Buying Health Insurance Across State Lines

The number one plank in the Republican Party's "Common-sense Health Care Reforms Our Nation Can Afford" is: "let families and business buy health insurance across state lines." What does common sense tell us about this policy recommendation?

Currently, health insurance is regulated by State insurance commissioners. If you have a problem with your insurance company, at least in Wisconsin, you can file a complaint. Now, let's imagine you have purchased insurance from an insurance company in the State of Alabama. If you have a problem with the company, say they refuse to pay a large hospital bill you think is covered under your policy, what do you do? Under the Republican proposal, I'm not sure. You can't appeal to the State of Wisconsin, since they don't regulate Alabama companies. You probably can try to appeal to the State of Alabama and file a complaint, but on their website they say "Our mission is to serve the people of Alabama..." and you are a Wisconsin resident. Good luck with that appeal.

Or, possibly the Republican Party had in mind a Federal Regulator who would regulate interstate commerce in health insurance. Somehow, I don't think this was their intent. My guess is that their intent was to leave interstate commerce in health insurance unregulated. Since Republicans believe in the free market, let's imagine what will happen. The first avalanche of rejected claims and resulting health care related personal bankruptcies, will force people back into buying insurance within their own state where they have legal protection. This is common-sense?

Scientific Consensus and the Precautionary Principle

Since scientific consensus is never infallible, how do we respond to the debate between the Intergovernmental Panel on Climate Change (IPCC) and its critics? One approach is to adopt the precautionary principle: in the absence of infallible scientific consensus, do nothing that might harm either the public or the environment. The burden of proof is then on the critics.

Applying the precautionary principle in practice can be difficult. For example, higher gas prices will reduce CO2 emissions but place an added economic burden on drivers. Rather than applying the precautionary principle issue-by-issue, let's take a broader look at slowing down the overall growth of the economy. One positive benefit of the current Subprime Mortgage Crisis is that reduced economic growth has led to reduced CO2 emissions.

Our current economic system is caught in a vicious positive feedback loop: population increase (either through natural increase or through immigration) leads to greater consumption which leads to greater resource exploitation and more production, which leads to larger emissions and more people seeking a higher standard of consumption. Politicians are also hooked on growth. Today's new programs are funded by future tax revenues resulting from growth. When the system collapses, as it did during the Subprime Mortgage Crisis, public spending programs become unsustainable.

An economy with a slower growth rate or even a steady-state economy would concentrate on development rather than growth: improve the energy efficiency of existing homes (rather than sprawling into the suburbs), increase recycling, improve the quality and durability of products, replace the existing fleet of inefficient vehicles with electric vehicles, replace coal-fired power plants with renewable sources, improve population health and education, etc. Minimally, slower growth would buy time while new, carbon neutral technologies are developed. Or, we could get off the growth treadmill entirely and focus on improving the quality of life for the existing population.

Scientific Consensus and the IPCC

The reports of the Intergovernmental Panel on Climate Change (IPCC) are based on scientific consensus. Scientists have been wrong before: the Earth was thought to be flat, bodily fluids were thought to be associated with personality types (the four humors) as was the shape of the skull (phrenology), and during the 1970's climate scientists thought the world might be cooling. At one time, all these ideas more or less commanded scientific consensus. Should we believe the IPCC scientific consensus today?

First, we no longer accept flat-earth theories or phrenology based on the accumulation of (negative) evidence over time. The initial global cooling pattern was based on satellite data that was not corrected for changes in satellite orbits (the red line in the graphic above shows the uncorrected data, the blue line shows the corrected data that now agrees with other measures of global temperature--presented today in the Global Warming Debate). Second, since it takes time for data to accumulate, be analyzed, reanalyzed, critiqued, and possibly refuted, we are asking a lot of the IPCC. They are making their assessments based on reading the current, peer-reviewed literature.

Some climate change critics have submitted their results to peer-reviewed journals but most simply present their conclusions based on cherry-picked data or pure opinion. Time will resolve these disagreements but many scientists are concerned that we don't have the luxury of time.

A Primer on Climate Change Denial

There are basically four arguments made by those in "climate change denial":

(1) The world is not warming.

(2) Climate variability is natural and not anthropogenic.

Climate scientists who have participated on the Intergovernmental Panel on Climate Change (IPCC) consider the first two issues as having been answered by current research. The following two issues are areas of active concern and research:

(3) Future climate changes and impacts will be small.

(4) We can't stop climate change and, in any event, it will cost too much.

I will comment on all these points in future posts as the topics come up in the Global Warming Debate.

Black Thursday, Monday and Tuesday

This week marks the 79th anniversary of the Great Depression. On October 24, 1929 "Black Thursday," the stock market bubble burst and a pool of bankers attempted to prop up the market with an investment of money. On October 28, 1929 "Black Monday," the stock market fell 22.6% as did markets around the world. On October 29, 1929 "Black Tuesday," panic set in and a record 16 millions shares were sold. Reviewing the history of the Great Depression in the middle of the Subprime mortgage crisis (Great Depression II) is particularly salient. One of the best reviews is currently running on the PBS American Experience "The Crash of 1929".

The history of the Great Depression touches a number of current policy questions: (1) Did government policy before the crash create the bubble and did government policy after the crash make the Depression worse? (2) Should we bring back the Glass-Steagall Act of 1933 that separated banking and financial organizations and was repealed in 1999? (3) Did the stock market crash cause the Great Depression or were there other forces operating in the US economy and the world system? (4) Is our financial system becoming increasingly unstable with larger boom-and-bust episodes? (5) Did anyone see the Great Depression developing? Did anyone see the Subprime mortgage crisis developing? If they did, how were their forecasts received? (6) Is it even possible to forecast recessions and depressions?

Moving Toward Health Care Compromise?

This morning on CNN's State of the Union, Orrin Hatch (R-Utah) made the following comment:

Republicans would like 50 state laboratories, 50 states working on these things with yes, the help from the federal government and doing it in accordance with the needs of those states. If we did that, I think you'd find a really good health care system that would incrementally grow, be better, save costs, save -- bring down insurance premiums from where they are going to go if we don't. And I have to say, you know, stop the federal government from taking over everything in our lives.

My first thought was to reconsider my earlier posts on the state-level health care option. My second thought was that Senator Hatch was signaling some movement on the part of Republicans toward compromise. That would be useful.

A caveat might be that States that want to opt out of the public option be required to develop a program with measurable criteria (coverage and cost containment goals for starters) that would have to be reevaluated after experience with their program. If States want to pursue ideas such as Health Savings Accounts and catastrophic private insurance, let's see whether such programs (surprisingly, there are neo-liberal and liberal variants) will work better than the public option. It's a way to either confirm or reject some of the free-market ideas based on experience rather than argument.

Will Climate Change Impact Cherry Picking?

Although Wisconsin's Door County is still known for cherries, the cherry picking talked about this week in "The Global Warming Debate" involves data.

One type of cherry picking found in the global warming debate involves time scales. The graphic on the left above shows that over the last 300M years, there has actually been global cooling. Of course, at techtonic time scales, peak temperature occurred at a point when crocodiles where swimming at the North Pole. During the period of modern human civilizations (the far right graphic above) we are about to enter the warmest period modern human civilizations have experienced. Whatever the cause of the warming, the bigger question is what are human civilizations going to try to do about it (if anything).

Another kind of cherry picking involves focusing on a single decade. From that perspective, 2008 was the coldest year in the last decade. Taking a longer time scale, 2008 was the 9th warmest year on record.

One outcome of the global warming debate might be that people will take a little longer view of statistical data. But, myopia is endemic in the analysis of current events. From March 2009 to the present, the DJI has increased by 150%, a great Bull Market, but from October 2008 to March 2009 it fell 230%.

Freaked Out Neoliberals

There is an interesting comment on Paul Krugman's blog in response to the about-to-be-published book "Superfreakanomics: Global Cooling, Patriotic Prostitutes, and Why Suicide Bombers Should Buy Life Insurance". The point of the comment was that economists should "...stick to your third-quarter profit forecasts and leave climate predictions to real scientists!" I would slightly qualify this comment to read "neoliberal economists" since the ecological economist are doing research that is complimentary to the earth scientists.

Hey, Pizza Face!

It's National Pizza Month and the industry is suggesting that moms make pizza faces for their kids. Here's an example:

From the press releases I've read about this campaign, I can deduce that no one on the marketing team for this promotion attended my high school where "pizza face" was a term reserved for someone with a bad case of ache.

Incentives to be Smart

This morning on CNN, Lloyd Blankfein, CEO and Chairman of Goldman Sachs, commented (approximately): "You can incentivize someone to move from one part of the room to another ... but you can't incentivize someone to be smart." Although I know this isn't what he meant (he went on the say that the problem was with the dumb "risk managers"), if we can't incentivize people to be smart, what's the point of Mr. Blankfein earning $53.4 million in 2006?

Mr. Blankfein has been on a charm offensive recently and Goldman Sachs earnings did fall short of setting a record this quarter, but I'm not sure the charm offensive is helping his case.

Neoliberalsim and The Power of the Poor

Last night, our local Public TV channel ran "The Power of the Poor," documenting Hernando de Soto Polar's efforts to expand property rights for the poor. The program was evidently developed by the FreeToChooseNetwork which supports neoliberal ideas ("...the interdependency of personal, political and economic freedom sustained by the rule of law.")

The documentary touched on a number of issues: the tragedy of the commons (the poor without property or employment must earn their living off the commons), the ownership society (a Bush II era idea that led to the Subprime Mortgage Crisis), and the provision of public goods (ownership of private property does not absolve the government from providing public goods as is argued by market fundamentalists).

It would be very useful in the United States (and in the IMF), to have some agreement on the proper role of government: support for private property rights but where markets fail or where private property rights damage the public interest, the responsibility falls on government to intervene and regulate. Progress here would involve giving up the Reagan-era idea that government is the problem and must be dismantled.

Cannon Fodder

Why have neo-conservatives and neo-liberals opposed the economic stimulus package and health reform? This morning, CNN's Pentagon correspondent Barbara Starr reported that for the first time since the 1970's, all three branches of the military have reached their recruiting goals. The reasons given were (1) the economic downturn driving the unemployed into the military, (2) large cash bonuses being offered for enlistment and (3) the availability of health care. So now I understand the neo-cons: someone has to have an incentive for fighting their wars and their "public option" for health care is the military.

Starr also reported that General Stanley McChrystal's request for more troops in Afghanistan actually contained a range of recommendations from 10,000 to 80,00 with 40,000 being the desired increase. Let's see, 80,000/2 = 40,000. This is an old consultant's trick: provide three estimates, a low-ball, a high-ball and the one you want. Hopefully the president will not fall for this.

Diseconomies of Scale in Health Care

The PBS News Hour has been running a series comparing international health care systems. In the series, the US system is being compared against the Netherlands, Canada, Japan and Mexico. The Swiss model for health care has also been favorably reviewed as has the French model.

One thing that doesn't seem to come up is diseconomies of scale. The Netherlands has a population of 16M, Canada 33M, Japan 127M, Mexico 109M, Switzerland 7.5M, France 61.5M and the US 304M. Just for comparison, New York State has a population of 19.5M, Wisconsin 5.6M and Massachusetts 6.5M.

Since the delivery of health care is dependent on the interaction between a patient and a health care provider, some of the European models might scale better to the States rather than to the US. Europe has a population of 731M and has somewhat different health care systems in each country. Is there a way to have a national health care system in the US but still allow some room for innovation at the State level? The problem would be to write a minimum set of standards that all States would have to meet. In this respect, the Canadian model provides the most interesting comparison (the national government wrote a brief set of standards for the delivery of health care at the provincial level).

The Moon Is Still A Harsh Mistress

NASA just crashed a bus-size projectile into the moon looking for water. The mission is a result of earlier findings that water molecules exist on the surface of the moon. The moon still remains dryer that any desert on Earth and may contain about 32 ounces of water over the entire surface. This amount of water isn't enough to support a lunar base without importing heavy, expensive water from Earth, so what's behind this flurry of activity from NASA?

The figure above displays forecasts from one of my time series models of the US economy. The model forecasts the Federal R&D budgets for Space (FED.RD.SPACE.) and Energy (FED.RD.ENERGY.). Although there was a drop in Federal expenditure for Space R&D, the forecast is for continuing growth after 2010. Federal expenditure for Energy R&D, on the other hand, has been declining since the mid-1990's.

Something is wrong with this picture and other commentators have noticed. Space exploration has produced few scientific advances that could not have been achieved without manned space flight. From an economic perspective, manned space flight makes little sense. Let's redirect Federal R&D toward Energy, resist NASA's space spectaculars, and leave space flight to the super-rich who want to travel with Virgin Galactic.

State-Level Opt-Out Public Option

Charles Schumer (D-NY) and Tom Carper (D-DE) are floating a new idea: a public health insurance option that the States can opt out of if they aren't interested (how the decision will be made isn't clear right now). It's generated a lot of interesting discussion (here and here) and echos some of my earlier health care posts. It has the advantage of putting a stake in the ground. It has the disadvantage of discouraging state-level innovation. Let's see if the idea gets any traction...