The budget problems are all healthcare related

Fix ItHealthcare spending in the U.S. accounts for 17.6% of the economy, and is projected to be 20% by the end of this decade.  These are not federal budget numbers, this is the whole economy.  $1 out of every $6 that’s spent in this country is spent on healthcare.

For context, that’s double the percentage spent in the average OCED country.  In absolute dollars, we spend 2.5 times more per capita than average, at $8,650/person.  And for all that money, we rank just under the average for life expectancy and infant mortality.

This is a pointless drag on the entire economy.  Not only for the government and private employers, but for workers as well.  One of the reasons wages have been so flat for the last decade is that money available for employee raises has gone into preserving medical coverage rather than increasing take home pay.

Yet this is also a big issue, perhaps the only issue, for the current budget problems faced by the federal government.  Government spending on healthcare (including employee plans, veterans benefits, as well as Medicare and Medicaid) is $1.17 trillion each year.  And this is projected to double over the decade.  Granted, these numbers are inclusive of state and local government spending as well, but this is still paid for with our tax dollars.

In other words, considering our 2.5x cost premium, there’s $700 billion/year sitting on the table if we manage to get our healthcare costs in line with our global peers.  Even assuming the federal portion is only half of that, the numbers dwarf any of the cost savings currently proposed by either party’s budget plans.  Couple this with the already planned savings for drawing down the wars, and our deficit goes away by 2020.

This is the only budget problem we need to be addressing.  It saves Medicare, Medicaid, Social Security, NASA, Pell Grants, and everyone else currently on the chopping block.  Do the math.

So why aren’t we focused on fixing this?  Primarily because the proven method of achieving the healthcare cost goals, the one used by pretty much every other OCED country we are benchmarking against, is some form of single-payer model.  And for reasons known mostly to powerful corporate lobbies for insurance, pharmaceutical, and medical device  companies, single-payer health plans are socialist Nazi plots to kill Grandma. Instead, we are committed to responsible prudent austerity founded on shared sacrifice… because Grandma prefers be bankrupt such that she is forced to choose between food and medicine.  After all, it is about having a choice.


The GOP may be running out of feet to shoot

National Lampoon Cover
Don't make us resort to drowning kittens!

Senate Minority Leader Mitch McConnell continues to stand by his claim that Job 1 for Congressional Republicans is to defeat Obama in 2012.  Yet the question looms, how far are they willing to go to make that happen?  Recent history suggests, pretty damn far.

To understand what’s going on, you have to first recognize that the GOP is beholden to two major groups.  On the one hand they are funded by big business and the wealthy businessmen created therein.  The interests of this group define the overall agenda and goals for the party.

On the other hand, the foot soldiers at the polls are largely made up of blue-collars, religious fundamentalists, and seniors.  This group is necessary because, come November, you have to have lots of bodies show up to vote for you.  But they are ultimately fodder as far as the policy agenda goes.  They get tossed a rousing speech, a few sound bites, and an occasional red meat issue and it keeps them fired up and loyal. I’m somewhat reminded of Dennis Hooper’s line from Waterworld where he launches into a motivational tirade for his crew and they all storm off below decks to row their hearts out.  He’s asked, “So which way we rowin’?” And he replies, “I don’t have a goddamn clue. Don’t worry, they’ll row for a month before they figure out I’m fakin’ it.”

Now consider, the GOP won handily in 2012 on their promise of jobs, jobs, jobs.  Then, once in office, immediately focused on Obamacare and abortion.  Why?  For starters, creating jobs is hard. Especially when the economy is in a demand slump and the interest rates are bumping the zero-bound. The only solution is federal deficit spending, and they sure as hell weren’t going there.  After all, deficits are bad.  Not for the reasons often touted, but because ultimately deficits have to get repaid through taxes—something their corporate benefactors are not fond of—especially when corporate profits and CEO salaries are soaring.  Which brings us to the second point.  Among their fodder constituents, abortion and Obamacare are both reviled.  So the strategy was essentially to distract one group while appeasing the other.

Next up is the Paul Ryan budget.  No one in the GOP thought the plan had a snowflake’s chances in hell of passing, yet they lined up behind it in droves.  Why?  Two reasons.  First, the plan was a message to the corporate benefactors.  This was a wish list for the privatization of government programs and tax cuts that all serve to line the pockets of the folks who in turn fund the Republicans.  By standing behind it, they were assuring the benefactors they had their backs.  Secondly, the plan was political.  Actually passing a plan means you can be evaluated down the road for its efficacy.  Proposing a plan that can’t pass puts you in a position down the road to say that things suck because nobody listened to your ideas.  Politically this was a much more powerful position to be in.

However, the GOP underestimated their fodder constituents.  You’d think they’d have learned from Bush’s crash and burn on Social Security privatization, but not so much. They tried to couch the language, but the public saw through that.  The result being that Ryan’s budget is now enormously unpopular because it is recognized to fundamentally change Medicare.  It turns out that when fodder folks talk about support for smaller government and less spending, they don’t mean to include programs from which they benefit directly.  The message sent to Republicans in NY’s 26th District special election was overwhelmingly, mess with Medicare and we will vote your ass out.  This was the GOP’s first shot to its own foot.  It’s limping, and looking for a path back to hale and healthy. (Gee, I hope they can afford medical insurance.)

Still, the scary specter on the horizon is the debt ceiling.  If the Ryan budget was a pistol shot to the left foot, the debt ceiling is a hacksaw poised above the right knee.  All the sane people (which is not all of the people) on both sides of the aisle agree the ceiling must be raised.  To not do so would be economically disastrous with long-term consequences.  Even Wall Street is saying this has to happen. Both sides also recognize the Republicans are simply taking an opportunistic hostage to gain political advantage.  This is a dog they clearly don’t want to shoot, but if you think they just might be crazyenough, maybe you’ll buy the magazine anyway.

Again, why are they playing it this way?  And again, there are a couple of forces at work here.  On the one hand, the debt ceiling is enormously unpopular.  In fairness, understanding the nuances of the impact of the debt ceiling on the macroeconomic health of the U.S. economy is hard to capture in a sound bite, and most people lack the interest or the time to delve into the details.  Besides, the GOP has already established with the fodder constituents that deficits are bad. So selling a refusal to move on the debt ceiling is duck soup.  Besides, if they can get major concessions from Democrats, they will be in the politically favorable position of being able to crow about their accomplishments.  But there are more subtle and insidious forces at work here.

Everyone acknowledges that Obama’s reelection hopes hinge on the economy.  The last thing the GOP wants is for the economy to make any demonstrable progress, especially in the area of jobs, wages, or anything felt directly by their fodder constituents, prior to 2012.  Obama’s demise (Job 1) is directly contingent on the majority of Americans feeling substantive economic pain going in to the election booth.  The GOP is talking about needing $2 trillion dollars in cuts as ransom to get them to release the debt ceiling.  Those cuts cannot be achieved without significant job losses (both government and downstream private sector jobs as well) in addition to major entitlement programs like Social Security and Medicare.  This exacerbates the demand slump the economy is in, and pretty much guarantees pain for middle America, and what will border on inhumanity to the poor, disabled, and unemployed.

The gambit here is that Republicans can successfully hang the 2012 economic conditions on Obama—that their fodder constituents will blame their plight on “Obama’s wild spending spree” rather than on Republicans draconian budget cuts.  And you can bet there will be additional tax cuts for corporations and the rich included in any debt ceiling as well, which will seal the love of the GOP benefactors.  This is arguably the sweet spot for the GOP going in to the elections.

However, the downside is they are playing chicken with investors by holding the debt ceiling hostage.  Wall Street and foreign investors alike certainly recognize individually that raising the U.S. debt ceiling is a matter of when, not if.  But what the investors realize is that the market behaves like a herd of buffalo rather than as a single rational actor.  Everyone may realize that long term there’s no danger, but if one animal spooks and heads out, the herd will react and follow, trampling all of us in its wake.  This means the benefactor constituents are justifiably nervous about this brinksmanship.  They can’t control all the buffalo, so everyone is tip-toeing about hoping to keep everyone else calm.  Should someone spook, the results will be disastrous.  But the devastation will not be just to our economy.  The benefactors will doubtless bail on the GOP, who’s political ploy just cost them billions.  If this happens, the Republicans will have effectively lopped off their right leg.

This is high stakes poker.  The GOP may win at the polls.  The corporate benefactors may win, lose, or break even.  The rest of us will lose.  The only path here on which we win would be if Democrats refused to bargain, called the Republicans bluff, and got them to fold.  It’s pretty clear that won’t happen.

Is this view overly cynical?  Perhaps.  Maybe the GOP is not behaving with this much premeditation.  Perhaps they are instead just ignorant and reckless or opportunistically sociopathic.  But any way you slice it, unless you’re in the GOP’s corporate benefactor class, you voting for a Republican is like a chicken voting for Col. Sanders.


Zediva tweaks the nose of Hollywood studios

DVD Monkey
A peek behind the curtain at Zediva's operations center.

A new video on-demand service called Zediva was introduced this week.  It’s kind of like if Netflix and Redbox got together and turned Slingbox inside out.  The key feature of the new service is that you can rent new movie releases without ever leaving home. They are employing a delivery method that appears completely legal, but is sure to get the movie studio executives running hair-on-fire to their legal departments looking to find some means to stifle them using copyright law..

The consumer advantage is access to a movie selection similar to Redbox or Blockbuster, including the latest DVD releases.  That’s something neither cable or satellite video on-demand services, nor streaming services like Netflix are able to offer.  You see, Hollywood studios impose a release window around new DVDs such that streaming services are not allowed to play them for a period of time.  The theory being that this allows the studios to get people to buy DVDs, on which they make a tidy sum.  Studios correctly assume that if you could watch the movie without getting off of the couch, you would opt for that instead.  Meaning, if you’re in a rush to watch a new release, you either buy or rent a physical disc, or (heaven forbid) download a pirated torrent.

Zediva gets around that release window by actually buying DVDs and renting them to you.  However, rather than having to wait by the mailbox or run to the store for the disc, Zediva helpfully pops the disc in one of their networked DVD drives and streams it to your house over the Internet. The key being that during the playing of the movie, that DVD and player are only playing to you, the renter.

Thanks to legal precedents established when Slingboxes were introduced years ago, place-shifting is perfectly legal.  In the case of Slingbox, it was ruled that copyrights couldn’t prevent you from sending video content to your phone or remote computer from a box located in your house.  You were paying for the content, and studios couldn’t restrict you to watching it locally, as long as you weren’t sharing or reselling it.  It’s hard to see how this is different.  Zediva is a DVD rental store, nothing more. They just provide Slingbox-like capability (also legal) to allow you to watch the movie remotely.

The initial popularity of Zediva is huge.  They have already cut off new registrations as the demand for the service has far exceeded their capacity.  Thus it seems enormously likely we’ll soon hear the screams and howls from the studios of how they will go bankrupt if this sort of thing is allowed to continue.  (For reference, they screamed that when writable DVDs were introduced… and VHS tapes… and color television… Hollywood?  Still solvent.)

Yet, there is a larger message here that should not be lost.  The Zediva model is clever, but technologically stupid and inefficient.  It exists only to do an end-around to existing copyright rules put in place to prop up dying business models.  These are business models designed to create artificial scarcity and inflate prices.  Zediva also illustrates a pent up market demand for access to this sort of content.  People want the convenience and are willing to pay for it.

The theory of capitalism is that some new business will come along and leverage the consumer demand, thereby driving the dinosaurs to extinction.  But Hollywood studios are an effective monopoly.  The barrier to entrance in that business is huge. So the reality is that as long as they stick together, they can continue to abuse consumers in defiance of capitalist principles.

Kudos to Zediva for finding a way to give consumers what they want, but they may want to open up that legal defense fund now, just to get a head start.


It’s the health care costs, stupid

Doctor
Health care costs are the elephant in the room (Photo by Lauren Nelson on Flickr)

As Democrats and Republicans continue their budget dance over non-military discretionary spending, the elephant in the room remains the rising cost of health care.  The Congressional Budget Office estimates that over the next 25 years, the percent of GDP spent on Medicare and Medicaid will double.  And these cost increases will not be limited to government programs.  Private and employer based costs will rise at the same rate—costs that will be reflected in higher prices and lower wages. Simply put, if you’re serious about the economy, then you are serious about long term containment of medical costs. Clearly, Congress is not serious about the economy.

According to Kaiser Health News, Republicans mocked proposals to improve the use of Medicare and Medicaid funds. They declared spending money on prevention was just a “slush fund,” and research on innovation was “an oxymoron.”  Further, there was no cause to pay for “so-called effectiveness research.”

Meanwhile, two House Democrats have signed onto a Republican bill to repeal a health reform provision for the Medicare payment board, which fast-tracks cuts to Medicare payments when spending reaches a pre-determined target. The CBO estimated the board would save $28 billion through 2019.

GOP 2012 hopeful Mike Huckabee attacked the Obama stimulus because it included funds for comparative effectiveness research saying, “The stimulus didn’t just waste your money; it planted the seeds from which the poisonous tree of death panels will grow.”

The proposals opposing efforts to reign in escalating health care costs may be partly political opportunism run amok, but likely also reflect a broad ignorance about the state of medicine as currently practiced. A panel of experts convened in 2007 by the prestigious Institute of Medicine estimated that “well below half” of the procedures doctors perform and the decisions they make about surgeries, drugs, and tests have been adequately investigated and shown to be effective. The rest are based on a combination of guesswork, theory, and tradition, with a strong dose of marketing by drug and device companies. (reference—subscription required)

In fact, the reliance of doctors on companies marketing treatments is downright frightening. In many cases, physicians perform surgeries, prescribe drugs, and give patients tests that are not backed by sound evidence because most doctors are not trained to analyze scientific data, says Michael Wilkes, vice dean of education at U.C. Davis. “Most medical students don’t learn how to think critically.”  The reality is that doctors are human. They trust what they are told, especially by their peers. Yet, a 2002 study in the Journal of the American Medical Association (JAMA) found that 87 percent of guideline authors received industry funding and 59 percent were paid by the manufacturer of a drug affected by the guidelines they wrote. Their peers, it seems, are largely bought and paid for by companies trying to sell something.

The holes in medical knowledge can have life-threatening implications, according to an Agency for Healthcare Research and Quality report published in 2001: More than 770,000 Americans are injured or die each year from drug complications, including unexpected side effects, some of which might have been avoided if somebody had conducted the proper research. Meaningless or inaccurate tests can lead to medical interventions that are unnecessary or harmful. And risky surgical techniques can be performed for years before studies are launched to test whether the surgery is actually effective.

Getting health care costs under control requires government sponsored comparative effectiveness research.  This is research aimed at determining what treatments actually work, and educating doctors.  Doctors and hospitals do not have the resources to self-fund this research.  And private companies are incented to sell drugs, devices, and treatments rather than cure patients.

Doctors are smart people. But they are only as good as the information they have available to them. Comparative effectiveness research will allow doctors to make better choices, reduce costs, and have healthier patients.  That’s money well spent. Money that is an investment in not only our health, but our economic future.


Former Senator Chris Dodd breaks promise not to become a lobbyist

Chris Dodd Bobblehead
Chris Dodd's ethics bobble with the breeze (Photo by DonkeyHotey on Flickr)

Recently retired Senator from Connecticut Christopher Dodd said upon leaving office he would not seek to become a corporate lobbyist.   But that was two months ago, and times change.  The former five-term Democratic senator announced yesterday he accepted a job as head of the Motion Picture Association of America.

Technically, Dodd is legally barred from becoming a lobbyist for two years after leaving the Senate. However, like so many retired legislators before him, he skirts that rule by not officially being hired as a lobbyist.  Still, as the head of one of the most high profile lobbying groups in the country, it’s a distinction without a difference.

Interim MPAA CEO and president Bob Pisano told Hillicon Valley last month that his organization’s unwavering focus was on increasing the federal government’s efforts to stop online film piracy. Pisano also talks up the importance of COICA and how happy he is that Homeland Security has been seizing domains in violation of the First Amendment and basic due process, even taking down tens of thousands of perfectly innocent sites.

It remains to be seen how or if Dodd’s new million dollar job will change his previously professed positions on related issues. He was on record as a big supporter of Net Neutrality. However, the MPAA has come out against net neutrality, claiming it would hamper its efforts to “fight piracy.” He was also against ISP data retention, which the MPAA has supported (again as a way to fight piracy). On copyright he was somewhat non-committal, but did talk about how fair use rights are important. A position likely to disappear once he takes the role formerly filled by Jack Valenti—the man who once declared that fair use doesn’t exist.

Dodd co-authored the Wall Street Reform and Consumer Protection Act. This legislation was targeted at improving the accountability and ethics of the banking system.  Too bad Dodd’s own ethics now seem to be bobbling in the breeze.