Kevin Drum

The Problem With Private Health Insurance

| Mon Jul. 27, 2009 1:15 PM EDT

Paul Krugman says that in a private insurance market, insurance companies will do their best to avoid taking on sick people as customers.  Alex Tabarrok disagrees:

If insurance companies do avoid covering people who are "likely to need care," this suggests that the uninsured are unhealthy.  But 60% of the uninsured are in excellent health (Table 10)....

To be sure, this doesn't mean that being uninsured is not a problem but, contra Paul, it does mean that insurance companies would be willing to cover most of the uninsured at the same rates as the insured if the uninsured could or would pay those rates.

Color me perplexed.  That first sentence doesn't compute at all, and the rest doesn't make sense either.  Sure, insurance companies are willing to cover "most" of the uninsured.  That was Krugman's point.  The problem is that they won't cover the 40% who aren't in excellent health, and those 40% account for most of our healthcare expenses. That's perfectly reasonable behavior on their part, but it's also a pretty big problem for anyone who wants a solution to more than a fraction of the problem.

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The Cowboys of Kabul

| Mon Jul. 27, 2009 12:02 PM EDT

In early 2002 Del and Barbara Spier filed for bankruptcy.  Their Houston-based private investigations firm, the Agency for Investigation and Protective Services, was dead.

But thanks to the war in Afghanistan, that turned out not to be a problem.  They immediately started up a brand new company, US Protection and Investigations, and got themselves a lucrative contract providing war zone security:

....By 2006, USPI claimed to employ more than 3,000 Afghan guards, along with 160 US and expat employees, and had a significant presence throughout the country, especially in Kabul, where guard shacks bearing its logo were a common sight. "It basically grew into a monster," the former Berger official says. On its website, the company described itself as "the foremost private security company working in support of Operation Enduring Freedom in Afghanistan." Its stated goal? To "help bring about change and improvement for the people of Afghanistan."

Without question, USPI's role in Afghanistan had brought about change and improvement for the Spiers. In Kabul, they took up residence in a luxurious compound that some of their employees jokingly called the "marble palace." In their bedroom, an ex-employee adds, was a safe that sometimes contained upward of $1 million cash, used to bankroll USPI's operation.

The former USPI security coordinator told me, "I remember at one point seeing boxes of cash that they were bringing in. I thought, 'Wow, that's really fucking weird.'"

Not just weird, it turned out, but completely illegal.  The whole operation was a gigantic fraud, and in 2007 it finally came to an end when USPI's office in Kabul was raided and shut down.  "Have you ever seen a dynamic entry, where people are clearing rooms out with guns locked and loaded and shoving a gun in your face?" said a former USPI supervisor.  "That's the way Blackwater did their entry into the house."

If you want to find out how the Spiers pulled it off — and how they finally got caught — Daniel Schulman has the rest of the story here.  It's worth a read.

Ben and the Bank

| Mon Jul. 27, 2009 11:06 AM EDT

Nouriel Roubini writes in the New York Times that although Ben Bernanke made some serious mistakes in the runup to last year's financial crisis, when the moment of truth arrived he acted decisively:

When a liquidity and credit crunch emerged in the summer of 2007, Mr. Bernanke engineered a U-turn in Fed policy that prevented the crisis from turning into a near depression....The federal funds rate was effectively pushed down to zero....New programs encouraged skittish institutions to resume lending....Mr. Bernanke also introduced a wide range of other programs, like those to maintain the functioning of the commercial paper market....The Fed was involved directly in the rescue of financial institutions like Bear Stearns and American International Group. It lent money to foreign central banks to ease a global shortage of dollars. The Fed even committed to purchasing up to $1.7 trillion of Treasury bonds, mortgage-backed securities and agency debt to reduce market rates.

I agree with all this.  But I'm not sure Roubini's conclusion follows:

The Fed’s creative and aggressive actions have significantly reduced the risks of a near depression. For this reason alone Mr. Bernanke deserves to be reappointed so that he can manage the Fed’s exit from its most radical economic intervention since its creation in 1913.

Hmmm.  Bernanke's background and temperament did indeed make him well suited to address this crisis once it unraveled.  However, Roubini admits that back in more normal times Bernanke's actions also played a role in helping to create this crisis in the first place.

We're now — hopefully — about to head back into more normal times.  So does it really follow that just because Bernanke turned out to be a good crisis manager, he's also the best bet to head up the Fed during the mopping up stages?  I'm not sure I see that.  Unwinding Bernanke's programs doesn't require Bernanke at the helm, and the job of re-envisioning the role of the post-collapse Fed would be better off in the hands of someone who's taken bubbles seriously all along.

It's possible, of course, that Bernanke has gotten religion on this point, but I'd rather not chance it.  Why not choose someone instead whose views on credit bubbles are clear, consistent, and long held?  Someone who correctly assessed the situation before it blew up and can be trusted to do the right thing now even if he or she has to face down the financial industry to make it happen?  I don't think reappointing Bernanke would be any kind of disaster, but I also doubt that it would be the best choice.  The Fed needs a change of direction, not more of the same.

POSTSCRIPT: But what about Bernanke's recent charm offensive?  Consider me charmed!  I applaud the idea of a Fed chairman willing to talk to the press and answer questions in fairly plain language.  It's a change for the better.  But it's still not enough to make me think Bernanke ought to be reappointed.

Quote of the Day

| Mon Jul. 27, 2009 10:10 AM EDT

From Sen James Inhofe (R–Cloudcuckooland), commenting on the conspiracy theorists who think Barack Obama wasn't born in the United States:

"They have a point."

This provides some needed context to Inhofe's frequently stated belief that global warming is also a hoax.  At least now we know what his standards are.

Sunday Dog Blogging

| Mon Jul. 27, 2009 12:26 AM EDT

Paul Krugman writes today about the incoherence of the Blue Dog position on healthcare reform: they say they want it to be fiscally neutral, but they relentlessly oppose every effort to actually make it revenue neutral.  Does this mean they're just corporate shills?

I guess I’m not quite that cynical. After all, today’s Blue Dogs are politicians who didn’t go the Tauzin route — they didn’t switch parties even when the G.O.P. seemed to hold all the cards and pundits were declaring the Republican majority permanent. So these are Democrats who, despite their relative conservatism, have shown some commitment to their party and its values.

Now, however, they face their moment of truth. For they can’t extract major concessions on the shape of health care reform without dooming the whole project: knock away any of the four main pillars of reform, and the whole thing will collapse — and probably take the Obama presidency down with it.

I'll bet he was gritting his teeth when he typed that.  My attitude toward the Blue Dogs is a wee bit less charitable than that at the moment, and when he's not writing for public consumption I'll bet Krugman's is too.  The Dogs may be centrists, but someone needs to remind them that they're still supposed to be centrist Democrats.  It's time to fish or cut bait.

Paying the Piper

| Sun Jul. 26, 2009 3:49 PM EDT

Matt Yglesias is pessimistic today about the chances of serious healthcare reform:

David Leonhardt has another in a growing series of great David Leonhardt pieces on the nutty and dysfunctional nature of “fee-for-service” medicine in which doctors are paid for doing stuff rather than for treating illness.

The problem, however, is that to totally change how medical professionals get paid would be a big disruptive change, and I see no sign that the public really wants such a change....Opting for the Barack Obama approach where you focus on reassuring people that the status quo won’t change too much seems like a smart play, even though the case for changing things a great deal is very strong.

Generally speaking, this is true.  It's hard to get people to accept the inherent risk of a major change unless they're personally dissatisfied with the status quo.

But this particular issue strikes me as quite different.  After all, how many patients know how their doctors are paid?  How many would care if their doctors were paid a straight salary rather than fee-for-service?  Would any of them be upset if they learned their doctor was switching from one compensation plan to the other?

I doubt it.  Conservatives could undoubtedly gin up some scaremongering talking points on the subject, but fundamentally this isn't something that would be hard to sell to the public.  There are plenty of other complicated issues related to how doctors are compensated1, but I'm not sure that public rebellion is one of them.  As Leonhardt says, this is mostly doctor vs. doctor stuff.

1Oh yes, it's complicated.  Fee-for-service is a problem because it motivates the entire medical industry to order lots of tests and procedures even if they have marginal value.   Boo!  Then there's capitation, where doctors are paid a set annual fee for every patient they take on regardless of how much medical attention they need.  Ordering tests and followup visits eats into the bottom line, so they have an incentive not to overtreat.  Hooray!  But would you want to see a doctor who was highly motivated to offer as little service as possible?  I didn't think so.

Paying doctors a straight salary seems like the best middle ground.  But that just pushes the problem up a level: maybe individual doctors get a salary, but how do you set overall compensation for the medical group or hospital?  And what about physicians in private practice?  You can't very well pay them a salary when they work for themselves, so does private practice go away?  And what about bonuses?  Should doctors be paid more based on some kind of formula for productivity and general wonderfulness?  Would you care to propose such a formula so the rest of can all laugh at it?

Anyway: complicated.

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Adjusted for Inflation

| Sun Jul. 26, 2009 11:42 AM EDT

In the Washington Post today, David Brown says that as treatment for heart attacks has gotten better, it's also gotten more expensive:

Over the same period, the charges for treating a heart attack marched steadily upward, from about $5,700 in 1977 to $54,400 in 2007 (without adjusting for inflation).

I continue not to understand why anyone would write this.  Why not this instead?

Over the same period, adjusted for inflation, the charges for treating a heart attack marched steadily upward, from about $20,000 in 1977 to $54,400 in 2007.

Technically, Brown's wording is correct.  But it's not helpful, since most people don't have even a vague notion of how much cumulative inflation there's been since 1977.  The revised wording, however, is helpful: it gives people a correct impression of how much more we spend treating heart attacks these days.  Namely, two to three times as much as 30 years ago.

This wasn't just a slip of the keyboard.  Brown and his editor obviously made a deliberate decision to use nominal figures even though this doesn't give the average reader a very good idea of how much costs have actually risen.  I'd sure like to hear their explanation for why they made this decision.

Climate Change and the Skeptics

| Sun Jul. 26, 2009 12:40 AM EDT

Earlier today I was thinking of responding in more detail to yesterday's Jim Manzi post about George Will's brand of climate change denialism, but before I could get around to it he put up yet another post on the same subject.  You can read them here and here, but I think I can summarize them briefly without doing too much damage to his argument:

If global temperatures are the same tomorrow as they were today, that's not evidence against global warming.  However, if they're the same a thousand years from now as they were today, that is evidence against global warming.  So where's the cutoff point for skepticism?  Five years of no warming?  Ten?  Twenty?

More specifically, what we really want to know isn't merely the trend, but how well the trend observed today matches the predictions made by the scientific community in the past.  That's the only way of knowing whether their models are any good.  George Will may have expressed himself on this point too simplistically, but that's basically the question he's asking.

I guess there are a lot of things I could say about this, but I'll try to keep things brief.

First: Both Will in his column, as well as Manzi in his initial post, suggested that global temps haven't risen for the past ten years.  But that's wrong.  It's true that the warming signal has been pretty flat for the past five or six years, something that skeptics have latched onto gleefully even though it's almost certainly meaningless, but for virtually any recent ten-year span you choose, global temps are up by about 0.2ºC.  This isn't a nitpicky quibble.  Even if you're primarily trying to make a broader point (or, in Will's case, a cutesy point), you're still obligated to represent the data correctly.

Second: It's true that climate models have changed dramatically over the past 20 years as new data has poured in and more people have entered the field.  That makes it hard to judge the success of these models empirically.  The old ones are known to be flawed and the more recent ones haven't been around long enough to be measured.  So perhaps some caution is called for.

As an academic point, that's OK — though in fact, even the very earliest climate model from 1988 seems to have performed pretty well over the past two decades.  But here's the thing: George Will has an enormous readership and he isn't interested in making subtle academic points about epistemology and the nature of scientific uncertainty.  Will, along with most of the conservative establishment, simply wants to fool his audience into believing that the earth is not, in fact, warming.  He has made this absolutely crystal clear on multiple occasions. So when Manzi says this:

The instincts of those who are grasping for some way to hold the tools used to make temperature predictions accountable to reality in some way are sound, even if their method is somewhat misguided. They aren’t idiots or morons, they’re just not specialists.

That's just not supportable.  If Will were genuinely trying to grapple with a difficult subject, he wouldn't cherry pick data in a way that even a high school sophomore could tell him was fraudulent.  Will may not be an idiot or a moron, but as I said in my original post, he is a deliberate charlatan.  Nobody who's serious about the climate change debate should be trying to soft pedal this.

All that said, I agree entirely with Manzi about this:

What’s especially ironic abut a lot of the commentary on the post is that lots of people take assertions of uncertainty in climate forecasts as undercutting the case for emissions mitigation, so those on the Right argue for uncertainty, and those on the Left argue the opposite. In the sophisticated AGW debate, the economic justification for mitigation is seen as, conceptually, an insurance premium. If the expected warming takes place with expected effects, it is very difficult to justify the economic costs of mitigation, and therefore it is a hedge against much-worse-than-expected effects. Therefore, the greater the uncertainty in climate prediction, the stronger the case for mitigation — uncertainty is not our friend. So before you accuse me of intellectual dishonesty, recognize that in pointing out limitations in the current practice of climate model validation, I am actually arguing a point that cuts against my stated policy preference.

As I've mentioned previously, if we could be sure that global temperatures would rise no more than 2ºC over the next century, then you could make a case that it's not worth trying to prevent it.  Not a great case, perhaps, but maybe a defensible one.

But the real reason to get serious about global warming is that we can't be sure of that.  In particular, as more data has come in and our models have gotten better, it's looking more and more as if the likelihood of warming in the range of 4-5ºC or even higher is very real.  That would be undeniably catastrophic, and if there's even a 10% chance of that happening, we need to blow our gaskets trying to stop it.

Unfortunately, here in the real world, that's not why the skeptics are continually blustering about the uncertainty in climate models.  They're doing it because they want people to believe that global warming is a hoax and temperatures over the next century won't rise at all.  No good can come of being useful idiots for this crowd.

Fundraising Among the True Believers

| Sat Jul. 25, 2009 2:44 PM EDT

In the Boston Phoenix, David Bernstein mulls over Sarah Palin's future and suggests that one path she might take is lending her name to a big-time conservative fundraiser who has the infrastructure to rake in the bucks but lacks the star power:

One name-brand who takes that route is radio talk-show host Michael Reagan, son of the late president. He has teamed up with David Bossie — a Republican operative so sleazy that, when Bossie was a top Clinton-scandal investigator for House Republicans, Gingrich had to fire him for having "embarrassed" the effort.

Reagan lends his name and face as "co-founder" of, among other things, Bossie's Presidential Coalition. That PAC raised and spent about $6.5 million in 2007–'08....Of that $6.5 million, three-quarters was spent on fundraising....More than $400,000 of the rest went to salaries....mostly to Bossie and his cohort Michael Boos.

After rent, insurance, and legal and accounting fees, that left less than $150,000 — about two percent of the contributions — to put to actual use.

Of course, once people start contributing, you can make money just by renting their names to other fundraisers.  So what would a list of Palin's true believer fans be worth?  Bernstein's list of the drawing power of other conservative stars is on the right, and it's an interesting metric of who the big draws in wingnut land really are.  I'm not sure where Palin would slot in on that list, but surely she could outdraw Fred Thompson, couldn't she?

(Via Conor Friedersdorf.)

The Transformation of Sarah Palin

| Sat Jul. 25, 2009 12:33 PM EDT

One of the enduring mysteries of Sarah Palin is the Jekyll/Hyde transformation she underwent when John McCain chose her as his running mate.  As near as I can tell, Sarah Palin v1.0 was a relatively pragmatic governor of Alaska.  Sure, she was conservative, but for the most part the tribalism and rancor she sometimes displayed as mayor of Wasilla was absent.  She worked across the aisle and got things done.

Then the 2008 campaign happened.  Palin spent a couple of months on the national stage and developed such a fondness for her role as cultural attack dog — or perhaps redeveloped such a fondness for it — that she found herself either unable and unwilling to bother with actual governance once she got back to Juneau.  As Suzy Khimm reports in TNR, Alaska was just too small for Sarah Palin v2.0:

All of Palin's major bills failed to pass this year's first 90-day session. But conversations with both Republican and Democratic legislators reveal that Palin's inability to get anything done has little to do with the media attacks the Alaska governor claims drove her from office. The lawmakers say it has more to do with how national exposure changed her, moving her much further to the right than she had been and making her nearly impossible to work with. And state Republicans seem just as incensed about it as the Democrats.

....Upon returning to Juneau last fall, "she managed to alienate most of the 60 members of [the Alaska] House and Senate," says Larry Persily, an aide to state Republican Representative Mike Hawker. "It wasn't a matter of burning bridges — she blew them up."

Palin made it clear that she wasn't going to back away from the hard-line conservative ideology that had propelled her to national prominence...."The little bit of time she spent on policy, she devoted ... to issues of national merit," says Republican Representative Jay Ramras. "It wasn't when but how she was going to throw Alaska under the bus."

Read the whole thing.  The main question it leaves in my mind is whether the national spotlight really changed her, or whether it merely reconnected her with an earlier style of politics-as-bloodsport that had been submerged for a short while she was in the Alaska statehouse.  Whatever the case, though, she clearly thrives on the know-nothing, resentment-based politics she practices with such gusto these days.  It's not going away anytime soon.