Who says that Saturdays are slow days politically?

Between travel and work I haven’t had much time to do much recreational reading or writing.  But to clear out the inbox right quick, I give you: Chop Suey:

• Over in Europe, Business Insurance mentions that the increased capital requirements for insurers proposed under Solvency II standards could have the side effect of reducing capacity for catastrophe, excess, and long-tailed casualty lines of insurance.
   
• In New Orleans, the Times-Picayune reports that a federal judge found the Army Corps of Engineers grossly negligent in its work on the Mississippi River Gulf Outlet, contributing the the Great Flood of New Orleans in the wake of Katrina.   Three households and a business were awarded $700,000 in damages, and the door was opened a bit wider for the damage claims of an additional 100,000 claimants.   Total damages sought, if I recall correctly, were $3,014,170,389,176,410 (or $3 quadrillion, “with a ‘q’”).
   
• CBS relayed word from the Treasury that the national debt has finally crossed the $12 trillion mark ($12,031,299,186,290.07 as of 3pm EST, on 17 November).   That figure ($38,974.34 per American) is big, even if it’s only a tiny fraction of the damage claims against the Corps of Engineers.
   
• Also on Tuesday, the Wall Street Journal’s Health Blog reminded us of yet another game in health care financing which was not addressed in the House health care bill – balance billing.  The short version is that heath plans generally base reimbursement on “usual and customary” rates, which are less than the list prices many medical providers charge.  Unless the insurer has an agreement with the medical provider to forgive the difference, patients are on the hook for the balance.  I’ll refrain from rambling here about unreasonably low UCR’s, ludicrously high list prices, and how both might aggravate the problem of medical cost inflation.
   
• The Volokh Conspiracy saw an interesting article exploring the idea that a federal law making health care mandatory might be unconstitutional not because of a violation of the Bill of Rights, or the non-enumeration of that authority, but because the possible mechanism of imposing fines could be a breach of Article I, section 9 of the Constitution.  (The 16th Amendment, which revised Congress’ authority to tax, only extended to legalizing the direct taxation of income.)  I don’t think opponents to health care reform should rely on that argument either, but it is an intriguing line of thought.
    
• The big political news story of the week was, of course, the introduction of the Senate’s health reform bill.  The key differences between the Senate and the House bill seem to be its funding source (tax on Cadillac plans, 5% surcharge on elective cosmetic surgery, and an increase on the Medicare payroll tax for high-income employees), a different treatment of abortion (rather than a prohibition of non-emergency abortion in subsidized plans, a firewalling of subsidy funds away from the procedure), and the opt-out provision for individual states opposed to the public option.   The health insurance trade association has naturally pointed out the impact of the Cadillac plan tax on individual and small group health premiums.
   
• Back in my old hometown, the Memphis City Schools is one of three school systems to have received a rather large grant from the Gates foundation to improve teacher training and pay.  The Commercial Appeal article mentions that pay would be merit/skill-based, with the best teachers potentially earning 6-figure salaries, and that teachers could be dismissed for subpar performance.  The article, however, is silent on how they got the teachers’ union to go along with the plan.
   
• Fox News (please forgive the source) featured an article discussing efforts underway in the United Nations to push for a global treaty obliging signers to pass laws prohibiting blasphemy.  The United States, where most folks regardless of political persuasion still hold the freedom of speech almost sacrosanct, is opposing the effort and wouldn’t sign such a treaty anyway.  The Fox News article gives a few examples (admittedly Middle East-focused) of how such a law could be abused.  I share the concerns about censorship, and wish that the world could be civilized enough that good taste would keep blasphemy in check.  Besides, some organizations have adequately demonstrated that intellectual property laws can be an effective tool when satisfaction through the courts is required.
   
• Der Spiegel was one of a few mainstream media outlets noting that global temperatures haven’t behaved according to Al Gore’s hockey stick.  I wonder if we’re within a few years of my fears of global warming activists’ hype doing more harm than good being realized.  (Recall that I’m in favor of long-term planning for climate change – natural or man-made – and for reducing the harm inflicted by civilization on the environment, but I think activists are probably caught up in hype and a bit of junk science, and a backlash is coming if/when the predictions of doom fail to manifest as quickly as warned.)
   
• And finally, back here in Connecticut, CT New Junkie reports that the state has signed a contract with a Subway restaurant franchiser and others to renovate the 23 service areas on the Connecticut Turnpike, and the Merritt and Cross Parkways.  Given that other states are closing rest areas due to funding issues, raising the question of whether rest areas are even needed any more…well, perhaps a better question is whether it’s appropriate to maintain the virtual prohibition of services at interstate rest areas in most of the country.

Interested folks might wish to check out this letter to Congress from the American Academy of Actuaries, offering an opinion on the House reform bill.

As is the Academy’s general custom, the letter is written from an advisory point of view, neither promoting nor deprecating legislation; instead, offering a few thoughts for members of Congress to consider when evaluating the bill.

The punchline:

The American Academy of Actuaries’ Health Practice Council strongly supports three key considerations for a sustainable health insurance system with increased access to affordable health insurance. In particular, for insurance markets to be viable they must attract a broad cross section of risks; market competition requires a level playing field; and for long-term sustainability, health spending growth must be reduced. Outcomes of the policy changes before you, because they involve so many complex interactions and market behavior, may not be fully known until implementation. Even actuaries must make certain assumptions in their projections, based on experience and expertise, as to what the exact effects will be. However, as your membership casts their votes, we urge you to first and foremost examine these criteria as a litmus for determining the success of this reform effort.

Seen at Autopia:

The Dutch government wants to abolish ownership and sales taxes on automobiles and instead levy a fee on every kilometer driven. The Transport Ministry says the move will cut congestion in half and curb carbon dioxide emissions by 10 percent.

Motorists driving a typical sedan would pay 3 Euro cents per kilometer, or about 7 U.S. cents per mile, under the law, which if passed would take effect in 2012. The tax would climb to 6.7 Euro cents (16 U.S. cents) in 2018.

“Each vehicle will be equipped with a GPS device that tracks how many kilometres are driven and when and where. This data will be then be sent to a collection agency that will send out the bill,” the ministry said in a statement, according to AFP.

Personally I think that this is a rather cool idea, once you get over the Big Brother aspect of the government potentially having access to records of where your car is when.   Folks who drive more pay more to support the transportation system; the potential to modify behavior through congestion pricing has a certain appeal; and common hardware could facilitate the use of tolls on highways to support construction and maintenance, without the specter of too many toll barriers and queues to use them.

Of course, perhaps my fondness for the idea is affected, in spite of my long commute, by the fact that this measure would exempt vehicles owned by disabled people from the tax, and that our family vehicle does have handicapped tags…

Here’s yet another installment in my preaching that congressional health care reform measures do nothing to address the reality that a troublingly huge amount of money is poured into the health care system.

The Hill has shared a memo from the Office of the Actuary for CMS (Medicare) expressing its evaluation of the net impact of the House reform bill.

The bottom line: increased utilization will more than offset some of the forced spending reductions, increasing the net national cost of health care paid by the country by 1.3%, or $289 billion, in 2019.

Quoting the memo:

[W]e estimate that most of the provisions of H.R. 3962 that were designed, in part, to reduce the rate of growth in health care costs would have a relatively small savings impact.[…] Total national health expenditures under this bill would increase by an estimated 1.3 percent in calendar year 2019, reflecting the net impact of (i) greater utilization of health care services by individuals becoming newly covered (or having more complete coverage), (ii) lower prices paid to health providers for the subset of those individuals who become covered by Medicaid, and (iii) lower payments and payment updates for Medicare services.

One bit of good news, at least – the bill does acknowledge a reduction to the projected budget deficit.  We may end up spending more money on health care, but at least we will do a slightly better job of actually paying those bills, rather than just increasing the balance on Uncle Sam’s credit cards.

One of the themes I’ve tried to hold to when writing about health care reform is that the measures proposed in Congress do almost nothing to address the real underlying problem in making coverage available (medical cost inflation) or to deal with the shenanigans committed in the interest of maximizing profits.

(I don’t mind profit, mind you; I am a capitalist.  However, capitalism does need to be tempered with a certain measure of consumer protection when there are significant barriers for competitors to enter the market.)

An example of such shenanigans can be found in Hartford, the former insurance capital of the world.  The largest insurer in the country, Aetna, has been arguing with one of the hospitals in town, Hartford Hospital over service rates…and a failure to resolve that disagreement has lead to Aetna kicking Hartford Hospital and its affiliated medical practices out of its network, and requiring many Aetna insureds to seek other doctors.

Of course, Hartford proper has only two major hospitals – Hartford Hospital and Saint Francis – and Hartford Hospital is purportedly the lead institution in the area when it comes to emergency care.

The folks at St. Francis are nice enough, but recent news about that hospital might lead one to wonder if Aetna’s near-boycott of Hartford Hospital is a bad idea.  Quoting the Courant:

State health officials have placed St. Francis Hospital and Medical Center on probation for one year, citing violations of a range of state regulations in cases involving patient care.

Among the cases cited is the June death of a patient following a "catastrophic" failure involving the pump used for cardiopulmonary bypass during heart surgery. The patient sustained a brain injury during the May 18 surgery and died June 18, according to an investigation report.[…]

In the investigation report, state regulators cited several problems with how the hospital handled the pump failure:

• The pump was put back into use within three or four days after it failed, without first being reviewed by a clinical engineer and the manufacturer. […]

I should mention again that in the saga of my wife’s health issues, when we’ve worked with St. Francis, the staff there has been great and the care excellent, and accidents, though sometimes tragic, do happen.  However, the Aetna-Hartford Hospital tiff and the events described in the Courant do serve as a reminder that perhaps Congress, through its reform efforts, is taking a blind eye towards matters that could actually stand some reform.

Eric Dondero pointed to a comment recently made by Dick Armey (former R-TX) which merits repeating:

But now, they come along and they say, irrespective of the fact they’ve gone 20, 30, 40 years of their adult life without ever having bought insurance prior to getting a liver inflammation due to their excessive drinking habits or diabetes because they eat like a pig, you must now insure them.

But at what point do we allow the government to order people that you must sell your product to this person or that person, irrespective of any good judgment? We saw what happened in housing when they ordered banks to make loans to people who weren’t qualified. Are we now going to have the same destructive influences in health care because we’re going to order doctors to provide services and so forth?

I mention Mr. Armey’s comment not as a slam against the anti-underwriting provisions of health insurance reform.  If health coverage is to be universal, after all, there can be no underwriting, and participation must be compulsory.  Otherwise, the system will be inherently unstable.

Instead I bring his comment to your attention as a reminder of one of the slippery slopes we face if/when reform is implemented: if/when the public subsidizes insurance for everybody, the public will find significant fiscal incentive to impose requirements for that coverage.

To use Mr. Armey’s comments as an example – consider obesity, a health condition for which it is apparently politically correct in certain circles to be mean about.

For health coverage to be universal, it must be compulsory – either everyone must participate passively, or everyone must be made to acquire coverage and face penalties (fines, perhaps jail time) if they do not.

Some would apparently argue that even in such an environment, very obese people should be denied coverage, since absent other medical reasons, they’ve assumed excessive health risk through their own choices…and why should others be obliged to subsidize the consequences of those choices.

Extend the positions “everyone must buy coverage or else pay a fine or go to jail” and “coverage should not be provided to obese people”, and you reach the stance “obese people should pay a fine or go to jail”.

I don’t think the country would adopt such a stance…but the gap between “logical conclusion” and “utter silliness” is awfully narrow here.

It doesn’t require me to use too much imagination to see the following emerging in a society which promises universal health care but has health costs spiraling out of control:

• Fines for being over/underweight; mandatory nutrition camps for repeat offenders.
• New requirements that everyone get an annual physical, or face federal penalties.
• Mandatory licensing, based in part on a fitness evaluation, as a requirement to procreation.
• Government-sponsored weekend education camps, mandatory for citizens who cholesterol or A1C numbers come back a bit high.

I am probably being a bit paranoid about this.  Presumably, public opinion would prevent any of these from actually coming to pass.  However, given the apathy of the silent majority and the potential of ever-larger slices of one’s wages to support the national system of health care…is it really safe to trust in public opinion as a check on legislative or regulatory silliness?

Again, I think that the idea of expanding the availability of health coverage and of reining in some of the craziness engaged in by some health plan administrators are wonderful things to pursue.  However, I fear that our leaders are once again failing to really consider the consequences of their plans, and are not building the necessary supports or controls to prevent a nasty slide down a long slippery slope.

David Frum made an observation on one of the potential bits of fallout from the House health insurance reform bill, assuming it survives into law:

Small employers can now escape the obligation to provide health care for their employees by paying an 8% payroll tax. Many small employers will seize that offer. Their employees will have to go shopping for themselves in a very complicated and confusing marketplace. Many will opt for the seeming security of the government-run plan. Over time, the public option will grow, setting private insurance on the road to extinction – or at best to a tightly regulated new role as the health equivalent of public utilities. The big decisions will be made in Washington; the insurers will comply.

At any rate, that’s the House leadership’s hope: not a single payer, exactly, but a single administrator.

Since I read about the payroll tax option, I’ve suspected this could lead to an economic disincentive for employers to provide health insurance as part of an employee benefits package.  Seeing Frum’s article finally motivated me to grab an envelope and do some calculations:

(Hovering over a number should explain the assumption I’ve made.)

Those figures are very, very rough, and I haven’t done justice to the complexities involved in the pros/cons of an employer deciding to offer a health insurance benefit, the wide range of possible salaries, etc.

However, accepting that those numbers above are extremely rough and SWAGgish…I can easily accept the notion that a non-trivial number of employers will find an economic incentive to push employees into the new exchanges and the public option.

Quoting the Courant:

An emotional Gov. M. Jodi Rell announced Monday that she will not seek re-election next year, signaling the end of a tenure that brought her the highest popularity ratings in Connecticut history and setting off a scramble to replace her when she steps down in January 2011.

Rell gave no specific reason for her stunning announcement, saying only that "it’s time" to leave high-level public office after a long career that includes more than five years as governor, 10 years as lieutenant governor and 10 years as a state legislator.

Wow.

The race for the Democratic nomination was already shaping up to be potentially entertaining.  Now, it’ll be a circus.

While I definitely haven’t agreed with every position Governor Rell has taken (she is a politician after all), I will admit that I’m sorry to see her go.  She’s seemingly one of the seemingly increasingly rare members of the “not scary” wing of the GOP.  She’s been successful despite the ineptitude of the Nutmeg branch of the Republican Party, and she has done a pretty decent job at being a foil against the excesses of a Democratic legislature, considering the supermajority held by the Dems in Hartford.

She will be missed.  And it looks like the 2010 election season will be more entertaining in Connecticut than it would have been otherwise.