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dotCommonweal Blog

Existence and Pre-existence

The first three words of the first item of Donald Trump's healthcare plan are "Completely repeal Obamacare".

I was surprised to see this stated so starkly and unambiguously.  Because if this were to happen, along with everything else, the pre-existing condition ban would go away.  This could cause several million people, including people in mid-treatment, to lose their insurance.  And many of these people are people paying their own premiums with no subsidy from the government.

Most people think they know what "pre-existing condition" meant.  But it was far worse and more complicated than most people know.  The pre-existing condition problem was part of an overall underwriting philosophy that covered both individual policies and small groups (defined as 2 to 50 employees).  The Affordable Care Act not only eliminated pre-existing conditions as a means to deny coverage, it eliminated the underwriting of small groups, which had been underwritten in a way that carried the pre-existing condition philosophy into the commercial group market itself.  To explain how this worked, and what it would mean to go back to the way things were until only recently, I'd like to tell you a story about how I think I saw the old system kill someone once.

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Hillary Attempts to Add Alka-Seltzer to the Healthcare Stew

Hillary Clinton has now updated her health care proposal.  In addition to the usual promises to improve quality and cut costs and prices blah, blah, blah that all the politicians are making, there are two possibly substantive proposals.  The first is that people might be allowed to go on Medicare from age 55.  The second is a mysterious thing called the “public option”.

The lowering of the eligibility age for Medicare (ironic in a climate of raising the Social Security eligibility age) seems pretty straightforward in that she didn’t specify that this new age group would get anything other than standard Medicare.  But the “public option” could change the rules of the healthcare game, depending on what it really is.  And she left some clues.  Let’s take a closer look.

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Death Wish: The Politics of American Healthcare

Bernie wanted a single payer system: Medicare for All.  Hillary wants to tinker with Obamacare in a slow transition to God knows what.  Trump wants voters, but has no plan.  But Ryan does and his plan is to keep alive the part of Obamacare that everyone likes (no pre-existing conditions), but to separate the sick voters who want things he doesn’t think they deserve from those young healthy voters who might go Red in the future.

As for the electorate, like the American girls in the Rolling Stones song, they “want everything in the world that you can possibly imagine”.  Some for just themselves and some for everybody.

Sorry.  Nobody is going anywhere.  Bernie was right about single payer, but it’s not enough to just get elected.  One must also rule.  President Bernie would never have been able to lift that rock, for reasons I shall go into.  Hillary knows she has to rule, so in her usual cunning fashion she is setting the bar as low as possible for herself right at the start.  And Trump/Ryan are looking for a neutron bomb that will kill all the really sick people and leave a core of friendly voters and all the businesses standing.

What would we need to do to fix things and why can’t we do it?  Read below.  And weep.  I’ll try to keep this one simple.

 

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Rushkoff: The Popes Have the Operating System for the New Economy

The best reason for Commonweal readers to go out and purchase Douglas Rushkoff’s new book, Throwing Rocks at the Google Bus, is that the heroes at the end of the book turn out to be… the popes! The “new operating system” Rushkoff recommends turns out to be a variation on the fundamental vision of distributism – the wide, dispersed ownership and exchange of productive assets. He is quick to reassure his readers that “we don’t need to convert to Catholicism or even approve of Vatican doctrine” in order to appropriate their insights. Rather, the value in the papal social encyclicals is that “they remember”; that is, they retain “a memory of the wheels of commerce that preceded the engines of the industrial age.” Rushkoff’s book is particularly important for two reasons: first, he does not simply equate distributism with a back-to-the-land agrarianism, and second, he offers a way beyond the disturbing polarities that have emerged with Sanders, Trump, and Brexit.

This is because Rushkoff’s book, while accessible, is not simple. Too often, debates about any topic get forced into a simple pro- and anti- polarity, focused on a single magic bullet (and often enough, a single demon to be expelled). Worse, such debates too often “fight the last war” – and so Sanders’s solutions look like a Scandinavian playbook, while Trump’s yearn for a rebuilt manufacturing economy via protectionism and immigrant exclusion. These solutions are not all wrong, especially in their diagnoses of what has happened – the Sanders/Trump alliance against trade deals evidences this. There is a “tell it like it is” attraction here.

Rushkoff’s book, by contrast, insists on grappling with the present situation, which above all is one of massive technological change – higher minimum wages and barriers to foreign goods won’t create jobs if robots can do them. But this is not an anti-technology book; to borrow Pope Francis’s phrase from Laudato Si’, it’s an anti-technocratic-paradigm book. In his encyclical, Francis insists that technology itself is not bad, but that it becomes problematic when it becomes an end in itself – which, as he goes on to say, means an end for those who stand to profit from it. When Francis claims that “technology is not neutral,” he means that technological choices are in fact choices about “the kind of society we want.”

Rushkoff’s book is invaluable for fleshing out the technocratic paradigm problem, from the place of one who is extremely knowledgeable about technology. In essence, the book’s thesis can be boiled down into two key points. First, digital technologies can either promote wide, dispersed sharing or contribute to even more centralized power. The key is whether they are designed as “platform monopolies” or as peer-to-peer resources. And his second insight is that the digital economy has become more and more oriented to the development of platform monopolies because these are the form of businesses demanded by the returns needed to satisfy the “old operating system” of the existing economic system. Platform monopolies ultimately squeeze out small producers, first by casualizing their labor, and then by dispensing with it altogether. Uber is just a bridge, Rushkoff insists, to Google’s driverless cars. There is a kind of double reinforcing effect here, in narrowing ever more the labor market to those with highly-specialized operating skills, and then in narrowing capital return to fewer and fewer “winners.” In essence, he is summarizing what an economy looks like when labor ultimately serves capital, rather than capital serving labor. The goal is “removing humans from the equation.”

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Is Business an Ethics-Free Zone?

For many if not most, the idea of a “moral economy” is a contradiction. I was reminded of this when reading some of the comments on my last blog post. The logic is straightforward: the “business of business is business”, which is to maximize profits, and as long as corporations don’t break any laws, they are not doing anything wrong. To claim otherwise would be seek perfection in a fallen world.

In my own field of economics, this perspective is pervasive. One of the first things you learn in elementary microeconomics is that consumers maximize utility and firms maximize profits. That’s just how things are. This view is summed by nicely by Branko Milanovic:

“I am thus intellectually sympathetic to the view that personal morality exists only outside economics or capitalism. I might like the guys who are nice and ethical, but when it comes to economics I really do not expect them to be so. I even very much doubt when they claim they are. I tend to see them as hypocritical. This is not in their job description.”

Milanovic makes a comparison with bobsledding—you can go as fast as you like, but you should not hit the fence. In other words, do whatever you can to maximize profits, but don’t break the law. So Milanovic refuses to condemn the behavior of the financial sector in the run-up to the crisis, because they were doing what they are supposed to do and (for the most part) not breaking the law.

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Should a Catholic University take Koch Funding?

Can a Catholic university legitimately take money from the likes of the Koch Brothers? This is not a hypothetical question. Many Catholic universities are implicated. But none more so than Catholic University of America, which—in the face of much criticism—has just doubled down with another $10 million donation from the Koch Foundation.

The original partnership with the Kochs, and the subsequent criticism, predates Pope Francis and Laudato si’. If the university’s arguments were weak back then, they are paper-thin now.

Just consider how the philosophy and business practices of the Koch Brothers goes directly against the authoritative teaching of Pope Francis. I will make three points in this regard.

First, the Kochs are avid libertarians, defenders of the unconstrained free market as the best route to prosperity. This ideology is simply not compatible with Catholic social teaching. In full continuity with his predecessors, Pope Francis condemns the notion of a “deified market” or a “magical conception of the market.” His point is that an economic system underpinned by self-interest and oriented toward profit maximization is simply incapable of delivering integral and sustainable development. It leads instead to an economy of exclusion, and is deaf to the cry of the earth and the cry of the poor. Pope Francis stresses that working for a just distribution of the fruits of the earth and human labor is a moral obligation—and for Christians, a commandment. “It is about giving to the poor and to peoples what is theirs by right,” he says. In other words, the universal destination of goods is a reality prior to private property. I have a feeling the Kochs would strenuously disagree with this. And this is no mere prudential disagreement. It is foundational and anthropological.

Second, the Kochs are among the leading funders and promoters of climate-change denialism. In Laudato si’, Pope Francis castigates those who are focused on “masking the problems or concealing their symptoms.” “There are too many special interests,” he says, “and economic interests easily end up trumping the common good and manipulating information so that their own plans will not be affected.” It almost seems like the pope is addressing the Kochs directly! Today, the stakes are especially high after the signing of the Paris Agreement by 196 nations last December. This agreement, which aims to phase out carbon emissions, was a major priority of Pope Francis. It explains the timing of the encyclical’s release, and Laudato si’ served as a moral charter for the agreement. But, almost alone in the world, the Paris agreement is being opposed by key U.S. political interests—because they are beholden to those very same vested interests condemned by Pope Francis.

Third, the business activities of the Kochs cannot be deemed ethical. In terms of assessing ethics in business, the best starting point is "The Vocation of the Business Leader," put out by the Pontifical Council for Justice and Peace. This document is currently being updated to encompass the wisdom of Laudato si’. And Pope Francis makes a compelling point about business ethics that bears repeating in this context. He notes that businesses profit from not paying the true costs of their activities. “Only when the economic and social costs of using up shared environmental resources are recognized with transparency and fully borne by those who incur them, not by other peoples or future generations,” he says, “can those actions be considered ethical.” It is hard to avoid the conclusion that the business model of the Koch Brothers is simply unethical, period.

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An Heir to the Sanders 'Revolution'?

Supporters and pundits will in Bernie Sanders’s Michigan primary victory seek signs of new life in his bid for the Democratic nomination. But whether or not he bests Hillary Clinton in 2016, his campaign has given the nation a glimpse of what the future of the Democratic Party might look like – and who might be among its leaders.

U.S. Representative Tulsi Gabbard of Hawaii was probably little known outside her district or party circles until a few weeks ago. But then the thirty-four-year-old congresswoman resigned her position as Democratic National Committee vice chair to endorse Sanders. It was probably the highest profile endorsement of his campaign, and it came from a politician many consider to be a rising star.

Gabbard has an impressive resume: She was elected to the Hawaii House of Representatives at twenty-one, served two tours of duty in Iraq, and won her current House seat in 2013. While conventional wisdom suggests her DNC resignation appears to be a needless sacrifice of present prominence, her endorsement might instead be read as an initial effort to spearhead and lead the Democratic coalition of tomorrow.

Sanders’s campaign has been defined by a particular calling card: his absolute control of the millennial vote. Voters aged eighteen to thirty-four prefer Sanders over Clinton by an eleven-point margin and enthusiastically support the public spending programs he espouses. The tally from Iowa was especially stark:

In the Iowa entrance poll… Sanders amassed astounding margins among young people. He crushed Clinton by an almost unimaginable six to one—84 percent to 14 percent—among voters younger than 30. For those tempted to dismiss that as just a campus craze, he also routed her by 58 percent to 37 percent among those aged 30 to 44.

One state does not a nation make, of course. But the evidence strongly suggests that the future Democratic voter base is interested in policies farther to left than what the current party leadership is offering.

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What Do You Want in a Health Care System?

I am find a lot of articles about people wanting "single payer" or a continuation/improvement of Obamacare or the destruction of Obamacare and its replacement by something else.  Most of these talk about financing, with some lip service about improved quality.  But I am not finding any description from anyone about exactly what a post Obama health care system needs to have.

When we do corporate strategic planning in the private sector, this is the first question we ask. What do people want?  Without answering that question, we have no idea where to get to, much less how much it should cost.

Judging from people's complaints and working backwards (which is not the same as starting with a model and working forwards), people want access to all available providers (which is to say that all providers are in-network), they want zero out of pocket expense, and they want some sort of quantitive clarity about how good a provider really is before they receive services.  This pretty much covers everything.  Is there anything else?  And more importantly, for any system, if you had to settle for less than this, what would you tolerate?

Capitalism Without Tears

Here is a tiny but very interesting article, especially considering its source.

With capitalism,

...profit margins should naturally mean-revert and oscillate. The existence of fat margins should encourage new competitors and pricing cycles that cause those margins to erode; conversely, at the bottom of the cycle, low margins should lead to weaker players exiting the business and giving stronger companies more breathing space. If that cycle doesn't continue, something strange is taking place.  

We can discuss this. Regarding the articles I recently wrote about the Obamacare Co-Ops, one of the problems here may be that there has now been so much monopolization in capitalism that new players can simply not afford the costs of entering the market to compete. And what this would mean, of course, is that the "free market" is both disappearing and incapable of being recovered by anything other than political (as opposed to economic) activity.

On a related note, the head of Goldman Sachs has been watching Bernie Sanders and he doesn't like what he sees.

For many, this will count as a ringing endorsement.

On the subject of a President Hillary Clinton, Mr. Blankfein is coy.

In the Borough of Former Churches

Walk down almost any block in the part of Brooklyn where I live and it’s possible to see a building that once had a religious connection now being used for something else. Arches and spires are obvious indications of former houses of worship, but sometimes a Latin inscription above the lintel or a stone cross on the roof are the only evidence of original purpose. One statistic says twenty Brooklyn churches have been converted into condominiums over the past twenty years, but the scope and pace of redevelopment makes that count seem conservative, or outdated. In the few square blocks around me there are at least five such conversions, of varying degrees of luxury. Some years ago an acquaintance of mine, much bolder than I, confronted a resident leaving one of these buildings. “So how does it feel living in a deconsecrated church?” she demanded. No response was forthcoming—an exhibit of self-restraint, I think now.

I’ve officially lived just over half my life in what is still called the borough of churches, and, full disclosure, my wife and I even once looked at an apartment cantilevered into the sanctuary of a stately stone structure on what realtors still call “a lovely tree-lined street.” We’d just had our first child; we liked the neighborhood; we didn’t want to move to New Jersey. If the place was overpriced then, there’s no way to describe it now. And anyway, how would it have felt to live in a deconsecrated church?

Conversion and reuse is nothing new, obviously, and it’s not just churches—the structure too expensive to maintain, the lot too valuable to hold onto—that have come to function as something else. Parish schools and rectories, convents and hospitals: these also succumb to prevailing demographic and economic pressures, or, depending on your outlook, are made monetizable. People with ties to the community once defined by such places will naturally feel different about this than those who are seeking a home in a coveted neighborhood with good schools; both see it differently from the developer who’s swooped in to tap the financial exponentialities.

Novelist Colm Tóibín has said it was the very sense of the Irish having disappeared from these streets that helped him render so indelibly the environs of 2009’s Brooklyn (the film version of which was released last year)—that and having made himself a regular at a nearby church's 9 a.m. Sunday Mass. Just over a century ago the immediate neighborhood held the largest single concentration of Italians in the country, but by 1998, in the phrasing of the official history of the local parish, “many had left the railroad apartments of South Brooklyn for the lawns and pitched roofs in Long Island, Staten Island, [and] New Jersey.”

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Obamacare in Flames - Part Three - The Plague on All Our Houses

The Attacks on both Obamacare in particular and our healthcare system in general are fragmented and hard to talk about in a very systematic manner. People have specific things that they think are great and that they think are terrible. They focus on these to criticize or glorify the whole. I find this infuriating. To fix things, we have to know exactly how things work, and what and what doesn't work well. My response, then, will be broken into parts which I hope will make sense when you put them all together.

The questions are whether Obamacare has been worth it, can it survive, should it be replaced, and what should replace it.  To answer these questions, I think we have to go back to some basic concepts. Hold on. It's going to get ugly.

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Obamacare in Flames - Part Two - Mama Don't Want No Market Playing 'Round Here

"We can't really subsidize a marketplace that doesn't appear at the moment to be sustaining itself" —Stephen Hemsley, CEO, United Healthcare

It's a commonplace in American business that the difference between a brilliant statement and a stupid one usually depends on who is saying it. When Steve Hemsley asked his C-Suite crew why it looked like United Healthcare would be losing half a billion dollars on Obamacare in two years, I doubt anybody said "Gee, boss. I guess the marketplace must not be sustaining itself." Or if someone did, they're certainly not working there anymore.

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Obamacare in Flames - Part One - The Strange Life and Sudden Death of the Co-Ops

"As the camel falls to its knees, more knives are drawn" —Bedouin Proverb.

Despite the fact that the Affordable Care Act (Obamacare) has significantly reduced the number of uninsured in the United States, it has also failed to live up to its promises and has seen a great number of failures. The number of uninsured is still high, premiums are growing, networks are narrowing, insurers are losing money, and the Co-Ops, set up as a significant innovation of the program, are failing and will continue to fail everywhere.

In this hot election season, this has brought out enemies on the Left and the Right. The Left wants Obamacare dumped and replaced with a single payer system. The Right just wants it dumped.  Both sides attack the program with cherry picked examples that are nonsense and half truths. It's like watching a mud wrestling match where you know you hate one of the wrestlers, but you can't tell them apart anymore.

I am going to post three articles where I try to get to the bottom of what is really happening. I find the sniping on the Right and the Left mostly useless, but also infuriating. The system is broken and Obamacare has revealed all of the cracks. In the first article, I will talk about the Co-Ops and why they had to fail given the structure of the current insurance system. In the second, I will discuss what's going on with market risk and how the big insurance players, despite their massive resources and sophistication, also found themselves sucked into the whirlpool. In the third article I will talk about what we can and can't do about it.

***

The Affordable Care Act contained a provision to establish and fund the creation of 50 statewide non-profit insurance Co-Ops. There were several reasons for this. First, there was the concern that the current commercial insurers would not enter the ACA marketplace in large enough numbers to support millions of newly insured. Second, it was rightly believed that insurance markets in the United States tend to be dominated by one main insurer and the Co-Ops would add badly needed competition. Third, the Co-Ops were a compromise meant to forestall a government run "Medicare" option that might have a potential to move the entire country towards single payer insurance. And last, many people unclear of the concept of not-for-profit and citizen boards of directors in the United States thought that the Co-Ops would be less greedy and more consumer friendly.

Because the funding for this program was prematurely and summarily cut during one of our GOP manufactured budget crises coupled with Red State resistance to the idea itself, only 23 Co-Ops were eventually established. Of these, half have failed outright. Most of the rest are very weak and a significant number of these have been quietly put under some form of direct regulatory control. With the sole exception of the Maine Co-Op, the Co-Op program will fail unless radical measures are taken (which I will outline in article three).

The provision of all that sweet, sweet government money ($1.6 billion) drew into it two kinds of speculators. The first were the normal kind who wanted a crack at The Big Federal Pie. The second consisted of people who wanted the program to succeed for various political and occupational reasons. Most, but not all, were blinded by the fact that the mass establishment of these Co-Ops was probably the riskiest start- up venture in American history. While the insurance risk factors played a part in this (and the risk factors are what people focused on) I will argue that structural factors played a bigger role in creating risk here and I will try to outline these as briefly as I can.

A. Creating a Network

One of the main things that insurance companies do in the United States is obtain discounted rates from providers. These rates and their terms are set by individual private contracts. Insurance companies and providers are always recontracting with each other, hoping to gain an advantage. Any insurance company's contracting staff will be large and well funded with the latest complex modeling software and contract language software. And this will be true of any insurance company that already has a well developed network.

The insurance company will try to get the best terms and steepest discounts and then will aggregate these discounts to find an average discount so that it can begin to design its different benefit packages and price them. (It is also necessary to know in what way its member population uses the providers, but I will discuss this later).

The Co-Ops started out with no networks at all, no contracting staff or infrastructure, and a mandate as THE state Co-Op to be prepared to cover any member in the entire state.

What most Co-Ops did was to create "instant networks" by using what is called a "rental network." A rental network is a broad, usually multi-state network that has a very shallow discount with a large number of providers. They are usually used in cases where a business (typically a hospital) will want to create a quasi-network for its own employees, where these workers will get a steep discount for using their own hospital and hospital owned doctors, but will also get some sort of small discount should they go somewhere else. Rental networks are not meant to be used as full networks by insurance companies, because their discounts are so small that they can't compete with regular insurance companies with their own sets of contracts.

The Co-Ops plan was to start with the rental network in order to establish an "adequate" network per the state regulatory rules of wherever they were located, and then as quickly as possible, recontract the providers within it with their own more deeply discounted contracts on their own terms. If they did this quickly enough, they would have a network that would cover everyone, but they would also be able to eliminate the main rental contracts with their own competitive ones.

In practice, given the magnitude of the task and the fact that they were literally starting with nothing, they had no idea how long it would really take or what Co-Op contracts would actually be in place when the Co-Ops "went live" and actually started taking on new members. So in their business planning, they worked backwards from what they knew to be the average discount in the state to the average discount of the rental network. From this they created a fairy tale business plan and sent this to the regulators for approval. No one at either end of this chain believed the plan, which is why the Co-Ops were expected to lose money for the first one to three years of their existence until they could get a real network together. The vast majority of Co-Ops lost money in the first two years, even those that did not fail, because (in part) they simply could not build the network they needed. They had no market clout and their contracting infrastructure was mostly immature.  

B. Building an Infrastructure

Modern health insurance companies have massive expensive IT infrastructures. It is commonly said in the insurance business that insurance companies are now basically IT companies with insurance companies attached to them.

The core of the infrastructure is the claims payment system. This system has to be able to adjudicate electronically all claims per all the various separate provider contracts that an insurance company has. The claims system also has to be integrated with the member enrollment system, the billing and payment system, the banking system, the accounting system, the hospital contracting system, and the member services system. All of these are separate things. The work of the large insurance companies is to have all of these systems "in house" and seamlessly integrated with each other. For the Co-Ops, all of these separate systems had to be rented from separate vendors. It was the integration of these systems, which were generally not designed to be integrated, that was usually done in house. For many of the Co-Ops, some of the systems weren't even designed to do what the Co-Ops needed them to do, either in their basic functioning or in the volume of transactions that were required. And in some cases, multiple versions of a system were needed. For example, there were cases where a Co-Op needed one enrollment system for individual members and another for employer group members.  Both needed to be integrated with the rest of the system. Against this, the Co-Ops generally had inadequate staffs and had to rely on consultants who themselves were often inadequate, although terribly expensive.

To add to this, the Federal government was building its own enrollment and claims system from scratch (the latter not to pay claims but to do member level claims risk calculations) and required the Co-Ops and anyone else participating in Obamacare to able to integrate with their systems.

As you can imagine, there were massive, expensive, service affecting integration problems within the Co-Ops, within the government (which hit the news), and between the Co-Ops and the government. The Co-Ops did not figure these costs in their start up planning, and why should they have? No one had ever done this before.

C. Building a Staff

The Co-Ops had several staffing problems right from the beginning. The first was the acquisition of qualified management.  Co-Ops were, by definition, start up companies and risky ones at that. The best executives and managers in the insurance industry could tell how risky they were, if only by listening to their own senior managers panicking about Obamacare. Not many people were willing to leave safe well developed jobs late in their careers to join a Co-Op at any price. This was not only true of the executives but also the middle managers. And even those seasoned executives and managers who did come over had little experience starting an insurance company from scratch. Nor did they have the "turnaround" experience they would need to fix the inevitable mistakes. And there was another problem with capital. While the Co-Ops were relatively well funded, with a Federal capital development fund that was separate from the claims guarantee fund, the manager found problems with how to spend the money. Aside from the fact that at the beginning there did not exist such things as purchasing departments, which meant that that the Co-Ops (having to build up quickly) were screwed by almost everyone they did business with, they had trouble figuring out how to staff up. They couldn't take their time, which caused hiring standards to slip. But they also didn't know if they should staff up quickly against the possibility of small enrollments (and therefore risk spending to much right off the bat) or staff up slowly against the possibility of high enrollments and therefore risk being understaffed and having basic service issues). What usually happened was the worst of all worlds. They didn't anticipate the integration problems, so they didn't staff for them. They tried to forestall permanent staffing, so they outsourced a lot of things they should have taken in-house right away. In some cases, especially in the second year of Obamacare, their membership increased dramatically over the course of a month or two and they found themselves very understaffed against the volume of membership. The IT integration problems, the staffing quality and quantity problems, the in-sourcing of activities and the inevitable initial mistakes all had to be addressed in "real time" as the Co-Ops were providing health services to actual people. And they had to do this while painting rosy pictures to the Boards of Directors (who being appointed from the membership often had no idea how insurance companies worked to begin with) and regulators who were often hostile towards them.

The impossibility (there, I've said it) of constructing an adequate and competitive provider network in the face of major insurance companies, creating a fully integrated claims, enrollment, and financial structure, and a well trained, well organized experienced staff made working conditions at the Co-Ops stressful as they lurched from one catastrophe into another. The level headed leaders who actually thrive in this kind of environment turned out to be rare. So the lights began to go out to a chorus of "I told you so" from politically motivated groups who had their own reasons to want the Co-Ops to fail.

But what about the major established insurance companies with solid networks, infrastructures, and stable well trained staffs? When they entered the Obamacare market, what happened to them?

Here the question of risk enters the picture. With the Co-Ops' basic structural problems, we can look at the questions of pure insurance risk as the coup de grace. But how did the sophisticated risk experts at places like Blue Cross and United Healthcare manage to also shoot themselves in the face?

 

 

Why Ted Cruz is Dangerous: Econ Edition

It’s obvious that our presidential campaigns too often focus on non-substantive issues. It is amazing that so little attention is paid to the explicit tax plans offered by the candidates, particularly the Republican candidates, since if they were to be elected, they would presumably have some chance of actually passing something.

In this regard, there is no doubt that Ted Cruz is an exceptional candidate. The conservative-leaning Tax Foundation has excellent and detailed account for all of the major Republican contenders' plans. And all of them amount largely to the same thing: a flat or two-tiered income tax rate, significant changes in corporate and capital taxation, a larger initial exemption, and (of course) abolition of the estate tax. There are minor differences, of course. But the Tax Foundation agrees on one thing: they’d all add massively to the deficit. For example, they estimate Donald Trump’s tax plan would cut revenues by over $10 trillion – yes, that’s over a $1 trillion deficit every year.

All of them, that is, except Ted Cruz’s. Cruz’s plan, with the generous assumptions about economic growth that the Tax Foundation gives to all the plans, only reduce revenues by $768 billion over 10 years. And yet at the center of Cruz’s proposal is a flat 10 percent income tax, abolishing all deductions except charity and home mortgage interest, and providing for an expansion of the exemption and child tax credits. Thus, Cruz is prepared to campaign on a 10-percent flat tax, and to promise that he is not going to explode the deficit doing it.

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Is Bernie Sanders Anti-Immigrant?

When Bernie Sanders released the details of his “Medicare for All” single-payer healthcare proposal ahead of the Democratic debate last week, the plan was widely panned by journalists and pundits as an unserious, pie-in-the-sky idea that could never possibly see the light of day. But it was perhaps even more audacious than many of its critics realized: in contrast to the Affordable Care Act, whose drafters deliberately excluded undocumented immigrants from being eligible for coverage in order to avoid stepping into an even bigger political minefield than the one they were already in, Sanders’ policy advisor Warren Gunnels confirmed to reporters that the senator envisions an expanded Medicare being open to at least some of those living in the country illegally.

This is almost certainly one of the boldest pro-immigrant positions espoused by a major party candidate in recent history. A casual observer might reasonably infer from his willingness to take such a stand that Sanders must be the clear favorite of those who lobby on behalf of immigrant rights. Yet throughout the campaign, he has been dogged by criticism of his immigration recordfrom the left.

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George Rutler and David Bowie

When I think of New York priest Fr. George Rutler, three things come to mind. First, he is impressively erudite with an impressive breadth and depth of knowledge. Second, his previous church—Church of our Savior—is by far the most beautiful church in New York, and I believe he deserves some credit for that. And third, he is a holdover from an alliance between an influential circle of American Catholics and the arch-liberals of the Reagan era—a “deal with devil” that went disastrously wrong, causing Catholic intellectuals to cheerlead both the Iraq war and economic policies antithetical to Catholic social teaching.

But I digress. What prompts me to write this post is Rutler’s sniffling disgust that the Vatican had some nice things to say about David Bowie upon his death. Rutler was having none if it, even though he admits that he had never even heard of Bowie before this. But this kind of music does not find favor with a self-described aesthete who prefers Mozart and Chopin to Jackson and Bowie. (By the way, didn’t Alasdair MacIntyre list “aesthete” as one of the signature professions of an emotivist culture? And aren’t there shades of Mill’s version of higher-order utilitarianism here?).

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In Hoc Anno Domini

Every Christmas Eve since 1949 the Wall Street Journal has been publishing the same editorial.  (The Journal doesn’t publish on December 25, the stock exchange being closed.)  Obviously the editors must be pretty proud of it.  It’s also one of my favorites.  From year to year the words are the same but the meaning changes with the times.  In the last few years its message has been clear: Jesus came to save us from government regulation. 

That was probably not the major point at the moment of intensifying Cold War when the editorial first appeared.  The dangerous allure of Friedrich Hayek’s “road to serfdom” was merely implied.  But the Journal readers of 1949, who would have spontaneously understood Caesar to be operating out of the Kremlin, have been replaced by the readers of 2015, daily instructed that today’s Caesar operates from the White House and the federal bureaucracies.  

Entitled “In Hoc Anno Domini,” the editorial describes the world at the moment of Saul of Tarsus’s conversion: a world “in bondage,” with but one state and one master, his oppressive power maintained through legions and executioners, persecution of free thought, and enslavement of nations.  “Then, of a sudden, there was a light in the world, and a man from Galilee saying, Render unto Caesar the things which are Caesar’s and unto God the things that are God’s.” 

Having begun with Saul, the editorial ends with Paul:  “Stand fast therefore in the liberty where with Christ has made us free and be not entangled again with the yoke of bondage.” 

There are a number of historical and scriptural oddities about “In Hoc Anno Domini.” 

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Follow the (Really Big) Money

Something I’ve never quite been able to figure out about the powerful individual financial interests behind charter schools is just why those backers are so keen on charters and, correspondingly, so supportive of massive cuts in the funding of public education. One theory is that they stand to profit from the adoption, purchase, and licensing by charter schools of various educational products and services in which they have a stake. And yet that doesn’t seem to fully explain the fervor they exhibit for their cause; something is missing from the equation, no matter the stated desire to address (contestable) claims about an educational system in “crisis.”

Evidently, it’s also a mystery to Michael Massing. Why, the former executive editor of the Columbia Journalism Review asks in The New York Review of Books, “have so many billionaires concluded that charter schools are the best way to fix the system?” And, just as importantly: “What are the implications of having such a small group with so little expertise in the field of education exercising such influence in it?” Because he doesn’t have the answer, he proposes a way to work toward one: harness digital technology for a new form of journalism that would  “lift the veil off the super-rich and lay bare their power.”

Billionaires, as Massing doesn't need to remind us, are “shaping policy, influencing opinion, promoting favorite causes,” and not just when it comes to education. More than ever before the super-rich are pouring their money into national and state political races, and funding targeted campaigns on discrete issues like regulatory and tax “reform,” climate science, and even foreign diplomacy—all as they manage to shield themselves from scrutiny. Yet journalists, Massing states, “have largely let them get away with it.” His proposal: “[B]roadly based [websites] dedicated to covering the power elite,” at which data on spending by billionaires is collected, collated, and tracked, the information presented in regularly updated tables and charts, and linked to the latest news about which member of the 1 percent is contributing money (and how much) to which cause or politician.

Massing distinguishes his envisioned operation from social-media-enabled grassroots reporting and well-intentioned but undersized watchdogs like Muckety and SourceWatch. He calls for sufficiently funded, nonpartisan organizations with dedicated staff committed not just to breaking the story but also to pursuing it, so that the nexus of wealth and policy is fully exposed as the danger it is to American democracy. There necessarily remain questions about implementation and effectiveness, but for now it represents as good a plan as there is for publicizing information that urgently needs to be publicized.

How urgent is illustrated by one recent example: a New York Times article this week on the influence of billionaires in the 2014 election of Illinois governor Bruce Rauner and the policies he’s pursued since.

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Black Millennials & the Racial Wealth Gap

Mel Jones writes in the Washington Monthly about an issue I and many of my peers are familiar with: how to pay off student debt and other bills in a not-so-great economy, yet somehow build a financial foundation for the future. Her experience, however, is fundamentally different from mine, in that as a person of color she must also contend with what’s come to be known as the “second” racial wealth gap—the second phase in a “financial disparity that stems from continuous shortfalls in parents’ net worth and low homeownership rates among blacks,” which, Jones explains, “works to create an unlevel playing field.”

Since owning a home accounts for over 50 percent of wealth for blacks (compared with 39 percent for whites) and since black Americans are five times less likely to inherit wealth than white Americans generally (7 percent to 36 percent), low homeownership rates among black Americans, which often are the result of discriminatory lending practices, are a large contributing factor to the racial wealth gap. In addition, Jones points out, “[T]he most recent housing bust is estimated to have wiped out half of the collective wealth of black families—a setback of two generations,” resulting in essentially an exponential setback for millennials of color.

Jones cites a recent study published in the Journal of Economic Perspectives on the dynamics of wealth accumulation that found an estimated 20 percent of personal wealth can be attributed to formal and informal gifts from family members, especially parents. But blacks and Hispanics starting their careers are not likely to get such a boost. Moreover, they’re already starting at a disadvantage, given that they take on higher levels of student debt than their white peers, “often to pay for routine expenses, like textbooks, that their parents are less likely to subsidize,” Jones writes. They also often have to work while in college, thus missing out on opportunities to connect with classmates and forge the professional ties that might help them later.

I know I wouldn’t be where I am without “formal and informal gifts from family members,” before, during, and after college. I wouldn't have been able to make decisions toward furthering my professional career if I couldn't, for example, stay on my family’s cell phone plan or receive help covering the cost of an apartment security deposit. Understanding that there are inherent long-term benefits in being able to choose career development over routine expenses is one part of understanding what in current discourse is calledprivilege.” As Jones puts it simply: “If you have to decide between paying for a professional networking event or a cell phone bill, the latter is likely to win out”:

When this happens once or twice on a small scale, it’s not a big deal. It’s the collective impact of a series of decisions that matters, the result of which is displayed among ethnic and class lines and grounded in historical privilege.

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Catholic University's Business School Again

The problems at Catholic University’s business school run even deeper than I thought. Remember what is at stake: the business school has taken large sums of money from the unvirtuous Koch Brothers and other libertarian interests. The worry is that tainted money taints.

Now, CUA could try to deflect this criticism. They could argue that they need the money, and they will never waver in their commitment to traditional, orthodox, Catholic social teaching—the great legacy of people like John A. Ryan, whom Cardinal Turkson has been praising in recent speeches.

But CUA doesn’t take this approach. Quite the opposite, in fact. It actually attacks its critics and brags about these attacks. Look at the attached image. It is a photograph of a poster on public display at CUA’s business school. It boasts about taking large sums of money from the Kochs and the Busch Foundation. And it prominently displays an op-ed written by president John Garvey and then-dean (now provost) Andrew Abela for the Wall Street Journal, displaying the subtitle: “This Catholic university won’t cave to demands made by the liberal social justice movement.”

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