Mass Appeal

Massachusetts is one of those states that opted for universal health care (signed into law by a Republican Governor, Mitt Romney, in 2006), and today, it is estimated that 97% of the State’s residents have some form of coverage. The thrust of the legislation is that citizens are required to have health insurance, and if they cannot afford it, the State subsidizes the tab depending on income. For employers that opt out of providing this benefit to workers, there is a “per capita” assessment, which is in turned used by the State to provide health benefits to those who cannot otherwise afford a plan. There are also open general pools of private insurance benefits, aggregated by the State, which individuals not covered through work can access.

The plan has, by and large, proven to be a success, raising the governmental cost on healthcare from $1 billion to $1.7 billion (the entire budget for Massachusetts’ State governmental budget is $27 billion). Rising medical costs, however, forced the State to reduce some benefits and raise cigarette taxes to generate extra revenue for the program. Federal contributions also help carry the load. Recent bumps along the way, such as the recession which caused a drop in the State’s tax base (which has impacted virtually every state in the union), have forced the State to adopt some drastic measures (like denying legal immigrants’ coverage) and turn even more toward addressing that seemingly never-ending spiral of medical costs.

There is much to be learned from Massachusetts, since this appears to be a model similar to what the Federal government is contemplating. The thresholds for a cut-off on subsidizing healthcare vary, however, between the Federal plan under consideration and the Massachusetts structure. For example, for a family of four, $66,000 is the limit for subsidies in the State, while the Federal plan currently targets $88,000 as the top limit.

But the good news actually is about “costs.” Federal budgetary projections tend to run wildly below what ultimately costs turn out to be; Americans are wary of such numbers and look at them with a jaundiced eye (maybe some health benefits could cure the jaundice!). However, the Massachusetts experience provides positive news; the cost of the program has pretty much stayed within the parameters of the initial projections.

As the plan was implemented, administrators had to tinker with the scope of benefits, the price structure and how to fund those portions of the program (like open admission to emergency rooms) that were not provided for at the inception of the policy. The early and current stages of Massachusetts’ healthcare provide the usual reimbursement of fees for service, but to control costs, that model may be abandoned in favor of a structure that does not reward prescribing more fees and services as a way to generate medical compensation.

The August 9^th New York Times: “A special commission has just recommended that the state try, within five years, to move its entire health care system away from reliance on fee-for-service medicine, in which doctors are paid more for each additional test or procedure they provide.

“In its place, the commission wants a system in which groups of doctors and hospitals would receive fixed sums to deliver whatever care a patient needed over the course of a year. The hope is that doctors would be motivated to deliver only the most appropriate care, not needless and excessively costly care, with safeguards to ensure that they do not skimp on quality.”

These experiments are valuable lessons that do not have to be “re-learned” as a Federal plan makes its way, past the loud protests at town hall meetings, to the floor of Congress. Undoubtedly, even after passage (if that occurs) of national healthcare legislation, adjustments and changes in overall direction must be expected. Will we someday look at all the brouhaha surrounding the current proposals before Congress with the same bored detachment we view social security or unemployment insurance benefits? Time will tell.

I’m Peter Dekom, and I thought you might want to know.

“Pointed in the Right Direction”

Picture if you will a large ship being sucked backwards towards a vortex astern, a whirling oceanic anomaly that no one knew was there, that no one figured could happen, but that one that is inhaling hapless vessels by the thousands. The ship is struggling to move forward, rudder amidships, pointing toward home. Are we in the Bermuda Triangle? A science fiction film? Or the U.S. economy? Is our ship in good shape because of the direction of her bow – homeward?

We lost more jobs in July, 247,000 according to the government, but our national unemployment rate went from 9.5% to 9.4%, an adjustment that has more to do with the ways statistics are measured than with the reality of job loss. Do I think all this shall pass? Yes, but on the government’s timeline. Do I think we are “pointed in the right direction,” as the President said on August 7^th? Perhaps.

Do I think that the ship is pulling away from danger? One of the dangers perhaps, but other oceanic anomalies are still out there. Big ones! We still have to figure out exactly what unemployed Americans will do for a living, what happens to our banking system that is anything but stable (the commercial real estate failure and destroyed home values continue to test the system), AIG is hardly safe from collapse, the impact an inflation-threatening massive deficit looms, we don’t even know if the new GM and Chrysler will survive, Social Security is slowly running out of money, and no one really knows what healthcare proposal is actually on the table.

The President tells us, “We’re losing jobs at less than half the rate we were when I took office.” Yes, Mister President, you did not cause this mess, and we understand that you didn’t even begin the solution. The collapse did not start on your watch, and TARP did come from the last guy. The solutions that followed are yours, however, and while we all need a cheerleader, Americans probably need to believe the numbers released by private standard-setting organizations and the U.S. government. I’ve blogged that horse more than once. Consumer confidence must be based on numbers ordinary Americans can believe.

Obama continued: “Now, as we begin to put an end to this recession, we have to consider what comes next, because we can’t afford to return to an economy based on inflated profits and maxed-out credit cards, an economy where we depend on dirty and outdated sources of energy, an economy where we’re burdened by soaring health care costs that serve on the special interests.” How do unemployed and underemployed people pay those credit cards? Is alternative energy where the new jobs are coming from? Is that enough? Come on! Where do all those folks whose subprime mortgage brokering services get work… or do they just go into a massive new prison (an infrastructure project!) that so many Americans would like to see them endure? Where is that business bank credit that is so desperately linked to small business jobs? What’s the plan? Exactly?

The August 7^th New York Times: “Mr. Obama said, ‘We won’t rest until every American that is looking for work can find a job.’ … In a coincidence that was probably not intended, the president was quoting his predecessor almost verbatim: In the summer of 2004, the Republican Policy Committee said: ‘Improving the quantity and quality of jobs remains a top priority for Republicans. In the words of President Bush, ‘We won’t rest until everybody who wants to work can find a job.’” We must not be resting much!

I’m Peter Dekom, and I would really like some answers.

Death Panel

Sara Palin has a lot of followers. The Associated Press (August 8^th) noted her first “post-gubernatorial” edict: “Palin called President Barack Obama's health plan ‘downright evil’ [on August 7^th] in her first online comments since leaving office, saying in a Facebook posting that he would create a ‘death panel’ that would deny care to the neediest Americans… ‘The America I know and love is not one in which my parents or my baby with Down Syndrome will have to stand in front of Obama's ‘death panel’ so his bureaucrats can decide, based on a subjective judgment of their ‘level of productivity in society,’ whether they are worthy of health care,’ the former Republican vice presidential candidate wrote.”

OK, the debate is on. The President did say that the biggest expense in our healthcare system was focused on extending the lives of the elderly, often at hideous cost (averaging $20K a day in the last year of life) with exceptionally unspectacular results and some pretty terribly painful treatments. So we should kill the old bastards, tell them they are out of luck on the care they want and kiss them off? Not exactly. OK, not even close.

Charles Lane writing in the August 8^th Washington Post: “Enter Section 1233 of the health-care bill drafted in the Democratic-led House, which would pay doctors to give Medicare patients end-of-life counseling every five years -- or sooner if the patient gets a terminal diagnosis…. On the far right, this is being portrayed as a plan to force everyone over 65 to sign his or her own death warrant. That's rubbish. Federal law already bars Medicare from paying for services ‘the purpose of which is to cause, or assist in causing,’ suicide, euthanasia or mercy killing. Nothing in Section 1233 would change that.”

The counseling that is envisioned deals with choice. Do you want extreme measures to be applied to you, when you are unable to think or speak coherently for yourself, to extend your life? Even if such procedures are painful, uncomfortable or even akin to torture? I’ve noted my own familiarity with these issues, and both my parents wanted to die rather than face the world in which they were living at the end of their lives. My mother, who died of Alzheimer’s, knew her mind was crumbling long before her death. She did not want to live without her memories or an ability to talk to those around her about who she was.

My father, frail, weak and in pain, begged me to end his life. His mind was operating at a delusional and primitive level, even though during most of his life, he could only be described as brilliant. He died in abject desolation, unable to dress himself, speak coherently or walk without wincing and shuffling. He died “of natural causes.” He was not mentally capable of making a rational decision about his own life, so doctors just “kept him alive.”

Picture yourself, barely conscious, drugged out, with an IV drip and an oxygen mask over your face attached to a constantly beeping EKG machine monitoring your existence. Feel the pain creeping in between the drug treatments. Imagine confusion and the inability to speak to those around you; the words just don’t come out. Could a living will have given you a more comfortable choice? Could counseling have given you a clearer decision?

Perhaps, we simply need to be more humane – a kind of pragmatic approach to those final months of life. If there is a “death panel,” there is no way that Americans could ever live with such a system. But that’s not on the table (and it never will be); it’s just a scare tactic paid for by those with huge economic stakes in the profitability inherent in an industry that consumes 16% of the U.S. gross domestic product: healthcare. People do not want to be separated from their money, and if it takes scare tactics to do that, well… it wouldn’t be the first time.

That said, the healthcare proposal that may wind up before Congress has yet to be ironed out. Blue dog Democrats are bucking some of the universal benefits that were in the original concept; virtually all Republicans on the Hill oppose the notion of national healthcare of any kind. Solid debate is necessary. Not death threats against those who favor the plan or screaming epithets drowning out genuine exchanges of points of view. Scare tactics hide the truth; the shape and scope of healthcare reform needs ideas. The plan has yet to take a “final form,” but making a decision based on fabrications, left or right, isn’t what this process should be all about. Let’s deal with truth. 46 million Americans are not covered by any form of health insurance, and the cost of existing healthcare plans is rising still at a multiple of the general cost of living; soon even fewer Americans will have coverage.

I’m Peter Dekom, and I approve this message.

No Siree, No Grocery!

Another couple of hundred thousand jobs gone in July (9.4% unemployment for the nation), according to the Department of Labor, but the jobless rate in Michigan is over 16%... and yeah, that comes with my normal admonition that these numbers address only non-farm labor and do not include folks whose unemployment benefits have completely run out (and there are lot of them now), and people who want full time jobs but can either only find occasional or part-time work or don’t know where to look anymore. You know Michigan reaches well above 20% when that correction is included.

Getting right down to it, we know that Detroit has been losing population for quite a while, but the demise of big General Motors and big-enough Chrysler suggests that “Motor City” might just have to be content with being known as “Hockey Town” – if there are enough folks are left to buy tickets. You see Detroit has dropped from an all-time high population of 1.8+ million to about half that number. It’s fallen in size from the fourth largest US city (in the 1950s) to eleventh today. And while there are rumors of Chinese buyers scooping up masses of vacant residential and factory real estate, I’m not sure they are big hockey fans.

My Webmaster, who was the gent who spotted a great deal for a house in Detroit (under $10K for a three bedroom, two bath house in seemingly decent condition) until a view from Google Earth showed that the rest of the neighborhood had been bulldozed into rubble, pointed out another ramification of the crumbling neighborhoods, abandoned factories, de-population and economic demise of this once-great American city: “In this recession-racked town, the lack of food is a serious problem. It's a theme that comes up again and again in conversations in Detroit. There isn't a single major chain supermarket in the city, forcing residents to buy food from corner stores. Often less healthy and more expensive food.” August 6^th CNN.com.

Middle class workers have become increasingly formerly middle class workers. From shopper to food line aficionado. They’re not good at the welfare thang. They don’t know their rights, struggle to qualify for unemployment benefits (which eventually run out) and find the adjustment from comfort to poverty completely, mind-numbingly horrible. They didn’t grow up this way; they don’t know how to make the system work. There’s real hunger in Hockey Town. It’s a real struggle for local charities and local, cash-strapped, governmental agencies to keep up. Resources have worn thin, but neighbors are helping neighbors as best they can.

There’s lots of vacant land in the area, and “urban farming” has seen resurgence out of necessity. Volunteerism at local food pantries has also increased significantly. There’s a lot of humanity here. But the pictures and stories from decimated urban Detroit seem more like description of some third world hopeless country than my vision of the United States. I am deeply saddened. The reports that we’re getting better because we are getting worse more slowly just don’t cut it in my eyes.

I’m Peter Dekom, and I approve this message.

Stressed and Depressed

I’ve railed that the government and Wall Street seem more obsessed that the “numbers look right” than if the economy is getting better. People tell you that the rate of job loss is declining in the U.S. making it seem like continuing and rising unemployment is somehow good news. Fact is there are fewer employed Americans now than at any time in decades! Home prices have stopped falling in some markets, still plunging in others, but home prices are in the cellar everywhere, it seems. Yet the “stall in the fall” is still viewed as good news. That like saying a terminal patient isn’t dying quite as fast as anticipated. Getting worse more slowly doesn’t seem exactly like getting better to me.

I’ve screamed that most of the rise in Wall Street market numbers is attributable to economies generated by cost-cutting, not revenue generation. Lay-offs and unemployment can be “great” when you are looking to reduce operating costs of a single company, but all those former employees (and those with reduced pay) aren’t new consumers; they aren’t going to spend more money and boost corporate revenues. Still the market seems not to care. It should.

I’ve repeatedly reminded readers that 70% of American economic activity is generated by consumer spending. And consumers are definitely not spending, so if companies think that they can grow and have good numbers by cutting costs but without customers, I’m wondering what planet they must be on. Where there have been retail numbers that show activities, a little “look behind the curtain” suggests that all is not that rosy. You may see more car sales, but what role does the government’s “cash for clunkers” program have in all that? When stores report increases in sales, how much of that is dumping inventory below cost (some stores seem to be in perpetual “sale” mode) to generate operating capital to stay afloat?

July retail sales were grim. The August 6^th Money on AOL: “‘The consumer is stressed and depressed,’ said Ken Perkins, president of retail consulting firm Retail Metrics. ‘Back-to-school shopping season is going to be very late.’ He added that jobs are ‘everything right now,’ and if the pace of job losses continues to slow, consumers will start to feel better… A number of special factors also depressed July's sales results. Lean inventories left fewer clearance options for bargain hunters, as stores wanted to protect themselves from getting stuck with piles of leftovers. The shift of the sales-tax holidays from July to August in most of the 14 states that have them because of a late Labor Day weekend also stole momentum from July.”

We’ve had eleven straight months of same-store-sales declines. Yet the government is telling us how we are turning the corner. What corner? Is it a corner that leads to another corner? If folks’ home values remain trashed, job loss rising and retail sales are like a stone falling over a financial cliff, how exactly are we turning a corner? “Show me the money!” Sorry, since I’m not a managing director at Goldman Sachs, you are going to have to explain exactly why this economy should look good to me… or even a bit better than it was. Things are actually worse! Naked emperors abound!

I’m Peter Dekom, and I really don’t see how we are getting better!

Hey, Honey, Wanna Go Watch the Submarine Races?

During the Cold War, that tense stand-off between the Soviet Union and the United States that ended with the fall of communism almost two decades ago, produced a cat-and-mouse display of brinksmanship. We’d track their boats and planes; they’d track ours. We sent spy planes over their lands; they’d send “fishing trawlers” with sophisticated radar and tracking systems our way. But the most fun were there stealthy submarines that patrolled deep under water, the gigantic floating missile platforms, the Ohio Class for the US and the mega-huge Typhoon Class for the Soviets. Fast attack “anti-missile” subs also patrolled the waters off the coast of each nation, and more than one Hollywood epic flowed out of that scenario (“The Hunt for Red October” being one of the more famous efforts).

The 1962 Cuban Missile Crisis was the epitome of brinksmanship; the Soviets deployed land-based intercontinental ballistic missile in Cuba, clearly aimed at the United States. President Jack Kennedy almost took the U.S. to war over that one, but the Russians backed down. The “red phone” – a direct hotline from the White House to the Kremlin – was installed to foster communication and take down the threat of a nuclear holocaust. It’s still there.

Most of the U.S. population missed that one, and there are more than a few who never lived through (or were too young to experience) the fear and tension of the Cold War. For those old enough to remember “bomb shelters” and “nuclear attack drills” in school, perhaps the memories still linger. But Russian subs have not patrolled near the U.S. border for about a decade and a half, and most of us don’t even think about a re-escalation of tensions between the U.S. and Russia. After all, President’s Obama and Russian President Medvedev are buddies and talk all the time.

Yet in recent times, there have been some pretty sore spots in U.S./Russian relations. Russian strongman, Vladimir Putin (“Prime Minister”), is concerned, almost obsessed with Russia’s re-emergence as a powerful superpower and with a concomitant reduction in America’s perceived power. The military conflict between Russia and Georgia, the potential of a U.S. missile installation in Eastern Europe (even if it’s target was ostensibly in the Middle East), the use of the dollar as the denomination for oil transactions, protests over NATO, Russia’s withdrawal from the World Trade Organization talks, etc. are all signs of this growing need of Russia to be recognized, and as oil price reestablish Russia’s economic power, we are seeing signs that she wants to be recognized across the board. That she has had some spectacular military failures – like the botched launch of the Bulava missile from a Soviet sub in the Arctic in June – only seems to accelerate her quest for recognition.

Which brings up a change in “the way Russia acts” that can drive political “readers of tea leaves” bonkers. For the first time in a decade and a half, Russian Akula Class subs (the smaller, fast attack kind – not the big nuclear missile platforms of the Typhoon Class) – two of them – are back off our coast. The August 5^th New York Times: “According to Defense Department officials, one of the Russian submarines remained in international waters on Tuesday about 200 miles off the coast of the United States. The location of the second remained unclear. One senior official said the second submarine traveled south in recent days toward Cuba, while another senior official with access to reports on the surveillance mission said it had sailed away in a northerly direction.”

With the American deficit rising and the U.S. economy anything but strong, American prestige is also suffering as well. We are vulnerable. As the price of oil goes up, given her vast resources and petroleum reserves, Russia gains in economic power. Putin, whether through ego or some more sinister plot, appears willing to recreate that kind of brinksmanship we may have thought long gone. Time to keep our eyes open.

I’m Peter Dekom, and I approve this message.

Account Dracula!

The Financial Accounting Standards Board is the other “white meat.” It a private non-profit of green-shaders – accountants who set the standards for accountants in the U.S. (the international counterpart is the International Accounting Standards Board). I can feel your chins heading slowly for your chest, reaching for the browser, looking for something more bearable to read. Well hang on, because let’s face it, big public companies don’t hire accountants to make them look bad in public, even if they stink like a hot festering wound in the tropics! Ewwww!

So our government, and private standards-setting boards like FASB, are supposed to keep “truth in the equation” – to make the numbers real. Yeah, right. A government that really wants the consumer confidence level to rise and for people to believe we’re just peachy, beginning a recovery. So if we shade a little here... and twist a little there, how bad can it be? What’s the price on “hope” these days?

FASB has implemented a lot of new rules in light of the crunched economy. “One change softened the impact of when short-term investments such as securities lose value. Banks had been required to set aside money from earnings to cover such declines. Under the new rules, banks are not required to set aside money against the portion of a loss judged to be temporary. [like define “temporary” huh?] Companies were allowed to adopt the rule in the first quarter and required to adopt it in the second quarter. A study … found that 45 financial firms took advantage of the new rules in the first quarter to report higher earnings. [The study] estimated that the total benefit exceeded $3 billion.” The August 4^th Washington Post.

English please! OK, it means that the same banks with the same crappy investments can account in a way that makes them look more profitable, when in fact nothing has changed. Thus, you might look at that company, think it’s getting healthier, invest in the bank, and get hosed by the folly of believing the numbers you were reading! Hey, but it lets the Dept. of the Treasury use this financial information to convince us that the economy is getting better! So banks really like this rule.

FASB is thinking that applying a fair market evaluation of longer term assets, forcing banks to accept and declare a big write-down of toxic assets they’ve kept on their books at artificially high paper valuations. This would make the banks and the economy look bad. So surprise, banks with a little help from the government are resisting this change. “[B]anks could be required to set aside money from capital, or their reserve against unexpected losses, to cover the predicted losses. That could leave many banks with less capital than regulators require, forcing them to raise money.” The Post. Banks don’t like that much honesty!

And you thought Fairy Tales were Grimm? “The industry is preparing to fight the rule change aggressively. Many bankers blame existing mark-to-market accounting rules for deepening the financial crisis, by creating a cycle in which desperation sales dragged down market prices, forcing additional fire sales and further declines in asset prices… Banks already must acknowledge losses if a borrower stops making payments. But opponents of mark-to-market accounting question why a bank should be required to report the fluctuating value of a loan it intends to keep if the checks keep coming every month.” The Post. It’s like owing $4 billion dollars, paying the interest, but knowing when the loan eventually comes due, you can’t repay it or restructure that debt. Sooner or later, that debt will kill the debtor. You can lie and pretend you’re ok, hope you can pay the interest when due, but you know… you know… you are dead with the due date drops doo doo on you hoo!

Where are the feds in all this? Well, as FASB is about to amend a rule that allows banks to park bad assets in “other companies” (special purpose companies referred to in the biz as “Q’s”) to avoid showing them on their financial reports (the so-call “off-balance-sheet” rule), the government is squawking. The August 5^th the Deal.com: “The change could affect trillions of dollars of off-balance-sheet assets when they take effect in 2010. .. Federal Deposit Insurance Corp Chairman Sheila Bair told the Senate Banking Committee the notion that off-balance-sheet rules must be implemented while the economy is still restoring itself following last fall’s financial panic ‘gives me some heartburn’ and could hamper recovery of the securitization market.”

One of the reasons we lack “consumer confidence” is because we get lied to through numbers so much. We just don’t believe what we’re told. The entire financial meltdown taught us that. Politician’s reassurances notwithstanding, if I am getting paid less, or have lost my job, or my home value is less than the cash in my pocket, stop lying to me!

I’m Peter Dekom, and I approve this message.

Internal Medicine

The U.S. has free choice of private medical plans, but no generally available governmental alternative unless you fall into one of several limited categories (Medicare for the elderly, Medicaid for the poor, the VA for our veterans, some state programs, mostly focused on children, but some programs are more encompassing). We spend about $2.3 trillion a year on healthcare, 31% of which relates to administrative costs, and we have about 46 million human beings without health insurance. Healthcare costs have been given a substantial degree of credit for the demise of General Motors and Chrysler as well as dozens of other businesses; smaller employers are dumping the healthcare plans by the thousands as unaffordable. Medical costs bankrupt a million Americans a year. So everybody here wants universal healthcare, right?

I’m listening to radio programs, reading news reports, stating with credible voices that the elderly will be cut off from the benefits as they grow older, being allowed to die from whatever ails them… after all, President Obama told everyone that “end-of-life” healthcare is hugely expensive with limited comfort or medical benefit to the recipient. Costing about $20,000 a week, the question was raised if the nation could continue to support such formidable costs with limited results… costs that account for the bulk of all medical costs. Rumors of a future with hospice consulting in lieu of real medical treatment terrified large numbers of our older citizens. As you get older, your empathy for illness rises exponentially – you feel the ravages of time.

The elderly want to know they are not being put out to pasture, set out on an ice flow to drift into a timed end of their days. The anti-healthcare-reform groups have seized on this issue, but how much of this fear is justified? There is the fact that a vast number of elderly would opt for “comfort care,” which is focused on the quality of life, not merely extension by all means possible; is this all the administration is saying? Americans also want to keep their existing private plans, even with healthcare premiums doubling every ten years. But we want manageable costs, healthcare at all levels of earning (or non-earning power) and as much choice as possible.

In Canada, with the national government acting as the single insurer, all residents have free access to hospital and physician care. No deductibles. No co-pays. Provincial programs supplemental coverage with shared costs (with the patient) for pharmaceuticals, long-term care, in-home care and medical equipment required at home. Canadians see doctors more and use prescription drugs more than Americans, on average.

Canadian physician, Dr. Michael Rachlis, writing for the Los Angeles Times on August 3^rd notes: “On costs, Canada spends 10% of its economy on healthcare; the U.S. spends 16%. The extra 6% of GDP amounts to more than $800 billion per year. The spending gap between the two nations is almost entirely because of higher overhead. Canadians don't need thousands of actuaries to set premiums or thousands of lawyers to deny care. Even the U.S. Medicare program has 80% to 90% lower administrative costs than private Medicare Advantage policies. And providers and suppliers can’t charge as much when they have to deal with a single payer [insurer].”

Rachlis notes that all is not perfect, but it works pretty well all things considered: “The Canadian system does have its problems, and these also provide important lessons. Notwithstanding a few well-publicized and misleading cases, Canadians needing urgent care get immediate treatment. But we do wait too long for much elective care, including appointments with family doctors and specialists and selected surgical procedures. We also do a poor job managing chronic disease.

“However, according to the New York-based Commonwealth Fund, both the American and the Canadian systems fare badly in these areas. In fact, an April U.S. Government Accountability Office report noted that U.S. emergency room wait times have increased, and patients who should be seen immediately are now waiting an average of 28 minutes. The GAO has also raised concerns about two- to four-month waiting times for mammograms.”

Republicans have vowed to do everything in their power to stop the U.S. national healthcare movement – taking down healthcare is, to many such politicos, the same as taking down Obama. Ranks are closing. Filibusters are in the planning stages. Democrats are also divided... Blue Dogs (fiscally conservative) versus liberals. The healthcare coalitions are unraveling. Will they be put together again?

Industry lobbying groups are whittling away at the government’s “intrusion” into private healthcare. As President Obama gathered various “industry segments” to focus on “cost reductions” in anticipation of a new national program, apparently previously unpublicized government promises were made. The August 5^th New York Times: “Pressed by industry lobbyists, White House officials on [August 5^th] assured drug makers that the administration stood by a behind-the-scenes deal to block any Congressional effort to extract cost savings from them beyond an agreed-upon $80 billion… [T] the industry successfully demanded that the White House explicitly acknowledge for the first time that it had committed to protect drug makers from bearing further costs in the overhaul. The Obama administration had never spelled out the details of the agreement.”

What other secret agreements were made? Will a plan be adopted? Will it cover everyone? Will the “protests” that were being organized by plan opponents derail national healthcare and perhaps even the President himself? What exactly do you want to see happen?

I’m Peter Dekom, and what do you want?

High Frequency, Low Fidelity

A few years ago, my wife and I traveled to my college reunion, and we attended one of several terrific classes provided by the university for gathered alumni. One such class, given by the Yale School of Management, presented studies of the psychological factors that skewed the stock market, particularly the practices of amateur day traders, away from a clear “economic” reaction to market conditions and company values. YSM had gotten their behavioral tracking numbers down so well that their mathematical formulae began to provide greater predictive information in company values and market direction than the projections of the most sophisticated analysts at places like Morgan Stanley and Goldman Sachs.

So when the investment houses began to adopt the YSM system as one of their market measurements, and as psychological variables began to guide the pricing structures as set by the institutional buyers, as everybody started doing it, oddly the ubiquitous use of psychological factors eventually rendered them vastly less useful. Since the institutions, the champions of rational value-analysis, were now deploying the irrational elements of human behavior in their market activities, this mass flood of new behavioral data began to mirror the rational market predictions as well… and to a measurable extent, the behavioral data effectively neutralized themselves.

In short, the stock market will give an edge to you if you have some specialized insights, but when everybody has the same access to the same insights, that which was special when only a few used it no longer provides an analysis edge in predictive value. And that is the problem with the U.S. capital markets today… and it has been for several years. Instead of investing in good companies, with good managers and great ideas, our “best and brightest” (in the big financial institutions) are in the markets for a quick buck (and a mega-bonuses) by second-guessing market trends and making quick trades in and out of the market on an alarmingly short term strategy.

This is precisely how you can explain a soaring stock market amid an economy, driven 70% of consumer activity, where consumers have effectively stopped buying all but the essentials. It’s not real or sustainable until the underlying fundamentals correct themselves, factors long lacking in this managed depression. But what is the new “sinister force” du jure? The use of supercomputers, programmed with micro-second data analysis software that spots trends, identifies momentary gaps and finds the best stocks to reflect those flashes of opportunity, all in literally nano-seconds – and the same computer will also implement the buy or sell recommendation without the intervention of a human intermediary.

The advantage accelerates when you are a big institution with a computer right next to the exchange (time matters, even tiny fractions of a second!) and are permitted a further fraction of a second access to electronic information before anyone else as a reward by that exchange for volume trading. But increasingly, the top financial players are each creating and deploying such mathematically sophisticated software used in such supercomputers to trade on their behalf. Analysts’ inputted data, constantly updated, melds with the instantaneous analytical capacity of these systems to produce very quick highs and often quicker lows in the overall market. This is one of the major reasons companies like Goldman Sachs and JP Morgan have made so much money in a very down market and are now paying out mega-bonuses to their top financial employees.

The July 31^st Washington Post: “With high-frequency trading, high-speed computers, programmed with proprietary software based on complex algorithms, spew out a constant stream of orders to buy and sell millions of shares of stocks and other securities, hoping to make a penny on each trade. Although high-frequency traders employ any number of different strategies, what's common to virtually all of them is that shares are usually held for only minutes or even seconds.

“Because it thrives on volatility, high-frequency trading has generated hefty profits over the past two years for hedge funds and proprietary trading desks, and hefty bonuses for the quants who oversee it. It has also generated lots of fees for the exchanges and brokers who process the trades and are now locked in a high-tech arms race to see who can install the biggest, fastest computers to execute them. This has even generated a caper worthy of a David Ignatius spy novel: federal officials recently charged a former Goldman Sachs executive with stealing the firm's closely guarded high-frequency trading software on his way out the door.”

This is also a practice that does not serve this country at all – it is based on high speed market manipulation through systems not available to most traders and is further distorted by favorable access accorded these institutions which cannot be replicated by smaller institutions or individuals. As the systems become more widespread, their value will probably decline (note my example above), but the damage that they are capable of inflicting in the meantime may be huge. Mass use of such software can most certainly result in a market spiral that can collapse the exchange at a speed unheard of in the past. Wild gyrations, up and down, become the uncontrolled excess reflecting a battle of the supercomputers.

What America needs is jobs, business that work, values that we can produce… not the mere ability to generate financial machinations – profiting wildly in the process – that do not add an ounce of real value to an economy in dire need of tangible worth. This preoccupation with the financial system at the expense of genuine business value is what created this economic meltdown in the first place. If there is an arena that merits regulation, I cannot think of a more obvious place. The injustice of the manipulation of the system by the rich and powerful few at the expense the rest of the nation is simply intolerable.

I’m Peter Dekom, and I approve this message.

Stirring the Calderón

So how would you feel if the government decided to use the army – not being able to trust the local police – to fight a declared war on drug gangs? What if it provoked open warfare on the streets, with gunfire so common that people were loathe to walk or drive city streets? If over 12,000 were killed as part of the conflict and scores of others seriously injured? Civilian casualties caught in the crossfire, kidnappings, businesses closing, tourists staying away in droves, a nation spiraling out of control? And what if suppressing those drug gangs were of profoundly more benefit to another neighboring country, not your own? That’s a pretty good description of the fight between the Mexican government and the large drug cartels operating within her borders that battle to maintain firm control over the drug routes to the United States.

President Felipe Calderón declared that war just two-and-half years ago shortly after his election. Authorities have arrested 76,765 suspected drug traffickers; 187 cartel members have been extradited to the United States. But the toll on daily life for average Mexican citizens has changed the general mood from supportive of this government campaign to increasing resentment that Mexicans must endure bloodshed and chaos to deal with a problem that appears to be nothing more than solving a U.S. problem – the demand for drugs from American buyers, the motivator for the drug war in Mexico, is where the solution lies, many believe, and not to control the supply of drugs from within Mexico.

The cartels, well financed and pervasive, have the money to pay for “soldiers” in a world where jobs are few and poverty rampant. While the government hopes to move the battle from the military to local, better-trained police, the seven major cartels have the money and reach to “buy” local officials and neutralize these efforts. Simply, the people want an end to the violence that has become woven into their daily lives. Calderón’s policies, which are losing support by the day, may ultimately lead to the election of a new regime that is no longer willing to allow Mexico to be the battlefield for what is increasing viewed as a huge U.S. benefit with insufficient value to Mexico.

The July 28^th Washington Post notes that the cartels are growing in strength across Central America as well. But other than capitulate to the cartels, what are the alternatives to Mexico? The Post interviewed Mexico’s Interior Minister Fernando Gómez Mont: “‘No one has told us what alternative we have,’ [said the Minister], gently slapping his palm on a table during an interview. ‘We are committed to enduring this wave of violence. We are strengthening our ability to protect the innocent victims of this process, which is the most important thing. We will not look the other way… We have to do this while we are strong enough to do it,’ he said. ‘We know we are right. Do I have to accept corruption as a way of stabilizing our society? No. I have to act.’”

But the cartels play Robin Hood on occasion, winning the hearts and minds of the locals, while the government responds with hard line attacks. Seemingly a war without end, local support is eroding faster in some areas. The Post: “Dan Lund, president of the MUND Group polling organization, said public support for Calderón's strategy appears to be weakest in the places where the federal government needs it most. ‘In a series of national surveys, polls consistently have found a reasonable but cautious level of support for using the military in the front lines against the cartels,’ he said. ‘But in all the states where the military is actually deployed, the support goes down, sometimes dramatically.’”

The cartels also have stepped up the level of violence to intimidate the people… and the authorities. The Post: “In Mexico, neither high-profile arrests nor mass troop deployments have stopped the cartels from unleashing spectacular acts of violence. [Recently], the cartel called La Familia launched three days of coordinated attacks in eight cities in the western state of Michoacan. Responding to the arrest of one its leaders, La Familia abducted, tortured and killed a dozen federal agents; their corpses were found piled up beside a highway… Calderón appears to be increasingly isolated in Mexico, weakened by his party's defeat in recent mid-term elections and by the relentless carnage. The cover of [of a recent edition of the] influential news magazine Proceso … featured a photo of the 12 federal agents, their bound and mutilated corpses in a pile, beneath the headline: ‘Calderón's War.’”

I’m Peter Dekom, and I thought you should know.

The Beverly Hills of Military Bases?

What strategic address is worth the United States’ ignoring human rights abuses that are widely known to Western journalists? It’s inconvenient to point out obvious shortcomings, from wholesale corruption to beatings, detentions, political prosecutions and more than a few mysterious killings when you are trying to get a nice, strategically-close-to-Afghanistan Air Force base, in a Central Asian location. Okay, hey, it’s not as bad as some of the practices in neighboring nations, but… well… er … it’s embarrassing for us to ignore. Or is it?

The July 23^rd NY Times: “‘You know what this is for,’ Emilbek Kaptagaev recalled being told by the police officers who snatched him off the street. No other words, just blows to the head, then all went black. Mr. Kaptagaev, an opponent of Kyrgyzstan’s president, who is a vital American ally in the war in nearby Afghanistan, was found later in a field with a concussion, broken ribs and a face swollen into a mosaic of bruises…. Many opposition politicians and independent journalists have been arrested, prosecuted, attacked and even killed over the last year as the Kyrgyz president, Kurmanbek Bakiyev, has consolidated control…”

In June, President Obama sent Bakiyev a letter congratulating his Kyrgyz counterpart for the latter’s tough stand on terrorism and his support for the war in Afghanistan. The American military let out a visible sigh of relief when Bakiyev approved the extension of the lease on a huge U.S. Air Force base just outside the capital city of Bishkek in Manas… albeit at a significantly increased rental payment. It was $17.4 million; now it will rise to $60 million a year (plus $100 million in other “aid.” Who said real estate prices are falling?! Human rights abuses? Hey, we need the base, and so, it is perfectly acceptable for a U.S. president – who ran for office on a campaign which at least in part pressed that America needed to retake the moral high ground shattered by a previous administration that openly support what many described as torture – to set principles aside for a great landing strip.

We just gotta have it! The July 25^th NY Times: “The United States believes that it must have a sizable military base in Central Asia to support the NATO mission in Afghanistan, especially now that supply routes through Pakistan are perilous. The American installation… is crowded with C-17 cargo planes and KC-135 tanker planes that readily reach the Afghan skies for mid-air refueling of fighters. As many as 30,000 military personnel cycle through the base monthly.”

Since Kyrgyzstan is a nation carved out of the former Soviet Union, needless to say that Russia, which still believes that these CIS republics are still her “sphere of influence,” was profoundly upset when this Air Force base lease extension was approved. Well, torn actually, since Afghani Muslim extremists threaten Russia as well, and Obama and Russian President Dmitri Medvedev seem to have worked out a compromise, but still, it is a bit galling to have the American military so close to home. So what’s a Russian leader to do when demon America builds a base in her own backyard? Why not build add a nice new military base with nice long runways? So what if military real estate in getting rather pricey in the new, hot, chi chi Kyrgyzstan?

Russia’s got oil and the money that flows from it! Russian strongman, Prime Minister Vladimir Putin, not quite as enamored of President Obama as is Medvedev, sent two high-ranking deputies to Bishkek to discuss securing another Russian base. They’ll probably succeed. The Times: “‘It is a symbolic action — symbolic of Russia’s presence, symbolic of its greatness, symbolic of its getting up off its knees,’ said Sergei A. Panarin, a prominent Central Asia specialist in Moscow. ‘It’s nostalgia for an empire.’”

As China battles Muslim Uighurs in its western Xinjiang province, which borders Central Asia, might they be the next supplicants for military land? Real estate prices seem to have nowhere to go but up! Sound familiar?

I’m Peter Dekom, and I approve this message.

Basque Kit Case

Euskadi Ta Askatasuna or ETA (Basque Homeland and Freedom) was founded in 1959, and by the time Spain’s Generalissimo Francisco Franco’s regime was replaced by an interim government under Prince Juan Carlos in 1975 and then by a democracy in 1978, this Marxist-Leninist organization had escalated into a paramilitary terrorist organization dead set on a creating a separate Basque nation, carved out of that area of northern Spain and part of bordering France where roughly 3 million Basques live. About one third of this population base actually speaks Basque (the last remaining pre-Indo-European tongue in Western Europe), a language very different from French or Spanish.

Since 1968, ETA has mounted an aggressive, violent and deadly campaign of terror, unleashing car bombs and other terrorist attacks across Spain and France, much focused on Spanish police forces in the Basque region. An estimated 825 people have died in this carnage, and over 700 Basque separatists are currently incarcerated in French and Spanish prisons. With each major arrest, the respective French or Spanish government will issue a report that the ETA threat has now been crushed. Until the next explosion. What is strange is how little we as Americans know about this long-established separatist movement in the middle of what we perceive to be a stable Europe.

With narco-terrorism in Colombia and Mexico, state-sponsored terrorism from countries like Iran, al Qaeda and Hezbollah blowing stuff up and seeming terrorist states like North Korea, nationalist/separatist movements – such as the Tamil separatist revolt in Sri Lanka (pretty heavily crushed) and the ETA movement in France and Spain – seem pretty small potatoes. Marx-Lenist separatist movements – including the old Baader-Meinhoff or the Red Army leftist movements of the 1960s and 70s – are so passé; the IRA/Sinn Féin battles in Northern Ireland with the British have long since departed the headlines, diffused by the 1998 Good Friday Agreement. We just don’t see these separatist movements as mainstream, headline-grabbing stories anymore.

9/11 changed our focus, but for people living or visiting the colorful Basque region of Europe, the potential for disaster is always just around the corner. There have been nine attacks so far this year, and while there are often anonymous phone calls warning civilians of impending blasts, the ETA isn’t always so generous. The latest blasts include one (no warning phone call), which blew the face off a 14 story police residential facility in the local capital of Burgos on July 29, that didn’t kill anyone, but it injured more than 60 people (one third of the residents were the children of the Spanish officers), damaged surrounding buildings and left a water-filled crater as a reminder of the power of the explosion. The car bomb blew the van carrying the explosive mix about 230 feet away from its parked spot.

The other bombing on Spanish soil, on July 30^th, killed two police officers and is also attributed to the ETA; this attack occurred on the tourist-friendly Mediterranean island of Mallorca, far from Basque territory. I’m sure when the relevant arrests are finally made, the authorities will repeat how they have once again cut the head off the ETA monster.

The story of separatist movements is literally “history.” America was born of “freedom fighters,” but I suspect that back in 1776 the British troops, who thought it cowardly for soldiers to hide behind barriers to fire their weapons, called the colonial fighters “terrorists.” The Stern Gang and the Irgun fought their way against British forces using similar “terrorist” techniques until the state of Israel was born in 1948, and you know how German occupying forces felt about partisan resistance during World War II if you have seen an old movie or two.

The fact that a grassroots strategy of sabotage and random attacks has worked in the past – although the victors always reclassify their status as “freedom fighters” – suggests that this is an inexorable part of the human condition. Even small minorities, with little real followings, believe that with persistence and the passage of time, somehow, their blowing up innocents (collateral damage in the cause of freedom in their eyes) will achieve the blessed goal of “independence” – well “independence” on terms that conform to the underlying philosophy of the successful militant group in power.

Whether motivated by passionate and militant religious beliefs or a blinding commitment to a nationalist, ethnic or political ethos, these “small pockets of discontent” will shape our history as militant factions try, often unsuccessfully, to carve out their vision in the flesh of those around them, a reality of particular import when political borders are drawn to unite people of fundamentally different belief systems. Like the Kurds, Shiites and Sunnis in the Iraq we will soon leave behind.

I’m Peter Dekom, and I approve this message.

A Medical “Fee-for-All”?

If you’ve ever been hospitalized (other than at a government or HMO facility) and examined your invoice – scary if you were not insured – you can actually see tangible evidence of why U.S. medical costs are the highest on earth. Every service, every drug, every procedure, every test, every piece of special equipment, every doctor’s service (often billed separately, by the way)… well, they are separate line items on the charge slip.

If the hospital/doctors happens to be on your insurance company’s “preferred provider” list (or you are a good negotiator) or if you are covered by government program like Medicare, there is a schedule (a computer program) that sets the rates for every service provided, which completely ignores the hospital’s or doctor’s public rates. And that’s the core of the issue: if insurance companies and government plans pay “per procedure,” and that’s the only way they pay, guess what that policy produces?

Those doctors that pulled up to the hospital in their Mercedes sports cars (a small minority these days) probably charge much higher rates (why? Because they can, based on the quality of their service), but for most doctors, to make more money, they really have to work harder and… er… thus perform more procedures. Doctors are rewarded by volume if not by rate. And over-testing and over-treatment – particularly in the high-tech urban medical centers, discussed in earlier blogs citing the Dartmouth studies – are the American way. Doctors struggle with very high malpractice insurance rates, “managed care” limits imposed by insurance companies, and piles and piles of debt incurred in medical school, which high costs mandate higher tuition. Catch-22.

The law of supply and demand will pretty much establish human behavior. If doctors and hospitals are rewarded (paid more) for more tests and procedures, they are more likely to order more tests and procedures. If they are paid the same, regardless of the number of tests and procedures, then their behavior would undoubtedly change. Pay a good doctor a salary, promote for results in patient recovery and treatment (and not in the number of procedures ordered), and you get behavior that reflects that mandate. Pay a doctor according to the number of patients that can be treated in a day, and watch doctors “treat” more patients without regard to quality.

Look at the behavior in practice groups where physicians create their own testing facilities (or own their own hospitals). Since money is formulaically applied based on a computer program, if a doctor orders a test, the test will generate a fixed payment automatically to the testing facility. More tests, more payments. And if the doctor owns the testing facility too?

Try this example cited in the July 31^st Washington Post: “In August 2005, doctors at Urological Associates, a medical practice on the Iowa-Illinois border, ordered nine CT scans for patients covered by Wellmark Blue Cross and Blue Shield insurance. In September that year, they ordered eight. But then the numbers rose steeply. The urologists ordered 35 scans in October, 41 in November and 55 in December. Within seven months, they were ordering scans at a rate that had climbed more than 700 percent… The increase came in the months after the urologists bought their own CT scanner, according to documents obtained by The Washington Post. Instead of referring patients to radiologists, the doctors started conducting their own imaging -- and drawing insurance reimbursements for each of those patients.” It’s human nature… and a badly designed system.

Superstar specialists will always be able to set a premium, no matter what government or insurance program may apply – if you want them, you will have to reach deep into your pockets (rich folks don’t care) to get “the best.” It works that way in “socialized medicine” venues like England, and the notion of universal healthcare coverage for all Americans is unlikely to change that fact. But to deal with expensive medical care, we have to look at the cost components of the most expensive components, and this blog is focused on doctors.

Start with medical school, a professional school with expensive and highly paid practitioner-professors. We can’t have doctors graduating with six figures of debt from their education, require years of internship and residency at low pay and then smack them with the economic impact of exorbitant malpractice premiums. If we are limiting doctor pay, we also have to reduce the cost of becoming and remaining a doctor.

What happens when doctors are simply paid salaries; does the system provide inferior results? The July 24^th New York Times: “By contrast [to traditional ‘pay per procedure’ hospitals and doctors, Mary Imogene Bassett Hospital, a small facility with 180 beds in Cooperstown, NY, is like a] small number of other health systems in this country — pays salaries to all of its doctors. No matter how many tests or procedures are performed, they take home the same amount of money. Medical costs at Bassett are lower than those at 90 percent of the hospitals in New York, while the quality of care ranks among the top 10 percent in the nation, surveys show.”

Reducing or retiring physician medical school debt and removing the burden of medical malpractice costs may be the trade-off for many doctors to opt for a salaried system. For those practitioners in search of the highest revenue model, there mere possibility of getting more money in a “pay for specific service” format makes the salaried approach less attractive. In restructuring the future of our medical programs, we need to create insurance plans and governmental policies that pay doctors/hospitals to keep patients healthy, not simply to over-test and over-treat.

Further, salaried doctors working in groups tend to communicate with their peers more frequently – there is no hesitation because a consulting fee must be determined or a payment might be lost. The Times: “Such coordinated care is a hallmark of integrated health systems with salaried doctors, like Kaiser Permanente, the Mayo Clinic, the Veterans Administration and the Cleveland Clinic. In each system, medical records are electronic, so doctors have quick access to patients’ entire histories, including X-rays and prescriptions. And doctors often treat patients in interdisciplinary teams where coordination is encouraged since no one loses money by passing a patient to a colleague.”

To effect deep cuts in the cost of the system while increasing effectiveness requires a ground-up rebuilding of the entire spectrum of underlying assumptions. Costs are the product of governmental policies and industry practices, part of the chain of costs that go into each component of healthcare. We must shift those basic policies and address each “cost link” in each chain if we really are going to be able to provide good healthcare for all Americans. You can’t just shove the costs down from the top.

I’m Peter Dekom, and I approve this message.