We got it right, right?

At the least, the United States is a bit more humane than it was a week ago after President Barack Obama signed the reconciled health reform act. Despite opposition from vested interests ranging from labor unions to pharmaceutical firms to insurers as well as ideological clash within the House of Representatives, more Americans will have access to health care. Credit Madame Speaker Nancy Pelosi (D-CA) for wrangling the necessary votes in the House of Representatives. Aptly, she convinced holdouts that the reform act was not a referendum on abortion. She succeeded where more influential Speakers such as Thomas O'Neill (D-MA) failed. Language in the bill calls for digitizing medical records, and utilizing new technology so doctors and patients can communicate will decrease monetary and opportunity costs for patients. However, the plaudits end there, for the means fail to justify the ends philosophically and pragmatically.

First, the terms under which this bill came to be enacted are dubious within the context of democratic process and procedure. The bill passed on a pure party line vote. What are the significances? According to Senator John McCain (R-AZ), all other major legislation to pass through Congress has had the imprimatur of bipartisan support. Seemingly left out, Republicans may embark upon a future strategy during this legislative session to obstruct other bits of the Democratic agenda. Laudable ideas such as Senator Maria Cantwell's (D-WA) proposal of 'cap and dividend' regarding carbon emissions standards, the formation of a consumer protection agency or more intelligent financial regulation may stall. By accentuating the polarities within the polity, the terms of future debate will have narrowed. This does not mean that American democracy has reached a crisis point. However, it is difficult to take as axiomatic that the longer term benefits of expanded medical coverage are a worthwhile trade off for short term harm to the democratic process.

On the second, pragmatic level, the health reform act will decrease the number of uninsured, but it will do so without addressing the major structural flaws to the factors highly responsible for cost inflation. Though more media attention focused on the Cornhusker Kickback, Louisiana Purchase, and the Stupak amendment due to their close link to the hot-button abortion issue, more relevant factors received short shrift. These included reformation of the Food and Drug Administration (FDA), statutory caps on payouts in medical malpractice cases and appropriate levels of malpractice cover for physicians, the level of co-payments for those already enrolled, and the effect of mandates.

In an Economics focus column, written in the summer of 2007, in The Economist, a study was cited that the process through which the FDA vets and approves drugs adds an extra $173 billion to the cost of health care in the United States. Essentially, the piece argued, this constituted a stealth tax. FDA drugs approval methods greatly influence the business model of the industry. Due to the high costs and regulatory hurdles of the drugs testing regime, firms invest heavily in developing blockbuster drugs which will yield revenue greater than $1 billion. Because the costs of development are so high, pharmaceutical firms allocate more resources to patent protection. These input costs translate into higher prices for the end-users be they patients or even large entities such as Medicare. Such higher costs create barriers to entry for smaller biotechnology start ups responsible for many of the recent drug patent filings. The status quo detracts from the fundamental competences of science and improving the quality of life. All drugs firm, big or small, will maximize profit. However, the current approval process diminishes their ability to do good and make money. Changes to the approval process that reflect advents and progress in biotechnology will create incentives for larger firms to more targeted research and development as well as to be more acquisitive. Better resource allocation in this area will go a long way to controlling costs.

Next, the dual problem of necessary amounts of malpractice cover and court-ordered tort liability payouts create huge distortions in the practice and delivery of medicine. As courts have raised the value of payouts in medical malpractice cases, doctors have seen their own malpractice cover premiums increase. Since the threat of a malpractice suit can be a career killer, to say nothing if a case goes to trial and results in a guilty verdict, doctors practice what some call 'defensive' medicine. This is a bit of a misnomer. Prevention is by nature defensive, and that is no bad thing in health care. A more appropriate term would be 'disingenuous' medicine where though the patient is by no means neglected, yet the doctor may have an equal concern not to get sued. Hence, physicians order many expensive tests because they are afraid of letters from attorneys. Not all doctors are good. Even competent physicians will err. However, the function of medicine is not to perfect imperfections and to do so perfectly. The dynamic between the threat of a suit, the concomitant potential problems, and the extortionate protection price doctors themselves must pay to insurers has influenced the behavior of an entire profession adversely. In addition, many intelligent and able students will avoid medicine, despite its rewards, if they feel they are beholden to lawyers and insurers as they cannot practice freely. All of society loses out, and the shortage of doctors indicates that despite the reward and prestige of the profession, students will not pursue it if they feel their professional behavior will be governed by outsiders with poor understanding of science rather than by the ethics of their craft.

Third, economists agree that Americans 'over consume' health care. When a co-payment for a doctor visit costs less than a movie ticket, then the price might be too low. Because the price for a doctor visit is low, individual attitude towards health care pay little attention to prevention as well as taking greater interest in one's own health. Insurance premiums are expensive, and many will argue what is the point of paying thousands a year if they never actually go to the doctor. However, higher costs to see a doctor will encourage greater discretion among consumers. Overconsumption stems from a bit of labor practice arcana. During the Second World War, when the government froze wages, employers attracted staff through the payment of benefits, notably health insurance. This hiring practice relic has remained part of the system. These benefits are treated as tax-free. Amending the tax treatment of health benefits would go a long way to changing consumer behavior as firms would get out of the business of health care. Simplifying the way health care is bought and sold would reduce costs. Yet, as the next paragraph will argue, the reform act has expanded the role of firms in the health care marketplace and entrenched these lingering inefficiencies. The expanded roles of the Internet and other information technology will help reduce costs as email will allow doctors and patients to communicate more easily, and routine consultation may not require a trip to the office. This point does not claim that the medical system is backlogged with frivolous visits. However, it does argue that if people go visit a doctor, and each visit requires a test or billable procedure to insurance companies, then premiums will rise due to more claims made on the system. The tax on 'gold-plated, Cadillac' plans is a start, but it does not go into effect until 2014. Advocating greater individual interest and responsibility in one's own health is tough to legislate, but artificially low costs to visit a clinic lead to higher costs of health care as a whole. Such behavior ought to be discouraged.

Lastly comes the issue of mandates. The act has two types of mandates. The first apply to firms. Even the smallest firms must provide health cover. Regarding citizens, they must purchase health cover. Those who cannot would receive subsidies. The first set of mandates are a bit easier to explain. Congress has constitutional authority as written in the 'commerce clause' to regulate interstate commerce. This particular exercise of authority, though technically legal, would raise operating costs for small firms which drive job creation and innovation in the economy. Though the mandate aims to promote equity, it will likely do the opposite as firms may have to shed staff to afford compliance. This must be fixed as this provision creates an ill-timed, ill-conceived burden. The second type of mandate falls upon individual citizens. When on March 11, the Virginia state legislature voted that no individual shall be required to obtain or maintain individual insurance coverage. Mandates were a central issue of the federal Health Care Reform Act. State Attorneys General for Virginia and South Carolina believe the new law creates a Constitutional question on Ninth and Tenth Amendment grounds. Moreover, applying the commerce clause in this context poses a problem because states regulate insurance markets and a compulsory mandate does not fit within the scope of economic activity. Randy Barnett's piece in the Washington Post elucidates these arguments quite clearly. In principle, mandates do impinge on liberty. Also, this type of default into the system has caused some to believe that a public option might be possible. However, compulsory automobile insurance in some states is an example of an explicit-cost default that might seem an affront to liberty but has where the state has a compelling, countervailing, state-interest. Such a mandate sets a dangerous precedent regarding where government can intercede and compel participation. Such a mandate raises fears over what else the government can require on technical grounds without truly representative support of the legislature.

Perhaps these oversights and imperfections are the strengths of the Federal Health Care Reform Act. Perhaps voters and politicians will set aside ideological opinions and the rancorous exchanges the next time Congress or the President propose a fundamentally good reform. The scale of lobbying, the dollops of district aid to garner the necessary votes, and acrimony of the debate might have been too much for the electorate to countenance. However, if debate and resolution of the big issues are left to be decided solely on technicalities, the public will question whether it was a good idea in the first place. The Health Care Reform Act contains some good. That is why Congress must follow through to amend it to make it better. Otherwise, as in the case of employer-provided health care, its lasting effect will eclipse the good intentions at the onset.

21st century fireside chats

Federal Open Markets Committee Chairman Ben Bernanke is an expert on the Great Depression. President Barack Obama has studied the first Franklin Delano Roosevelt term extensively. The Fed and the executive have acted quickly in the face of systemic calamity in the banking sector. For these students of history, the price of inaction is seemingly greater than the consequences of ill-conceived, hastily constructed measures. Many have conflated the early days of the Obama presidency with the aftermath of the October 27, 1929 stock market crash through the 1932 presidential election. One of the lesser appreciated, common aspects of the two eras is the relative explosion in mass media, and how FDR and Obama have co-opted it.

Internet and cable television now are as prevalent as radio and telephone then. Keynesian policies embodied in New Deal programs facilitated the spread of new technology, for the government created demand where the private sector could not. The alphabet soup of the then newly created federal agencies brought electric power, and with it radio, telephone, and telegraph, for the first time to rural areas in the Deep South, Appalachia and the West. Around the same time, FDR began periodic radio transmissions known as the Fireside Chats which acted as a palliative for an uneasy, uncertain population. 

President Obama's current media blitz harkens back to the sonorous, patrician tones crackling over the airwaves. Nearly everyone who so desires has access to television, and high speed internet is widely available. Appearances on the 'Tonight Show,' publicly revealing his picks in the NCAA men's basketball bracket, as well as a speaking tour of swing states all will serve to make the president seem like a guy the common man would want to have a beer with, and this follows in the vein of FDR. One of the signals the original FDR Fireside Chats sent was that he could descend from the ivory towers of old New York City wealth, the Columbia Brain Trust, and the White House to communicate the intentions and the design of his policies in layman's terms to a population which was still only two-thirds literate. 

Yet, through the first 100 days, this is where the similarities end. Despite an ambitious media campaign, Obama has clarified little because he has little to clarify. Though the hash left to the current administration by its predecessor is complex, the lack of a coherent plan is glaring. The first priority is shoring up the banking system through outright or partial nationalization. The corollary problem is what to do with the bad assets that continue to pollute the financial system. The Congress and president have taken very little meaningful, decisive action on these measures. What is most alarming is the absence of clear rules where the government has intervened. Few will argue against that statist intervention in the forms of central control of resources, planning of economies, and direction of output are good things. However, if the public is to accept that banking and finance underpins the whole economy, then, in times of distress, that sector must take on the characteristics of a 'public' good and be subject to certain atypical restrictions due to market failure and the pressing need for intervention. Recent spats over the payment of bonuses at AIG have erupted into a debate over the tyranny of the majority (pop quiz. define bill of attainder in 20 words or less).

 

Sensible policy areas such as renewable energy, health care, and entitlement reform keep cropping up, but sadly distract from a clear, definitive resolution on such a crucial, ongoing issue. In the meantime, stories of lesser financial rescues of the automobile and auto parts industries as well as loose guidelines over who is eligible for TARP relief also deflect attention from the biggest problem of all. Perhaps the worst part of this recession is that there is no exogenous factor or glimmer of hope on the horizon to stimulate growth such as the peace dividend that came at the end of the Cold War. Some economists dispute its effect, but making military technological infrastructure available for commercial use along with the commoditization of personal computing spawned the internet age. No new real business cycle seems likely in the near future. It is a tragedy devoid of a dea ex machina.

Unless President Obama can convey effectively what and how the government is doing to justify deficits equal to 17% of GDP, trillion dollar bond issues, and continual raising of the federal debt ceiling, his luster will fade. Moreover, even with a united government, a weakened executive will find it harder to push through sensible ideas without a few accomplishments to his credit. Having campaigned as the  candidate of change, the only visible change thus far has been from the gung-ho, singular style of his predecessor to a mincing absence of conviction due to overstretch. Such a judgment may be hasty. It will gladly be withdrawn if some substance accompanies the glitzy iconography. 

Got me there

"If a tree falls in the forest and no one is around to hear it does it make a sound? If a golfer makes a hole-in-one and no one is around to see it does it count? If you post a blog and no one reads it does it make a point?"

Pretty clever. Good heckle. Though your queries are likely rhetorical and lacking formal syntax, I will respond out of spite: No, not really.

However, technically, would someone had to have either sought out the blog specifically or searched for its particular genre in the first place? After finding it or stumbling upon it, would he then have to have read something in it to have commented? Yeah, probably.

Much obliged for the kind words, you spineless cunt.