The horizon is not so far as we can see, but as far as we can imagine

Month: July 2009 Page 2 of 5

Bait and Switch on Public Option?

The most devastating critique I’ve read of the current public option comes from Kip Sullivan. What makes it devastating is that although he’s a single payer advocate, instead of attacking it from the point of view of single payer, he takes it on on its own terms—comparing the House bill’s version of the public option to the one originally proposed by Hacker:

• The PO had to be pre-populated with tens of millions of people, that is, it had to begin like Medicare did representing a large pool of people the day it commenced operations (Hacker proposed shifting all or most uninsured people as well as Medicaid and SCHIP enrollees into his public program);
• Subsidies to individuals to buy insurance would be substantial, and only PO enrollees could get subsidies (people who chose to buy insurance from insurance companies could not get subsidies);
• The PO and its subsidies had to be available to all nonelderly Americans (not just the uninsured and employees of small employers);
• The PO had to be given authority to use Medicare’s provider reimbursement rates; and
• The insurance industry had to be required to offer the same minimum level of benefits the PO had to offer.

What would this mean in effect?  123 million people enrolled, the ability to set premiums substantially below those of private insurers and the ability pay hospitals and doctors less than private insurers, leading to massive cost savings.

But of the five conditions, only  one is met in the new plan: requiring the insurance industry to offer the same plan.  Not a single other requirement of the original public option plan is met.  Not one.  As Sullivan points out, the public plan starts without a single enrollee and has to hire sales staff, negotiate contracts and so on, all while being required to pay back its start up costs within 10 years.

What advantage do you have over the private insurers that means you will be able to out compete them?  The only one I can think of is that you don’t have to make a profit, but that’s only half true, because of the requirement to pay back within 10 years, you effectively do have to turn a profit.

Go read the entire thing.  Sullivans’ argument is, in my opinion, strong enough as to be devastating.  I’ll be discussing this more next week, as promised, but Sullivan has said most of what I wanted to say and said it better than I would have. His argument about why the CBO scoring of only 9 million enrollees is either correct, or even overstates the case is of particular interest.

Republicans operate as if in a parliamentary system

and Democrats don’t.

As someone who lives in a parliamentary democracy (Canada) that’s what I’ve noticed.

The fundamental rule of parliamentary democratic politics if you are the opposition party is this:

Whatever the ruling party does is wrong

Why?  Because if the ruling parties policies work and make people happy, healthy and wealthier, then they will be re-elected.  If they are a complete disaster, the opposition will win.  If some don’t work, you need to be able to run against them, and it’s difficult to do that when you supported them.

The archetypal US example of this is John Kerry in 2004.  The Iraq war is already unpopular, but Kerry can’t credibly run against it because he voted for it.

This calculus is something that Republicans understand, and that Democrats don’t.

Never give an enemy an even break…

As Dave observed today, many Democrats still think they are living in the past, when gentlemen and ladies could reach across the aisle, find agreement, and do what is right for the country.

The Republicans don’t live in that world, and from an electoral politics point of view it’s not clear they aren’t right not to.  Incumbent parties defeat themselves by failing to rule adequately.  If you don’t believe that you weren’t paying attention to the last 8 years.  The Democrats didn’t defeat the Republicans, they defeated themselves by their complete inability to put through effective policy or to govern effectively day to day (an inability revealed starkly in both Katrina and Iraq).  Democrats walked into the void.

You can walk in faster if you opposed the failed policies (again, see Kerry, 2004) but eventually screwing up governance will tank a party.

Now in parliamentary systems a majority government just does what it likes, and the opposition reflexively opposes but can’t stop anything.  In a minority government, the opposition can’t just stop everything because if it defeats the government on the wrong vote it’ll cause an election and you don’t want one of those till you’re sure you’ll win and the governing party won’t get a majority.  So the government can still get through a fair bit of its agenda, even if it doesn’t have a parliamentary majority.

In the US there’s no threat of a snap election, and the opposition can often hold up significant legislation, especially in a case like the current one where the governing party has unreliable members (something that’s very rare in most parliamentary systems).

So the Republicans have taken parliamentary opposition one step further.  Instead of just opposing everything but letting it pass, then running against it, they figure why not oppose everything in the hopes of weakening policy to the point where it doesn’t work?  The stimulus bill was compromised to the point where it didn’t do the necessary job.  The global warming bill likewise, and the health care bill appears headed for the same fate.

Lousy policy leads to lousy outcomes. Lousy outcomes make the population unhappy, and less likely to vote the incumbents back in.

What the Republicans are doing makes perfect sense from an electoral point of view.  Voters are not going to primarily blame Republicans for Democrats failing to govern effectively.

This is something that many Democrats, especially older ones who came from a more genteel era, or those who some sort of strange genetic disposition to compromise (Obama) don’t seem to get.  But Republicans get it in their limbic system.  They believe that your enemy is your enemy and that you never give your enemy an inch.  When you’re on top, you give them the boot, when you’re down, you knaw at their ankles till they bleed out and fall.

Comity and compromise only work with people who believe in them. Contrary to the moronic statement “it takes two to fight”, it actually takes two to make peace.  When one person wants to fight, and one won’t fight, what happens may not be fighting, but it certainly isn’t peace.

How insurance works and why private insurance costs more than universal government insurance

Today I’m going to talk about how insurance works.  I used to work in the industry (on the life side, but in the American industry) and I studied it in detail at the time.

Insurance is making book

One of my friends was an underwriter, and she used to say “I feel like a bookie.  I figure out the odds on people’s lives.”  I used to joke “when a life insurer writes you a letter saying they’re sorry about your  relative dying, you can be sure they mean it from the bottom of their cold shriveled hearts”.

Which is to say, what insurance companies do is look at how risky a person or a group of people are, assign odds to them taking a loss and figure out how much the average loss will be.  That’s the basic cost of the insurance.  To vastly oversimplify and pull numbers out of the air, say you get insurance for getting your hand cut off, then replaced.  The odds per year are 1 in 1,000 (you work in a machine shop) and the cost of reattaching your hand is 100,000 dollars.  To break even they will have to charge each person $100.

Variability: God plays dice

Well, they would if there were no variability.  Those may be the odds, but what if one year there number of machinists getting their hands chopped up is higher than normal?  The fewer machinists the company is insuring the more variable this will be. Insure one machinist and you either pay out nothing or $100,000.  Sure the odds of paying out are low, but if you do, your loss is 99,900.  Ouch!

The more machinists the company insures, the less the variability.  So they will want to insure as many machinists as possible.  The larger the population they insure, the closer actual claim experience will match with theoretical claim experience.  And if they insure every machinist in the country, well the experience should be very close to exactly what they originally calculated.

So the larger the population an insurer serves, the closer its experience matches what would be expected.  The smaller, the less it does: the more the variability increases.  This has a cost, the smaller the population you insure, the more money you have to put aside to cover variability.  (1)

When you divide up an insurance market you increase variability, and therefore you increase the cost of insurance.  It is impossible to avoid.

So at this point, the price of insurance is the cost of covering average losses plus the cost of covering variations from normal claims.

Underwriting.  Or some people don’t have average experience.

So, since you don’t have a monopoly, and you aren’t the government, you don’t have the entire market.  That mean your experience could vary for reasons other than just luck.  Say you happen to insure machinists in a shop which has bad safety procedures and where machinists gets their hands chopped off at twice the normal rate?  If you were to give them standard rates, and assume standard deviations from the norm, you’d take a huge loss.

That’s not a risk you can take.  So you hire people to get all the records on the shop, someone to inspect it and someone to make book on the shop.  How likely is it that this shop will have more (or less) than the normal experience?  How much more, or less, should you charge them based on their safety precautions or lack thereof?

And if individual machinists are applying it gets even worse.  Not only do you have to look at where they’re working, you have to make sure the applicant isn’t accident prone. How’s his eyesight?  What’s his personal safety record?  Does he have drug or alcohol problem?  Any medical problems which might make him more likely to slip up?  How old is he and what is the relationship between age and accidents?  Etc…

All of this underwriting costs money.  You’ve got the people getting the records, doing the medical tests, visiting the sites and so on.

So the price of insurance is now the cost of average losses modified by your specific population’s characteristics + variability + underwriting costs.

Anti-Selection: or, people who need insurance are bad bets (2)

One of the biggest problems in insurance is that an applicant knows more about his situation than you do.  When everyone isn’t automatically enrolled, studies find that those people who do insure themselves are more likely to have adverse events.  Think about it.  If you have reason to believe you won’t get sick, you’re more likely not to get health insurance. If you live in a geologically stable area with no woods nearby in a stout well built house you’re far less likely to apply for catastrophe insurance, and so on.

People who want insurance are bad bets.  So you have to underwrite them and investigate them.  What it is that they know that you don’t know, that you need to know?  (This is why insurance companies see recissions as moral: they figure that people held out on them, and holding out on them is effectively cheating them.)

But even after you underwrite, the people you underwrite will still have more incidents than they should have.  So you have to put in some extra money to pay for that.  If you insured the entire population you wouldn’t have to do that, but you don’t.

This, by the way, is one reason why insurers prefer to insure groups, like companies.  A company hires employees for a purpose other than buying insurance.  There shouldn’t be any anti-selection. If anything, a corporation’s employee’s experience should be slightly better than the general population, because people who are really ill (or likely to die) are less likely to be employed.  Sick people don’t make hiring managers day.

So, the price of insurance is now up the cost of average losses modified by your specific population’s characteristics + variability + underwriting costs + anti-selection costs.

Insurance Companies Aren’t Non-Profits

Well, most of them aren’t.  Companies that are mutual companies (fewer and fewer are) are sort of non-profits.  But the rest of them need to make a profit.  Traditionally 5% was considered a reasonable profit in the insurance industry—it was a widows and orphans sort of industry which invested in the dullest of dull, safest of safe securities.  But, alas, when you’re a stock company, and Wall Street is demanding 15%, well, you’ve got to make that amount of profit, because if you don’t the stock price won’t go up and the executives options and bonuses won’t be as high as they could be.  And we all understand that would be an unacceptable disaster.

So, the price of insurance is now up the cost of average losses modified by your specific population’s characteristics + variability + underwriting costs + anti-selection costs + profits.

Investing for the future

Health insurance costs can be roughly divided into two parts.  There are ongoing health care costs which are about even over the life of your insured, and there are catastrophic end of life expenditures.  About half of the cost of health care for Americans comes in the last year of their life (the problem being guessing which year is the last year.  My father has been through his last year twice.)  Insurance companies take the premiums they gain and the invest them in various securities. Roughly half of them go into short and medium term duration investments, the other half go into long term bonds.

This may not seem like a cost, but the point is that they have to take in more money than they are spending any given year, so they can invest that money for the future.  That is an expense.  It is an expense which a national insurance system which simply pays out of pocket each year does not have.

So, price of insurance is now the cost of average losses modified by your specific population’s characteristics + variability + underwriting costs + profits + investment costs.

Private Insurance Costs More

Why?  Because it is the cost of average losses modified by your specific population’s characteristics + variability + underwriting costs + profits + investment costs.

Public insurance is either the cost of average losses + (very small) variability

or, if you do invest rather than paying year to year

Public insurance is the cost of average losses + (very small) variability + investment costs

There’s more to it than this, of course.  But those are the basics embedded in the way that insurance itself works.

Let’s talk about some other issues.

A Sure Thing Isn’t Insurance

If you aren’t insuring the entire population another issue crops up.  What about individuals who you know are going to take a loss?  In medical insurance, what about someone who’s an asthmatic, or a diabetic, or has Parkinson’s, or whatever?  The odds of that loss aren’t (population X incidence rate), they are already known.   Insurance is about odds, about making book.  When someone is already a claimant before they even sign up that’s not insurance.  It’s just a known cost and you can’t provide it for less than the cost of providing it.  You can’t make a profit on someone who’s already sick, unless you charge them more than the cost of their healthcare.  At which point, why bother?  If instead, you were to average their costs over the population of people who haven’t suffered a loss, well, that increases the cost to everyone.  And it isn’t insurance. Insurance is about losses which haven’t yet occurred

This is why insurance companies won’t take people with pre-existing conditions.  Either such people are a straight loss, or they increase cost and price for everyone else, and that damages the insurance companies competitive position.  Either way it damages profits.

The Gatekeeper problem, aka: doctors and hospitals and drug companies want more money

Or to put it another way, between the insurer and the insured are gatekeepers who decide (or try to) how much care those people get.  The more care the person receives, whether they need it or not, the more the gatekeeper gets.  The insured isn’t in a position to deny care in most cases.  If your doctor tells you you need a test, how often do you argue.  So as an insurance company you have two choices. You can just accept the bills, and pay them or you can try and manage the care the insureds receive.  Even if this is totally good faith (you actually do want people to get care they need, just not care they don’t need), well, denying care costs money in terms of staff and so on.  And once an insurer realizes that staff saves you money, well perhaps you should deny even more care and turn into a profit center.

Of course, somehow costs do keep rising fast, and part of it is that some actors don’t get negotiated with very hard, for example drug and medical appliance companies.  The question of bargaining comes down to difficulty: it’s easy to screw over a sick individual.  He or she doesn’t have the power, money, time or health to fight back effectively.  A big pharma company does.  So the small actors get squeezed, and the larger actors make outsize profits (for most of the 00’s the only sector making more profit than the pharmaceutical companies were the financial companies.)

Lessons for health reform and the public option

Look again at the formula:

cost of average losses modified by your specific population’s characteristics + variability + underwriting costs + profits + investment costs

The public option, should eliminate profit costs, at least for it.

Removing the ability to deny applicants + not allowing different premiums due to history eliminates underwriting costs.

Anti-selection costs are reduced but not eliminated if one of the plans is seen as better than the others when it comes to actually delivering care (i.e. if insurance companies continue to make it hard to make claims and the public option doesn’t, the public option will suffer from anti-selection

Variability costs due to population size are not eliminated

Investment costs are not eliminated

The gatekeeper issue does not go away.  Especially if the public option is specifically forbidden to negotiate with pharmaceutical companies.

The sure thing problem goes away, but could lead to an increase in prices depending on whether gains from reducing uncovered catastrophic care are enough to offset sure costs for actually treating people

Concluding Remarks

This is a fairly simplified look at how insurance works.  But it does suggest a number of things.

  • Insure the entire population’s so you eliminate variability, anti-selection and the need for underwriting
  • Remove the need for profits
  • move to pay-go rather than pay-in and invest
  • Allow negotiation with large actors
  • Move away from fee-for-service(4)

Next week I’ll talk more specifically about what is required for a public option to work to reduce the number of uninsured people, under-insured people and to reduce health care costs at the same time.  While single payor automatically eliminates all of these problems except for fee-for service, public option needs to be done very carefully to actually work.

Notes

1) Note that in health insurance terms a population could be “all 66 year olds”.  Medicare has an entire population, everyone above a certain age.  There are still disadvantages to this because if you don’t have the population through its lifespan you can’t institute preventative care and other insurers can try and dump costs on you, but you do get the variability taken out to as large a degree as possible.

2) Also known as adverse selection.  Same thing.

3) Mutual companis had consistently lower costs for insurance than stock companies.  They are better for people who are insured, the data is dead clear on this.  One model of reform is forcing all stock companies in the insurance business to go back to the mutual model.

4) There are some arguments against moving away from fee for service. It seems to work well enough in various other countries and inside some parts of the US health care system. When economics fails it tends to fall back on bad sociology, but the fact is that a health culture amongst health care providers doesn’t take advantage of fee for service to do necessary procedures and tests. Unfortunately, so much of US medical culture is sick that messing with incentives (the last refuge of bad management) may be necessary.

Why I’m pessimistic on health reform and the argument for doing it anyway

Yesterday Brett asked why I’ve become negative on health care reform when so many other bloggers aren’t.

Of course, it’s dangerous to speak for other bloggers, but I think the calculus which many are operating under is that if you get a bill with some sort of public option, and some sort of subsidies, some lives will be saved.  Something, in other words, is better than nothing. I also think that people need to believe.  Many bloggers worked really really hard to elect Obama, to get a House and Senate majority, and the that it can’t deliver on something so fundamentally important as making sure every American has the health care they need is something they just don’t want to believe.

Also most other bloggers are not fundamentally econobloggers and econobloggers who don’t buy the “TARP saved the universe” disillusionment started much earlier than for most other bloggers.   For me it started at TARP time when Obama pushed through Paulson’s highway robbery act  Then Obama hired Geithner and Summers as his key economic people.  So I started down the path of “no hope” a lot earlier than most bloggers.

I use the stimulus bill as my model for looking at healthcare.  As with the stimulus bill I think that the House draft bill is the high point.  I think this is the best bill we are going to see.  I think the Senate bill will be worse (Daniel reported last night, as I was writing, that the Senate bill probably won’t have a public option) and that it may well be worse than nothing even if a weak public option is in the bill. In particularly Medicare and Medicaid are being hit to pay for this, people will have deductibles on “non preventative” care (and maybe preventative by the time it gets through) and so on.  The Massachussets experience, which is the closest parallel, has not been good.

There is a counterargument, I made part of it the first day I wrote at OpenLeft.  The public option could drive out private insurance or at least drive costs lower.  Getting people into the system turns them into real patients and suddenly there are doctors and so on who don’t want to lose them, and that gives them a constituency, and above all, you do save some lives and help some people and isn’t that better than nothing?

I’m not a single payor purist, though I think the fact single payer isn’t even on the table is a terrible indictment of the system—however, I’ll settle for a good public option, or even a non-sucky one.  But I’m becoming convinced that any public option will either be too compromised, or non existent, and at that point, all that happens is you have slashes to Medicare and Medicaid, forced purchase of bad insurance, and through those purchases more money being pumped into the system.

Is forcing people to buy insurance the real goal?  The best way to make money, bar none, is to have government force people to buy your product.  It’s a wet dream for any industry, so if it’s going to be done, it has to be done right—it has to be very highly regulated and controlled with rates of return set like utilities.

Will it be?

(Addendum: Before I ride off into the sunset next thursday, I’ll see if I can pull together a post on what is required for a good public option.  One of the reasons I favor single payor is that it has many fewer moving parts. It’s easier to do single payor right than it is to do a public option right.  Not least because there are many different working models of single payer and variations.  Getting the public option right is very complicated.)

How stupid do they think we are? (Executive Compensation edition)

Seriously, can’t Obama even pretend he intends to meaningfully reform corporate governance?  If not, why does he insult our intelligence? (h/t Americablog)

The president specifically mentioned regulatory changes that would require shareholders to have nonbinding votes on executive compensation packages (emphasis added)

This is similar to the plan to create create standardized credit default swaps (CDSs) which can trade on open markets, but not require firms to actually use them, and still allow custom CDSs.

I’d say that Obama and his financial advisors still think that if they just ask banks and brokers nicely, they’ll do the right thing, but that would insult the administration’s intelligence as well as mine and yours.

Why health care reform isn’t: part II-the bought and paid for Congress

He who has the gold, makes the rules

The numbers on how much various medical interests have spent on influencing Congress and the Presidency make clear why health care reform keeps getting watered down:

..the data so far suggest that the second quarter has a good chance of reaching a new high for the health-care lobby. The industry already set records from January to March, when health-care firms and their lobbyists spent money at the rate of $1.4 million a day.

Impressive…  Is anyone on the side of good reform spending that type of money?

Of course they aren’t.  Healthcare in the US costs 5% more of GDP than it should.  That’s a lot of money, and there are a lot of people getting rich off that money.  They’ll do whatever they have to in order to keep the flow coming.  When you’re talking 692 billion dollars (give or take), well, what’s 1.2 million a day to keep the cash flow coming?

The fundamental truth of America’s Congress is that its first and most important function, when you take the time to look at the bills it passes, is to take money from rich special interests and then pass bills which favor them.  The same, I’m afraid, is true of the presidency.  Most of the 15 trillion given, loaned and guaranteed during the financial crisis was to the financial sector, and most of that was given by the Federal Reserve, which if it answers to anyone (questionable) answers to the President.  But even when Congress got into play it’s noticeable that they gave 700 billion for TARP but are now insisting that health reform be “decifit neutral”.  Likewise no one seems to mind giving lots of money to the military.

Interesting set of priorities.  Politicians seem to always be telling us how “protecting Americans” is their most important duty.  Which is how they justify spending money on a military which doesn’t seem to protect Americans from anything noticeable.  And by protecting I assume they mean “save American lives.”  This is odd, because health reform, properly done, would save those lives than anything else except massive reform of the way Ameiricans eat. But, unlike with the military, there isn’t a health-reform complex pushing to save American lives that is nearly as strong as the one pushing to keep the gravy train going.  So suddenly, saving American lives isn’t a priority.

The Gates Conundrum: Racism or Police “Authority”

Whenever I read about an incident such as the one which happened with Henry Louis Gates Jr, in which a police officer arrests someone for, essentially, not paying them enough respect, the old Cartman line “respect my authoritae!” floats through my mind.

After reading the officer’s account and Gates account, I have no idea whether racism was at the core of Gates being arrested. But I will lay long odds that if Gates had done everything Sergeant Crowley had told him to do and done it snappish, well, he wouldn’t have been arrested. My interactions with police in the US have all reinforced to me that even something as simple as a question is interpreted by many policy as a direct assault on their authority, and that they have no tolerance for any such thing. If a policeman in the US asks you to do something, or tells you, you’d best do it, right now, whether he has the right to order you around or not. And if you don’t, be ready to deal with the consequences.

Which is to say, I agree with lawyer Scott Greenfield, when he writes:

But there is similarly a possibility, based upon a larger experience by those who follow the conduct of police officers, that this was unrelated to Henry Louis Gates’ race.  This encounter could have, and has, happened to whites as well as black, to Hispanics as well as Asians.  To old women and young men.

Henry Louis Gates was arrested for engaging in “tumultuous” behavior.  Only in Cambridge would the complaint use the word “tumultuous”.  But many a man forced from his castle upon the command of a police officer who refused to accept that he was at home would have been outraged.  Tumult seems an appropriate way to act.  The crime was Gates’ hurling words at Sgt. Crowley at a time when the sergeant commanded him to be obsequious and compliant.  Gates would not calm down.  There is no law that requires him to be calm because a police officer ordered him to do so.  Other than the expectation that we do what an officer tells us to do, no matter what.

It may well be that what happened to Henry Louis Gates reflects, as he is accused of screaming at Sgt. Crowley, “what happens to a black man in America.”  Because the black man happens to be the director of the W.E.B. Du Bois Institute for African and African American Research at Harvard, perhaps the pre-eminent black scholar, it will open a discussion that we still need to have, black president notwithstanding.

It is also possible, however, that what happened to Henry Louis Gates is the outgrowth of the conflict between law and order, order represented by police who have been empowered, in our post 9/11 age, to believe that their every command is the law, that our blind obedience is mandatory.  Other than a few old-timers on the Supreme Court who live in a fantasy world where ordinary people can assert their rights and refuse to comply with the command of a police officer with impunity, this encounter between a distinguished scholar, within his own home, and a police sergeant who believes that his command is sufficient to create the divide between citizen and criminal, may offer the chance to question who commands whom in our society.

The counter to this is that “cops everywhere are cops”.  Now there’s certainly some truth to that.  But I will say this.  I don’t fear Canadian police the way I do American ones.  My sample size isn’t large, but I’ve found that unless there’s a real crisis or threat (ie. not an unarmed 60 year old man), most of them don’t demand instant obseqious obedience to their every demand and are willing to answer reasonable questions.

In the US my experience has been that unless I want things to get unpleasant, I’d better click my heels, cringe and do as commanded.

So, racism?  I don’t know.  Could well be.  But I don’t think it’s necessary to invoke racism to explain officer Crowley’s behaviour.  He was disrespected by someone who didn’t obey his every command.  To his mind he was even lenient, he gave his orders multiple times.  Gates stepped out of line and needed to be put in his place, not because he was black, but because he was a civilian who wasn’t doing what a police officer told him.

The real dividing line may not be black and white, the real dividing line may be the blue line.  You either wear the blue, or you don’t, and Gates didn’t.

(Addendum: I read the police report when it was released.  When I went looking for it today, it had been taken down both by the Boston Globe and the NY Daily News.  How… interesting.  Fortunately someone saved a copy. I’m so glad the press has an adversarial relationship with authority.)

The Compromised President and Congress: Why this health care bill probably won’t reduce costs

Ok, I’ve tried to keep an open mind on this. I prefer single payor, but a properly done public option could, indeed, drive down costs and help some people get care.

But I’m no longer sure I can maintain benefit of the doubt.  First it was the AMA endorsement, which was bought by a promise not to reduce medicare rates as much as initially planned.  Now I read from Robert Reich that the price of pharma not killing it is:

  • Not allowing drug reimportation from Canada
  • Not allowing the government to negotiate drug prices

The 80 billion pharma promised last month is a small price to pay for that, and I’ll tell you right now that that 80 billion won’t appear anyway.  As soon as the pharma companies can betray, they will.

The mandate, as Reich points out, can easily lead to insurance companies earning more money than they’ll lose, which since the insurance companies are the problem, means that costs won’t go down much, if at all.

All in all, I don’t think any bill that’s going to come out of this Congress is going to be strong enough to drive down costs or even significantly reduce the growth rate.  The mandates, combined with insufficient subsidies mean that many people are going to be hurt by being forced to buy insurance.  The Massachussets plan, which this is based on, has not worked well.  This isn’t going to either.

This bill is turning into a pork-fest.  Buy-in is being achieved by making it clear that stakeholders will make more money once it’s done, not less.

My biggest weakness this year in doing analysis has been hope.  I have let hope that the Obama administration and a Democratic Congress will do the right thing, and that they aren’t corrupt and incompetent, get in the way of clear thinking.  Enough.  Hope isn’t a plan, and hope isn’t policy.  Hope without good policy is a con-job.

There hasn’t been a good, major, bill come out of this Congress this year.  They have all been fatally compromised, from the stimulus bill (larded up with useless tax cuts and without necessary State relief) to the global warming bill, which is so far from doing enough that it’s a joke.

At this point I see no reason to believe this bill won’t be the same.  Yes, a few people may get health care who wouldn’t otherwise and that matters, but it won’t contain costs to any significant degree and it will put a huge burden on Americans who can’t afford it.  The likelihood that a surtax on the rich to pay for it won’t happen just makes this even more clear.

This is not the Bush administration, but the primary assumption of the Bush years that nothing would get through Congress that wasn’t bought and paid for; that wasn’t fatally compromised at very best still holds in only a mildly mitigated form.  Yes, Obama and the Democrats sometimes try to do the right thing while Bush almost never bothered, but  the bills that come out at the end are still awful.

This year is effectively over.  Obama’s ratings are dropping and will continue to drop as the economy doesn’t improve for ordinary people.  In future years he will reap what he has sown: bad policy will lead to bad real results, and Obama and the Democratic Congress will be blamed for that.  They will deserve it.

Hope I’m wrong about this.

But I wouldn’t bet on it.  Even hope wears thin over time.

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