What could possibly go wrong?

Posted by Marc Hodak on June 21, 2012 under Futurama, Scandal, Unintended consequences | 2 Comments to Read

Some people collect marbles.  Some collect art.  I collect these examples.

Now that they have fixed my healthcare plan, I’d like some Democrats to help me with my investment plan

Posted by Marc Hodak on March 22, 2010 under Futurama, Unintended consequences | 7 Comments to Read

So, the Democrats have gotten their legislation.  They are promising:

- Lower insurance premiums

- Near universal health insurance coverage

- Preservation of Medicare’s benefits

- Reduction of the budget deficit

- Lower medical costs

Since I am now petrified to put any of my long-term savings into the stock market, I need to find creative ways to boost my returns.  So, here is what I’m willing to wager against anyone who wishes to bet against me.  By the end of 2014:

- Insurance premiums will be higher

- The percent of America’s uninsured will fall far short of the target

- Medicare’s benefits will be reduced

- The federal budget deficit will be higher than currently projected

- Medical costs will be higher than currently projected

My over/under is that at least four of these five predictions will come true.  If you’re particularly gutsy or liberal, then I will be happy to offer 2:3 odds that at least three of these predictions will come to pass, or take 3:2 odds that all five of them come to pass.

To be more specific;

- The national average for health insurance premiums per year is currently $4,824 per person and $13,375 per family; I am wagering that premiums for 2014 will be higher than those numbers plus the rate of inflation.  Why?  Because insurance companies will be required to accept all comers despite pre-existing conditions (just the kids, at first, then adults in 2014), which will increase their costs, especially in the individual market.  Also, to the extent that mandates work to push more people into the insurance pools, greater demand will enable higher prices, notwithstanding the adverse selection that mandates are supposed to fix.

- The bill is expressly designed to drive coverage from the current level of about 85% to “near-universal” level of 95%; I am wagering that the percentage of Americans with health insurance by the end of 2014 will be no higher than 88%.  Why?  As costs go up (see above), there will be less incentive for healthy individuals to obtain coverage, especially if they can get covered whenever they get sick, which will exacerbate the adverse selection problem insurers now face.  The $695 penalties will be tiny compared to the $10,000 premiums, so you’d have to be a sucker to pay the latter when you can get away with just paying the former, and be guaranteed coverage anyway.

- It’s difficult to quantify Medicare benefits; one indicator is the percent of doctors accepting new Medicare patients.  That number is currently about 75% nationally.  I predict that number will drop, even if Congress adopts the budget-busting repeal of Medicare cutbacks, i.e., the “doc fix,” that was hidden from this legislation to help it’s CBO score.  Why?  Because Medicare will have to suffer some kind of cutbacks in order to keep costs from exploding as much as they otherwise would, and because one of the cost-control measures is likely to be more bureaucratic hurdles for doctors to leap in an attempt to limit fraud.  Both of these trends will continue to turn off doctors, especially the successful, experienced ones who don’t need Medicare patients to maintain their lifestyles (or sanity).

- The fact that Congress will immediately make a mockery of the CBO score by adopting the “doc fix” is just one reason that the deficit will continue to climb.  The Obama budget projects $2.1 trillion in deficits over the next two years.  I am wagering that deficits will exceed that amount.  Why?  Congress has consistently underestimated the costs of its entitlement programs.  This one, too, will be higher than projected.  The higher taxes and fees that Congress is imposing to pay for this law will slow economic growth, resulting in disappointing government revenues.

- According to HHS, the national health expenditures were about $2.4 trillion in 2009, or $8,000 per person, and accounted for about 16% of GDP.  They have projected 6.1 percent per year growth over 2010 and 2011, which means the expense will rise to about $9,100 per person for 2011.  I am betting that the total cost per person will be higher than that.  Why?  More money will be funneling into the health care system, which will drive up prices, just as student loan subsidies have driven up college costs.  In addition, the regulations flowing out of the 2700 page law like topsy will increase the cost of our health care system, which will be reflected in the prices people will pay as both consumers and taxpayers.

There you have it.  Anyone with some liberal convictions and cash can put them both on the line here.  Otherwise, this simply serves as a detailed warning for the time when those liberals will claim that nobody could have predicted how badly this law could have turned out.  Just before they blame the insurance companies for the outcome.

Don Boudreaux, as usual, sums it up best;

Putting any part of the economy into the hands of politicians is like putting the space program into the hands of astrologers.

I now have a new goal in life…

Posted by Marc Hodak on July 18, 2009 under Futurama, Invisible trade-offs | Be the First to Comment

to be able to see a great-great-great grandchild.

I don’t know that even the best health care system will get that for me, but I firmly believe that at the current pace of treatment innovation–which is by no means guaranteed–the first immortals are now among us, being pushed around in their strollers.

How about paying the president like a CEO?

Posted by Marc Hodak on January 31, 2009 under Futurama | 3 Comments to Read

It think the biggest problem I have with the McCaskill proposal for paying senior executives like the president is that it gets it all backward.  Most of what executives get is variable compensation.  Say what you want about pay-for-performance, but when was the last time senior government officials saw their pay drop 44 percent for a bad year?  It think the president and congress should get much higher pay, but most of it variable, based on performance.

Since I design this stuff for a living, let me propose something simple and definitive, something that points us in about the right direction.  How about:

- A target bonus equal to current salaries, e.g., $400,000 for the President, and something similar for every senator and congressperson,

- A bonus pool for these 536 elected officials that adds $1 for every $1,000 in budget surpluses to those target bonuses, and reduces them by $1 for every $1,000 in deficits.  (I’m talking cash surpluses and deficits; none of this “off-balance” sheet stuff that only the most Enron-friendly accountant would accept.)

So, a $230 billion surplus, like Clinton and the Republican congress produced in 2000, would create a bonus pool of $230 million, to be divided among our president and legislators in proportion to their respective salaries.  That would average about $430,000 per pol, with a little more for the Prez and little less for a House member.  Remember, this would be on top of their respective target bonuses.

On the other hand, if they bring home a Bush-sized $400 billion deficit, their bonus pool would be -$400 million, which would wipe out their target bonuses.  Don’t even ask what a $2 trillion deficit would do.

Actually, let’s ask.  That would create a negative bonus of over $2 million per pol.  Should we institute clawbacks?  Or perhaps do it like the hedge funds that we love to demonize, and have our new bonus babies earn back the negative amounts before they can get more bonuses in the future.

I know my libertarian friends will complain that this will encourage tax increases as much as spending decreases, but I wouldn’t fret too much about that.  We like to joke about the financial literacy of our elected representatives, but I think they are actually smart people, and will quickly realize what most of us economists already know, which is that they don’t control the lever of overall tax revenue nearly as much as they control expenditures.

And I solemnly promise not to complain about their massive layoffs of government employees while getting paid large bonuses.  Not one peep.

How many birthdays?

Posted by Marc Hodak on July 14, 2008 under Futurama | Be the First to Comment

I’ve been on vacation this past week, which included my birthday, which is why there have been no posts since Wednesday.

One thing I missed on my birthday was this review by Andrew Stark of “The Mortal Coil” by David Boyd Haycock. The review of the book itself was OK, but then the author transitions into a pointless after-commentary:

But how desirable would cryonics or immortality in tiny steps be, even if they were possible? Mr. Haycock says that he “will leave it for others to try and answer” such a question. OK, let’s try.

He fails. Stark doesn’t like the proposed, rocky road to immortality that might be just around the corner, and says he will pass. The next step in Darwinism may be the intellectuals and mystics who are bothered by such proposed interventions, and step off the path of continued existence.

Political specialization

Posted by Marc Hodak on July 1, 2008 under Futurama | 4 Comments to Read

Forbes just came out with an issue about Best Places to Raise a Family Most of these places seem very geared to young families, with great schools and kid-friendly open spaces. Other issues have touted best places to retire. These tend to have lower property taxes (which often, though not always, translate into poorer schools) and easy living.

I’m wondering if in our more mobile society, certain political jurisdictions will realize they can’t be all things to all people, and begin to specialize. Florida itself seems to be doing that with senior friendly areas (with pretty crappy public schools), and family friendly areas with sky-high property taxes.

I know that some individual states and counties are starting to give significant property tax breaks to retirees as a way of keeping them, presumably as sales tax and fee payers with higher-than-average disposable income (not to mention a significant voting block).

Max goes to college

Posted by Marc Hodak on August 20, 2007 under Futurama | Comments are off for this article

In three months, Max has gone from lofty, cum laude senior to lowly frosh having to prove himself all over again. Today we make the eight-hour drive down to his new school. We’d have flown him down, but he’s got the accumulated STUFF of a post-industrial teen who happens to be both very athletic and crazy-smart with computing technology. Also, he’s going away! By driving him down, I get a couple more days with him.

Many years ago, when the big guy was much smaller and more daddy-centered, and our worlds largely overlapped, the thought of this day would have inspired dread. Now that it’s time to cut him loose, and for us to become visitors in each other’s separate worlds, it’s not as bad as I thought. First of all, it’s not exactly a cold-turkey split. Max weaned us with a stint at boarding school these last couple of years. His school was only an hour away, so this still feels like a big step, but not nearly as big as “now-you-see-me-now-you-don’t.” Second, communications have changed a lot since the time of mini-Max; every kid now has a cell phone and Al Gore has invented the Internets!

I’ll try to set a good example while I still have some parental influence, and not use my phone while driving.

Update: Eight hours turned out to be wishful thinking. Traffic was thick, even without the expected rains. Thank goodness, we’ll only have to move his STUFF once in these next four years. At least the Internet is working down here.

Another world

Posted by Marc Hodak on April 24, 2007 under Futurama | Comments are off for this article

Astronomy was my childhood passion. It was the height of the “space race.” What boy’s imagination wasn’t captivated by Star Trek and the eventuality that science fiction would become fact?

So, my heart still races when we find something remarkable out there, as today when we discovered the first planet with earth-like temperatures. This planet may have water. If it does, it would very likely be liquid on its surface beneath an atmosphere of some kind. That makes it a keen candidate for a life-bearing world.

The exciting thing is that even if this world contains no water or no life, it’s still a harbinger of other worlds yet to be discovered that almost certainly do have water and life. We’ve only been looking for a relatively short time, a few cosmic seconds, and already we have found over 200 planets, one of them earth-like, albeit with a big red sun that would look 20 times the size of the moon. (How cool is that?) At this rate, our grandkids should be familiar with dozens, if not hundreds of worlds likely to support life of some sort. Soon after, we may even be able to reach them in a reasonable amount of time.

The reason I love history is because it kind of makes up, in my mind, for all the years that I wasn’t around before I was born. At times like this, I wish I were looking back on these exciting times of discovery, but knowing what those discoveries eventually turned into. I guess there are as many ways of saying life is too short as there are stars in the sky.

Not quite the end of history, but getting there

Posted by Marc Hodak on April 17, 2007 under Futurama | Read the First Comment

You might not have seen the article. It was on page 12 of the WSJ.

Until recently, Germany condemned the low-tax competition from Poland and others as ���tax dumping.��� But after failing to win support within the EU, Germany has joined in�Ķ Others in Western Europe have reacted to the tax cut in Germany.

Most of the media presents globalization as the result of a political intent to liberalize. Uh-uh. Globalization is less an effect than a driver of government policy. The illusion that governments trump markets is based on the immediate, visible effects of new laws. The unseen, long-term effects include a market reaction that ultimately undermines laws that don’t make economic sense. Ultimately, we see a change in the laws–the government responding to market realities when its alternatives look worse. Chinese communists and Indian bureaucrats aren’t letting go because they like economic freedom.

Markets are aided by transparency. The impact of government policy on economic outcomes is becoming easier to see (or harder to hide). People are seeing through the collectivist excuses for limiting their ability to invest in or accept investment from anywhere, to sell to or buy from anyone. People are taking advantage of their ability to hire anyone anywhere to do a job. They’re having more trouble justifying denying anyone the right to live or work anywhere. Eventually, we may even begin to insist on the freedom to adopt a governmental jurisdiction of our own choosing, possibly even regardless of where we happen to reside, like American corporations choosing among states. Sovereignty will become commoditized. That���s what this article is illustrating in its infancy.

Read more of this article »

The price of immortality

Posted by Marc Hodak on March 15, 2007 under Futurama | Be the First to Comment

Actually, I’m just referring to the price of cancer drugs, as mentioned in today’s WSJ, which drugs unfortunately do not yet offer the prospect of immortality. The point of the article’s protagonist, Morgan Stanley biotech analyst Steven Harr, is that if the drug companies price their breakthroughs too high, they will face a political backlash that could undermine their long-term profitability. So, he says, they need to limit how much they earn from their breakthroughs by moderating their prices.

Setting aside the key assumption behind this claim, i.e., that the drug companies can forestall regulation by pre-emptively pricing below what the market can bear, I think this article presents a glimpse into what I believe will be the most important social debate of all time, the coming war over who will be allowed to afford immortality.

As I see it, it’s just a matter of time before the totality of human health problems becomes treatable. We will eventually, perhaps a long time from now, get to the point where even the poorest person will have access to these treatments. Between now and then, however, one thing needs to happen: the life-extending treatments need to be developed.

Their pace of development will be faster or slower depending on the rewards of development and overall economic growth. There will inevitably be a phase-in period, which could last several generations, where those treatments will not be universally available at market prices, so they will need to be rationed or heavily subsidized.

The key question, and this is where the mega-debate will happen, will be over the means of rationing or level of subsidization during this transition period. Market-based rationing without subsidization means that the treatments will go to the richest. It will also mean that those developing the treatments will have the maximum incentive to develop more, faster, and that the overall economy will grow more quickly, all of which hastens the day when the full set of treatments exist and are universally available.

In the meantime, will society accept the idea that Bill Gate’s kids or grandkids get to live forever but yours and mine may not? Of course, if we ration these treatments on any other basis, or tax everyone so that they are universally available more quickly, then the market will suffer. Either the drug company incentives or resources for further development won’t be there (which is the effect of the policy described in today’s article), or the economy as a whole will suffer from trying to afford the unaffordable–universal access to expensive innovations.

That’s going to be the big debate.