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.
“There oughta be a law” is the religious mantra of statists. But people habitually understate the complexity that even the simplest laws can create. The WSJ provides an object lesson in this:
The Washington, D.C., bag tax seemed simple enough: Beginning Jan. 1, grocery stores in the district would charge five cents a bag, plastic or paper. The goal was to cut down on waste and raise money to clean up the polluted Anacostia River.
But nearly a month into the program, it’s turning out that government is having trouble legislating its way out of a plastic bag
This article highlights one of the universal, and universally ignored, facts about regulation. Regulations are force. If you fail to comply with a regulation, you are subject to fines or sanctions, and ultimately confiscation or imprisonment. Therefore, regulations must make fine distinctions about what is being taxed or proscribed. You have to translate “taxing paper bags at food stores” into something that will, in every case, separate legal from illegal behavior. It’s never as simple at it sounds:
The law specifically excludes bags that “package bulk items, such as fruit, vegetables, nuts, grains, candy, or small hardware items.” It also excludes those that “contain or wrap frozen foods, meat, or fish…flowers, potted plants, or other items where dampness may be a problem.” Other exceptions include unwrapped prepared foods and bakery goods, as well as bags provided by pharmacists to contain prescription drugs, newspaper bags, door-hanger bags and laundry dry-cleaning bags. Also tax free: “Bags sold in packages containing multiple bags intended for use as garbage, pet waste, or yard waste bags.”
By law, a restaurant patron who requests a doggie bag doesn’t have to pay a nickel—as long as the bag is paper, not plastic. “When you go to a nice restaurant and you want a doggie bag, you may have already cleared the bill,” Mr. Wells said. “You don’t want to go through this whole nickel kind of relationship.”
A takeout sandwich shop, however, has to charge unless it has chairs and tables, in which case it doesn’t have to charge as long as the bags are paper, 100% recyclable, made of at least 40% post-consumer recycled content and say something like “Please Recycle This Bag” in highly visible type on the outside of the bag. Banned altogether at food and drink establishments: plastic bags that can’t be recycled (the opaque plastic kind).
There are many other exceptions and clarifications, and they continue to grow because the line of demarcation between what is and isn’t taxed is not as black and white as the legislators originally thought. It never is. The point is that something as simple as taxing bags, something legislators can deal with by some wordsmith and a show of hands, can turn into a bureaucratic morass for everyone else involved.
Politics & Prose, a well-known local bookstore, sold one food item—mints—including a variety that came in a tin with Barack Obama’s likeness. To be safe, and avoid charging every customer who bought a book five cents a bag, the store dropped the mints. “It’s all been a little bit unclear,” says Tracey Filar Atwood, general manager. “Those items are not really at the core of our business. It was a very easy decision to make not to stock them,” she says.
For many other stores, the decision is not so easy. But this “simple” tax will cause a major realignment of commerce into stores that sell food versus those that sell none at all. Nobody pretends that this realignment would be of the least benefit to anyone.
If a social engineering project as simple as a 5 cent tax on bags can create this much confusion, bureaucracy, and pointless market realignment, consider what havoc a massive experiment like cap and trade or health care reform would wreak.
That’s what a statistically improbable number of death certificates are likely to read due to our tax law. No one will be able to prove which of the death certificates were fudged, or which doctors might have been fogging up the mirror for their patients until the magic hour struck. But there is no question about how powerful the incentives will be for perhaps dozens of would-be beneficiaries of congressional ineptitude.
Congress has allowed the estate tax to be completely repealed. Over 90 percent of Congress did not want this result. Virtually none of the Democrats wanted the wealthy to have any shot at keeping all their money in the family. The mere thought makes your fainting liberal…well, faint. Even a majority of Republicans were willing to keep an estate tax around, as long as it was something less than confiscatory. And it’s not like Congress didn’t have plenty of warning to do something about it. Like 10 years. This is the kind of failure that in the private sector would have gotten someone fired, for sure. The congressmen involved will most likely be reelected.
But Congress will not simply recognize its incompetence and let the law be the law. It’s not: “Hey, we screwed up on the estate tax. We guess we’ll have to figure out how to fix the mess we created later.” No. They are doubling down on their fecklessness by threatening to make their “fix” retroactive, making the mess even messier.
That’s right. Congress is telling law-abiding taxpayers with a straight face, “Sure, the law says that your estates will be exempt from tax in 2010. And we know that you selfish slobs will plan accordingly in order to deprive us of your hard-earned cash to the extent allowed by the law, you unpatriotic wretches. But don’t spend too much on that party, fair shitizens. When we’ve fixed the law to our satisfaction on our unhurried timetable, we will reach back into the past to take your money away. Don’t like it? Tell it to the justices.”
HR executives are rated, in good part, on their ability to retain their talent. If your best people keep leaving, you’re unlikely to see much progress If progress is making enough money to pay back, or at least get a fair return on, the $182 billion that your main investor has provided, you need all the help you can get.
So far, Kenneth Feinberg has not done well on the retention score at AIG. About half of the 25 executives whose compensation he was charged with reviewing have left the company. Another five are likely to leave pretty soon, including: Anastasia Kelly, General Counsel; Rodney Martin, head of one of AIG’s international life-insurance businesses; William Dooley, head of the financial-services division; Nicholas Walsh, vice chairman and head of AIG’s international property-and-casualty-insurance businesses; and John Doyle, head of the U.S. property-casualty business. By giving their notice and leaving before the end of the year, they get to keep their rights with respect to severance and prior bonuses.
A fair percentage of the people in the next tier of earners whose pay is subject to less stringent regulation have left as well, but about 20 of them are about to get bumped up to the top 25 category. This is a promotion that they will not relish. They will be interfacing directly with their government masters, trading off political and business considerations while having their pay scrutinized and limited.
The Father of our country, for all his wisdom and brilliance, may have unintentionally put his wife’s life at risk.
President Washington was mindful of his place in the history of the young nation he did so much to bring about. But he was also deeply bothered by slavery, and aware that his slave ownership would be a stain on his reputation. He decided to limit that black mark as best as he legally could, promising to free his slaves in his will. But not wishing to leave his wife in the lurch economically, President Washington willed that his slaves would be freed after her death.
Well, Martha Washington was no fool. Abigail Adams, on a visit to Mount Vernon, wrote in 1800:
In the state in which they were left by the General, to be free at her death, she did not feel as tho her Life was safe in their Hands, many of whom would be told that it was [in] their interest to get rid of her–She therefore was advised to set them all free at the close of the year.
Smart lady. Martha died of natural causes two years later.
There was a wonderful article in the WSJ yesterday comparing veterinary care to human health care in Britain. The care of humans was found wanting:
As a British dog, you get to choose (through an intermediary, I admit) your veterinarian. If you don’t like him, you can pick up your leash and go elsewhere, that very day if necessary. Any vet will see you straight away, there is no delay in such investigations as you may need, and treatment is immediate. There are no waiting lists for dogs, no operations postponed because something more important has come up, no appalling stories of dogs being made to wait for years because other dogs—or hamsters—come first.
The conditions in which you receive your treatment are much more pleasant than British humans have to endure. For one thing, there is no bureaucracy to be negotiated with the skill of a white-water canoeist; above all, the atmosphere is different. There is no tension, no feeling that one more patient will bring the whole system to the point of collapse, and all the staff go off with nervous breakdowns. In the waiting rooms, a perfect calm reigns; the patients’ relatives are not on the verge of hysteria, and do not suspect that the system is cheating their loved one, for economic reasons, of the treatment which he needs. The relatives are united by their concern for the welfare of each other’s loved one. They are not terrified that someone is getting more out of the system than they.
The last statement is particularly insightful. The overwhelming rationale for socializing health care is the sense of fairness it’s supposed to satisfy in our society. Yet anyone who has experienced socialized anything knows that the system reinforces the notion that we are all playing in a zero-sum game, that what you get must come at my expense, which it does, of course, when we’re paying for each other’s stuff, and there is no way to economize except by rationing.
My only quibble with this magnificent piece is the repetition of this canard:
A few simple facts seem established, however, even in this contentious field. The United States spends a greater proportion of its gross domestic product on health care than any other advanced nation, yet the results, as measured by the health of the population overall, are mediocre.
Well, that’s what you get for measuring the health of the population overall. You get dubious statistics about British life expectancy being comparable to that of Americans, or the French having an even higher life expectancy, and the Japanese even higher. But when we look at health by population segment, the picture looks quite different: French-Americans live longer than French in France; British Americans live longer than the average Brit across the pond. And the Japanese, who have the longest life expectancies on earth, don’t live as long as Japanese-Americans. No need to resort to convoluted and unconvincing excuses about lifestyle and diet.
What the health care reformers don’t want to tell us, and possibly don’t want to know themselves, is that equalizing health care for all will mean worse health care for most so we can provide better health care for a few. One may or may not believe that is the way to go, but we should at least be honest about the trade-off we are considering in this debate.
Probably not. No one knows which of the many elements contributing to the meltdown of last September were necessary or sufficient to be labeled a cause, but Larry Ribstein connects the dots in an intriguing way.
Treasury Secretary Paulson was obviously willing to let Lehman go down. But he saved AIG in order to “mitigate broader disruptions” in the economy. AIG was simply too big or too connected to fail, and their book of credit default swaps was the focus of Paulson’s concern.
So, why did their CDS exposure get so completely out of hand? Larry refers to a piece Michael Lewis had written about AIG:
Lewis blames everything on Joe Cassano, head of AIG Financial Products, whom Lewis dubs “the man who crashed the world.” According to Lewis, Cassano was not a financial wizard – just a back office guy with “a real talent for bullying people who doubted him.” He became ascendant when the man who put him in power, and who could control him (Hank Greenberg), was forced to resign by Eliot Spitzer (so, hey, let’s blame all this on Spitzer).
More than four years later, the federal government has decided that it cannot even make a civil case for fraud against Mr. Greenberg, never mind a criminal one. The SEC has essentially settled with Mr. Greenberg on the charge that he was the CEO at the time that “material misstatements” in earnings occurred.
Yet even if one accepts the SEC’s view of events, it may be a stretch to call them material, as they add up to less than 1% of AIG’s net income during the period at issue. The accounting items in the SEC charges, which Mr. Greenberg neither admits nor denies, represent less than 10% of the restatement AIG filed to justify the Greenberg firing demanded by Mr. Spitzer. The impact on retained earnings was roughly $250 million, when AIG’s total retained earnings at the time were approaching $70 billion.
So Larry concludes:
The bottom line: if Joe Cassano was the “man who crashed the world,” Spitzer was the guy who gave him the keys to the car. And all this for his supposed non-fraudulent responsibility for a barely material (if that) accounting mistake, plus, of course, the boost to Spitzer’s then career.
Another bank, Wells Fargo, has decided that they, too, will not sacrifice competitiveness for the sake of making their politicians feel good; they are dramatically raising salaries of their top executives:
“We must pay our senior people fairly,” said Melissa Murray, a Wells Fargo spokeswoman. “We are using stock to increase their salaries to keep the pay of these leaders closely tied to the success of the shareholder.”
Wells Fargo’s move illustrates the tricky mix of politics and government oversight that TARP recipients must navigate in running their businesses. Banks maintain that they must continue to offer competitive pay packages to avoid losing key talent. To do so, some are skirting rules designed to limit such pay.
The intent of the rules was certainly to limit such pay. The companies are skirting the rules in the same way that an animal will skirt a trap designed to make it dinner. Unfortunately, most readers are likely to interpret “skirting rules” as one of those nefarious things that dishonest business people do rather than the logical, predictable response of a market to ill-conceived regulations.
How much of an increase in salary did these silly rules induce? Over a 600% increase, in this case:
The Wells Fargo board approved a new salary of $5.6 million for Mr. Stumpf, who was originally slated to earn $900,000 in base salary this year. Last year, Mr. Stumpf made more than $9 million, $7.9 million of which came in the form of stock options.
My favorite line of this article:
Elizabeth Warren, chairman of the Congressional Oversight Panel, which oversees TARP, declined to comment.
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