Wednesday, March 31, 2010

Obama divides and conquers, again

From BHO’s remarks on the signing of the Healthcare Reconciliation Bill, which included changes in the law applicable to student loans:

Now, I’ve said before and I’ve repeated this week the health insurance reform bill I signed won’t fix every problem in our health care system in one fell swoop. But it does represent some of the toughest insurance reforms in history.


Now, the debate on health care reform is one that’s gone on for generations, and I’m glad -- I’m gratified that we were able to get it done last week. But what’s gotten overlooked amid all the hoopla, all the drama of last week, is what happened in education -- when a great battle pitting the interests of the banks and financial institutions against the interests of students finally came to an end.

You see, for almost two decades, we’ve been trying to fix a sweetheart deal in federal law that essentially gave billions of dollars to banks to act as unnecessary middlemen in administering student loans. So those are billions of dollars that could have been spent helping more of our students attend and complete college; that could have been spent advancing the dreams of our children; that could have been spent easing the burden of tuition on middle-class families. Instead, that money was spent padding student lenders’ profits.

Now, it probably won’t surprise you to learn that the big banks and financial institutions hired a [sic, at] army of lobbyists to protect the status quo. In fact, Sallie Mae, America’s biggest student lender, spent more than $3 million on lobbying last year alone.

But I didn’t stand with the banks and the financial industries in this fight. That’s not why I came to Washington. And neither did any of the members of Congress who are here today. We stood with you. We stood with America’s students. And together, we finally won that battle.

And this is the President of all the people? All the people except those who oppose anything he wants to take from them. He doesn’t “stand with” the special interests, unless, of course, they’re unions or trial lawyers. No, those bastards in the insurance and financial services biz aren’t like you and me: they’re “unnecessary middlemen,” with sweetheart deals. This Obama is a very zero-sum guy: there’s no getting without taking. It’s a good thing there are so many evil people out there for him to scapegoat, er, I mean win battles with.

The new healthcare bill does not include the “toughest insurance reforms” in the past week, much less in history. It mandates coverage so that insurance companies - who would like nothing better! – can now afford to cover pre-existing conditions, because there won’t be any pre-existing conditions. BHO calls it “reform” so that he can pretend that he is throwing the insurance companies under the bus, when in fact he is throwing them more claims to handle.

The political case against insurers is built on the silly idea that insurance companies bet against their customers. But they don’t. The insurance company processes claims and marks up the transaction. Insurers have an interest in denying claims only because that keeps premiums down so that customers stay so that more claims can be processed. Now, they will have more claims. Tough on them.

The student loan thing does hurt the private lenders. Of course, only the “big” banks and financial institutions sent the armies of lobbyists. The little ones are ok folks, I guess, even though this law removes them from the student loan process, too. Collateral damage – you can’t make an omelet without breaking eggs, right?

I have no idea whether the single-lender approach will be workable. Maybe it will. Certainly, removing the private companies from the process makes it unnecessary to demand repayment, and that’s gotta be nice for the politicians who get to bestow that bit of largesse on future supporters. But, nah, that can’t be what’s going on here. This is about sweetheart deals and, ugh, middlemen. Yeah, right.

Monday, March 22, 2010

Healthcare! With an immodest proposal for REALLY fixing it.

Now that the lies are done being told, what have we got?

In political terms, we have goodies that will be apparent before the next Congressional election and costs that won’t be apparent until after the next Presidential election.  I wonder how that happened.

I believe the Republicans are wrong about the political unpopularity of this bill.  I might go so far as to say that they are not wrong about it, but, rather, were lying about it in the hopes of spooking some conservative Dems.  It takes a certain amount of Chutzpah to lie to people about how bad a bill is and then cite their credulity as evidence that the bill is unpopular.  But that’s pretty much what the Republicans did, I think.  And now they will be whipsawed by the timing of the benefits and the costs.

Not that the Democrats earned any points for candor.  They railed about special interests fighting the bill, all the while kowtowing to Big Labor and the Plaintiffs’ bar.  They demonized insurance companies for having the temerity to refuse to sell health insurance to people who are already sick.  (Ask anyone if an insurance company to which they pay premiums should be required to sell insurance to people who are already sick, and they’ll shout “Hell, no.”  But ask them what they think about those dastardly pre-existing conditions clauses, and see how well they’ve been lied to.)

But enough politics.  There’s still an exploding usage problem, and we need to do something about it.  Of course, there’s only one way to make universal healthcare work: doctors in the aggregate have to make less money.  The mechanism whereby that happens has to be that the profession gets paid for keeping people well rather than for curing them when they get sick.  Unfortunately, under our hyper-specialized system, we cannot pay surgeons to practice preventive care.  Making this omelet is going to require breaking a lot of eggs!

One way to reduce what doctors make as a group is to increase what family practitioners make as individuals.  If my doctor could earn a million dollars a year by knocking a couple hundred thousand off the income of ten or twenty surgeons, that would be a net win for the system.  I don’t know if that calculation makes any practical sense, but I know the math works.  But that research has been done, and it seems clear that more of at least some types of preventive care – and especially lifestyle fixes that cost very little – would save a lot.

The missing ingredient from the current system is an economic incentive for people to take care of themselves.  The new law requires coverage of preventive care, and it may even require that it be provided without deductible or co-pay.  But I think it stops short: a patient’s co-pays for treatment should be higher if he or she has not undergone the free preventive care provided by his insurer.  (It’s odd how being healthy is not its own reward.  We can’t be sure that an ounce of prevention will be worth a pound of cure.  Some folks hear their wallets better than they hear their better judgment.) 

It might be a good idea to enlist the family practitioners in the effort by changing their incentives, too.  Those docs should be rewarded if their patients file fewer claims for treatment.  If we’re going to pay family practice guys more and surgeons less, then let’s pay the family practice guys out of the money that we don’t spend on surgery.  Seems like a no-brainer.

But what’s the mechanism for creating these incentives?  Suppose every employee in a company were enrolled automatically in a healthcare cost reduction plan.  The company’s baseline healthcare costs would be established as a bogey for the plan.  To the extent that the company’s overall costs for a year are less than expected, a percentage of the savings would be shared with employees whose claims were less than their premiums.   (The formula is a detail.  Any scheme that pays out net savings to those who take care of themselves  - and maybe to their family practitioners - ought to work.)

It’s not hard to create incentives for preventive care and healthy lifestyles.  Employers just need to want to do it.  I say “employers” because insurers have no incentive to reduce costs.  Reducing costs reduces premiums, which, absent aggressive price competition reduces profits.  Maybe that’s the sense in which a public option would “keep insurance companies honest.”  But I believe that task should fall to employers, who, so far, simply have not put their minds to it.  Some “promote” wellness, but few if any reward it with hard dollars.  And I don’t know of any that pays family practitioners for keeping their patients well.  That seems so obvious a place to go.  Oh, well.

Wednesday, March 17, 2010

Drug Re-importation

First, let’s get clear that no one actually wants to re-import drugs. That would be a total waste of fuel and transaction costs. What people want is for drug re-importation to be legal, so that drug prices here will make re-importation unnecessary. But would it? (Hint: No.)

Right now, US drug companies charge the Canadian Health Service less than they charge American pharmacies. But what if re-importation were legal? Well, one thing that seems pretty certain is that Americans would not be paying Canadian prices for drugs. Anyone who thinks drug re-importation is a good idea because they would actually be able to go to Canada and buy prescription medicines for the price the Canadian health service pays (plus some reasonable mark-up), is nuts. There just is no dynamic by which that happens.

From whom would we “re-import” the drugs? The Canadian Health Service? Why would they do that? And why would drug companies sell the Canadian Health Service more medicine than it needs if all the extra pills would just come right back at reduced prices? So we may get legalized re-importation, but we won’t get re-importation, and if we don’t get re-importation, there won’t be any pricing pressure from re-importation. So what’s the point?

It seems to me the only way we get price equalization between the US and Canada is for the price to equilibrate at around 97% of the current price. If we assume that Canada pays 30% less than we do, and they represent 10% of the demand for a given drug, then the average price of a pill is about 97% of the American price. So that’s what the drug company will demand for the drug, or it won’t bother to invent it in the first place.

That’s the missing ingredient in all drug-pricing debates: the drugs are assumed to have been discovered and approved and to cost virtually nothing to manufacture, so any price is “profitable” for the drug company. But the drugs that exist are not the issue. It’s the money to be made on new drugs that drives research. Perhaps if we found a way to subsidize drug research, we could impose lower prices. But no one has yet found a reliable, incorruptible, or more efficient way to choose among drug candidates than capitalist risk-assessment. There may be a better way, but I guess no one has figured out how to profit from thinking it up, so it hasn’t been thought up. Sort of like the drugs that won’t exist if the prices aren’t high enough.

The Heritage Foundation made the arguments against drug-re-importation several years ago. The logic of their analysis seems sound to me: drugs cannot profitably be invented for sale here at Canadian prices, so they won’t be invented here for sale at Canadian prices. Drug companies won’t sell the drugs to Canada in sufficient volume to permit re-importation, and Canada won’t jeopardize its deal by buying enough drugs for re-importation. At least not in volumes that make a difference to American consumers.

I’m not saying that we should subsidize other countries’ socialized medicine plans. But we should not be misled into thinking that the purchasing power of Canada’s single-payer system is indicative of what Medicare, for example, could do here if it used its purchasing power in the same way. Canada is a remainder market. Drug companies can accede to the CHS pricing demands because US consumers are paying the cost of development. We are subsidizing Canada because that’s how remainder markets work, not because it has a single-payer system. Canada could just as easily have have imposed price controls on its pharmacies under a US-style healthcare system, and the result would have been the same – drug companies happily selling to Canadian importers at the controlled prices, because Canada is a remainder market.

The only way for the US to end the subsidy is to impose an export tariff on drugs sold to developed nations for less than the average wholesale price in the US. I don’t know how many trade deals that would break or require renegotiating, so I’m not advocating for or against its being done. I’m just saying that it’s the only way to do what drug re-importation is supposed to do.

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Monday, March 15, 2010

A Universal DNA Database: Yea or Nay?

I was struck by an op-ed in the NYT this morning. It’s by a Yale Law Student named Michael Seringhaus. Mr. Seringhaus was reacting to a proposal to include the DNA profiles of all arrestees, whether or not convicted, in the national database of such profiles. Mr. Seringhaus suggests that we should not just take these DNA profiles from arrestees but from everyone. His logic, though, strikes me as odd. His principal concern seems to be that collecting this information only for arrestees will cause a disproportionate representation of Blacks in the database. Let’s assume this is so, as it already is of the fingerprint database, also compiled for anyone booked for any offense (as well as for a gazillion other reasons). What I don’t get is why this is a bad thing, if, as Mr. Seringhaus claims, it would be a good thing for us all to included in the database.

As far as I can tell, being in the database has three consequences:

1. You are more likely to be caught for a crime you did commit.

2. You are less likely to be accused of a crime you did not commit.

3. “Big Brother” has a way to track your whereabouts in addition to the tools he already has.

Now, if you are concerned about Big Brother, then having a universal database is a bad thing. Mr. Seringhaus does not seem concerned with that aspect of privacy. He does explain that DNA profiles do not reveal personal genetic information. They record info about “junk DNA” that can be used for identification but not to determine anything about the subject’s operative genome. With this aspect of “privacy” out of the way, Mr. Seringhaus seems unconcerned about the general issue of the Government being able to track our comings and goings any more than it already can. And he may be right – the chances of leaving no footprints as we go about our daily lives of charging and EZ-passing are quite small. Still, it’s nice to think that we could stay off the grid if we wanted to go to the trouble.

That leaves consequences ##1 and 2. Although Blacks are more likely to be arrested than Whites, Mr. Seringhaus has not made the claim that they are more likely to be unjustly arrested. I’m not talking about traffic stops for Driving While Black, or even being rounded up with the usual suspects. Those things aren’t arrests and so do not trigger DNA collection under the current proposal. I’m talking about “Turn around, you’re under arrest for ….” Maybe such arrests are disproportionately skewed racially, but, as I say, Mr. Seringhaus has made no such claim. He seems to think that a database made up of people arrested with good reason (whether or not the case is ultimately dropped) is a bad thing because more Blacks than Whites are arrested even with cause. I don't see, however, precisely what consequence of being in the database offends Mr. Seringhaus on this score.

As regards consequence #1, Mr. Seringhaus’s argument boils down to this: We should not collect DNA profiles of arrestees, because that would cause the percentage of Whites who get away with crimes to be greater than the percentage of Blacks who do. I agree that if the system were designed to achieve that result, it would be bad. But whatever the merits of “disparate impact” analysis in the world of employment discrimination, it seems to me inapplicable where the only downside of being in the disfavored group under a facially neutral policy is that you may not get away with a crime. Remember, this is not racial profiling, where anyone in the database is stopped or hauled in or questioned about crimes on account of being in the database. This is about getting caught for a crime one actually did commit.

And this is where consequence #2 comes in. Leaving Big Brother aside for a moment, the more likely one is to be suspected of a crime one did not commit, the more likely one is to want his or her DNA in the database. If there is DNA evidence at a crime scene, being among the usual suspects becomes less onerous if DNA has already ruled you out. Thus, for anyone arrested unjustly, the DNA profile will make a reoccurrence less likely rather than more likely. Again, getting away with a crime becomes harder; but being wrongly accused becomes less likely. That strikes me as a good deal. (Maybe Whites should complain that the disproportionate arrest of Blacks makes Whites more likely to be wrongly accused, as their exonerating DNA is not on file. Sounds dumb? Can you articulate a reason that doesn’t make Mr. Seringhaus’s claims evaporate?)

Mr. Seringhaus raises another objection to expanding the DNA database to include all arrestees, and that’s the growing practice of using DNA near-matches to identify family members of people in the database for suspicion. He seems to be concerned about false positives – results that identify people who are related to someone in the database but not, as it turns out, related to the perpetrator. He says such false positives “cripple” the technique, but he does not say how. The possibility of a false positive turning up someone who might otherwise “look good” for the crime seems pretty remote. And even then, one swab and the confusion is cleared up.

If near-misses are used to identify suspects, consequence #2 also operates at the family level: if I’m in the database, and the DNA at the crime scene does not look at all like mine – which will be the case in an overwhelming majority of cases – then my whole family’s off the hook, too. That’s bad because…?

Mr. Seringhaus says that the near-miss approach effectively “includes” in the database people who have never been arrested, and that’s a bad thing because of the racial aspect. Again, he makes no practical arguments. I would think any over-suspected demographic would cheer the exonerating implications of the technique.

I just don’t see the difference between DNA profiles and fingerprints. It seems to me that whoever gets fingerprinted for whatever reason should also give DNA. The two biomarkers serve the same purpose – conclusive identification – and DNA just seems to me a better mousetrap, a belt under the suspenders.

And a universal database – any universal database – gives me the creeps. As William of Occam might have counseled, such things should not be multiplied beyond necessity.

Wednesday, March 10, 2010

The Filibuster Train Picks up Steam

In an Op-ed today, two professors explain how the “virtual” filibuster – the practice of achieving the goals of a filibuster merely by threatening one – actually works.  The Majority Leader has the power under current Senate practice to change the subject.  He can’t stop debate on a bill, but he can switch debate to something else, so that the filibuster “continues” but the Senate is not tied up by the actual debate.  Thus, what has come to be termed a “hold” – a single senator’s ability to stop any piece of legislation – is actually a filibuster going on “in the background,” while the Senate goes on with other business.

Anyway, these two profs want the Senate to renounce the so-called “tracking” system that allows business to go forward while a filibuster continues.  They are, of course, a bit late to the party, but they are welcome to join Gail Collins and me in the campaign.

The tracking system is an excellent example of careless wishing.  Robert Byrd instituted it to keep Republican filibusters of Civil Rights legislation from stopping the Senate.  It certainly must have seemed like a good idea at the time to keep the Senate moving while the filibuster held up only one bill, but it turns out that being responsible for tying up the Senate was the only political disincentive to filibustering.  The tracking system switches the onus of shutting down the Senate from the filibusterer to the Majority Leader, who has the power to keep moving while the filibuster continues.  The additional power given to the Majority Leader is in effect the power to be to blame if the Senate bogs down.  That power and responsibility must be returned to the filibusterer.  The weapon must do enough collateral damage to make senators unwilling to deploy it on a whim. 

The frequency and intensity of public calls for restoring the filibuster’s messiness is encouraging.  Maybe this country is governable after all.