One More Time – And Other Stuff

One More Time

I’m finding myself hugely aggravated by the Obamacare rollout.  Not because of the technological incompetence (see “Sibelius”), not because I think it’s ill-intended, let alone evil (see “Cruz”), but because it doesn’t address the economic reality of healthcare, which means that it can’t and won’t solve the problem it’s supposed to solve.  The unaddressed reality is that the vast majority of what we call health insurance isn’t insurance (see “my earlier posts on healthcare”).  Rather, it’s the confiscation and transfer of wealth from young, healthy people to older, less healthy people (see “individual mandate”). Until we face up to that reality, we’re doomed to a healthcare system that raises blood pressure instead of lowering it.

If someone can come up with a way to make healthcare function like an actual market, and to make health insurance actual insurance, I’ll be first in line to support it.  Failing that, we have an entity whose job it is to confiscate and redistribute wealth.  It’s the government.  Which means that like it or not, we’re going to wind up with a single-payer system for the bulk of healthcare.

To be clear, I don’t like it.  But it’s inevitable.  It reminds me of Ben Affleck’s great line in Argo, when his boss asks if he can’t come up with a good idea to rescue the American hostages.  “No sir, this is the best bad idea we’ve got.”

That’s where we’re going, and I wish we would just get on with it.

Other Stuff

First:  I loved watching Chris Christie clean up on Tuesday.  It turns out that people like candor and problem-solving.  Didn’t see that one coming.  I’m also amazed that he’s being challenged on his conservative credentials since his politics are basically the same as Reagan’s.

Second:  a few weeks ago, I heard on the radio that a group of (presumably wealthy) Saudi women had decided to protest their country’s prohibition against women driving by giving their drivers the day off and driving themselves.  My sympathies are totally with them, but this strikes me as a phenomenally bad way to make the point.  Call me crazy, but turning hundreds of completely inexperienced drivers loose on the roads as a way of proving that they should be there seems like an effort that might. . .um. . .backfire.

Third:  On the radio yesterday, I heard that Chicago Bears’ quarterback Jay Cutler will be returning from an injury sooner than expected thanks to “a new form of groin stimulation.”  (Again, I refer you to my policy of never making this stuff up.)  That someone could come up with a new approach to what seems like it must have been the first thing mankind ever did is a great testament to the inventiveness of our species.  It’s enough to make me regret both my career choices and my lack of athletic talent.

And finally this:  Over the past week, I’ve learned a couple of new things about the mortgage industry.  How I came to learn these things is a long story that I’m not going into here.  Suffice it to say that however bad you’ve heard the machine is, it’s worse.

One thing I learned is that Citigroup, a company with 300,000 employees, which holds billions of dollars of mortgage assets and services billions more, doesn’t know the difference between the words “approved” and “completed,” something most of us had our heads around out by the 3rd or 4th grade.   This in a standardized email they must send out by the thousands.  And which they claimed they hadn’t sent at all (although they had), which must be a scam (which it wasn’t), and which shouldn’t be opened (a little late, don’t you think?).  Billions of dollars.  Failing 3rd grade vocabulary.  Go phish.

The other thing I learned, which might go a long way toward explaining the first, is that the tax code apparently allows financial institutions to write off 100% of the losses they incur when they take ownership of underwater properties through foreclosure, but only 50% of the losses they incur when they settle without taking ownership of the property.  I was told this by a lawyer who specializes in such things.  I’ve looked online and haven’t been able to verify it (Google yields up only pages relating to the tax impact on the borrower, not the lender).  If it’s true, however, it provides mortgage holders with a massive incentive to NOT work with homeowners to find solutions short of full foreclosure.

A non-free market at non-work, not working.  Which brings us full circle. . .One More Time.

4 thoughts on “One More Time – And Other Stuff

  1. Dan, my freshman econ professor told me the definition of insurance: It is the economic sharing of risk. As such, it is fundamentally a redistribution of wealth.

    In the area of medical insurance, is a redistribution of wealth from people who stay healthy to people who don’t. It’s the same mechanism for fire insurance, life insurance – it’s all a redistribution of wealth from those who don’t need to those who do. And it doesn’t matter if the program is managed by the semi-collusive, not-so-free market that has nine times the overhead of Medicare and raises premiums by double digits every year, or if the program is managed by a governmental agency. Insurance is what it is.

    In a very real sense we do the same thing with road and bridge building. We all pay taxes and, given a progressive tax system, wealthier people pay more in taxes than poorer people, but they all get to use the roads and bridges without pro rata limitations. That’s a redistribution of wealth. Anybody got a problem with that?

    Ideally, government is about our doing collectively what we cannot do on our own. Sometimes it works that way. Regardless, that does not mean that everyone contributes the same amount of money, which necessarily means that effectively there is a redistribution of wealth.

    Righties like to wail about the redistribution of wealth, as though it is evil incarnate. It would be refreshing if they were to get over their temper tantrum over that sound bite.

    Note that as far as I can tell the only “fix” for our healthcare system through the Affordable Care Act will have little to do with improving outcomes. All we’ve focused on is the method of payment. We’ll still have the worst infant mortality of any nation in the industrialized world.

    1. Jack, thanks for your comment – thoughtful as always. In this case, you and I agree on almost everything. We differ on the definition of insurance. I’m with your econ prof that it’s the pooling of risk. I disagree that this makes it a redistribution of wealth. Before going on, can I invite you to read these two posts?

      We can insure ourselves against appendicitis because, like car accidents, we know pretty well how many appendectomies will occur in a year, but we have no idea who will have them. So we all throw a few dollars in the pot, and then dole it out to the unfortunates (like me) who no longer have that little worm-like gadget.

      But you can’t insure yourself against getting older (other than through a pension or life insurance-like vehicle in which you, individually, pay in early in order to have money later). Nor can you insure yourself against getting a chronic disease once you already have it. Imagine calling Geico and saying, “Yes, I’d like to save 15%! By the way, I’m going to have an accident every year for the next 10 years. After that, it’s going up to two accidents a year.” The lizard would laugh you off the phone so fast it would make your head spin.

      As you know, I’m a big fan of Willie Sutton, who really was the best economist ever. 70% of what we spend on healthcare is the direct result of aging and chronic diseases that people already have. Actually, it’s more than that. 50% goes to chronic diseases. 20% goes to people in the last year of life. There’s some correlation and overlap there, and healthcare needs go up way before the last year of life. So the amount accounted for by chronic diseases and aging is probably more like 80-90%. The only way to pay for that is to make the people who account for the 10-20% of healthcare spending overpay. We can do that through the fiction of the individual mandate (and also by making people pay for coverage they clearly don’t need – I have two friends in their 50’s who have been dropped or are seeing their insurance cost double because their prior policies don’t have maternity benefits). Or we can admit what we’re doing, call it what it is, taxation and redistribution, and let the government do it. That’s where you and I agree, although you are perhaps more inclined to like that answer than I am. I just see it as inevitable and the best available option.

      In my opinion the solution that works is to have everyone pay for the routine stuff that amounts oil changes and lube jobs (checkups, flu shots, etc.) Low cost, everyone needs it, no need to insure. A single-payer system (Medicare for all) should pay for whatever we decide is “core healthcare” beyond that. And the private market should be invited to sell supplemental policies (as it does today for Medicare) to enhance coverage and pay for things the single-payer system doesn’t cover.

      We need to do two other things as well: 1) Because much chronic disease results from lifestyle choices, we need to create a powerful incentive (perhaps through a graduated co-pay system) for people to manage their own wellness. 2) We need to make some very difficult choices about what we will and won’t pay for as people age. Yes, I’m in favor of “death panels.” We currently spend more than $600 billion a year to add a few months of life to those nearing their end. This is individually understandable but makes no sense from a societal standpoint. Call this WillieSuttonCare.

      Of course, I don’t expect any of this actually to happen. But I think it should.

      The other place we disagree is on progressive taxation. I would prefer a tax return that said, “How much did you make last year? Multiply by 15% and send us a check.” You can certainly argue that this is unfair. By I lived under such a system briefly (in Hong Kong, where the rates were 17.5% for individuals and 21% for corporations), and what I observed was that people spent lots of time and energy figuring out how to prosper and zero time and energy figuring out how to dodge taxes. Of course, this would immediately dislocate the hundreds of thousands of accountants and tax lawyers who spend their days figuring out how to hide value rather than create it. We would have to factor in the cost of retraining them or adding them to the unemployment rolls :-).

      1. All those potentially unemployed tax accountants, tax attorneys, financial consultants and their lobbying groups with goo-gobs of money to smear from K Street to the Capitol building represent a gigantic force against tax code simplification. It is the same principle for single payer healthcare insurance.

        So, the Willie Sutton theorem makes sense, as always; it’s just that this isn’t a primitive bank vault guarded by Sheriff Andy and Deputy Barney Fife. It is guarded by a dug-in army that includes most of the Congress.

  2. Dan – bulls-eye as always. You are also right on your last statement that the banks make out better when they don’t settle with someone underwater. Sheila is in the real estate biz (I think you know) and she has said that for years. Banks make more money when people are foreclosed on. Capitalism at it,s finest.

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