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Sunday, March 21, 2010


Slightly edited comment I put on a major blog in response to a broadside with the time-worn arguments of sell-out, etc., on the health reform bill.

Blah, blah, blah. We've all heard all these great arguments, and most of us have decided that, on balance, while we sympathize with them very much, we would like to see the best deal that is politically feasible now passed into law. That's partly because we recognize that the sole focus should be on what the bill actually does for people and how it can be used in the future, and that whether or not insurance companies and drug manufacturers like it or not is totally irrelevant -- the tail wagging the dog.

It is totally beyond my comprehension how anyone claiming to be a progressive would be willing to kill legislation that will:

(1) end some of the worst insurance company abuses, including denial of coverage for pre-existing conditions (including rescissions after the claim for insurance coverage is activated by treatment) and lifetime benefits caps;

(2) move closer than ever to universal coverage and reduce bankruptcies due to high medical expenses;

(3) set Federal minimum standards for acceptable health insurance;

(4) set up a marketplace in which insurance companies will have to compete on an apples-to-apples basis, making it easier for buyers to make direct price comparisons of the same basic coverage;

(5) require more companies to provide their employees with health insurance and provides tax credits to help the smaller ones to do so;

(6) require insurance companies to pay out no less than a set percentage of premiums on actual medical claims;

(7) require the Federal agency that negotiates plans for Federal employees to establish at least one national non-profit plan that will be made available in the exchanges, and enable state exchanges (or groups of states) to set up additional non-profit co-operative plans that are owned by their customers and have the legal duty to make decisions to the benefit of those customers;

(8) make several million more Americans eligible for Medicaid;

(9) improve Medicare finances by virtually ending the insurance company gravy train from diverting tax dollars to subsidize companies offering plans under the Republican-generated Medicare Advantage (Medicare privatization) program;

(10) create hundreds of new low-cost Federally-supported clinics for extending primary care to lower income Americans;

(11) provide significant tax credits to reduce insurance premiums for the majority of middle class and lower income Americans who need to buy insurance through the exchanges;

(12) by guaranteeing affordable insurance through the exchanges, enable employees who are hanging on to jobs by their fingernails for the benefits to have less fear of losing a job or taking a chance on an entrepreneurial idea, thereby reducing job lock and beefing up Republican-depleted consumer confidence that is essential to a thriving economy;

(13) incorporate cost controls, including enlarging the pool of insureds, that a large group of economists who are generally considered to be progressive consider to include, save one important idea, every cost-control idea that's ever been identified; and, finally,

(14) create the exchanges and thereby set up the regulatory structure into which a public option may be inserted long before the exchanges go into operation -- that is, if progressives, instead of taking their marbles and going home to pout, have done their job of continuing to promote public support of this already-popular concept, and forcing the issue at a more opportune moment after it is allowed to stand alone unencumbered by the other controversial elements of the main bill.

That's 14 very worthwhile things this legislation does. Most of the canards from the left – most notably, that it forces people to buy from for-profit insurance companies – are just that, canards that misrepresent the actual bill. Just as I would like to see Republicans tell us which if any of these are an idea they oppose -- they cannot do that because their opposition has zero to do with substance -- I would ask the recalcitrant progressives to identify exactly which of these elements of the bill are either worthless or make the problems in the current non-system worse.

I know, I know, it's not good enough, because it does not guarantee that insurance companies and drug manufacturers will suffer -- and that, after all, is what's most important. If we hold out now, we might be able to get single-payer within 10 years or so. For the 450,000 people who die for lack of insurance in that period (per New England Journal of Medicine article's estimate of annual deaths), you hard-line “progressives” can make their families feel better by instructing them on the eggs-omelet metaphor.

It's time for some of the left-side Kill-Bill adherents to look in the mirror and ask why only a handful of liberals or progressives are still holding out. Most of them (outside of Congress anyway) would have preferred single-payer, and virtually all supported the public option in its absence. Is it not possible they have a better grasp of the present and future dynamics? Perhaps it has come to the point, however, where narcissism and the inability to admit a mistake have rendered such reflection impossible.

Tuesday, March 16, 2010

Regret Matrix for Health Care Reform Failure by the Numbers

· $1,115 – that’s the average premium for employer-sponsored family coverage per month in 2009. Annually, that amounts to $13,375 – or roughly the yearly income of someone working a minimum wage job. (Source)
· And if nothing is done to reform our broken health care system, a recent survey found that over the next ten years, out-of-pocket expenses for Americans with health insurance could increase 35 percent in every state in the country. (Source)
· 8 -- The number of people every minute who are denied coverage, charged a higher rate, or otherwise discriminated against because of a pre-existing condition. [Source:] · 8 -- The number of lobbyists hired by special interests to influence health reform for every member of Congress in 2009. [Source: Center for Public Integrity]
· 1 -- in every six dollars in the U.S. economy is spent on health care today. [Source]
· If we do nothing, in 30 years, 1 out of every three dollars in our economy will be tied up in the health care system. [Source]

The Robert Wood Johnson Foundation and the Urban Institute, non-partisan research organizations, released a report analyzing the cost of maintaining the status quo on health care. Here’s just a sample of what they believe we could be facing in the years ahead:
· Families will face dramatically higher health care costs. Individual and family spending on premiums and out-of-pocket health care costs will increase significantly. Spending would jump 34 percent by 2015 and 79 percent by 2020.
· Premiums will become increasingly expensive for employers and their workers. Premiums for both single and family policies would more than double by 2020, increasing from $4,800 to $10,300 for single policies, and from $12,100 to $25,600 for family policies.
· Employers will see large increases in premium costs. Employer spending on premiums would increase from $430 billion in 2010 to $851 billion in 2020 -- a 98 percent increase.
· Many small and medium sized firms would quit offering health care coverage to workers. As premiums nearly double, employees in small firms would see offers of health insurance almost cut in half, dropping from 41 percent of firms offering insurance in 2010 to 23 percent in 2020. Medium-sized firms would also cut offers of health insurance, dropping from 90 percent in 2010 to 75 percent in 2020.

It’s clear: the cost of doing nothing is too high. The time is now to reform our broken health care system.

41 economists support the health care reform plan.

Monday, March 15, 2010

Learning From Lehman, but Doing Nothing to Show It

March 14, 2010
Editorial NYT
Learning From Lehman
On top of everything Lehman Brothers did before it collapsed in 2008, nearly toppling the financial system, it now seems that it was aggressively massaging its books.
Of course, many colossal bankruptcies involve bad accounting. But a new report on the Lehman collapse, released last week and described in an article in Friday’s Times, would leave anyone dumbstruck by the firm’s audacity — and reminded of the crying need for adult supervision of Wall Street.

The 2,200-page report was written by Anton R. Valukas, a former federal prosecutor who was appointed by the Justice Department as an examiner for the Lehman bankruptcy case. According to the report, Lehman engaged in transactions that let it temporarily shift assets off its books and in so doing, hide its reliance on borrowed money.
The maneuvers, which Mr. Valukas said were “materially misleading,” made the firm appear healthier than it was. He wrote that Richard S. Fuld Jr., Lehman’s former chief executive, was “at least grossly negligent,” and that Lehman executives engaged in “actionable balance sheet manipulation.”

At the time, one Lehman executive sent e-mail to a colleague describing the accounting ploys as “basically window dressing.”
Window dressing? Shortly before Lehman’s failure, $50 billion in liquid assets were shed from its balance sheet. The executive who got the e-mail almost manages a question: “So it’s legally do-able but doesn’t look good when we actually do it?” — followed by that familiar dodge: “Does the rest of the street do it?”

Surely those whose job it is to analyze and supervise were alarmed, weren’t they? According to the report, rating agencies, government regulators and Lehman’s board of directors had no clue about the gimmicks. The result is that we were all blindsided. And we could be blindsided again. Congress is not even close to passing meaningful regulatory reform. The surviving banks have only gotten bigger and more politically powerful. If the Valukas report is not a wake-up call, what would be?

Crooks and Liars

Fed Helped Bank Raise Cash Quickly
By ERIC DASH NYT 3/12/10

They were considered the dregs of Lehman Brothers — “bottom of the barrel,” as one banker put it. But as Lehman executives tried to keep the floundering bank afloat in 2008, they used these troubled investments to raise quick cash that helped mask the extent of the firm’s troubles. And they did it with the help of the Federal Reserve Bank of New York.
The newly released report on the collapse of Lehman Brothers — which lays out what it characterizes as “materially misleading” accounting at the bank — also sheds surprising new light on Lehman’s dealings with the New York Fed.

Lehman engaged in a series of transactions with the New York Fed that were similar to the ones that drew criticism from the bankruptcy court examiner who investigated its collapse. The examiner, Anton R. Valukas, drew no conclusions about the transactions with the Fed, and focused instead on deals that were known inside Lehman as “Repo 105.”
But the report by Mr. Valukas nonetheless raises fresh questions about the role of the New York Fed in supporting Lehman during the frantic months leading up to its collapse. It suggests that Lehman executives believed the Fed would be able to help the bank avert disaster and provide it with a business opportunity.

“Bernanke and Co. may have ‘saved the day’ ” a Lehman executive, Geoffrey Feldkamp, wrote in an e-mail message to a colleague in March 2008, according to the report. Neither Ben S. Bernanke, the chairman of the Federal Reserve, nor Treasury officials saved Lehman, of course. But it was that month that the Fed started a special lending program open to Wall Street banks like Lehman that could not borrow directly from it. The Fed also lowered its standards for the kinds of collateral that it would accept against such short-term loans.
Lehman, desperate for financing, seized its chance. It packaged billions of dollars of troubled corporate loans into an investment called Freedom CLO. Then, in a series of transactions, it shifted Freedom back and forth to the New York Fed, in exchange for cash. Those moves helped make Lehman look healthier.

Essentially, Lehman was able to temporarily warehouse illiquid investments that were worrying its investors at the New York Fed in return for cash. The Fed created this facility immediately after the near collapse of Bear Stearns. Some suspect that other banks engaged in similar maneuvers.

“There were a number of tricks designed to make their balance sheet look stronger than it was,” said Janet Tavakoli, a structured finance analyst. “And they weren’t alone.”
A spokesman for the New York Fed said the loan facility was created to help the entire financial system and prevent the problems at one bank from cascading. The collateral accepted from Lehman met the Fed’s standards, he added. A third party valued it, the Fed accepted it and then reduced prices to limit the risk.

In March 2008, Lehman packaged 66 corporate loans to create the $2.8 billion Freedom CLO, which it planned to use exclusively for transactions with the Fed, the examiner’s report found.
The idea, according to a former Lehman trader familiar with Freedom, was to temporarily reduce the size of Lehman’s balance sheet. The Repo 105 transactions, according to the examiner, were created with a similar goal in mind. The deals with the New York Fed let Lehman pledge Freedom — a mix of low-quality assets, plus some cash — in return for all cash from the Fed.

According to the examiner’s report, New York Fed officials were aware that Lehman viewed the lending facility as an opportunity to finance a bundle of loans that it could not offload easily to a rival bank. In August 2008, Lehman tried to pledge Freedom CLO and similar investments as collateral for its trading positions with Citigroup. A Citigroup executive rejected the offer as “junk” that was impossible to value, the report said.

Health Reform Passes the Cost Test

The WSJ ran this on its op-ed page 3/13/10

"The Obama plan will cut costs—$600 billion over the next decade. Why walk away from it?'
By David Cutler, Harvard University'... Why is reform viewed so negatively? In part, it may reflect the perfect being the enemy of the good. If the only passing grade is 10 out of 10, then reform clearly fails. But given where the Republican Party is on a public option, no reform will get a passing grade. If both parties were willing to raise taxes and Republicans negotiated malpractice reform for their overall support, we could probably get a nine out of 10. 'Reform is also viewed negatively because official scorekeepers do not believe anything on this list other than reducing prices will save much money. The Congressional Budget Office has consistently estimated that policies built around changing incentives and thus encouraging more efficient care will not have any effect on cost trends. My own calculations, mirrored by other observers and a host of business and provider groups, suggest that the reforms will save nearly $600 billion over the next decade and even more in the subsequent one. 'Of course, no one knows precisely how much medical spending increases will moderate. But one cannot doubt the commitment to try. What is on the table is the most significant action on medical spending ever proposed in the United States. Should we really walk away from that?' '

Mr. Cutler is a professor of economics at Harvard University. He was senior health-care adviser to the Obama presidential campaign.'

Healthcare: time for progressives to get a bit more Machiavellian

What does the administration mean when it says the public option doesn't have the votes in the Senate? It doesn't seem to make sense when 41 senators have signed the Bennett letter urging fellow senators to pass the public option in reconciliation, and more than nine others have at some time declared support for it (only 50 needed with Biden available to break a tie).

Here's what I think they really mean. Yes, we could possibly “ram through” the public option right now, but some senators do not feel they have enough “cover” yet against inevitable Republican attacks in their states. Many representatives feel the same way in their districts. Although it receives majority public support when explained, there is still too much misinformation and lack of understanding – yes, through the fault of a poor White House communications strategy. Republicans use it as “evidence” that the bill is a “government takeover,” and in the heat of a campaign it is hard to fight against such attacks with surface plausibility among those not yet inoculated against the relentless lying of the right wing.

After the main structure of the bill is passed, it will be much easier to get the public to focus on the public option, what it actually means and its significance for them. I have been making the argument on other blogs that not cramming it into this bill is a blessing in disguise. When accurately explained as a choice that people who must buy insurance through the exchanges would have, the support for such a public option in an August 2009 poll was 77% to 22%. Standing alone without the baggage of the main bill, a new public option bill, already popular, would only gain in public support, not only making it more likely to get done, but to be stronger than the watered-down public option version in the House bill today. Since it will be popular and will make the absurdity of the “government takeover” argument more obvious, it will also be easier for those at-risk senators to counter-attack against such right-wing talking points.

Here is one of the comments I entered on another blog elaborating on the benefit of holding off and making the public option the first great fix to the Healthcare Bill:

And progressives can help make it all happen by re-starting the public option debate as the first great fix to the healthcare bill, gaining more public support for the already-popular concept since it will now be unburdened by the other baggage in the main bill, forcing "centrist" Democrats to jump on board or be driven to K Street in the next couple of years, and forcing Republicans to take the side of insurance company profits and CEO salaries.

If he's smart, because it's a political fact that the public option will never go away until it's adopted, Obama will jump on board, too, regardless of what inappropriate promises were secretly made before. It will be dangerous for the next round for any Democrat to play around with the public option like so many did this time.

But not getting a watered-down public option now is a blessing. Progressives should not miss this opportunity. After a bit of good rabble-rousing, including a ringing declaration that the public option will never die or fade away and insurance companies and for-profit hospitals are going to have to deal with it someday soon, Bernie Sanders should withdraw the demand for a vote at this time on his public option bill, and use it over the next few months as a way for progressives to re-take their rightful position as the driving force of a strong Democratic Party -- and recapture the populist momentum for November.

Here's a somewhat more elaborate explanation below in one of my comments to another blog (slightly edited). I am 100% in the “Pass The Damn Bill” camp -- almost a charter member. That's because, mainly, I don't see how any liberal or progressive could in good conscience tell the parents who can't get a kid covered for a pre-existing condition they will have to wait another 5 or 10 years until we can (possibly) get a single-payer bill more to our liking, and if the kid dies we'll give them the omelet-eggs bromide; or to tell a family with an income of $50,000 – the national median – that tax credits reducing their premiums – for better insurance than cannot be denied or canceled and that will have no lifetime limit on claims paid – from, say, $1200 per month to $300 per month is a “worthless bill” or “worse than nothing.”

The public option in particular will be the subject of relentless progressive pressure and continuing growth in public support as it becomes better understood and is separated from the baggage of the main bill. When the question is phrased properly as a choice for people who cannot be covered by their employers and must buy insurance through the exchanges -- i.e., in many cases, people who have lost their jobs -- the public approval already approaches 80%. When they further understand the policy rationale, as a constraint on insurance company excess profits and CEO salaries, and when the remaining low-information independent voters start to realize how absurd the claim that it is a "government takeover," that public support will only solidify.

It will be politically very dangerous for Republicans to be on the side of the insurance companies against the interests of the people in the lowest costs possible. Democrats should be riding this issue all the way to November even if they temporarily refrain from including it in the main legislation. The Democratic mantra should be, from day one of passage, that everyone knows "the public option will never go away". It's an excellent policy idea and is very popular with the people -- and has tens of millions of passionate supporters comprising most of the Democratic Party (not just "the left"); accordingly, Democrats can score points with most Americans by delivering some "tough love" to the insurance industry, pharma, the AMA-type doctors and the for-profit hospitals, warning them they would be better off to stop fighting a war against a public option they will eventually lose and start trying to deal with that reality.

However, don't expect the heavily compromised Obama administration or Congressional leadership to lead the charge. That progressive passion is going to be the driving force that eventually, and probably long before the exchanges go into operation, makes it happen. As good Machiavellians in the service of high ideals, we should welcome this opportunity to grab center stage in the party for something most Americans will want.

Platitudes and generalities about whether or not a less-than-complete piece of legislation can be "fixed" later or be subject to incremental improvement are irrelevant. You have to look at the particular forces at work on particular changes. The stars are aligned for the public option to be the first big fix, whether Obama, Emanuel, Reid and Pelosi want it or not.

Democrats nationwide -- the real centrists who actually believe in historic American values like the rule of law and a strong middle class -- are sick of Republican-lite Democrats. They are desperate for candidates who are real Democrats. Any self-professed Democrat serving now who doesn't get on board for the next round on the public option will be in serious danger of not having the chance to do so again.

If Democrats keep the majority in Congress, we will get a public option. It may take the form of a so-called "Medicare Buy-In" for buyers in the exchanges, a version that "polls well," in DC insider parlance. My bet: we can still get it in 2010, but in any case we can get it before the exchanges go into operation. Not part of the main bill now? No harm, no foul. Pass The Damn Bill.

Friday, March 05, 2010

Why the U.S. is going BANKRUPT

I just got my tax returns back from my tax preparer. (Usually I do my own returns, but the last two years have been somewhat complicated due to the death of my mother and related one-time events affecting my tax status, so I have retained an accountant to prepare the returns for the last two years).

Here's a rough-out of my tax situation. I'm retired. Last year I had approximately $100,000 of gross income, almost all in the form of qualified dividends, from various sources, including part of the earnings of my mother's estate from the prior years. After exemptions and itemized deductions, that was reduced to taxable income of about $82,000.

Now, I knew that the Bush tax cuts limited the top tax rate on qualified dividends to the ridiculously low rate of 15%, so I assumed I would be paying tax of about 15% on almost the entire $82,000, which would result in taxes of about $12,000. I was absolutely floored when the accountant told me my total taxes would be about $2,100 (little more than 2.5% of my taxable income). But, as it turns out, under the BUSH TAX CUTS, the first $67,900 (for married persons filing joint returns) of taxable income derived from qualified dividends is NOT TAXED AT ALL. That's right. The tax on the first $67,900 of income from qualified dividends is not taxed at all. The total tax is zero, zippo, nada, nil!

So, I am only taxed on the difference between the $82,000 and the 67,900 (i.e., on $14,100), and even then the tax is limited to 15%. So, in the end, my total tax is just a shade over $2,100.

And you wondered why we're going bankrupt in this country! My state income taxes are higher than my federal taxes!

Meanwhile, of course, a person who had taxable income of only $16,800 in taxable income from "earned income" sources would pay the same tax I do. That's roughly what someone earning the minimum wage would make. And, the rich still complain they pay too much in taxes!

Jesus must be weeping.