Coyote Blog

It is a really weird mental block we have against paying out of pocket for medical bills, particularly since this is probably the most, not the least, important thing we can spend our money on.  Having a high-deductible health insurance plan has been a real eye-opener for me.  As in this post from Maggie's Farm, I too have found doctors will very often give a discount for cash.  My son has a great sports medicine guy (he plays 3 varsity sports so we seem to be at the doctor a lot for one injury or another) who gives us a $40 cash rate for a visit.  Further, when he needs X-rays, the radiology place downstairs usually does 2-3 films of the injured appendage du jour for around $35.  The X-ray place has a special cash price book they pull out when I show up.  I shudder to think what rate they charge insurance companies.  And t just think of the piles of infrastructure from my doctors office to the insurance company to Washington DC that would have had to come into play had I sought 3rd party payments for these bills.

And when it comes to the expensive things, it is amazing what price cuts you can find with just a little shopping.  Previously, I had spent less time in my whole life shopping medical care prices than I had price-shopping my last hard drive.  But when my son had to get a CT scan on his head (yes, another sports injury) we saved hundreds of dollars just calling a second place for a quote.  In fact, even mentioning that we were going to price shop the first quote got a few hundred dollars knocked off.  The lack of any rigor in health care pricing is just appalling, and will only get worse as government / single payer solutions crowd out approaches like mine under Obamacare.

In a European-style corporate state, very large corporations (and their unions) get special protections, privileges, and exemptions, to the detriment of consumers, entrepreneurs, small businesses, and taxpayers.  Here we go, via Russ Roberts:

Nearly a million workers won't get a consumer protection in the U.S. health reform law meant to cap insurance costs because the government exempted their employers.

Thirty companies and organizations, including McDonald's (MCD) and Jack in the Box (JACK), won't be required to raise the minimum annual benefit included in low-cost health plans, which are often used to cover part-time or low-wage employees.

The Department of Health and Human Services, which provided a list of exemptions, said it granted waivers in late September so workers with such plans wouldn't lose coverage from employers who might choose instead to drop health insurance altogether.

Without waivers, companies would have had to provide a minimum of $750,000 in coverage next year, increasing to $1.25 million in 2012, $2 million in 2013 and unlimited in 2014.

"The big political issue here is the president promised no one would lose the coverage they've got," says Robert Laszewski, chief executive officer of consulting company Health Policy and Strategy Associates. "Here we are a month before the election, and these companies represent 1 million people who would lose the coverage they've got."

Actually, the real political question is why McDonald's gets special treatment, but the folks who run the deli downstairs in my building, who effectively compete with McDonald's, does not get to operate under the same law, merely because they are not large enough to get the President's special attention.

I had not realized that some Federal employees did not have to participate in Social Security.  Intriguingly, this fact was raised by people who were defending government pay as not being excessive -- they said something like, "well, some workers don't even get Social Security."  Via Bryan Caplan

Some government employees don't participate in Social Security. How does that change the benefits picture?

[T]hat's irrelevant because they're neither paying nor receiving benefits. If you follow Social Security, you know it pays a low rate of return... [N]ot to participate in Social Security is actually a benefit, because they're keeping more.

I agree. Not participating in Social Security is a huge benefit.  The implicit return on "premiums" paid by you and your employer is typically below zero.  In other words, if you took your social security taxes and stuffed them in a mattress, you would get a better return.  As I wrote in the link above

as a retirement program, [social security] is a really, really big RIPOFF.  Ever worker in this country is being raped by this retirement plan.  In fact, it is the worst retirement program in the whole country:

• As we see above, it pays a negative rate of return
• It is not optional "“ you go to prison if you choose not to participate
• Unlike a private annuity contract, the government can rewrite your benefits level any time, and you have to take it.  In fact, my statement says "Your estimated benefits are based on current law.  Congress has made changes to the law in the past and can do so at any time.  The law governing benefit amounts may change because, by 2040, the payroll taxes collected will be enough to pay only about 74 percent of scheduled benefits."
• There are no assets backing this annuity!!  An insurance company that wrote annuities without any invested assets backing them would be thrown in jail faster than Jeff Skilling.  The government has been doing it for decades.

One of the arguments Democrats have made for nationalized health care is that government expenses will be much lower than private companies.  This is on its face absurd, given most people's experience with government agencies, but is nominally supported by low expense ratios in Medicare.  I won't go into this today, but this is more an artifact of the way government does accounting as well as operations decisions at Medicare which may be non-optimal (e.g. Medicare does much less claims verification and investigation than private companies, which is why we see huge fraud cases from time to time).

Anyway, we get a fresh example of private vs. public expenses on a very comparable basis in California workers comp.  The public State Fund acts as an insurer of last resort as well as a competitor to many private providers.  The fact that it is an insurer of last resort will increase its loss ratios, but its expense ratios of management or "claims adjustment" expenses should be similar.  But of course they are not.

State Fund's unallocated loss adjustment expense ratio was a whopping 51.4% last year compared to 8.9% for private carriers, while State Funds allocated loss adjustment expenses were 9.8% compared to the industry's 13.8% respectively.

This means the management expense ration of the state agency is 61.2% of premiums vs. 18.7% for private companies.  This just makes laughable the pious requirement in Obamacare that insurance companies keep their expense ratios under 20% -- or else the more efficient government agency will take over.

We are facing a huge 29.6% increase in workers comp rates in California, in part because the very high State Fund expense ratios are averaged into the calculation.

I have written before about carbon offset scams -- even well intentioned programs are unlikely to achieve their promised benefits because

• The projects they fund are typically not incremental -- many likely would have proceeded without the offset funds, so that the benefits are effectively double counted.
• I have never seen any of these programs submit themselves to 3rd party offset of their supposed CO2 reductions.  In most cases, these are faith-based programs where it is impolite to ask if the promised reductions actually occur.

Randal O'Toole has a good example of a program that makes all these mistakes, and compounds them with absurdly high administrative costs.  One is left to wonder whether the Oregon state-run program is actually reducing CO2 or simply making sure a number of government salaries get paid.

In 2006, Climate Trust spent about two-thirds of its funds on carbon offsets, while most of the rest went for payroll and professional fees. In 2007, the share going to carbon offsets declined to 64 percent. By 2008, as near as I can tell, none of Climate Trust's money went for carbon offsets. Instead, 73 percent of its $1.65 million budget went for salaries, fees, and other compensation. It also spent more than $120,000 on travel and conferences and $95,000 on rent and office expenses. In 2008, Climate Trust paid its executive director $154,000, not counting health insurance and other fringe benefits. At least one other staff member whose title was "director of offset programs" was paid more than $100,000 and a third one received $88,000.

Megan McArdle writes:

There was a great deal of back-and-forth in the left half of the blogosphere this weekend over employers who use FICO scores as a way of weeding out job candidates.  In a sort of peculiarly American fashion, our nation seems to have decided that one's credit history is a good proxy for one's worth as a human being, and thus should be used to determine eligibility for everything from employment to excellent rates on car insurance.

I have no trouble believing that the FICO score is often a proxy for what some researchers call conscientiousness; I've certainly had roommates and others around me who had terrible credit because, well, they didn't bother to pay their bills, and regarded rent as something optional that could be turned in if no more exciting commercial opportunities immediately presented themselves.

That said, it's going to be at best a weak proxy.  It's also a proxy for things that, as a society, we may not want employers to consider, like a past history of depression.  And for things that have nothing to do with your job performance, like a car accident that left you with huge medical bills and no job, or a sudden job loss.  Looking at our national savings rate, lots and lots of Americans live very close to the edge of their paychecks; they can't all be terrible employees.

I have never really even considered asking employees for their FICO score, in part because all small business people hate these scores as, even with perfect credit records, our scores tend to be smaller than people with similar income and history due to the constant credit checks made on us by vendors and other partners.

That being said, as someone who has 500 service employees working for me, I understand the insatiable desire for information on employee reliability and conscientiousness.  A large number of our employees we hire who interview well tend to get released within 60 days of their hire.  I can't tell you how many people who seem totally normal and friendly turn out to be raving maniacs in stressful customer contact situations.

The elephant in the room that neither McArdle or folks like Kevin Drum mention is that businesses are starved for reliability information on potential employees.  It used to be the best source was to check job references.  Nowadays, though, very few employers will give a honest job reference, or will provide any information at all.  I know I am guilty of that -- my company does not allow any manager to give out performance data on past employees.  I only needed to be sued once over somehow interfering with someone's living by giving honest information about that employee's reliability to change my behavior.

I understand that this is exactly what the Left is shooting for - an environment where the competent have no advantage over the incompetent.  If employers are resorting to FICO scores, it just demonstrates how all the other reasonable avenues of obtaining information have been closed to them.

The only saving grace in this country is that employment is still mostly at-will, meaning we can fire our hiring mistakes and move on.  Of course the Left wants a European-style system where it is impossible to fire anyone too -- this is the system the post office has, and one can see how well it works out.  If they are victorious on this final front, I will be forced into a game of Russian Roulette, where I can't find out anything about those I hire, I can't fire the incompetent people I do hire, and I am infinitely legally liable for any mistakes any of these employees make.

Further proof that the only cost control idea the Obama administration ever had was service cuts and price controls.

Health and Human Services is once again playing freelance actuary, demanding that the health insurers hold down increases in the premiums for their Medicare Advantage plans.  As far as the administration is concerned, this is a two-fer.  When people have to pay more for their insurance, they tend to ask what the hell good this gargantuan new health care bill is doing--not the question you want them asking as they head to the polls.  But in the case of Medicare Advantage, there's another benefit.  The health care reform bill mandated a substantial cut in payments to Medicare Advantage providers, which everyone expects will translate into cuts in the extra services that Medicare Advantage plans now provide.  If they make those cuts a year early, maybe the administration gets to claim that the cuts don't have anything to do with the new health care bill.

Of course, for the insurers, it's not such a good deal.  The administration doesn't seem to have offered any evidence that insurers are overcharging; basically, they're saying that they ought to underprice their product, even if that means losing money.  Which is what has happened in Massachusetts, where the state insurance regulator refused substantial rate increases, even though as far as I know they never found an actuary to sign off on their orders.  The insurers posted big losses shortly thereafter.

Via the USAToday

Paychecks from private business shrank to their smallest share of personal income in U.S. history during the first quarter of this year, a USA TODAY analysis of government data finds.

At the same time, government-provided benefits "” from Social Security, unemployment insurance, food stamps and other programs "” rose to a record high during the first three months of 2010.

Those records reflect a long-term trend accelerated by the recession and the federal stimulus program to counteract the downturn. The result is a major shift in the source of personal income from private wages to government programs.

Buried in the ariticle is a quote that I have to cite as perhaps the worst analysis I have ever seen:

The shift in incomeshows that the federal government's stimulus efforts have been effective, says Paul Van de Water, an economist at the liberal Center on Budget and Policy Priorities.

"It's the system working as it should," Van de Water says. Government is stimulating growth and helping people in need, he says. As the economy recovers, private wages will rebound, he says.

How does the income shift prove the stimulus worked?  The problem is, as usual, a difficult one of evaluating what the economy would have done without the stimulus.  The mere shift in income is a necesary outcome of the stimulus -- all it means is that we have succesfully robbed Peter to pay Paul -- it says nothing about whether Peter and Paul are more wealthy in aggregate had we not moved money around by force.  In fact, proponents of the stimulus never, ever address a very simple fact - someone was using the money to run a business or invest or buy things or employ people before the government took it for stimulus programs.  And it is really, really hard to look at the body of stimulus programs and come to the conclusion that the private sector was investing the money worse, which is the only way stimulus would occur.

I have not read the relevant text of the law, so this may be an exaggeration, but it sure would not surprise me:

Remember when Obama and congressional Democrats made a big show of dropping the public option government insurance program that was supposedly going to give private insurers competition and drive rates down? The truth is the public option is alive and well, residing in Section 1334, pages 97-100, of the new health care law. That section gives the U.S. Office of Personnel Management "” which presently manages the federal civil service "” new responsibilities: establishing and running two entirely new government health insurance programs to compete directly with private insurance companies in every state with coverage for people outside of government.Quoting the new law, former OPM director Donald Devine notes that it makes the OPM boss a health care czar, with power to set ""˜profit margin premiums and other such terms and conditions of coverage as are in the interest of enrollees in such plans.' That's open-ended. You can do anything." Dan Blair, another former OPM director, calls the new program "nothing but a placeholder for the public option." Indeed, the OPM head is also given the authority to "appoint as many employees" as needed to run the program, and to spend "such sums as may be necessary" to establish and administer it.

It sure looks like the Feds are bending over backwards to make sure R. Allen Stanford, accused of massive investment fraud, is not allowed to defend himself.  The Feds are running the whole playbook at him, from onerous pre-trial detention requirements to asset forfeiture (the latter to the point that the Feds are working to make sure the insurance policy he had to pay for his defense in such actions is not allowed to pay him.)  I understand that a guy who has substantial interest in offshore banking centers might be a flight risk, but this is absurd:

Mr. Stanford has been incarcerated since June 18, 2009 and was moved to the [Federal Detention Center] on September 29, 2009. Immediately upon his arrival at the FDC, he underwent general anesthesia surgery due to injuries that were inflicted upon him at the Joe Corley Detention Facility. He was then immediately taken from surgery and placed in the Maximum Security Section "” known as the "Special Housing Unit" (SHU) "” in a 7' x 6 1/2' solitary cell. He was kept there, 24 hours a day, unless visited by his lawyers. No other visitors were permitted, nor was he permitted to make or receive telephone calls. He had virtually no contact with other human beings, except for guards or his lawyers.

When he was taken from his cell, even for legal visits, he was forced to put his hands behind his back and place them through a small opening in the door. He then was handcuffed, with his arms behind his back, and removed from his cell. After being searched, he was escorted to the attorney visiting room down the hall from his cell; he was placed in the room and then the guards locked the heavy steel door. He was required, again, to back up to the door and place his shackled hands through the opening, so that the handcuffs could be removed. At the conclusion of his legal visits, he was handcuffed through the steel door, again, and then taken to a different cell where he was once again required to back up to the cell door to have his handcuffs removed and then forced to remove all of his clothing. Once he was nude, the guards then conducted a complete, external and internal search of his body, including his anus and genitalia. He was then shackled and returned to his cell. In his cell there was neither a television nor a radio and only minimal reading material  was made available to him. He remained there in complete solitude and isolation until the next time his lawyers returned for a visit.

In short, Mr. Stanford was confined under the same maximum security conditions as a convicted death row prisoner, even though the allegations against him are for white collar, non-violent offenses. He is certainly not viewed as someone who poses a threat to other persons or the community, nevertheless, he has been deprived of human contact, communication with family and friends, and was incarcerated under conditions reserved for the most violent of convicted criminals. Officials at the FDC informed counsel that this was for Mr. Stanford's "own protection" and to minimize their liability.  .  .  .

Remember, he has not been convicted -- this is pre-trial detention.  The sole goal, legally, is supposed to be to keep him from fleeing before his trial.

I am sensitive to this from my climate work.  My gut feel is that people who are truly confident in their case do not work overtime to make sure their opposition is not allowed to make their case.

How else could they have gotten the idea for the hospital unification plan, except by modeling it after the steel and railroad plans in Ayn Rands novel.

The Massachussetts plan:

In hopes of bringing down the state's skyrocketing health care costs"”which are currently growing about 8 percent faster than the state's GDP"”the Massachusetts Senate is reportedly considering a bill that, among other things, would "require hospitals in better financial shape to put money back into the health care system to lower premiums." At first glance, this might sound like an easy way to bring down prices: Cut into provider profits to bring down insurance premiums. And the AP article doesn't provide much in the way of detail about how the provision would work, so it could be basically harmless. But it looks to me like the Senate is pushing for a system in which hospitals that set prices and contain costs successfully enough to find solid financial footing subsidize those that don't. Does this strike anyone else as an odd way to attempt to curb costs?

From the Atlas Society, describing a scene from Atlas Shrugged:

In one scene government dictators explain to steel magnate Hank Rearden how they intend to save his industry as a whole"”read his incompetent competitor"”through a Steel Unification Plan. All income from steel producers will be placed into a common pool and distributed to manufacturers based on how many furnaces each company owns. Follow the math here for a moment as an incredulous Rearden explains their own plan to them:

"Orren Boyle's Associated Steel owns 60 open-hearth furnaces, one-third of them standing idle and the rest producing an average of 300 tons of steel per furnace per day. I own 20 open-hearth furnaces, working at capacity, producing 750 tons of Rearden Metal per furnace per day. So we own 80 "˜pooled' furnaces with a "˜pooled' output of 27,000 tons, which makes an average of 337.5 tons per furnace. Each day of the year, I producing 15,000 tons, will be paid for 6,750 tons. Boyle, producing 12,000 tons, will be paid for 20,250 tons"¦ Now how long do you expect me to last under your plan?"

Rearden can't believe that these bureaucrats actually believe such nonsense. And their only answers are "In times of national peril, it's your duty to serve" and "You must make certain sacrifices to the public welfare" and "You'll manage."

First, the background.  Veronique de Rugy writes something that is undeniably true, though the Left has played semantic games with words like "trust fund" and "lockbox" for years to try to "shelter" the public from this reality:

In practice, [] the trust fund and interest payments it receives are simply accounting fiction. For years, the federal government has been borrowing the Social Security Trust Fund assets for its daily spending. The fund has nothing left in it except IOUs from the federal government. In fact, even the interest is paid in IOUs.

Hence, the only way Social Security will not go into the red this year and in future years is if the federal government pays back Social Security. But since the money has long ago been consumed, it must borrow money from the public or raise taxes to pay its Social Security debts.

In response, Kevin Drum whips out this absolutely stunning statement:

Back in 1983, we made a deal. The deal was this: for 30 years poor people would overpay their taxes, building up the trust fund and helping lower the taxes of the rich. For the next 30 years, rich people would overpay their taxes, drawing down the trust fund and helping lower the taxes of the poor.¹

Well, the first 30 years are about up. And now the rich are complaining about the deal that Alan Greenspan cut back in 1983. As it happens, I agree that it was a bad deal. If it were up to me, I'd fund Social Security out of current taxes and leave it at that. But it doesn't matter. Once the deal is made, you can't stop halfway through and toss it out. The rich got their subsidy for 30 years, and soon it's going to be time to raise their taxes and use it to subsidize the poor. Any other option would be an unconscionable fraud.

I really had a WTF moment when reading this.  Its hard to know where to start, so here are some reactions in semi-random order:

• For those of you over 40, do you remember such a deal?  No, you don't, because there never was one.  What happened was that Congress decided to sweep the Social Security surplus into the deficit calculation in order to disguise the magnitude of unsustainable spending, to help prevent the kind of electoral backlash we may well see later this year.  This is Soviet-style history making.
• Here is a thought problem: Picture Tip O'Neil, Speaker of the Democrat dominated House of Representatives at the time, publicly signing on to a deal that the poor would pay higher taxes for 30 years to give the rich a tax break.  It is a total joke to even consider.   The absurdity of such a notion is mind-boggling.
• It took me a while to parse this and figure out what he was even talking about.   For example, there was never a tax increase to the poor during the 1980's, so what does he mean that the poor would pay more for 30 years?  The only way this can even be the correct view of the world is if one makes two assumptions:
  1. Everything Congress chooses to spend money on is perfectly, morally justifiable and therefore spending levels are a fact of nature beyond our ability to challenge or question
  2. Rich people have the moral obligation to pay for all incremental government programs, and all budget gaps will be closed by new taxes on rich people.  Taxes on rich people, as a corollary, are never too high.

Given these assumptions, then the "Deal" sort of kind of makes sense.  By the progressive "logic" of these two assumptions, social security taxes in an alternate world would have been reduced during the surplus and the general budget deficit would have been filled not with social security surpluses but higher taxes on the rich.

• The previous logic depends on treating social security taxes as unfairly regressive taxes as part of an income transfer / welfare program.  If you treat them as premiums in an insurance program, the retroactive logic trying to cast this as a "deal" in 1983 doesn't work.  Interestingly, many on the left in other forums have argued against calling social security taxes anything but insurance premiums, including....Kevin Drum

The men in my family of my father's generation returned home after serving their country and got jobs in the local steel mills, as had their fathers and their grandfathers. In exchange for their brawn, sweat, and expertise, the steel mills promised these men certain benefits. In exchange for Social Security taxes withheld from their already modest paychecks, the government promised these men certain benefits as well.

"¦.These were church-attending, flag-waving, football-loving, honest family men. They are rightfully proud of providing homes and educations for their children and instilling the sorts of values and manners that serve them well as adults. And if I have to move heaven and earth, now that they've retired, the Republican party is NOT going to redefine them as welfare recipients.

• Note by the way, that if this really is an insurance program, any private insurer or private pension fund managers in America would be in jail had they done what our trustworthy federal government did.  In effect, they spent other people's pension money on current operations.

If we want to describe the last 30 year history of Social Security surpluses as a deal, here is what the actual deal was without ex post facto varnish:  Congress in the eighties said that they were going to spend that surplus money now to get themselves re-elected, and some other Congress 30 years hence would have to figure out how to deal with the bare cupboard.   That was the deal.  It was a simple screw you to future generations.

Drum, given his progressive assumptions, fantasizes a deal based on his assumption that the only way to fill in the hole is with higher taxes on the rich, because his mind is incapable of wrapping itself around any other alternatives (see the two assumptions above).

But it is worth noting that the surplus was in the main handed away by the Democrats to the poor and middle class through new entitlement spending.  Its hard to figure how a series of actions that took seniors pensions and frittered it away in a variety of programs that at best helped the poor and in reality probably helped no one but government bureaucrats somehow obligates the rich to pay 30 years of new taxes to clean the whole mess up.

... because I won't have to face the full consequences of this:

The 2009 federal balance sheet indicates that the government's net position (total assets less total liabilities) is a negative $11.5 trillion, 12.3 percent worse than the previous year. But that's just the tip of the iceberg. That negative balance excludes government obligations for social insurance programs, mainly Social Security and Medicare.

Whether social insurance should be booked as a liability has long been a controversial issue among government accountants....

Unable to reach agreement as to whether social insurance should be included as a balance sheet liability, the members of the FASAB compromised, and thus, immediately following the balance sheet is a "Statement of Social Insurance." In the 2009 annual report this indicates that the total present value of estimated social insurance expenditures over revenues is $45.9 trillion.

Hence, simple addition indicates that the total net position of the government is a whopping negative $57.4 trillion.

I think this article makes it clear that, no matter what the rhetoric, the only health care cost control idea Obama and the Democrats ever had was saying "no" to care.  Whatever one calls this (managed care, rationing, death panels) it is really not that much different from what insurance companies have been doing for years.  And it is areal irony that Democrats passed this legislation feeding off anger of voters with insurance companies saying "no", when their plan really depends on the government saying "no" even more often  (or else there won't be any cost savings).

The author argues that information is important for patients to make better decisions:

When patients are given information about potential benefits and risks, they seem to choose less invasive care, on average, than doctors do, according to early studies. Some people, of course, decide that aggressive care is right for them "” like the cancer patient (and palliative care doctor) profiled in this newspaper a few days ago. They are willing to accept the risks and side effects that come with treatment. Many people, however, go the other way once they understand the trade-offs.

They decide the risk of incontinence and impotence isn't worth the marginal chance of preventing prostate cancer. Or they choose cardiac drugs and lifestyle changes over stenting. Or they opt to skip the prenatal test to determine if their baby has Down syndrome. Or, in the toughest situation of all, they decide to leave an intensive care unit and enter a hospice.

I agree, but I would go further -- information and incentives are important.  And the absolute most important bit of information when it comes to cost control is price, and patients under Obamacare have absolutely no incentive to give a sh*t about price even if they were informed of it.  Exactly the opposite of the incentives I have had since I took on a high-deductible health care policy several years ago.

Update: Brad Warbiany discusses the proposed IPAB and its powers to shape health care spending in the context of Congress as an addict trying to control its impulses.  However, I think Brad underestimates the power of the board to be captured.  What will result is rulings for more coverage of procedures with powerful lobbies, offset by less coverage of procedures with weaker lobbies, irrespective of the science.   Just look at the diseases the NIH and NSF gives grant money for -- the grants have nothing to do with the science of where research could be most productive and everything to do with diseases that have large and powerful constituencies.

Update #2: Isn't it interesting to see the NY Times, after arguing for months that Obamacare was not about rationing, is now admitting that rationing is the key to success.  It reminds me of this that I wrote a while back:

I have decided there is something that is very predictable about the media:  they usually are very sympathetic to legislation expanding government powers or spending when the legislation is being discussed in Congress.  Then, after the legislation is passed, and there is nothing that can be done to get rid of it, the media gets really insightful all of a sudden, running thoughtful pieces about the hidden problems and unintended consequences of the legislation.

From Boston.com. via a reader:

Thousands of consumers are gaming Massachusetts' 2006 health insurance law by buying insurance when they need to cover pricey medical care, such as fertility treatments and knee surgery, and then swiftly dropping coverage, a practice that insurance executives say is driving up costs for other people and small businesses.

In 2009 alone, 936 people signed up for coverage with Blue Cross and Blue Shield of Massachusetts for three months or less and ran up claims of more than $1,000 per month while in the plan. Their medical spending while insured was more than four times the average for consumers who buy coverage on their own and retain it in a normal fashion, according to data the state's largest private insurer provided the Globe.

The typical monthly premium for these short-term members was $400, but their average claims exceeded $2,200 per month. The previous year, the company's data show it had even more high-spending, short-term members. Over those two years, the figures suggest the price tag ran into the millions.

Other insurers could not produce such detailed information for short-term customers but said they have witnessed a similar pattern. And, they said, the phenomenon is likely to be repeated on a grander scale when the new national health care law begins requiring most people to have insurance in 2014, unless federal regulators craft regulations to avoid the pitfall.

I would argue that these numbers for system gamers would be even higher save for a residual sense of honor in the population that resists such gaming, a sense of honor that will tend to be eroded over time by these incentives.  This is a theme I have discussed before, in answer to the question of why socialized nations seem to do well at first.  My answer to that question was that residual work ethic and values tend to mitigate, initially, against the horrible incentives inherent in socialism, but that these values erode when people see themselves effectively punished for their values and work ethic.

It's hard to imagine a more naked example of rent-seeking than this one

A group representing Arizona hospitals is pursuing a ballot initiative that would tax the state's high-income earners to help pay the health-care tab for the state's neediest kids and adults.

The Arizona Hospital and Healthcare Association expects to file paperwork for the initiative later this week, aiming for a place on the November ballot.

It asks voters to raise the state income-tax rate 1 percentage point on income exceeding $150,000 per individual and $300,000 per couple.

The association estimates the initiative would raise more than $140 million each year to pay for health insurance for low-income children and adults, graduate-school medical education and reimbursement to hospitals that care for the poor.

In other words, the government will take the money and hand it over to hospitals to do the things they are already doing.  I could put together a heartwarming story too for my industry -- we think there should be a 1% tax on all Arizona residents for kids to visit parks and campgrounds to fight childhood obesity and improve their connection with nature -- but you don't see me rent-seeking like this.

My gut feel, though I have no direct evidence, is that this is being rushed through to beat the deadline on Obamacare implentation -- my guess being that this will be somehow moot once that program is in place so the hospitals want to get their licks in before anyone really figures out the new health care law.  Once the tax and program is in place, it will be virtually impossible to kill, even if it is irrelevent post-Obamacare.  Anyone have knowlege about this one way or the other?

As is usual when I make an immigration post (wherein I am supportive of open immigration and suspicious of gung-ho enforcement efforts) I got mail saying that the real concern here is the rule of law.   People inevitably want to inform me that this immigration is ILLEGAL (usually in caps) and that these immigrants are BREAKING THE LAW and that the law cannot be enforced unevenly.

First, I am happy to listen to this argument from any commenter who has never broken the speed limit or done a rolling stop at a stop sign.

Second, I would like to offer the rule of law folks, especially those on the right side of the aisle, a thought problem:  Soon, it will be illegal to not purchase a health insurance policy that meets specifications set by Congress.  It is anticipated, however, given relatively low fines, that many people will break this law and not obtain health insurance.   This failure will be ILLEGAL.  These people will be criminals.  Do those of you who seek higher penalties, more robust enforcement, police sweeps, and reduced standards of probable cause for people committing the crime of illegal immigration also plan to seek the same higher penalties for lawbreakers who do not buy an insurance policy?   After all, as you have said, this is not about the law itself but respect for the rule of law.

By your immigration logic, we should be ruthless about lawbreakers who do not have the right insurance policy.  We should encourage the Minutemen to patrol for people without health insurance -- after all, they have said that their concern is with people breaking the law, not immigration or Mexicans per se.  There should be sweeps where people can be arrested for suspicion of not having health insurance, just as they can be arrested under our new AZ law for suspicion that they do not have a green card.

If there is a difference, please explain it to me.  I understand that you may be opposed to open immigration or high immigration rates or immigration by poor uneducated people or whatever.  If so, fine, we disagree -- but stop saying that this is all about the rule of law, or telling me we can't pick and choose what laws we violate.  Because we do the latter all the time.  Our willingness to challenge the state is a large part of American exceptionalism.

PS- Just to avoid misunderstandings from trolls who do not usually read this site, of course I do not advocate the above for health insurance violations.  Just as I don't for Mexicans seeking a better life in this country without obtaining a license to do so from the government.

Disclosure: I have several good friends who are illegal immigrants.  They are wonderful, hard-working people who have been in this country for years.  If we were to conduct tests of people's acceptability to be present in this country, they would pass with scores far ahead of many US citizens.

Update:  I find the argument that open immigration and an overly-generous welfare state can't coexist to be moderately compelling, though I don't see why we could tie citizenship narrowly to receiving these benefits.  I have problems saying that a government license in the form of a green card is required for mere presence in the country.  I have no problem imposing this licensing requirement for receipt of unearned goodies.

My health insurance policy, which is an actual "insurance" policy that insures me against catastrophic medical costs but leaves me with responsibility for day to day expenses, just became illegal.   Over the last couple of years, I have documented my learning curve as, for the first time, I actually had an incentive to shop around for medical care, or to push back on doctors when I thought they are calling for too many tests and procedures.  I have learned a lot about saving money, but all of this education is now for naught, as I will now be required to buy a pre-paid medical policy that leaves very little of the decision-making to my family and provides zero incentives for me to be cost conscious.  Apparently, the operators of the US Postal Service and US military procurement felt they were better qualified to manage these cost/value trade-offs than I am.

Here, by the way, is my favorite quote from today, from Nancy Pelosi (who else):

House Speaker Nancy Pelosi praised the health care legislation for its ability to "unleash tremendous entrepreneurial power into our economy."

Only if one considers rent-seeking to be entrepreneurship.  There will certainly be a mad rush of special interests to Congress to get their pet procedure or drug included in national must-cover rules.  I discussed this rent-seeking process, which used to have to proceed inefficiently state by state but now can be achieved single-source, here.   Naturopath coverage, anyone? (already required under coverage rules in 4 states).   Already a lot of so-called medical research is really just thinly disguised pleas to have a certain procedure in must-cover rules.  For example, I wrote about one study:

In other words, the study surveyed a bunch of cosmetic surgeons.  They were asked "should an expensive procedure you provide be covered by insurance."  They all answered "Hell YES!"  Anyone want to bet whether the funding for the study came from the company that makes the laser equipment?

This is pretty scary.  From the Massachusetts state treasurer, the state health care system (essentially the model for the current version of Obamacare) is going bankrupt, and only huge cash infusions from the Federal government are hiding the full disaster.

"If President Obama and the Democrats repeat the mistake of the health insurance reform here in Massachusetts on a national level, they will threaten to wipe out the American economy within four years," Cahill said in a press conference in his office.

Echoing criticism leveled by congressional Republicans in recent weeks, Cahill said, "It is time for the president, the Democratic leadership, to go back to the drawing board and come up with a new plan that does not threaten to bankrupt this country."

[T]he state's health insurance law"¦Cahill said, "has nearly bankrupted the state."

Cahill said the law is being sustained only with the help of federal aid, which he suggested that the Obama administration is funneling to Massachusetts to help the president make the case for a similar plan in Congress.

"The real problem is the sucking sound of money that has been going in to pay for this health care reform," Cahill said. "And I would argue that we're being propped up so that the federal government and the Obama administration can drive it through" Congress.

The Democrats have no good ideas for controlling Medicare costs after a government takeover.  If they did, they would have already implemented these ideas on Medicare or in Massachusetts.  Their only plan is price controls and rationing.  Here is an example of price controls hitting a wall in Medicare:

Walgreens drugstores across the state won't take any new Medicaid patients, saying that filling their prescriptions is a money-losing proposition "” the latest development in an ongoing dispute over Medicaid reimbursement....

In a news release, Walgreens said its decision to not take new Medicaid patients stemmed from a "continued reduction in reimbursement" under the state's Medicaid program, which reimburses it at less than the break-even point for 95 percent of brand-name medications dispensed to Medicaid patents....

Washington was reimbursing pharmacies 86 percent of a drug's average wholesale price until July, when it began paying them just 84 percent. While pharmacies weren't happy about the reimbursement reduction, the Department of Social and Health Services said that move was expected to save the state about $10 million.

Then in September came another blow. The average wholesale price is calculated by a private company, which was accused in a Massachusetts lawsuit of fraudulently inflating its figures. The company did not admit wrongdoing but agreed in a court settlement to ratchet its figures down by about 4 percent.

So the Government is reimbursing retailers at 80% of wholesale costs.  Even forgetting their overhead,  Walgreens was asked to sell dollar bills to the government for 80 cents.

What both stories have in common are government health plans that are subsidized from the outside:  The Feds are pouring money into Massachusetts and money is sucked out of the private medical side to subsidize Medicare.  But what happens when there is only one system, when there is nothing outside of it to subsidize it?  What are they counting on to save them?

Per Nancy Pelosi:

"Think of an economy where people could be an artist or a photographer or a writer without worrying about keeping their day job in order to have health insurance."

Yeah, its a world where only the suckers work hard and try to be productive.

... so it's probably about time.  Kevin Drum has a very cogent analysis of all the issues, and is, if anything, givin ethanol the benefit of the doubt with some of the numbers he uses.  He ends by echoing something I have said any number of times:

Bottom line: corn ethanol is no greener than gasoline. In fact, it's almost certainly less green, and at the very least, there's no urgent need for the U.S. government to pay billions of dollars to subsidize its production. Too bad Iowa is the first state on the primary calendar every four years, isn't it?

What I find amazing is that when he wants to, Drum can be quite insightful about this kind of political failing,  What I don't understand is why he continues to advocate programs like government health care that are almost assured of being dominated by the same horrible incentives and decision-making.  Under either the House or Senate health care bills, for example, just imagine the line of lobbyists who will be working to get their pet procedures covered under insurance  must-cover rules.  How can he possibly imagine that the same Congress that votes for ever-expanding ethanol subsidies is going to make good cost-benefit tradeoffs based on science for health care procedures?   Doing the same thing over and over and expecting different results is the definiation of, what?

This was the trick behind cap-and-trade: Politicians know that the only real way to reduce energy usage is to raise its price much higher.  They also know that doing so would lose them their jobs, so instead of passing a simple carbon tax, they created a cap-and-trade system that would force private companies to be the bad guys.  They then try to hide this basic fact with a lot of distracting arm-waving about green jobs and wind power.

The new Obama health proposal, which looks a heck of a lot like the old Obama health proposal (same basic features, same lack of detail) plays a similar game.  Do you remember all that Obama talk about mysterious brilliant ways to reduce health care costs?  Where did they all go?  It turns out that the only real idea they had for reducing health care costs was to deny people care.  They just try to hide this with a lot of distracting arm-waving about gold-plated insurance and electronic medical records.

This denial of service is unpopular.  In fact, it is a great (and sad) irony that Obama is trying to harness anger at insurance companies that is caused mainly by denial of coverage for certain procedures with a system that will deny coverage for even more procedures.  Just like carbon taxes, Obama has fixed on a scheme where once again he sets up private enterprises to be the bad guys to give himself some sort of quasi-plausible deniability.  Obama is proposing artificial price caps on insurance premiums.  The inevitable result:

For example, as I have written elsewhere, artificially limiting premium growth allows the government to curtail spending while leaving the dirty work of withholding medical care to private insurers: "Premium caps, which Massachusetts governor Deval Patrick is currently threatening to impose, force private insurers to manage care more tightly "” i.e., to deny coverage for more services."  No doubt the Obama administration would lay the blame for coverage denials on private insurers and claim that such denials demonstrate the need for a so-called "public option."

Alan Reynolds has more.  And Peter Suderman.   And Phillip Klein points to an interesting anti-progressive angle:

Like the Senate bill, Obama's proposal doesn't include a strict employer mandate, but it does penalize businesses who do not offer insurance to workers who then get their insurance through the exchange. The Obama proposal provides more subsidies to small businesses, and helps mid-sized businesses by exempting the first 30 workers when calculating the tax, but large employers who do not offer coverage would face higher penalties under the Obama proposal. In the end, the tax will make it more expensive for large employers to hire lower income workers (who qualify for government subsidies), and thus exacerbate unemployment.

My read is that this all takes a hodge-podge mess and, uh, makes it even  hodgier-podgier.

By the way, my take is that there is only one health care cost reduction proposal worth talking about, and that is making individuals more responsible for their own health care costs, not less, thus creating incentives to do the thing we do for every other purchase we make:  shop around.

There just seems to be a tremendous mental block people have about paying cash for health care.  Megan McArdle is surprised at how strong this bias is in some of her readers.  I'm not, as I see it in my wife and friends all the time.

Several years ago we switched to a high-deductible catastrophic health care policy.  We save a TON of money with this policy, such that year in and year out, even with fairly high out of pocket expenditures, our total health care expenses have been lowered.

Generally, I go ahead and wash all of the charges through the policy so I get credit for them against the cumulative deductible.  But since we have never hit the number, I am increasingly less attached to this approach.  Particularly since a number of doctors and other providers are offering cash discounts now for bypassing insurance and paying cash.

Here is an example -- my son has had some elbow pain pitching lately, so seeing all the kids who are having to get Tommy John surgery before they are out of high school, we decided to make sure everything was OK.  We took him to a GP who specialized in sports medicine and works with a number of MLB pitchers as a team physician to the Brewers.   For cash, he charged me $50 and spent nearly 30 minutes with my son.  Then he sent us downstairs for some x-rays of his elbow, and the radiology group there, again for cash, charged us $35 total for three x-rays.  There are people who pay more for a pedicure.

Nothing is ever going to improve in health care costs until individuals take more responsibility for the cost-benefit tradeoffs of the services they receive.

Kevin Drum writes a post that I would interpret as saying "I really can't dispute the Supreme Court speech decision on principles but I am going to anyway because I don't like the result.  He ends by saying

In the end, I guess I think the court missed the obvious "” and right "” decision: recognizing that while nonprofit corporations created for the purpose of political advocacy can be fairly described as "organized groups of people" and treated as such, that doesn't require us to be willfully oblivious to the fact that big public companies are far more than that and can be treated differently. Exxon is not the Audubon Society and Google is not the NRA. There's no reason we have to pretend otherwise.

This is silly.  Just because people are not organized primarily as an influence group does not mean that those folks, once they are pursuing their goals, don't find the need to try to have influence, or have somehow given up their right to try to have influence.  And whose fault is this anyway if Exxon shareholders feel the need to influence the political process?  If the Left hadn't targeted commerce with a never-ending proliferation of restrictions and wealth-confiscations, commercial enterprises probably would not see much reason to waste money on advocacy.  I can tell you that the last possible thing I want to spend money on in my company is kissing some Senator's ass or buffing up the NY Times ad budget, and would spend money to do so only under a pretty existential threat.

But why is there some mythology that members of Audubon or the NRA somehow have more control of the organization's advocacy than Exxon's shareholders?  Sure, when you join the NRA you probably have a good idea what their positions are going to be, but are you really any less able to predict Exxon's positions on most issues?  As I wrote in his comment section:

When you say "Exxon is not the Audubon society," I am not sure how? I am a stockholder of the first and a member of and contributor to the second. I have bought products from both. I have written both (well, actually I wrote Mobil once but it is the same now as Exxon) about their issue advocacy, each time with equally small effect. It is as difficult as a stockholder of Exxon to even get a disclosure of their issue advocacy and lobbying efforts as it is for Audubon (though I am smart enough to take a pretty good guess at both). Neither allows me, as a shareholder/member/contributor to vote on their advocacy/lobbying, either in terms of amount spent or direction. Each carry substantial influence in particular government realms.

So I am confused how they are different, except perhaps that you are personally sympathetic to one and not the other.

Just to remind you the existential threat that causes corporations to want to speak out in public, I will take an example from Drum himself, when he said:

It means the health insurance industry is scared that we might actually do something in 2009 and they want to be seen as something other than completely obstructionist. That means only one thing: they've shown fear, and now it's time to bore in for the kill and gut them like trouts. Let's get to it.

So I guess Exxon is indeed different from the Audubon Society - no one is trying to gut the Audubon Society like trouts.

The Florida sales tax auditor has been in my office for 2 days and shows no sign of leaving.  Most of the audit is as expected and I ceased long ago getting ticked off about it;  but the new focus on use tax - ie, not just did you collect and pay sales tax on your retail sales but did you pay proper sales tax on every purchase, is really annoying.  We are going to have to be pulling invoices and xeroxing for weeks.  Somehow, if as a retailer I don't collect enough sales taxes, I am liable for the shortage.  But if someone else sells me something and there is not enough sales tax collected, I am again apparently liable for the difference.  The latter makes no sense to me.    Apparently I owe taxes in this non-symmetric way based on the deep philosophic principle that he is sitting in my office, not theirs.

Update: Now he suddenly thinks that I am getting over because there is no sales tax shown on my liability insurance premiums.    AAArrrrggghhh.  Two entire days lost.