Saturday, April 22, 2017

North Korea celebrates Earth Day... failing to develop.  Poverty is natural.

Photo credit: NASA

Friday, April 07, 2017

Thoughts on Shayrat strike

One of my colleagues who is, like me, a libertarian, today asked my view of Trump's decision to strike Syria's Shayrat airbase.  He's quite skeptical of it, while I favor it, and he challenged me on several points.  First, he asked me whether I think it is Constitutional.  Frankly, I do not know, but my best guess is that it isn't (and I said so).  But if so, I also think it sets no new precedent and is far less serious than violations committed by Obama and Bush 43.

My argument in favor is consequentialist.  I think that, on net, the strike makes the world a safer place, for the following reasons.

1. The attack was on the military hardware used by Assad to launch chemical weapons attacks.  For Assad, the cost of using chemical weapons just increased enormously, and his capacity to use them has been reduced.  Human casualties seem minimal.

2.  Under Obama, America was a paper tiger, and the Russians, Iranians, North Koreans, and Chinese acted accordingly.  I suspect they'll now be more least the Russians and Chinese.  There may be some staring down, but America has a winning hand in that game, so long as Trump is willing to play it.

3. The BS about Trump being a Russian patsy is now obviously BS to any sane person.

4.  The dishonesty and incompetence of Obama, Clinton, Kerry, Rice, and the rest of those fools is exposed.

5.  America's reputation in the Arab and Muslim world has been boosted.

My friend's primary argument is that interventions unleash unintended and unanticipated consequences, and that there's danger in this.  That's no doubt true, but it's also the case that there's danger in doing nothing.  I think a world in which Assad can use sarin against civilians with impunity is a world in which Ali Khamenei and the Majlis, Kim Jong-un, and Vladimir Putin believe they can also do as they wish with impunity.  I also note that the Tomahawking was measured and appropriate.  It was directed against (and apparently largely disabled) the base from which the sarin attack was launched.  I can't think of any reason not to like that the Syrian Air Force lost 15 aircraft, as one report suggested.  At the same time, it's not an invasion, a commitment to further war or regime change, or anything else.  It's simply depriving a criminal of his weapons.  It's hard to imagine a more appropriately measured, limited response.  (Thanks, Mad Dog!)

The Russians are now in a huff, but so what.  I think there's very little they can do, and it's unclear why they'd gain from doing anything other than posturing.  But if they go farther and provoke a fight with the United States (something I gather my friend fears), well, they were eventually going to do it anyway then.  There's nothing in the Shayrat strike that would change Russia's calculus.

I don't know that I convinced my friend, but at least I've convinced myself.  This is how it all looks to me.

Interestingly enough, only a few hours before the missile strikes, Hillary Clinton said the U.S. ought to engage in airstrikes against Assad.  And as numerous observers have pointed out, Donald Trump has just enforced Barack Obama's red line.  Trump defending Obama's legacy, now that's an unforeseen contingency!

Photo: a Tomahawk lifts off from U.S.S. Ross. Go get 'em!

Thursday, April 06, 2017

Three Quick Observations and a comment

1.  It's just been announced that the United States Navy has fired 50 or so cruise missiles at Syrian Air Force bases.  Good!  Obama's "red line" was a lie, and his idle posturing encouraged continued bloodshed in Syria, emboldened that Russians to intervene on Assad's behalf, and enabled Assad's recent use of sarin.  No more idle posturing, and let tyrants around the world take note.

2.  The Senate Republicans have ended the filibuster rule that required 60 votes for cloture; Gorsuch will be approved and join SCOTUS.  The Democrats brought this upon themelves; I hope Gorsuch is joined by more Constitutionalists before long, and I hope the Democrat Party never recovers.

3.  It's clear that Barack Obama and his administration used the national security apparatus to engage in political espionage against the Trump campaign, and very possibly against others.  I hope very much that before this is done, Susan Rice, Evelyn Farkas, John Podesta, Hillary Clinton, and Obama himself are behind bars where they belong.  Put Lois Lerner in with them.

Re the the allegations that Trump is somehow in Putin's control, it's hard to understand how this could be.  For all his comments and semi-defenses of Putin as a strong leader (comments which I find outrageous), Trump's policies have been much less Putin-friendly than Obama's.  Advancing the Keystone XL and Dakota Access pipelines, proposing a buildup of the U.S. military and increased NATO strength, adding Macedonia to NATO, and now attacking Assad... One would suppose that people would finally catch on that Trump's blathering is no more meaningful than Obama's; it's action that matters, and so far, Putin shouldn't see much to like in Trump.

Saturday, April 01, 2017

What to do about health care reform?

Here are three excellent short articles on how to fix the health insurance mess.  In the wake of Ryancare ("wake" --  yes, that's a double entendre) there's been some very good analysis.  These are my three favorite pieces.

Economist Veronique de Rugy of the Mercatus Center points out how badly flawed the AHCA was, and also how foolish it would be to give up now on health care reform (as some have suggested) after only a couple weeks of frenzied and thoughtless effort.  As she points out, the AHCA did not constitute a serious reform.  It certainly didn't repeal ACA, and it did nothing to stop the rapid increases in insurance premiums.  As she correctly points out, [AHCA] "failed because it was a bad bill. It wouldn't have reformed many of the Affordable Care Act's regulations, and it would have done little to control rising health care insurance premiums. It also doubled down on the misguided idea that the government and insurers, rather than consumers, should pay for a large number of Americans' non-catastrophic health care needs. This, among other things, contributes to the rise of health care costs. Adding insult to injury, it was a political bill that failed the long-term stated policy goal of repealing Obamacare."  Real reform will repeal ACA, open a free market in health care, and shrik Medicare and Medicaid.

Law professor Charles Silver of University of Texas-Austin points out, correctly, that health insurance is the fundamental driver of spiraling medical costs, and that nothing short of eliminating most insurance will solve the problems and make health care increasingly accessible.  As he writes,
"In healthcare, the collective action dilemma stems from the fact that comprehensive coverage—by which I mean all forms of third-party payment, including Medicare and Medicaid, as well as private insurance—is the main driver of the healthcare cost spiral that gone unchecked since the mid-1900s.

The problem is a vicious circle.

1. The more insurance a person has, the less the cost of health care figures in individual decision making.
2. The less costs matter, the more willing people are to use healthcare, especially healthcare that is expensive.
3. The more people consume, the more society spends and the pricier healthcare becomes.
4. As healthcare costs increase, the more people want insurance and the more they want insurance that covers everything.
5. Return to step #1.

In short, third-party payment got the healthcare cost spiral going and has fed off it ever since."

The solution is made more complicated by the perfidy of politicians of both parties; "In the short run, the education program is the most urgently needed.  Republicans will have to teach fearful Americans that healthcare is expensive because it is insured.  This will be hard to do.  Democrats, most of whom want universal insurance coverage for everything and all of whom want to kick the Republicans out of office, will do what they can to stoke voters’ fears.  Health care businesses will too.  They know that private insurance, Medicare, and Medicaid are their cash-cows, so they will say and do what they must to protect them.

Worst of all, Republicans have undermined their ability to teach anyone anything by cultivating a reputation for being stupid, dishonest, and corrupt."

So what to do?  In my favorite piece of the three, aerospace engineer, futurist, and author Robert Zubrin considers simply outlawing health insurance (this would work!), but -- recognizing the risk of catastrophic costs from low-probability events -- suggests getting rid of most insurance, mandating and enforcing price transparency in health care, and... providing a universal catastrophic policy.  "[R]epeal Obamacare, with all of its mandates, as well as all prior incentives for employer-provided health-insurance plans. It would provide raises for federal employees, replacing their health-insurance policies with cash and encouraging state, local, and private employers to do the same. It would create a regime of enforced transparency, including published prices and hospital-cost ratings calculated by government statisticians, so that the public knew where health-care bargains were to be found. It would include regulations forbidding the uninsured from being charged more than the insured, and laws sharply limiting the maximum punitive damages obtainable from medical-malpractice lawsuits...And it would create a universal system of catastrophic health insurance, administered either through the federal government, the states, or employers."

He also notes, "The last item on the bill’s list could stick in the craw of conservatives, because a universal system of catastrophic health insurance might have to be single-payer to pass Congress with bipartisan support. But they should reflect: Such insurance would be very cheap, both because catastrophic insurance is in general cheap and because the free-market principles enshrined in the rest of the bill would drive down health-care costs across the board."

He's right.  I have often thought this.  In crop insurance, the USDA offers a CAT policy (catastrophic risk protection) that -- for a nominal fee -- protects the insured from a total financial disaster in the case of a 50% or worse crop failure.  It's cheap insurance for unusual events; it does not generate market distortions and it's not a source of taxpayer loss.  A similar health insurance would deflate almost all of the opposition to a free market in health care...or at least the opposition that's honest and well-meaning.

As Zubrin puts it, "[t]he last item on the bill’s list could stick in the craw of conservatives, because a universal system of catastrophic health insurance might have to be single-payer to pass Congress with bipartisan support. But they should reflect: Such insurance would be very cheap, both because catastrophic insurance is in general cheap and because the free-market principles enshrined in the rest of the bill would drive down health-care costs across the board. Besides which, unless there is serious reform along the lines described above, the ultimate result of Obamacare’s ongoing failure will be an enormously costly single-payer health-care system of the European variety. A system combining free-market principles that dramatically reduce costs with single-payer catastrophic insurance and a safety net for those who need it would certainly be a much better outcome."

All three of these articles should be read in their entirety.  They are not too long, and they say much.  Veronique de Rugy, Charles Silver, and Robert Zubrin should be on the team that designs the real Obamacare repeal!

Wednesday, March 29, 2017

Adverse Selection: Flaw or Feature?

"We" at Unforeseen Contingencies seem to be on a health insurance jag these days.

You can't have an insurance program that says "people can forgo buying insurance until an insured risk occurs, and then if one does they can buy insurance at the regular rate and receive complete coverage for the risk that has already occurred."  No healthy person would ever have any reason to buy insurance under such a scheme.  That's why Obamacare, with its "guaranteed issue regardless of pre-existing conditions" rule also contains another rule, a mandate requiring everyone to buy insurance.  The Ryan-Trump AHCA left the first rule intact but would have abolished the second, the mandate.  This would have guaranteed the more rapid destruction of the individual insurance markets.

This isn't a matter of opinion, conjecture, ideology, politics, or anything else -- it's basic economics of insurance.  It's also not difficult to understand -- anyone with basic understanding of insurance knows this.  So that has me wondering -- why did the Republican leadership propose a bill that would destroy the private market for individual insurance?  I don't have an answer.  I can see at least three possible explanations.

1.  Ignorance and Stupidity: never underestimate the power of stupidity or the pervasiveness of ignorance.  It could be that the Ryan, Trump, and Co. didn't know or couldn't understand what they were doing.  Given President Trump's infamous retort to the Freedom Caucus that their concerns were about "small  #@!*," I suspect this at least explains Trump's position.  But as soon as the bill was rolled out, numerous experts pointed out this flaw, and no attempt was made to fix it.  So I find this explanation unsatisfactory, although I can't rule it out.

2.  The Republicans wanted the bill to pass and for the individual market to collapse.  Very possible, since they were apparently trying to get the bill through both houses without having to attack the Senate filibuster; that is they seemed serious about passing it in the Senate, where certainly zero Democrats would have supported it.  OK, but why?  In this scenario, adverse selection is a design feature.  But what purpose would be served by hastening the collapse of the individual markets and getting the blame placed on Republicans?  I can conjecture, but frankly have no idea.  So maybe...

3. The Republican leadership wanted the bill to fail in the House, and adverse selection is again a design feature.  That's a very strange possibility, and it's hard to know what to make of it.  But it isn't implausible; there's circumstantial evidence, at least.  On the day of the rollout, Hugh Hewitt (a supporter of AHCA) was beside himself on his radio program over the fact that the GOP leadership was completely unavailable for comment and did nothing to promote or explain the bill.  Similarly, the secret meetings in which the bill was developed seemed almost staged to offend the House Freedom Caucus and its fellow travelers in the Senate.  So explanation #3 also seems possible.  But why would they do this?

Steve McCann, a writer for American Thinker, argues that Trump and the GOP leadership in fact support nationalized health care; his article makes a good case for this with respect to Trump.  I have often argued that the GOP leadership has no desire to tackle Obamacare or propose serious reform because of the difficulty; it's unclear how they benefit personally from fixing the mess, and they aren't harmed if the system collapses.  This is true of everyone in the political elite, regardless of party.  So for #3 I can tell what seems the most plausible story -- but again, it's conjecture.

In fact, for all three there's not much other than conjecture.  Perhaps there are other explanations, or a complex mix of all three explanations apply to different players.  (If any readers have explanations, please comment!)

I think it matters.  If #1 is the explanation, then the Hamilton/Haskins argument that this opens the door for real reform seems very likely.  But if #2 or #3 hold, then the McCann argument seems more likely.  And I  really don't know, I can only conjecture.

"Enough already, make a conjecture" cries the exasperated (and perhaps hypothetical) reader.  OK.  While #3 is the most plausible story, or perhaps #2 and #3 together since either one seems to take us towards nationalized "single payer" health care, my guess is that #1 holds.  I've personally observed many instances of intelligent, well-educated, well-read people making bone-headed errors in fields they should understand (arguably I've done this myself...but I won't make that argument!)  The best description of Congressmen isn't necessarily "intelligent, well-educated, well-read," and political processes are not particularly prone to procedural rationality -- in fact, they tend to generate incoherence.  (Did anyone actually read the bill?  If they did, did they think about what it said?)

In the end, I don't know if adverse selection was a flaw or feature.  But never underestimate the power of stupidity.

Tuesday, March 28, 2017

Observations on the failure of AHCA

In the wake of the failure of the Paul Ryan's AHCA, there's been some very interesting commentary, some of it excellent, so of it execrable.  Here's a sample that I've found interesting.

Michael Hamilton and Justin Haskins of Heartland Institute argue in the Washington Examiner that the failure of AHCA is a triumph for the Freedom Caucus and opens an opportunity for real repeal and reform.  They also point out that the Republicans must use the nuclear option, and need to do this now.  I fully agree... unsurprisingly, given that I made a similar point in my Heartland press release comments.  (See the March 9 post below.)

Bob Laszewski, who also opposed the AHCA and who knows as well as anyone why ACA is a catastrophe, disagrees.  He thinks the only way forward is to modify ACA, and that the GOP leadership is closer to the Democrats than to conservative Republicans on this.  Hence he thinks Ryan and McConnell and Co. will appeal to Schumer and Pelosi.  I don't agree with Laszewski's analysis of the conservatives, but he may well have the big picture right.

John Goodman, arguably the leading thinker on free market health care (and the inventor of HSA's) has a great piece in Forbes that explains clearly why Obamacare is destroying health insurance, and why the AHCA was much worse.  Must reading!

Mark Levin has torn the AHCA to shreds on his radio program with careful and discerning criticism.  but for reasons I can't fathom radio talk show hosts Hugh Hewitt and Dennis Praeger seem to have lost their minds over the issue.  Hugh Hewitt rambles about how the Freedom Caucus members are "Area 51 Republicans" waiting for a flying saucer to carry them away to Roswell.  Dennis Praeger simply calls them "purists."  I guess that's what you do in lieu of rational argumentation, but I'm unsure why ad hominem arguments are supposed to be convincing.  Both of them claim that opposition to the AHCA was an example of "letting the perfect be the enemy of the good."  Yet as Goodman and Laszewski clearly explain, the AHCA was worse than Obamacare.  I make the same point in my previous post.

As I suggested in my previous post, it's possible Ryan & Co. understood what a mess they were proposing, and had ulterior and nefarious reasons it.  Hewitt and Praeger?  I'll be charitable.  I'll assume Hewitt and Praeger aren't disingenuous and malicious but simply have no idea of how insurance works or what adverse selection is... in which case they are ignorant and should simply remain silent.  Or as the late Murray Rothbard put it, “It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.”

What was wrong with the AHCA -- why it was worse than Obamacare

Thank heavens the American Health Care Act (AHCA, a.k.a. Ryancare/RINOcare) was withdrawn.  It was worse than the Affordable Care Act (ACA, Obamacare).  Obamacare is unsustainable and is rapidly destroying the individual market in health insurance (this is the market where individuals purchase their own insurance, as opposed to the employer market where firms buy insurance for employees as part of their compensation.)  The AHCA would have accelerated the destruction of the individual insurance market through adverse selection, i.e. encouraging only the sickest people to sign up for insurance.  Here's why.

ACA has "guaranteed issue" provision for all health insurance, that is, an insurer may not take pre-existing conditions into account in selling insurance or determining premiums.  For example, if a potential customer shows up and has advanced cancer requiring expensive treatment, not only must the insurer sell this person "insurance," the insurer can charge no more than it would charge a perfectly healthy individual.  Needless to say, this means a healthy person has little incentive to buy insurance; waiting until one is sick is the financially responsible policy.

But that, of course, means that the people in the insurance pool, those buying insurance, will tend to be sick people. This means, in turn, insurance premiums will begin going upwards to cover the insurers' costs, and there'll be increasing use of cost-reduction methods such as higher deductibles and narrower and lower quality provider networks. Add to this Obamacare's rules of no cap on lifetime and annual payouts, and the requirement of comprehensive coverage, and insurance becomes extremely expensive.  The people who tend to drop out of the market first will be the healthier/less sick, inducing even higher costs and a death spiral of rising premiums and shrinking pool.  Adverse selection becomes a self-feeding cycle.

To try to prevent this, Obamacare also included a mandate -- people are required to have insurance, and if they don't must pay a fine tax.  This was supposed to provide an incentive to keep healthy people in the pool and thus prevent the death spiral.  Insurance expert Bob Laszewski says an insurance pool must have 75% of eligible people sign up to be sustainable.  Obamacare had 30%.  The mandate proved ineffective, as people either paid it or ignored it and it wasn't enforced (I know people who fall into each category), and adverse selection began destroying the individual insurance market.

So how was AHCA worse than this nightmare?  AHCA retained "guaranteed issue," co cap on lifetime or annual benefits, and the mandate that insurance be comprehensive, but abolished the mandate that people buy insurance.  That increased the incentive for healthy people to stay out of the insurance market, which would have accelerated adverse selection and the death spiral.  AHCA substituted a one-time one-year 30% surcharge on any uninsured person who decided to buy insurance.  So, for example, if insurance costs $10,000/yr, a healthy person could avoid buying insurance for every year they were healthy, saving $10,000/yr.  Then, when they finally became sick and needed insurance because of, say, expected medical bills of $100,000, they could spend $13,000 for full insurance.  What a deal!  No healthy person should ever buy insurance under that scheme!

Needless to say, this would destroy individual insurance quickly, more quickly than Obamacare is doing.  That's why Bob Laszewski called AHCA "mind-boggling;" to anyone who understands insurance it's so obviously destructive that it is hard to imagine its a real proposal.  Mark Levin argued this evening that the Ryan and Co. never really meant for it to pass; they simply wanted to make a gesture so that they could pretend to have tried to repeal Obamacare while actually never doing anything, since fixing this mess will be difficult and risky.  That's very likely right... although one should never underestimate stupidity as the explanation.  Maybe they really imagined this crazy scheme could work.

Regardless of the motives of supporters of Ryancare, as a system, it was a catastrophe that would have destroyed individual insurance and likely had negative effects on employer insurance.  I expect that my premium increases would have accelerated under Ryancare (Ryan himself argued the growth rate would slow -- "higher insurance premiums! but could have been worse so success!")  There were other aspects of the bill that were desirable, such as higher caps for HSA's (tax-free health savings accounts) and repeal of the Obamacare subsidies and replacement with the Rynocare subsidies tax credits.  But here's the bottom line:

If we destroy the private sector insurance market with government intervention, what follows will be nationalized health insurance and national health care -- socialized medicine.  And that's where the AHCA was taking us.  Good riddance.

Sunday, March 26, 2017

On the failure of AHCA

The American Health Care Act (AHCA) was pulled from consideration by Paul Ryan.  When Ryan announced he was pulling it, Heartland Institute immediately asked for comments from its experts for a press release.  I'm on the list and had a free moment to send some comments.

Here's the press release.  It contains my thoughts, as well as those of four others, and all are worth reading.  Mine are the last. (They saved the best for last? Buried the worst at the bottom? Either way, at least I'm not mediocre... hahaha!)

However, they did cut my submission, perhaps for length, or relevance, or to help me avoid mediocrity, or for some other reason.  Probably length.  Regardless, here is my original set of comments...unexpurgated!  (It's the penultimate paragraph that was cut.)
Comment from Steele:

The decision by Paul Ryan to pull the AHCA bill is a good one, but it must be followed by developing a much better bill.  The AHCA really is not a repeal of the ACA but a modification, and not a very deep one.  It left untouched some of the deepest flaws of ACA.  For example, there's the prohibition on taking pre-existing conditions into account  when an uninsured person decides to buy insurance.  There's also the absence of annual and lifetime caps on payouts.  Never mind whether these are "fair" or liked by the many among the public, together these guarantee that insurance costs will rise uncontrollably and that insurance programs will eventually collapse from adverse selection.  The comprehensive nature of coverage simply adds to the problem.

One of the main drivers of increasing health care costs is insurance.  Having all purchases of health care handled through insurance means patients have no way to make decisions about the benefits and costs of care, and no way to shop for good deals in health care.  Decision making must be returned to the patient, on a free market for health care services.  This cannot happen under schemes like ACA and AHCA, and requires that the Republicans rethink the entire approach to reform.

The notion that AHCA is just the first of three phases is specious.  The Phase 2 regulatory changes from HHS are at best temporary stopgaps.  Phase 3, additional changes made in a bill that can garner 60 Senate votes, is a pipe dream, given the current Senate.   And none of this addresses the growing crises with Medicaid and Medicare.  Speaker Ryan and the GOP need to simply get one good bill together that  genuinely repeals ACA and gets us to a free market in health care.  This will take careful thought and great determination, and they should simply get on with it.

One thing that I find disturbing is that the Republican leadership seems more beholden to the Senate filibuster rule than to the liberty of the American people, the Constitution, or the quality and affordability of our health care.  The Democrats are behaving as complete obstructionists, and should they return to power with the basic framework of Obamacare in place, they'll use it to take us all the way to fully socialized medicine. The Republicans should simply acknowledge this and get to work dismantling government intervention in health care.

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