D” on voter’s rights because the state allegedly dooes not allow citizens to introduce constitutional amendments, provide for referendums on legislation, or propose state laws.

Democracy in a pluralistic society as ours is about citizens being able to elect their leaders. That is as far as direct democracy ought to go in the United States.

I don’t know who this group is about obviously they never took Poli Sci 101. Rather than propose an inefficient solution, they should educate citizens on how they petition for constitutional changes through their elected representatives.

Mob rule is not what the Founding Fathers had in mind for the United States. It’s bad for public policy and disastrous for the economy.

Perdue’s plan: responsive versus representative

Governor Sonny Perdue’s (R-GA) proposal that the governor appoint the commissioners of insurance, labor, and agriculture as well as the state superintendant of schools raises an interesting issue: why elect a governor if he is not being allowed to govern? Georgia’s governor cannot be called a chief executive if the final buck does not stop with him or her on public policy. He becomes just another administrator and the executive branch truly morphs into tiers of adminsitrators with no real head leading.

The premise that Georgia government becomes less representative because the governor appoints a cabinet is a weak one. Government in general should first be responsive. Government should be looking for optimal solutions and it can’t do so if it follows a smokestack formula for executing the laws and administering the policies of the state.

Cabinet heads cannot be effective if they have to constantly worry about how representative they are politically. They should focus on finding best solutions. If they can concentrate on policy making versus politics, the positive results will be favorable and deemed representative by the voting public.

Besides, Georgians like strong leadership. This proposal would strengthen it.

MARTA attempts at price discrimination is bad policy and bad politics

Talk about a clash of politics and public policy. Charging people more money to travel longer distances is voo-doo economics. It costs more to serve people who want to travel a couple stops on a system that runs through two counties. The more riders and the longer the distance traveled, the greater the efficiency of the system. MARTA’s value comes from its use.

Politically, this proposal sends a bad message. MARTA is saying that we will implement price discrimination to discourage people from venturing where they are not wanted. This type of discouragement of ridership makes no sense.

MARTA should consider charging higher amounts during peak periods when the system is under greater load pressure, similar to the policy on DC’s Metro.

http://blogs.ajc.com/political-insider-jim-galloway/2010/02/05/marta-may-charge-by-the-mile-or-time-of-day/comment-page-2/#comment-44198

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From tea party to afterparty to cocktail party

The tea partiers are finding out the hard way what the Founding Fathers realized over two-hundred years ago: passions have no place in the administration of government.  

In addition, organization stifles passion.  You start to lose sight of the issues that bound you together.  You end up focusing on vote-getting instead of issue vetting.  The immediate issues become who gets to set the agenda. 

The irony, according to a CNN report http://www.cnn.com/2010/POLITICS/02/03/tea.party/index.html?hpt=C1, is that the very capitalist philosophy that most of these people have been railing against, is the same philosophy that is leading the organization of the tea party convention.  You know, money-grubbing capitalists.  Oh well, let’s hope they can put on an after party.

Obama budget to emphasize jobs in light of $1.6 trillion deficit

The Obama administration is set to release its FY 2011 budget proposal today at 10:00 am with remarks by President Obama scheduled for 10:45 am.

The budget reportedly projects a deficit of $1.6 trillion, a 23% increase from the estimated deficit in the FY 2010 budget. This budget includes $100 billion for a job creation initiative. The budget will also propose a freeze on discretionary spending, which accounts for 15% to 17% of the budget.

According to the White House, the administration is proposing 120 terminations, reductions, and savings for a number of programs that is expected to amount to $20 billion in savings in FY 2011.

Source: The Office of Management and Budget

Published: 1 February 2010

The great recession is more like the great regression

On Tuesday, Federal Reserve chairman Ben S. Bernanke opined after a speech before the Brookings Institution that from a technical standpoint, the recession is very likely over. To the 9.7% of the workforce who are not employed that does not provide much relief. Consumers, based on their level of confidence in the economy’s future, are becoming resigned to the “new normal.” Wall Street, that great radar detector of uncertainty around the corner, may have already built in this new normalcy into its prices.

Since the end of the first quarter 2009, stock prices overall have been enjoying a resurgence, albeit bumpy at times. The investment community may be experiencing green shoots but when it comes to where the nation is now in terms of economic growth, the green shoots look more like weeds. For example, we have lost over a million jobs during the last three months. More than likely we will lose approximately 250,000 jobs again in September. Unemployment will likely remain somewhere between 9.6% to 9.8%. Gross Domestic Product will likely increase slightly in the third quarter. All this while the fiscal fertilizer we call the American Recovery and Reinvestment Act is being sprinkled from the White House lawn throughout the rest of the nation.

What is most disconcerting is the acceptance of the new normalcy. Americans are apparently resigning themselves not only to 10% unemployment for the next year but also to an erosion in growth, a turning away from our production possibilities. Our real GDP fell from $12.93 trillion in the first quarter of 2009 to $12.89 trillion in the second quarter of 2009. Our real GDP, based on historical annual growth rates of three percent, should be at $14.03 trillion, which means that we have a gap in productivity of approximately $1.14 trillion. Ten years ago this would have been unacceptable. Today, it is the new normal.

To be fair to Dr. Bernanke, when he refers to the likelihood of the recession ending, he may be basing this on an expected uptick in third quarter GDP. By my admittedly rough estimate, third quarter GDP should be approximately $13.14 trillion, up 1.9% from last quarter. The gap between where we are and where we should be in terms of growth will probably shrink to $1 trillion or by 12.2 %.

But while we blow a collected sigh of relief and watch consumer confidence and stock prices increase next quarter, we should reconsider the new normal. We should not let this mindset impact how we approach economic policy. The new normal reflects not only a regression in our standard of living; it is reflecting how we approach productivity and possibly innovation. “It is what it is” has been the mantra for too long. If we do accept this new mindset, then we run the risk of ignoring an unemployed class that has almost doubled in the past two years. The unemployed still vote.

Public policy should move America away from insurance not toward it

The issue of health care reform is shedding light on an underlying problem not just with the supply and demand for health care services or how we pay for it, but more importantly on how we prioritize the importance of health care and the strength of our wealth health. We have become used to investing next to nothing in our health and for this primary reason, the United States should embark on a policy that moves us away from additional health insurance, not more of it.

The Democratic party has made the issue of health care a component of its platform over the last few decades and President Obama promised during his campaign to address the problem of 47 million people in America having no health insurance. To address this problem, the administration and democratic members of Congress have proposed offering a government-sponsored health insurance plan that they hope will provide a competitive option to private health insurance companies eventually leading to slowing down increases in insurance premiums.

Slowing down the increase in health insurance premiums may be possible with the entrant of a government funded health insurance provider, but what is more likely is an increase in the moral hazard problem that health insurance overall engenders. Moral hazard refers to the reduced incentives that the insured have to prevent compensable losses. For the consumer of health care services who is fully insured, she can make herself better off by not spending any of her money on her health. Society, or at least her fellow policyholders who may be taking better care of themselves, may end up worse off.

Insurance companies attempt to reduce the element of moral hazard by requiring a co-payment. For example, your insurance may require that you pay some amount when you visit the doctor or spend down some deductible before insurance pays for treatment. In addition, it may be very costly for an insurance company to determine whether you are exercising regularly, not smoking three packs of cigarettes a day, or eating your vegetables. As the insurance company’s cost of monitoring a consumer’s preventive methods (or lack thereof) goes up, the less likely is the consumer going to exercise, diet, and stop smoking.

Moving more consumers on to another insurance plan, whether the plan is private or government sponsored, will only add to the moral hazard problem. Government, in its attempt to maintain inexpensive health insurance, will fail to promote health care by intentionally avoiding the monitoring necessary to ensure consumers practice preventative care. The slippery slope may not get steeper, but as we add more consumers to the hill of no accountability, there will be an eventual mudslide in terms of the human costs resulting from continued poor health care habits.

What the Obama administration should be focusing on is why, with our willingness to purchase food, cars, houses, and clothes without any subsidies or insurance, would Americans not give the purchase of health care services the same priority. In the 1950s, Americans paid for 50% of their health care out of pocket. Today we pay approximately 10% of our health care out of pocket. If our health is our wealth, why are we afraid to invest in it?

Our decision to socialize our health care by spreading our cost of care onto society through insurance contributes to health care consuming 16% of our gross domestic. We have also allowed health insurance, much like credit, to become a proxy for our wealth. If anything, the existence, prevalence, and desire for health insurance is a subliminal admittance that we have failed to accumulate a sufficient stock of wealth and autonomous income sufficient enough to protect the most important asset that we have which is us.

Is it time for Obama to change course on health care policy?

During a press briefing on August 13, 2009, Press Secretary Robert Gibbs noted that the American people may not be completely on board with the Administration reform efforts but argued that overall the Americans support the notion of health care. Mr. Gibbs suggested that misconceptions were probably partly to blame for the lack of a higher rate of acceptance of the Administration’s efforts and that Mr. Obama’s town hall meetings were in response to this. “…the President isn’t out doing town hall meetings just for his health.”

Hopefully no pun was intended by Mr. Gibbs’ quip but depending on the poll results you subscribe to, Mr. Obama may not be doing as well as he needs to in order to sell his overall plan. According to a CNN/Opinion Research Corporation survey released on August 4, 2009, fifty percent of those questioned say they supported the president’s plan while 45 percent were opposed. A more recent Gallop poll cited by the L.A. Times on August 13, 2009 put the president’s approval numbers at 43% while the percentage of responders disapproving his approach to health care came in at 49%.

We probably won’t know what impact Mr. Obama’s trek through midwest and western states will have on his approval ratings until next week. With three more weeks left until Congress ends its recess and a 1,000 pages of legislation to review, the press and pundits will have a lot of time to take major shots across the bow at a big target. At this point, Mr. Obama could continue to move the ship of state through treacherous policy waters in hopes that, as most analysts predict, he will get some type of health care legislation and leave the debate with a win albeit bruised. His other option would be to turn the ship around and dock in the safe harbor of “do-over”. There have been a few calls from the right to do just that along with the observation that there is still time to do health care right.

The problem with starting over from scratch is that the president will look indecisive and weak. He can ill-afford creating such a perception especially as the country draws closer to mid-term elections in 2010. There is also the president’s own election time table. With Mitt Romney quietly testing the waters, Mr. Obama need not throw chum into those very waters. More important is Mr. Obama’s legacy. He is pinning his domestic agenda on health care. Bill Clinton bounced back in 1994 from his failed attempt to reform the health care system only because he had a relatively good economy under his belt and had a targeted victory in Bosnia and a few air strikes at Saddam Hussein to distract the nation.

Mr. Obama does not have the type of cover Mr. Clinton had. The economy is still poor and the Administration is digging itself deeper into an Afghanistan quagmire while shooting its way out of Iraq. To save his legacy, Mr. Obama will have to govern from the middle; govern from reason. Rather than scuttle the ship or run her aground, Mr. Obama should release some ballast and keep some portion of his plan afloat. He can do this by focusing the legislation on one health care problem at a time; being a bit marginal in his re-write of health care policy. For example, Mr. Obama could address the 47 million uninsured consumers of health care by subsidizing their out-of-pocket expenses via a universal care access fund. By focusing on this population, Mr. Obama can get rid of the rest of the proposals House Democrats have ill-advisedly provided in HR 3200, thus creating a leaner bill that even conservatives may be able to get on board with.

It takes strength to say our direction is wrong so lets fine tune it. No one will fault Mr. Obama for making an executive decision to do the practical thing. It would be foolhardy to run his ship aground with an unpopular proposal that the people do not want.

 

Could the problem with health care be health insurance?

In an article entitled,”Health Care in the Twentieth Century: A History of Government Interference and Protection”, Terree P. Wasley provides some insightful historical perspective on the development of health insurance in the United States. Wasley notes that from 1880 to 1930, America saw the establishment of a professionalized medical industry and the use of health insurance to prepay health care costs. As a result of the Great Depression, hospitals saw incomes per patient fall from $200 to $60. Hospitals turned to insurance plans as a way to guarantee revenues.

The first insurance plan was introduced in 1929 at Baylor University Hospital, where teachers prepaid their health care expenses to the hospital. Soon after other groups of hospitals formed multiple hospital insurance plans.

Insurance plans compensated doctors on a cost-plus method, which meant that doctors would be reimbursed based on “reasonable and customary” charges. According to Walsey, the plans reimbursed hospitals on a percentage of their costs as well as working and equity capital. Doctors and hospitals could charge what they wanted knowing they would be reimbursed and consumers had no incentive to manage their health costs given that care was being paid by money from a “third party.”

As we progressed thorugh the 1940s, America saw the establishment of employer-provided health insurance. As a way to attract quality employees and avoid higher taxes, employers began offering health insurance. The Internal Revenue Service provided some tax relief by allowing employers to deduct the cost of providing insurance as a cost of doing business. In 1954, Congress went ahead and codified the tax exempt status of health insurance benefits.

Labor unions got into the act and began negotiating for employer provided health insurance in the 1940s. Receiving additional cover from the U.S. Supreme Court’s resolving the issue of whether unions could negotiate for health care in collective bargaining in Inland Steel, coverage expanded via collective bargaining agreements and employer contributions. During the 1940s and 1950s, the U.S. saw an expansion of employer-provided plans that offered first-dollar and routine care coverage as opposed to just catastrophic coverage. This expansion of employer-based insurance eventually drove up the cost of health care, especially since it is more expensive to provide for and insure first dollar care i.e. doctor visits, flu shots, etc. than low probability, low frequency, high-cost events such as catastrophic injury.

This expansion of employer-based health insurance fueled the argument that health insurance should be expanded to the poor, elderly, and unemployed, thus the implementation of Medicare for the elderly, and state administered, federally funded Medicaid for the poor. Like private insurance, Medicare reimbursed doctors and hospitals for reasonable and customary fees.

Through his historical expansion, health care insurance has, according to Reason.com’s Ronald Bailey, managed to obscure the basic notion of insurance. In his November 2004 article, “Mandatory Health Insurance Now!”, Bailey notes that insurance was designed to protect against unexpected financial losses. Insuring routine activities such as flu shots and annual physicals drive up health care costs.

The irony of it is that most Americans who are typically concerned about catastrophic care could reduce their insurance costs by purchasing less costly catastrophic health insurance. Bonnie Erbe noted in her article, “Most Could Afford Catastrophic Health Coverage”, (U.S. News and World Report, December 13, 2006) that the costs of such policies is approximately $3,000, a fraction of the cost that most Americans incur for a standard health insurance policy.

Rather than revamp an entire $2.4 trillion health care services market to cover, at most, an additional 30 million uninsured citizens, some of whom do not want to buy health care insurance in the first place, wouldn’t it be better to subsidize a portion of their out-of-pocket routine care expenses and encourage the uninsured to purchase lower cost catastrophic insurance with their savings?

Driving Supply and Demand for Healthcare, part 2

President Obama has created a quagmire with his health care initiative. Building on his earlier mistake with the stimulus package, Mr. Obama again laid out a talking points framework for health care legislation and allowed the “firm” of Dodd, Pelosi, Reid, & Waxman to craft four or five pieces of health care legislation. In addition to allowing the Congress to run wild with the legislation, Mr. Obama has been transmitting a confusing message to Americans regarding his health care policy. On the one hand, Mr. Obama wants to make health care more affordable while driving down the cost of health care. He then throws in a desire to address Medicare’s increasingly negative impact on the budget, laying partial blame for our deficits on the increasing costs of administering Medicare. His particular beef is with the payments made to doctors and other providers who are paid too much for providing an uncoordinated health service that is based on quantity of service versus quality of service.

It is a tall order, especially when you are trying to figure out what the president is really trying to provide; what are his true priorities when it comes to health care. Are we merely trying to provide a new insurance plan? Is our goal a single-payer system? Are we really just interested in reducing the deficit by mandating that every American purchase health insurance? The president appears to be saying all of the above and if so is merely putting a lot of old junk into a closet that the American public will eventually have to open one day.

The president is still in a position to put the truck in reverse and move back from the abyss. He can start by rewriting the legislative packages that Congress has produced within the basic economic rules of supply and demand. As demand for health care services increases, the cost for service, whether a doctor visit or brain surgery, will go up. Doctors, nurses, nurse practitioners, and physician assistants will provide more services when you pay them more. Mr. Obama will only be able to effectively rewrite legislation if he looks at the health care issue as pure market failure. While I have discussed the demand side of the market equation earlier, Mr. Obama can probably address the supply side a whole lot faster.

In her testimony on July 15, 2009 before the House Small Business Committee, Lori Heim, president of the American Academy of Family Physicians, pointed out that health care reform would not work without an increase in the supply of primary care physicians. According to Dr. Heim, 31% of physicians in the United States were primary care physicians while the remaining 69% were specialists. Dr. Heim noted that a physician pool that was 45% primary care would be adequate. Dr. Heim also called for an increase in primary care physician compensation. An increase would attract medical students to the primary care field. In her testimony, Dr. Heim also expressed support for incentives to medical students such as loan forgiveness and an increase in the number of scholarships. http://www.aafp.org/online/en/home/publications/news/news-now/government-medicine/20090715heim-sbc-tstmny.html

The General Accounting Office appears to agree with Dr. Heim on the issue of financing primary care. In testimony his February 12, 2008 testimony before Congress, the GAO’s director of health care Bruce Steinwald, pointed out that financial support for primary care medicine is declining. The health care delivery system, according to Mr. Steinwald, is less efficient because of its reliance on specialty care versus primary care and that signals from the market indicate that there is lesser value placed on primary care services versus specialty services. If America wants better health outcomes, according to Mr. Steinwald, then there needs to be a greater reliance on primary care services versus specialty care.

To Congress’ credit, it has not ignored the need for attracting medical students to primary care or incentivizing entities to provide primary care training. For example, HR 3200 attempts to increase the number of doctors providing primary care in rural areas through the National Health Service Corps. Students can meet the requirements for loan repayments by serving on a half-time basis in the NHSC. The bill also provides for an additional $254 million in FY 2010 for loan repayments. HR 3200 also establishes another loan repayment program, the Frontline Health Providers Loan Repayment Program, where students can meet repayment requirements while working in for a solo or group practitioner or clinic.

HR 3200 may be a start but by creating a competing health insurance plan, it forces the president and members of Congress to be distracted from focusing on solving the failure in the market for health care services first. Hopefully Mr. Obama can step back from the abyss before it’s too late.