2centsworth.info

Well the citizens of Massachusetts (and, indeed, the State Legislature) are waking up to just what a mess this so-called universal healthcare initiative actually is.

The front page of the Boston Globe (January 27, 2007) has an article talking about the bloated salaries being paid to the administers of this quasi-state agency (the official name is the Commonwealth Health Insurance Connector). The Globe article points out that average salary of the 22 employees is $111,000 and that six of them have higher salaries than the Governor. One of them gets $175k and only works a four day week.

The best spin one can put on this is that these folks are really good at their job and totally dedicated to getting the best deal possible for the State’s citizens. But, as pointed out in an earlier posting, the average cost of this program’s insurance is going to be $380 per month for an individual… This is actually higher than what most citizens could obtain on their own. So why are we paying these bloated salaries?

The answer, as usual in Massachusetts, is that these quasi-state agencies (like the Mass Turnpike Authority and Massachusetts Port Authority) provide lots of well-paid patronage jobs and are virtually unaccountable. And the Commonwealth Health Insurance Connector is turning out to be the same thing.

Just as Medicare Plan D was set up to serve the interests of the big insurers and pharmaceutical companies, the Commonwealth Health Insurance Connect was set up to serve the interests of local commercial health insurance providers. Note that under this plan citizens are going to be required to buy their insurance… And if you cannot afford to buy their coverage, the taxpayers will subsidize the cost of your inadequate coverage. It all means more money for the insurance companies (and six-figure salaries for the Connector administrators).

Not only is the mandated insurance unaffordable, but the actual coverage being offered is unknown. One would think that there should be complete transparency, that one could go to a website and get the details of the coverage being offered. Think again. Even, the 10 member board of directors are apparently in the dark. They don’t seem to have any knowledge of the coverage details, they had no say in who was hired and at what salaries, and, according to the Globe article, they are forbidden to make any public statements about the agency. And Massachusetts State Legislators are also in the dark about this program. Several have been quoted as saying that their requests for information from the agency have stonewalled.

And, remember, Massachusetts citizens are going to required to purchase this insurance. Furthermore, people are being thrown off the Federal Medicaid healthcare program and being required to get this Commonwealth Connector pig-in-a-poke.

The Massachusetts Turnpike Authority was created about 40 years ago to run the tollbooths on the Mass Turnpike and use the revenue to pay off the state bonds that funded the turnpike construction… But those bonds were paid off about 20 years ago and the Turnpike Authority should have been dissolved. But the State Legislature kept it in existence and used it to float more bonds (and then said they had to keep it running to pay off those bonds)… And, of course, it was a good place for politically well-connected folks to get a job. Famously, they had “couriers” who drove packages between various Authority offices that got paid $70k per year.

And, even more famously, it was the Turnpike Authority that was responsible for the colossal mis-management of Boston’s Big Dig; leading to billions of dollars in cost overruns and, ultimately, the death of motorist when a tunnel roof collapsed.

And the Massachusetts Port Authority has a similar track record of patronage, bloated costs, incompetence, and tragedy. Two of airliners that were hijacked on 9/11 flew out of Boston’s Logan Airport. MassPort’s chief of security at the time? It turns out that he was the driver of the previous Republican Governor, Bill Weld. How does one go from being a driver to head of security for an international airport earning a six-figure salary? Well, that’s what these quasi-state agencies have been all about.

So add the Commonwealth Health Insurance Connector to the list… We can only expect more waste, corruption, comedy, and tragedy. It was set up to provide guaranteed revenue for insurers and patronage jobs that can be doled out by the politicians on Beacon Hill.

It is noticeable that even industry lobbyists like John McDonough and key members of the legislature that were responsible for creating this agency are now trying to distance themselves from it.

I absolutely agree that we need a means of providing high quality, affordable healthcare to our citizens at all income levels but this is certainly not the answer.

I saw a very interesting program on PBS FrontLine the other night about the growing epidemic of addiction to meth-amphetamines. You can find out more at the The METH EPIDEMIC page on the pbs.org website.

The program describes how the US Drug Enforcement Agency (DEA) attempted to head off the problem of meth-amphetamine addiction 20 years ago by controlling the production and distribution of ephedrine and pseudoephedrine, the key ingredients used to manufacture meth-amphetamine. Apparently both ingredients require very sophisticated manufacturing technology and they are made by only 9 industrial plants world wide.

But when the DEA attempted to set up controls on the manufacture and distribution of ephedrine and pseudoephedrine they were repeatedly stymied by Congressional interference brought on by lobbyists from the various companies that make over-the-counter cold medicines that use ephedrine and pseudoephedrine. Even as “Meth” addiction grew to epidemic proportions during the 90’s, Congress and the pharmaceutical industry lobbyists fought every attempt to keep these key raw ingredients out of the hands of the drug cartels.

When the DEA managed to stop direct shipments from the manufacturers to the cartels, the cartels began having people buy over-the-counter cold remedies containing ephedrine and pseudoephedrine from local pharmacies. When various States tried to have pharmacies take action to control who was buying these cold medicines, the pharmaceutical industry lobbied against it. In the FrontLine program someone suggested that 75 percent of the cold pill industry sales in some States came from people buying on behalf of the Meth drug cartels.

I generally view class action suits as an excuse for lawyers to get a lot of money but they do serve a useful punitive purpose at times and given that we now have more than 1.5 million citizens addicted to Meth, and since there seems clear evidence that this was avoidable… and that it happened because of lobbying by the cold pill manufacturers… Perhaps one or more law firms might try bringing a class action suit against the manufacturers.

And given the huge costs that Meth addiction has imposed on local and State law enforcement, prison systems, and healthcare… I don’t remember the exact number but something like 80% of the prison inmates in Oregan are Meth addicts. Perhaps the various State Attorney Generals should bring suit against the manufacturers as well and recover, say, 80% of the cost of operating the prison systems.

The US healthcare system is a shambles (e.g. 44 million uninsured, the highest per-capita spending in the world but health statistics among the worst outside the Third World, etc.) but one of the bigger problems is the sky-rocketing costs of prescriptions drugs.

One of the current battles going on in the newly Democratic Congress is an attempt to control the costs of prescription drugs purchased under Medicare Plan D. The previous Republican-controlled Congress (having received $ millions from Big Pharma) had explicitly forbidden Medicare from even negotiating on price with the pharmaceutical companies.

The “so-called” ethical drug industry (the “so-called” modifier has been applied to Big Pharma since the 60’s but only now is the general public really understanding why the term was coined) has long held that any attempt to control their prices would turn off the never ending fountain of miraculous remedies that these white-coated priests of science and medicine produce. Never mind the fact that they are perpetually the most profitable industry in the world.

There was a recent headline article (Showdown Looms in Congress Over Drug Advertising on TV; January 22, 2007 by Milt Freudenheim) in the New York Times that pointed out that the pharmaceutical industry is on track to spend $4.5 billion on TV advertising directed at consumers. This is up from $1.1 billion in the late 1990’s.

I think anyone who watches prime-time TV has noticed that virtually all the ad’s are now for prescription drugs (sleep-aids, cholesterol-lowering remedies, remedies for incontinence, etc.). The focus of the New York Times was on the amount of false and misleading information is being provided in these ad’s but my feeling is this direct-to-consumer advertising represents an easy $4.5 billion in immediate savings to the consumer and taxpayer if it was outlawed. I don’t think prescription drugs should be advertised to consumers at all.

You could also save billions by eliminating all the free lunches, all-expenses-paid junkets, and gifts that the pharmaceutical industry uses to reward our more corrupt medical professionals for prescribing (or mis-prescribing) their products.

And then you could save another few billion dollars by eliminating the high-pressure pharmaceutical salesmen that infest our doctors’ offices, clinics, and hospitals. According to a recent Boston Globe article there are 6 pharmaceutical salesmen for every doctor in Massachusetts. I imagine the ratio is similar for all the other states.

And there might be a few million dollars to be saved by eliminating the stream of money that Big Pharma’s lobbyists use to corruptly influence our legislators.

In today’s (January 20, 2007) Boston Globe there is an article entitled Sticker shock for state care plan talking about the new Massachusetts state-mandated health plan…

State-mandated, to be clear, means that all citizens are going to be required to have state-approved health coverage. If you cannot show that you have state-approved coverage then you will be penalized on your state taxes (there was even talk of having your drivers license revoked).

This plan is supposed to eliminate the state’s population of uninsured people by forcing them to sign up for insurance. Unfortunately, nothing in the plan does anything to make the insurance offered affordable. The underlying agenda is to use the state’s enforcement capability to provide an additional revenue stream to politically well-connected insurance companies.

There is this strange notion that the majority of the uninsured just cannot be bothered buying insurance. In actual fact, the vast majority of folks without insurance simply cannot afford it.

According to the Globe article, the average individual’s monthly cost under the state-mandated plan will be $380 per month. That is about the same monthly cost as I pay for the health insurance I get through my local Chamber of Commerce… And I get the strong impression that the state-mandated coverage will actually cover less than my current coverage.

Of course, what will and will not be covered is rather hard to figure out. The details of the coverage being proposed by the insurers are “secret.” Even State Legislators have been unable to get any details on what is and is not included in the coverage.

It seems from the Globe article that the state panel responsible for setting up the plan was hoping to establish coverage that would cost about 50% of the current norm for commercial coverage (i.e. the mandated insurance would cost about $200 per month for an individual). And the insurance companies were OK with that until they found out they were actually expected to provide at least a minimum level of coverage.

As one of the members of the State panel, MIT Economics Professor Jonathan Gruber, stated, “If we’re going to mandate this, people need to see that they’re getting some value.”

This gets back to a fundamental issue with healthcare policy. Free market capitalism and private enterprise are not the way to go with healthcare. Free market capitalism leads to enormous efficiencies in some areas. Computers and consumer electronics get better and better and cheaper and cheaper each year. But that is because the right market conditions exist.

There are a number of conditions that need to exist to create efficient markets. You need real competition between vendors or providers (which doesn’t exist in the healthcare market), you need the purchasing decisionmaker to be the same individual as the final consumer (which doesn’t exist in the healthcare market), and you need the purchases to be fully knowledgeable about the products or services being provided (which is not the case in the healthcare market), and you need elasticity of demand (which doesn’t exist in the healthcare market).

Competition

In most states there are only 3 or 4 health insurance companies operating. And for the most part they offer similar coverage for similar prices. One of the reasons that healthcare costs keep rising is that no one is trying to keep them under control. The insurance companies are basically skimming a percentage of the revenue that passes through their hands on the way to doctors, hospitals, medical testing companies, and the pharmaceutical industry. The more money flowing through, the higher their profits.

Individuals do not decide who provides their coverage

The vast majority of individuals get their healthcare through their employer. The individuals do not decide which insurance company to use… Their employer’s HR department decides. And the HR department is deciding based on the cost of the plan to the employer, how easy or difficult it is for the HR department to deal with that insurer, etc. Very few individuals decide to accept or reject a job offer based on what health plan the company offers and even fewer would leave a job for that reason. In the end, companies will happily sacrifice individuals coverage in order to save themselves money… Or they will follow the Walmart sweatshop approach and provide lavish coverage for their management personnel and no coverage at all for their rank and file employees.

Lack of transparency

Even the HR departments are largely flying blind when it comes to what is and is not included in a given plan’s coverage (I know, having asked the HR folks at a number of my previous employers). And, as we have seen in today’s Globe article, the people managing this State effort are similarly baffled by the obfuscation tactics and fine print used by the insurance companies.

Elasticity of Demand

In order for a healthy (so-to-speak) free market to exist, buyers need to be able to not buy a product or service if they think it is too expensive. The classic example used in college economics class is “water in the desert.” If you must have something to survive, you will pay any price to get it. The healthcare market is a bit more complicated but, if you have a medical condition that is life threatening or makes you horribly uncomfortable then you are not going to be able to walk away from buying a cure or treatment. In contrast, if that new wide-screen TV is too pricey, you can wait until next year.

Eat your own dogfood

Probably the only way we can make sure that this Mass State mandated plan is providing people with adequate coverage is by mandating that the State Legislators, State Officials, and their families use the plan too. Otherwise, we will be creating a state-mandated 2nd-class-citizen health plan.

And the only way we will reduce costs is when there is complete transparency about what is covered and how it is paid for. With that sort of transparency we have a better chance of streamlining the system and removing waste.

Good places to find out more about this issue are:

www.masscare.org

healthcareformass.org

When I look at the array of likely 2008 presidential candidates, from both parties, I feel a bit queasy. I am an independent, I have voted for both Republican and Democratic candidates in the past. I do certainly pay attention to a candidates policy stands but I am would prefer to vote for candidates that have shown some leadership and integrity.

I have not seen much of either in the last few years…

So who do we have in the running?

• John McCain – I voted for him in the past but I don’t think he has shown much leadership or integrity of late. He must despise GW, look at the tactics that GW’s campaign used against him during the primary. Yet he has repeatedly allowed the Bush campaign to use him to shore up GW’s rather deficient military credentials. And he must have known from day one what a disaster Iraq would be. So, forget McCain.
• John Kerry – God I hope he doesn’t run. To my mind John Kerry is the Democratic equivalent of GW. Hyper-privileged, went to all the best schools, had everything handed to him on a plate, achieved nothing, and then went into politics. He’s been the senator from my state for as long as I can remember and yet I cannot think of single bill he initiated, or principled stand he took. And he did flip-flop. Like McCain, he must have known that the Iraq invasion was stupid but he was scared of the polls and voted to invade like all the other gutless wonders in Congress… So no to John Kerry.
• Mitt Romney – It’s sort of funny. I actually helped vote Mitt in as Governor. I doubt many people outside of Massachusetts understand the peculiar political dynamics that got Mitt elected as a Republican Governor in an overwhelmingly Democratic state. The Massachusetts legislature has been dominated for decades by a corrupt bunch of South Boston Irish-American politicians and they have totally dominated the State’s Democratic machine. The voters have repeatedly voted in Republican Governors… Essentially, as a protest. Mitt got voted in because a majority of voters figured voting for Mitt was the equivalent of a write-in vote for “Mickey Mouse.” He’s a Republican version of John Kerry. Born with a silver spoon in his mouth, floated through life thanks to lots of money and political connections. Never really accomplished anything. Oh, I forgot, he ran the Salt Lake Olympics… Right. With that on his resume, sorting out Iraq will be duck soup.
• Hillary Clinton – Hillary is intelligent, seems to work very hard, and is about as tough a character as I have ever observed in US politics. But I also think she is unscrupulous and self-serving. Her constant support for unacceptable Israeli policies and blatant pandering to the NY Jewish vote is quite unattractive.And she seems to be taking a page out of the G.W. Bush playbook… Never admit a mistake. When challenged on her voting to support the Iraq invasion she says she was misled by the Bush administration erroneous information about WMDs and connections between Iraq and Al Qaeda. Yeah right. Whatever else one can say about Hilary, she’s nobody’s fool, she knew the administration justification was bullshit. But she was reading the polls and decided to do what was politically expedient at the time. It has come back to haunt her and I suspect it will thwart her presidential ambitions.
• Rudolf Giuliani – I thought Giuliani handled himself well after 9/11 and he was also able to maintain at least some distance between himself and GW… Against what I imagine was immense pressure. So.. Rudi’s a possibility.
• John Edwards – I always preferred him to Kerry. I have a bias towards self-made types as opposed to wasted scions of our imitation aristocracy. I am not crazy about lawyers but I prefer a good one to a bad one. And I like his policies. I might vote for John if he survives the primary season.
• Barak Obama – I am getting serious doubts about this guy. Does he have any kind of track record? What has he done apart from getting elected to Congress? He speaks very well but it seems to be largely platitudes. He is getting tons of media attention but for what?

Update 31JAN09: What a difference a year makes. Not only is Obama our new President but I actually voted for him. It took about 6 months but by the time the Democratic Convention was looming, Obama had convinced me that he was, if not “The One”, then at least the best choice available… And we have Hillary as Secretary of State. Oh well, at least she’s not incompetent and, one hopes, Obama has folks keeping an eye on Bill.

I really feel that American politics is devolving… We are getting more Third World. We vote in George Bush, Senior and then eight years later we vote in GW. What’s that remind you of, eh? Papa Doc and Baby Doc.

And now people are seriously talking about Hillary. What’s that remind you of? Juan and Eva Peron, maybe? Maybe we’ll have Madonna sing “Don’t Cry for Me, Argentina” at the convention.

Remember Gerald Ford and Jimmy Carter. I cannot say I was all that impressed with them back when they were in office but, boy, do they look good compared to the current bunch.