William J. Polley

Ok, that last post made me feel like I had gone down the rabbit hole, so it's only appropriate to post this to bring a smile back to your face.  Enjoy.

They could have titled the article, "Health researchers 'discover' that demand curves slope downward, find pizza has more substitutes than soft drinks."

Yawn.

But Reuters went with "Tax soda, pizza to cut obesity, researchers say."

Where does it stop?

This is an amazing back-and-forth from yesterday's White House press briefing.  They are doing this on the fly, folks.  They are governing based on public opinion polls and the 24 hour news cycle.  (Yeah, I know... this administration is not the first, but they are getting better with experience.)

Anyway, just read this.  Notice that Secretary Gibbs has no clue how to explain this.  Obviously he was badly prepped.  After reading this, and even after reading the NY Times article, I am left wondering what this would really do.  Is this just a device to strong-arm the states or would it have real power?  Have they even worked that out yet?  It's not clear to me.

What is clear to me is that it could put a lot of power to influence price and quality into a politically appointed panel being run out of a cabinet office.  What could go wrong?

Q    This new idea for the health insurance rate commission, I guess my confusion is, is this a commission that would sort of be -- serve as a guide to the other states, to the 50 states that do the actual regulating?  Or is this supposed to be a regulatory agency with --

MR. GIBBS:  No, no, no.  This is a -- the Secretary in conjunction with states will develop a review process for unreasonable premium increases.

Q    So the states are still going to be the regulators?  The federal government is --

MR. GIBBS:  Well, obviously they're still going to have --

Q    -- acting as a guidance counselor of sorts?

MR. GIBBS:  They're going to still have a big role in this.  Obviously there are state insurance commissioners that have some ability to change these.  Not everybody does.  But these can -- these will be looked at and evaluated in conjunction with the states, and then steps and measures can be taken.  Because again, Chuck, I think that -- I mean, we've even seen it now with Anthem, that proposed the 39 percent increase, that they've even put that increase on hold.  I think they understand that this was not a --

Q    No, I understand, but is this supposed to be a new federal regulatory agency?

MR. GIBBS:  It's not a new federal agency.  There's no new bureaucracy.  This will be done out of the Secretary's office in Health and Human Services.

Q    Out of HHS?

MR. GIBBS:  And we'll get -- I'll get Reid to walk you through some more --

Q    Okay, because that -- it's just a little confusing if this is a new agency.

MR. GIBBS:  Yes, ma'am.

The NY Times reports that President Obama wants the government to have veto power over private health insurance company rate increases.  (via Greg Mankiw)

WASHINGTON -- President Obama will propose on Monday giving the federal government new power to block excessive rate increases by health insurance companies, as he rolls out comprehensive legislation to revamp the nation's health care system, White House officials said Sunday.

...

By focusing on the effort to tighten regulation of insurance costs, a new element not included in either the House or Senate bills, Mr. Obama is seizing on outrage over recent premium increases of up to 39 percent announced by Anthem Blue Cross of California and moving to portray the Democrats' health overhaul as a way to protect Americans from profiteering insurers.

Ok, 39 percent is a lot.  I'll give you that.  So my first question would be whether there is a reason for that.

Anthem, California's largest for-profit insurer, has announced premium increases for nearly 700,000 customers, citing the soaring costs of medical care and the effects of a weak economy in which many younger and healthier people are dropping insurance. But the increases, far outpacing the rate of medical inflation, led to outrage among officials in Sacramento and Washington.

Less disposable income leading to a worsening of the adverse selection problem?  I'd like to see the numbers on that.  While I'm a little skeptical, I'll admit that I don't know enough of the details.  Let's go on...

The president's bill would grant the federal health and human services secretary new authority to review, and to block, premium increases by private insurers, potentially superseding state insurance regulators. The bill would create a new Health Insurance Rate Authority, made up of health industry experts that would issue an annual report setting the parameters for reasonable rate increases based on conditions in the market.

Hmmm...

The legislation would call on the secretary of health and human services to work with state regulators to develop an annual review of rate increases, and if increases are deemed "unjustified" the secretary or the state could block the increase, order the insurer to change it, or even issue a rebate to beneficiaries.

The new rate board would be composed of seven members, including consumer representatives, an insurance industry representative, a physician and other experts like health economists and actuaries, the White House said. The board's annual report would offer guidance to the public and states on whether rate increases should be approved.

Seven (politically appointed) people in charge of deciding how much you'll pay for health insurance.  Of course, they will be infinitely wise, incorruptible, and above political influence, right?  Yeah, right.

[Senator Dianne] Feinstein said that only 25 states allowed their insurance commissioners to regulate rates and that California was not one of them. "For the life of me, I am not sure why not," she said. "The time has come for the secretary of health and human services to step into this."

I'm not a huge fan of government regulation, but in our country we have come to a basic agreement that insurance should be regulated by the states.  This is an imperfect system.  Some states will do it well; others will not.  But the same is true of roads and schools, which have also been left in their care.  So half of the states have figured out how to take care of this themselves, and we need the federal government to be the nanny for the ones that don't have the courage to do it.

Now the fact that Anthem is raising their rates 39 percent suggests to me that Anthem may have caught onto the fact that California's regulatory environment is lax.  If there was a stronger insurance regulator, perhaps they would be a bit less aggressive.  Perhaps.  I'm trying to give the benefit of the doubt here.  Ms. Feinstein, I agree with you that for the life of me, I'm not sure why California hasn't done it since it looks like it might be a problem.  But with all due respect, that's California's problem.

On a related note,

Leaders of the National Governors Association meeting in Washington on Sunday expressed frustration that they had been largely shut out of negotiations over the future of the health care system, even though they would be responsible for carrying out many of the changes envisioned by federal officials. They said they wanted more of a voice in shaping those changes.

Indeed.  Nervous about turning your state's regulatory power over to seven federal appointees?  Come on... what could go wrong?

Mankiw calls this an example of price controls.  He's right, to a point.  Our system of health insurance, such as it is, really stinks.  The fact that it really is 50 different statewide markets with different regulations is bad enough.  Tying health care to employment is another problem.  There are plenty of things that could be done to improve the system.

This isn't one of them.

Selling insurance isn't like selling apples.  There are a lot of variables to consider.  Suppose companies are forced to accept lower rate increases.  There are dozens of ways that they could respond to reduce coverage.  How is that seven member committee going to keep up with that for all the insurance companies in the U.S.?  Are they going to tell them what they have to cover?  What the deductibles can be?  Hardly realistic, is it?  I mean, that sounds like that seven member panel would be more ambitious than whatever bureaucratic apparatus would run Obama's health plan.

Actually, they would probably just publish guidelines as to what is acceptable, but how detailed could those guidelines be?  If a company wanted to go outside those guidelines would they have to appeal?

The mind reels.

There is no way that this would end well.

To be continued...

From CNN comes a story of a 12 year old who was arrested for writing on her desk at school.  Obviously, this calls for some "expert" analysis.

Kenneth Trump, a security expert who founded the National School Safety and Security Services consulting firm, said ... zero tolerance policies can work if "common sense is applied."

But I thought zero tolerance came about because the people entrusted with our children could not be trusted to use common sense and so must be prohibited from using common sense.  One does not have to use common sense, or even be capable of conscious thought to apply zero tolerance.  A computer could be programmed to do it.

But once you start allowing people to use common sense some of the time, you might have some renegades who will actually start using it all the time.  Then it's not really zero tolerance anymore, is it?  Then it's just... well... common sense.

Whether those involved are capable of using common sense (in the way that most reasonable people would) is, I admit, a legitimate question--the implications of which go well beyond a simple blog post.  I will also admit that it is a challenge for anyone to be fair and consistent in dealing with a diverse range of situations.  I understand why zero tolerance is appealing, and perhaps in some extreme cases desirable as a "second best" solution.

But some people are capable of using common sense.  They should be put in positions where they can use it.  Those who are incapable of using common sense should not be in those positions.

A good litmus test would be to ask whether they support zero tolerance policies.

Afterthought:  I'm sure the expert who founded a consulting company would be happy to sell you his version of common sense for a fee.