Saturday, April 8, 2017

Who Knew? (Sarin edition)

Not long ago, President Trump "discovered" to his amazement that healthcare is complicated.  "No one knew," he tells us, how complicated it was.  Because our President lives in an impenetrable shell of ignorance, we should not be surprised that he is shocked to learn that nerve gas is bad for babies.  But we should not mistake "his" response to Assad's recent gas attacks for something approaching sentience.  Rather, this attack was the smart move of the smart acorns that our blind pig in chief reluctantly put in charge of the NSC.

The Tomahawk attack had one goal: to cause Assad to stop using chemical weapons and, having no use for them, to stop producing them or storing them lest his stockpiles fall into his enemies' hands.  Our object is not to save Syrian babies.  We don't have a way to do that.  Conventional bombs are lethal, too, and we can't stop them.  We are not trying to change the outcome of the Syrian civil war.  We are not even trying to "punish" Assad the man.  We are instead trying only to make the production of nerve gas a bad idea.  If none is made, none can be sold to or stolen by people we cannot persuade not to use it.  That alone is reason to make the use of sarin unprofitable for Assad.

The strategic decision to make Assad regret using chemical weapons is worthy of a national discussion.  Instead, our foolish media obsess over the morality of its use, the legality of our intervention, slippery slopes, palace intrigues, and everything else that has nothing to do with this act.  The Pentagon has tried to make clear that this attack was intended to discourage the use of the weapons, not to change our policy on Syria per se.   Of course, that's not what the President himself said in his mawkish blather about babies, but who cares what he says?

I am a big fan of Miller's law, a bit of communication theory that tells us to interpret statements in whatever reasonable way will make them true.  That won't turn "Obama tapped my phones" into "my associate's conversations were picked up by legal surveillance of foreigners," but it does facilitate an understanding of what people acting in good faith are trying to communicate.  The spirit behind Miller's law extends to analyses of public policy.  We should interpret each action in whatever reasonable way will make it the right thing to do, completely ignoring as irrelevant any defenses of the action that don't hold water.  Just because an actor offers a bad reason for doing something does not mean that the thing was the wrong thing to do.

In the case of the attack on Syria, discouraging proliferation of sarin is the good reason for doing it.
Viewing the attack in that light, I come out in favor of the raid and give the Administration credit for conducting it.  That the White House chooses instead to go off on a moralizing tangent is beside the point.  According to news accounts, the Pentagon (not the White House) has put forward a reasonable defense and strategic context for the action.  That's where our attention should be focused, and if our President's brain weren't such a muddle, we could in fact focus it there.

Update, 4/14/17.  Sean Spicer got in trouble for saying that not even Hitler used gas on his own people.  On the same day, Sec. Mattis was saying that not even Hitler used gas on the battlefield.  The people on the left who get outraged for a living went nuts over Spicer's version, but no one made a peep about Mattis's statement.  Spicer, of course, is an inarticulate spokesman, a quintessential first hire for Trump.  Loyalty, first, then, when that doesn't work, settle for competence.  But finding a good spokesperson will be hard for Trump, because a press secretary can't speak any more clearly than his principal thinks.  Better to have a liar like Conway, who doesn't care whether she's making sense, or a dimwit like Spicer, who doesn't know whether he's making sense.

But I digress.  The real difference between Spicer's gaffe and Mattis's statement is not that the Defenese Secretary speaks more clearly than the Press Secretary.  The difference is captured in this article.  Mattis attacked the weapon, whereas Spicer, like his boss, attacked the user.  Mattis compared Syrian war-fighting and German war-fighting.  Spicer compared Assad's war crimes and Hitler's war crimes.  On his Sunday show "Reliable Sources," Brian Stelter made the interesting point that Trump's talk about the pictures out of Syria reflects the fact that we don't see the pictures of the damage done by conventional weapons.  As Stelter put it, Trump only saw the gas victims because their bodies were intact.  The pictures of conventional bombing victims are so horrific that news media won't show them.  Those attacks didn't move Trump, but the gas bombs did.  As our wordsmith in chief might say, sad.

Anyway, Spicer got in trouble for making a moral argument about someone not being worse than Hitler.  That's a no-no, because the survival of the Jewish people may hinge on no one ever being publicly judged worse than Hitler, even though any number of tyrants and psychopaths in power could give the guy a run for his money.  But it all starts with the idea that Trump was moved by the immorality of the gas-bombing and not by our national interest in having gas-based weapons go away.  Mattis didn't say anything about the relative evil of people, just about the threat to humanity posed by the unique power of the weapon itself as a force multiplier.

Spicer is a constant reminder of Trump's inadequacy as a President.  If the President had anything to say worth hearing, he'd be forced to find someone capable of saying it.  So far, however, nothing useful has been lost in translation.  If the guy steps in it from time to time, the Left's outrage machine can huff and puff is it likes, but there's really no substance there, and we ought not to be distracted by it.

Tuesday, March 14, 2017

There Can Be Only One (Healthcare edition)

The nation appears to have reached a consensus that healthcare should be affordable and portable.  Our pols are now left with the impossible task of putting this square peg into the circular hole called "insurance."

Insurance is not a label; it's a concept.  Insurance covers risks that have not matured.  But we want to provide coverage for risks of illnesses that have already been contracted when the insurance policy is issued.  Unfortunately, the existence of the condition removes the risk that it will arise later, leaving only the risk that treatment will cost an unknown amount.  That risk can be insured, but the risk that the illness will occur cannot, because that insurable event has already happened.

Yet, we have decided we want to cover the costs of illnesses that have already been contracted when the insurance is taken out.  How do we do that?

One solution - the one used in Obamacare - is to require everyone to buy "insurance," all paying the same price (perhaps age-adjusted), whether they are sick or healthy.  All we have to do is add up the total expected costs of treating all illnesses, divide by the number of people paying insurance premiums, and provide assistance to those who can't afford that amount.  Problem solved.

Except for one thing.  The logic behind this solution demands that all of the premiums collected be available to pay all the claims presented.  But that cannot happen with multiple insurers in the same market.  The better a company is at servicing claims, the more likely it is to attract those who need claims serviced. Meanwhile, a company with poor service would make more money, as its premium payers leave when they get sick.  The companies would, in effect, be competing for the right to go broke.  Companies don't do that, and, mirabile dictu, many Obamacare insurance markets are finding only one player in the game.  How else could it be?  Nothing else works.

Portability is basic stuff to insurance people. A carrier can take on a matured risk if (i) it is paid the estimated cost associated with that risk, or (ii) it is reimbursed for paying actual claims associated with that risk, or (iii) some combination of both.  In the property/casualty business, so-called "loss portfolio transfers" are a common practice.  Claims incurred under one carrier's policy are transferred to another carrier in exchange for a lump sum or other negotiated payment.

A more pertinent model involves reinsurance.  Many primary insurance carriers have reinsurance agreements in place that survive a loss portfolio transfer.  Thus, when the transfer occurs, the amount the original carrier will have to pay to the acquiring carrier may be fully known and fairly small, because the real cost of the loss is borne by the reinsurer.

An Obamacare fix could adopt this reinsurance model.  Each insurance company could take the risk that a healthy insured will get sick while under its coverage, collecting a premium for that eventuality. When an insured gets sick, the company would be required to buy "reinsurance" with respect to that illness by paying an actuarially determined amount into a common Already Sick Pool (ASP),  Then, if an insured changes insurance companies, the company acquiring the risk could tap the ASP for payment.

To assure adequate financing for the reinsurance pool, some combination of three things must occur: (i) healthy people must buy insurance, or (ii) healthy people must pay a tax in lieu of the portion of the premiums they would have paid in excess of the actuarial cost of insuring them, or (iii) coverage by insurance would be automatic and free, with a tax imposed to pay for it on some basis that people find fair.  (See "Medicare.")

Note, though, that a single ASP is central to any of these approaches.  It is not a "detail to be worked out in conference."  It is essential to portability, which is essential to covering pre-existing conditions.  Unless the insurer on the risk when the illness is contracted, or someone else, pays for the cost of that illness, there cannot be portability between competing insurers. Since that is not happening now, competing insurers are withdrawing from the market, and they won't come back no matter how easy it is to enter the market, because the market itself cannot support competition without a single-payer already-sick pool.

The ramifications of a single ASP are enormous.  Insurance companies are essentially investment banks that make their money lending out their insurance reserves. Underwriting activities are just a way of collecting money to lend.  Insurers can even compete on the extent to which their investment results reduce the premiums they need to collect. So, unless an insurance company gets some money to manage, it's not really doing what its shareholders set it up to do.  It becomes a buying service for insureds rather than an investment bank for its owners.  Those are different businesses.

Who, then would manage the ASP?  In what would it be invested?  One can imagine a mechanism whereby each carrier gets to manage a chunk of the pool based on its contributions to the pool.  That might be cumbersome.  The obvious alternative would be transferring the ASP money to the Medicare Trust fund, where is would fund the national debt.  That's not a terrible idea in economic terms, as it would lower interest rates for everyone, thereby benefiting savers and borrowers. But it would deprive the capital markets of the money they now get in the form of health insurance company reserves, so that's pretty much a wash.

And, if there's going to be one pool, it might make sense to put it in a place where administering medical claims is already being done.  That means putting everyone in Medicare.  In short, if we want to insure pre-existing conditions, the only viable solution is a single payer, and the best choice for single payer is Medicare.

The rabbit is already in the hat. All that remains is for some political magician to extract it. Unfortunately, the rabbit looks like a poisonous snake. Maybe "ASP" isn't so good a name for it...

Sunday, February 12, 2017

About Judge Gorsuch

When it comes to Constitutional law, I'm an originalist.  That's with a small "o," like the small "r" in the republican that I also am.  I won't bore you with the difference between my kind of originalist and the kind the Right wants on the Court.  I'm just saying that I take the words in the document seriously.

So, when the Constitution says, in Article II, Section 2, that the President "shall nominate, and by and with the Advice and Consent of the Senate, shall appoint ... Judges of the supreme Court...", I believe that an originalist must regard as a dereliction of Constitutional duty the failure of any Senator to perform with respect to any nominee for "judge of the supreme Court" the actions that the founders intended be performed with respect to such a nominee.  And it is, therefore, the obligation of any such originalist, should he be offered the chance, to decline to take a seat for which a prior President made a nomination that the Senate has refused, with clearly partisan political motives, to consider.

Judge Gorsuch said in his remarks on being nominated that any judge who likes every decision he has to make is not a good judge.  Well, here's his chance to put his money where his mouth is.  If he takes the Constitution as seriously as those supporting his nomination say, without irony, that they want him to take it, he should decline the nomination until the Senate has dealt with the nomination of Merrick Garland.

I wonder what would have happened if President Obama had sued the Senate, claiming that its stonewalling his nomination of Judge Garland violated the Constitution.  Ignoring the procedural hurdles, how would Justice Scalia would have voted on that one?  How would Justice Gorsuch? Happily, President Obama did not bring that case, and I don't hear any suggestion that such a case is in the offing.  As a result, Judge Gorsuch may legitimately be asked about his reading of the Senate's responsibilities under Article II, Section 2, without the questioner having to worry that the issue might arise before the Court.

I would urge the Democrats on the Judiciary Committee to press Judge Gorsuch for his views, as an originalist, on the Constitutionality of the Senate's treatment of Judge Garland's nomination.  And then, whatever he says, I would urge the Democrats on the Senate to vote "nay" on Judge Gorsuch on the grounds that his very standing for the office is inconsistent with his claimed devotion to the Constitution and with the oath to uphold it that he will take as he usurps Justice Garland's seat.