Cause Of Death: Misprocessing of Medicaid Benefits

Nine year Zumante Lucero, pictured above, had asthma that he could treat with a drug called Advair that he has a prescription for and was entitled to as part of the Medicaid benefits for which he was eligible.

The Denver County Department of Human Services was in charge of handling his application and despite strenuous efforts by his mother to get the county to tell Walgreens that he was eligible to have the medicine, they instead incorrectly told Walgreens that he wasn't even though they had told Zumate's mother (correctly) that Zumante was eligible to have Medicaid pay for his medicines. Zumante couldn't afford the drugs over the several months that Denver's computer system told Walgreens that Zumante didn't have coverage when he actually did, despite Zumante's mother's efforts, and as a result, Zumante's asthma killed him in July of 2009.

"The city fixed Zumante's eligibility status to pay for his funeral." Swell job guys.

The State of Colorado has faced litigation for years over this computer system which it requires counties to use (if I recall correctly, this problem dates back to Governor Owens and neither Governor Ritter nor Governor Hickenlooper have yet been able to solve it), but the Medicaid benefits processing system that was purchased for millions of dollars by the State from a big name private contractor didn't work and never has worked. Judges have ordered the State to take action, but it didn't fix the problem, either by fixing the computer or by finding a work around that worked. This was something that was entirely foreseeable and had been predicted for years before it happened.

Zumante died as much because certain named bureaucrats (and no doubt other unnamed bureaucrats and government computer contractors) screwed up and denied him a few hundred bucks worth of medicine that the law said he was entitled to have and that the Denver County Department of Human Services knew he was entitled to have but didn't extent themselves to clear up despite the life threatening nature of this boy's conditions in the absence of his medicine.

I'm not even going to begin to think about the legal issues involved. Suffice it to say that the when some judge writes an opinion resolving this case a long time from now, if the case is not settled, that the statement of facts will less than a page long and the analysis of the procedural history and the law will be lengthy. Governmental liability in tort is an arcane subject at the best of times in the simplest of cases.

But there is no good reason that kids should be dying in Denver, Colorado when we have the drugs to treat it, the means to pay for the treatment, the legislative will to provide coverage, and an involved parent trying to obtain care by contacting the government officials and pharmacists in charge of making it happen. Moreover, any department whose bureaucratic screw ups can be a matter of life and death that serves people who are, by definition, poor and in practice, almost always not the most sophisticated in cutting through red tape, rarely politically connected and rarely able to afford lawyers, needs to have someone out there with the power and ability to fix problems promptly who is looking out for the program's beneficiaries.

This is not a program where it is reasonable to assume that the beneficiaries or those acting on their behalf will be able to navigate the system and correct governmental screw ups on their own.

READ MORE - Cause Of Death: Misprocessing of Medicaid Benefits

U.S. Health Insurance Reimbursement Paperwork Expensive

U.S. physicians spend nearly $61,000 more than their Canadian counterparts each year on administrative expenses related to health insurance. . . . The study, published in the August issue of the journal Health Affairs, found that per-physician costs in the U.S. averaged $82,975 annually, while Ontario-based physicians averaged $22,205 -- primarily because Canada's single-payer health care system is simpler.

Canadian physicians follow a single set of rules, but U.S. doctors grapple with different sets of regulations, procedures and forms mandated by each health insurance plan or payer. The bureaucratic burden falls heavily on U.S. nurses and medical practice staff, who spend 20.6 hours per physician per week on administrative duties; their Canadian counterparts spend only 2.5 hours. . . . "It's the nurse time and the clerical time, rather than physician time, that's different." . . . The result is an additional $27 billion spent every year in the U.S. when compared to the costs incurred by physicians in Canada.

From here.

The justification for the heavy bureaucratic burden and rules in the U.S. is "to keep health care costs down" but, there is little evidence tht they actually work as intended to do so (the U.S. has the highest health care costs in the world for less than the best care in the world and a bad cost trendline compared to the rest of the world that is long standing).

There are parts of the system, like U.S. government run single payer for the elderly health care system called Medicare and the Veteran's Administration Hospital systems (also run by the U.S. government), that are quite efficient in terms of administrative costs and cost control and outcomes relative to the private health insurance managed part of the market. But, the nation chose not to do that in the most recent round of health care reform out of an ideological commitment to the private sector provision of this insurance function, contrary to the empirical evidence that government insurance is more efficient and better at cost control and produces better outcomes than a private insurance company managed system in the area of health care.

It is also important to mention what the Canadian system is and is not. Health care providers in Canada, by and large, are not government employees (unlike the British health care system). They have their own businesses just like American health care providers do. But, Canadian private sector health care providers fill out insurance forms for one health insurance company run as a government agency, rather than many private sector health insurance companies.

Canadians have decided that it is important to let the private sector handle the very personal business of deciding who will provide you with health care but that the far less personal business (which most Americans have no choice in anyway) of deciding who will process the health insurance claims to decide if they will be paid is not very important ideologically or practically, given the huge cost savings this approach provides and the better cost controls that it facilitates.

READ MORE - U.S. Health Insurance Reimbursement Paperwork Expensive

Turkey's Invisible Democratic Revolution

Since Attaturk, the Turkish military has served a the defender of a secular constitution in a country that was dominantly Muslim at the expense of majoritarian democracy. But, it appears that this role has now ended for good as the senior military leadership has been purged by the combination of dozens of arrests of senior military officials by civilian law enforcement authorities and the mass resignation of the remaining top military officers. It isn't entirely clear from half the world away to what extent the charges that have led to the arrests of military officers are valid and to what extent they are cover for a political purge.

It also isn't clear what made it possible for the arrests to be successfully carried out this time when in the past civilian authorities have seemed unable to carry out these kinds of arrests, although the generalized influences of the Arab Spring in the region could be a factor.

Turkey's days of military supremacy over civilian rule has ended, bringing it out of the classic newly emerging democracy phase of development. But, it isn't yet clear if the civilians who now have unquestioned supremacy will be able to avoid the temptations to engage in unconstitutional conduct or establish a religion in governmental affairs, which could be worse.

The example is a worthwhile one for American political scientists to examine because a similar strategy of civilian arrests of military leaders is essentially the only recourse in the U.S. Constitution should there ever be a threat of a coup in the United States and a coup is by far the most plausible end of regime scenario for the American system of government.

READ MORE - Turkey's Invisible Democratic Revolution

Higher Education Overmanaged

John Hawks notes that the number of full time faculty per college administrators has gone from 3 to 1 in the time period from 1975 to 2008 in the California State University system. "[T]he number of full-time faculty in the whole CSU system rose from 11,614 to 12,019 between 1975 and 2008, an increase of only 3.5 percent. In the same time period the total number of administrators rose 221 percent, from 3,800 to 12,183." In the same time period, within the category of college administrators, the "managerial and professional" category "has bloated extremely," while "clerical, service/maintenance, and technical jobs . . . have actually declined significantly over the same period."

I suspect that one missing piece of information that clarifies the picture is that the number of part-time faculty, and the number of graduate student instructors not counted as faculty, has ballooned, but I can't confirm that fact.

READ MORE - Higher Education Overmanaged

Minnesota Running Out Of Liquor And Tobacco

The government shutdown in Minnesota means not just that state parks are closed, but also that licenses to purchase wholesale liquor and tobacco are expiring and impossible to renew. The result is that stores across the state are rapidly exhausting their inventories of booze and cigarettes. Licenses for hundreds of establishments have expired.

READ MORE - Minnesota Running Out Of Liquor And Tobacco

Principal Reductions In Mortgage Modifications Follow Pattern

Banks will sometimes modify mortgages to reduce principal if they are already shown at a discount on their books due to an acquisition from another bank, especially if the mortgages are currently not in default, but not if the write down will produce an accounting loss for the bank.

It seems that Wells and JP Morgan are happy to do principal reductions only on the mortgages they bought at a discount from Wells Fargo and WaMu respectively; Bank of America, meanwhile, which inherited a bunch of these loans when it acquired Countrywide, is not doing principal reductions, and I don’t think it’s a coincidence that the Countrywide loans were bought at very close to par.

The behavioral psychology here is very easy to understand. No bank wants to admit that it wrote idiotic loans, and write down its own assets from par. Meanwhile, it’s much easier to write up an acquired asset, if the amount you reduce the loan is less than the discount you bought the loan for in the first place.

Economically speaking, however, what the banks are doing here does not make sense. Either writing down option-ARM loans makes sense, from a P&L perspective, or it doesn’t. If it does, then the banks should do so on all their toxic loans, not just the ones they bought at a discount. And if it doesn’t, then they shouldn’t be doing so at all.

The truth is, of course, that banks should be doing principal reductions, and they should be doing them on lots of their loans, rather than just the ones they bought cheap. And the fact that they’re already doing this, entirely voluntarily, on some of their loans is the best possible indication that it makes perfect economic sense to do so on all of their loans. Even if doing so might involve admitting that the subprime crisis still isn’t fully over.

The implication is that the financial accounting reform may be a key to responding more rationally to the current and future asset bubbles.

The results also shed doubt on the prevailing assumption that banks act in an economically rational way, which makes reforms, like cramdowns in bankruptcy, that force lenders to act rationally rather than based on the reputational effect of a decision for actors in the organization look attractive.

READ MORE - Principal Reductions In Mortgage Modifications Follow Pattern

Congressional Partisanship At Record High

The partisan divide between the Democrats and Republicans in the United States Congress is currently at an all time high. Partisan divides were lowest in the mid-20th century, but are higher now than they were in the late 19th century and early 20th century.

Posed less negatively, the Democratic and Republican party are more distinct than every before rather than being blurred by politicians who don't fit either party's mold, in part, due to "realignment" with one time Northeastern moderate Republicans now identifying as Democrats, and one time conservative Southern Democrats now identifying as Republicans in federal elections.

Deadlock isn't always a bad thing when the country is divided. A deadlocked nation may be one that shouldn't be making major changes from the status quo in the law. But, deep partisan divisions and divided government may make action entirely unachievable even on issues that necessarily call for some action to keep the institution of the federal government functioning, like the debt ceiling, appointments to bureaucratic posts, or approval of a federal budget.

READ MORE - Congressional Partisanship At Record High

Denver's Race For City Auditor

Three candidates are running in Denver's municipal election for which mail-in ballots have been sent out and must be received back by May 3, 2011. The auditor's job in Denver's City government is basically to be an independent voice charged with identifying fraud, waste, abuse, corruption and other opportunities to get better economic deals for the city than it currently has in place. The office has also historically been a launching ground for heavy weight contenders in municipal government including former Mayor Wellington E. Webb, and the man who can in second place to Mayor Hickenlooper when Hickenlooper was first elected as Mayor, Don Mares.

One candidate is incumbent Dennis Gallagher, who is a bit of a gadfly on the liberal political scene, has had a generally successful and scandal free term of office, and is most famous for getting a proposition that makes businesses pay property taxes at higher rates than residential property owners into Colorado's Constitution. Since 1970, he has spent four years as a state representative, 20 years as a state senator, eight years on Denver's city council and is now the incumbent auditor. He runs with the support of former Denver Mayors Hickenlooper and Webb. His office has identified multiple cases of significant questionable spending during his tenure, and he has certainly not fallen prey to group think or bureaucratic capture by the rest of city government. During Hickenlooper's tenure, the City Charter was amended, in part in deference to the way in which Gallagher was running the office, to remove some of the more routine financial auditing duties from the position and to place those duties instead in the set of responsibilities of a new senior Mayoral appointee. Some would interpret this removal of responsibilities from the office as a criticism, but Gallagher did not object and it is part of a larger trend in how fiscal responsibilities are allocated in state and local governments. Thus, like the federal GAO, the focus of the auditor's role has shifted from an accounting oriented one to a more general accountability oriented role.

A second is Marcus D. Richardson, a long time career employee of the Denver auditor's office under four successive auditors who also had experience as a career auditor before coming to Denver. He is clearly competent and knows where the bodies are buried in city government. He is African-American. The main difficulties he faces in this campaign are that (1) all of his accomplishments as an auditor are also those of his boss whom he is running against, (2) his campaign basically calls for a continuation of the status quo approach to how the office is run apart from increasing diversity in the office, (3) he has identified no compelling reason for the voters to vote against Gallagher as a referendum on his performance in office, and (4) Richardson, as a career civil servant, hasn't had much of an opportunity to develop the political clout and savvy needed to be influential in a position whose power derives as much from having a bully pulpit as it does from having technical expertise. Locating accountability issues is only part of the job; one also has to generate enough public outrage about those issues to have them corrected. Gallagher's independent and populist streak has been a generally good fit for that bully pulpit role, while Richardson is untested in this part of the job.

Note also that Richardson isn't necessarily foolish for having run what seems in hindsight to be a hopeless campaign. It isn't unusual for a candidate to drop out of a race for public office for some reason mid-term, or to have a candidacy derailed by a late breaking scandal, and you have to be in the running to take advantage of an opportunity like that if it arises. He also establishes himself as someone interested in a more prominent role on the political scene than he holds right now, and because he has run a very clean campaign, he hasn't necessarily made many enemies by doing so.

Finally, Bill Wells is running on a campaign to abolish elections for the position he is is running to fill, which makes his agenda for the office seem a bit contradictory, as does the fact that he thinks it is appropriate manages to slip an attack on President Obama's budget process into his answers to questions from the Denver Post about his position on the issues in the city auditor race. He worked in Denver city government in the 1970s and early 1980s, left Denver to run a family trucking company in Pennsylvania where he served in the local city government, and returned in 2002. He is currently a semi-retired TSA employee. While he is not obvious either incompetent (he has a relevant professional credential and is not too cranky on his website despite its sloppy appearance), he is hardly a serious contender to an incumbent who is a state political legend and is largely out of the loop about what has been going on in the inner workings of Denver City government for the last thirty years.

There is some merit, by the way, in having a non-elected auditor. Arguably, voters are ill equipped to evaluate the qualifications of someone running for the office in a low profile, non-partisan race that will always be second banana to the Mayoral and city council races. In state government, the auditor is appointed by the legislature to provide a legislative branch check on executive branch excess (in addition to the check provided by having a divided executive branch). But, Denver's experience with the position has by and large been quite good. A bad auditor is not in a good position to harm city government, while a good auditor can make a valuable contribution. Also, alternate means of appointing an auditor may be less likely to attract someone who can break free of the "group think" of the rest of City government in a context where the politicians, after long hours working together, can become blinded to possible areas of concern, and may be less likely to attract someone with the political moxy and presence necessary to be effective in the job.

READ MORE - Denver's Race For City Auditor

The Sociology of Brain Disorder Treatment

There are two medical specialties that deal with brain disorders and conditions. One is neurology. The other is psychiatry. Where does one draw the line between the two?

Neuroskeptic compares the number of articles on particular conditions in leading academic journals for each specialty (Neurology and the American Journal of Psychiatry), to look empirically at how the line has been drawn within the medical profession.

The division doesn't seem to be very strongly linked to the extent that a condition is biologicallly based. As he notes:

Schizophrenia, which is probably considered "the most neurological" psychiatric disorder, is in fact the least talked about in Neurology.

Both mental retardation and autism are middle ground between the two specialties, with mental retardation leaning towards neurology, and autism leaning towards psychiatry.

Eyeballing the data, one way to think of the way that the conditions have been allocated is that psychiatrist deal with conditions that influence your personality and social interactions, other than pure cognition, while neurologists deal with other conditions and conditions that impact pure cognition.

This explains the mental retardation v. autism divide, for example. While both have a cognitive function element, explaining the neurological interest in both conditions, what distinguishes an autism diagnosis from a mental retardation diagnosis that is not autism is the diagnostic and treatment focus on how autism affects personality, social interaction and empathy, particularly in the case of autism spectrum disorders like Asperger's, where IQ is often in the normal range.

The gray area for ADHD, likewise, can be explained as a product of the lingering ambiguity over whether to think of the condition as a personality disorder that is a cogential part of who someone is, or as a developmental disorder of something large is part of a larger cognition process.

Psychaitry is concerned with "who you are" while neurology is concerned with "what you are" even though there isn't obviously any fundamental difference between the kind of brain functions that lead to schizophrenia and those that lead to congential epilepsy. The looming question behind Neuroskeptic's post is whether the divide says more about perhaps unfounded biases about mental health that pervade even the supposedly enlightened medical profession, than it does about science.

There are other ways to see the distinction, of course. One is that neurologists deal with issues that are believed to be exclusively "hardware" issues, while a core issue for psychiatrists is to parse "hardware" from "software" issues and address each appropriately. Some conditions may not neatly fit that divide today simply because historical ambiguity led a condition to be assigned to one category or the other, and given that all of the physicians involved have a similar allopathic medical background and training, there is no compelling reason to upset the apple cart of institutional and funding and bureaucratic arrangements based on the distinction at this point, even if it isn't terribly logical.

In the same way, no one is urgently pushing to have responsibility for counterfeiting enforcement removed from the duties of the United States Secret Service even though this doesn't logically have much to do with is primary responsibility to provide bodyguard protection to the President and other senior federal officials and candidates, because the skill set for the two tasks is similar.

Still, the divide has a strong impact on treatment modality. Neurologists use drugs and sometimes surgery, while seeing little place for therapy. Psychiatrists, while also prescribing drug treatments, recognize the value of psychological talk therapies as a complementary treatment modality to a much greater extent.

A footnote to the post in the study is also interesting:

"Gathering" this data took me 15 minutes. 20 years ago, it would have taken... well, you'd have had to read and manually categorize 30,000 abstracts. Even at 2 minutes per abstract (bare minimum) that's, er, 1000 man-hours of work.

READ MORE - The Sociology of Brain Disorder Treatment

Deconstructing the Concept of Health Care And Options For Dealing With It

The convention of lumping all of the issues that fit under the rubric of health care is necessarily somewhat arbitrary. As we look to improve ways to control costs and find better ways to finance care, which is a never ending process despite the passage of the Affordable Health Care Act, which makes major reforms, it is worth examining ways to break the overall field of health care into parts, and to see if there are things that we commonly don't define as health care that are appropriate to address with the same tools.

Group health insurance plans and Medicare define health care quite broadly, but exclude certain procedures and treatments commonly deemed to be cosmetic or recreational or fitness related; long term care in nursing homes or with home health care services; and sometimes abortion. Medicaid often includes a broader definition that includes, for example, nursing home care.

Individual health insurance plans, out of concerns about moral hazard in the purchase of health insurance, have narrower definitions of covered health care. Routine services are often covered by a deductible on the theory that the tax advantage that applies to group health care plans creating an incentive to include as much as possible in the plan coverage scope for tax reasons does not apply in individual plans of employees who are not self-employed where risk management and price negotiation with providers, but not tax minimization is the goal.

Individual health insurance plans also usually exclude, or include only at prohibitively expensive rider rates (far more than this kind of care contributes to the whole in group health insurance plans) types of health care for which moral hazards exist because patients can know that they will need coverage in advance and buy it only if they need it. These conditions include pregnancy related care, mental health coverage, and coverage for pre-existing conditions (mitigated by a variety of devices to allow pre-existing condition coverage where moral hazard risks are not as serious, such as quasi-group COBRA continuation coverage).

Pregnancy is very expensive to insure against in individual health insurance plans because it is highly controllable by the insured, even though the lifetime costs of pregnancy related care frequently don't vary much from one woman to the next.

Mental health coverage has been further divided into categories that look more or less medical (biologically based conditions). There is dispute over whether some treatment regimes such as non-allopathic medical approaches (such as chiropractic, aromatherapy, herbal remedies, psychological therapy, acupuncture, personal training, and massage therapy remedies) are really health care in the sense intended, and over whether treatments such as fertility treatments are genuinely necessary as opposed to recreational.

Long term care coverage is an example of a very expensive, high probability event, with moderate risks regarding duration and costs, that is further complicated by the fact that long term care typically covers not only medical-like expenses but also non-medical-like expenses such as rent and food costs for the resident. Similarly, loss of income due to disability, or the disabilities presumptively inferred from old age called retirement, are typically handled separately from medical care.

We make distinctions between "emergency care" which everyone who comes to an emergency room is entitled to regardless of ability to pay, at least until stabilized, and other kinds of medical care.

We have different financing regimes for dental care, vision care, work related injuries (worker's compensation or the equivalent), non-work related accidental injuries (tort remedies and casualty insurance), health care for foster children, health care for Medicaid v. non-Medicaid patients, health care for the uninsured who can and cannot pay in cash, health care for certain veterans, out-of-pocket and insurance paid care, over the counter and prescription treatments, and so on.

Within the area of Medicaid covered health care, there are two groups of beneficiaries whose care is very expensive: older people who need nursing home care, and people with disabilities, and another, poor people who are not disabled or old served by the minority of providers willing to accept new Medicaid patients for below market rate reimbursements, for whom it is very inexpensive to provide health care.

A large share of all people covered by health insurance or governmental health care programs are entitled to that coverage not in their own right, but by virtue of their status of dependents of someone else. Medicare is one of the few programs that does not cover the entire family (although individual policies and CHIP enrollment in Medicaid for children only in a family are another).

The Affordable Care Act has made several strategic choices, which made political sense at the moment, but may not be the best long term solutions. One is to focus on a scope of care similar to bare bones group health insurance plans. Group plans are encouraged. Individual plans are made more like group plans through prohibitions on pre-existing condition denials, through mandatory coverage, and through expanded scope of coverage, in order to address moral hazard issues. The scope of Medicaid is expanded to include the near poor. And, tax credits and incentives ease the ability to pay problem for both group and individual plans.

There are other ways that the task could have been divided.

We could have chosen to deliver some or all health care services to children (and even college students) through educational institutions. Most school districts have school nurses and psychologists already, administer a few routine screening tests, provide health education (mostly, but not entirely sex education and illegal drug use propaganda), and refer children who seemed to be in need of medical attention but are denied it to social services authority. But, it wouldn't have been hard to establish a system of comprehensive, single payer health care for children through the school system. This would prevent the current system from suffering strain from the fact that large families do not fully bear the cost of their own care in many cases (particularly with more generous employers), and would in some ways reinforce the notion of connecting health care to one's place of employment - extending the idea to school aged children.

Colorado until recently, and some other states, have experimented with no fault automobile accident medical coverage, in which care for automobile accident injuries are financed through the injured person's car insurance, with particularly severe cases to be settled via subrogation actions by the insurer who pays for the care. There have been proposals to make such no fault coverage universal and finance it with a gas tax or other excise tax that functions as a "pay at the pump" user's fee. Worker's compensation, in theory, at least, covers work related injuries and diseases without regard to fault.

With a universal health care system, it would be possible to remove health care payments from the domain of automobile insurance, casualty insurance, tort judgments and worker's compensation entirely, by making health insurance the primarily responsible party for all health care, with legal responsibility for medical expenses related to fault in accidents or on the job injuries or diseases limited to subrogation actions. This would take a great many personal injury cases outside the tort law system entirely, and narrow dramatically the scope of the issues presented in these cases. Even more dramatically, we could decide that compensation for lost income due to disabilities that arise from injuries or diseases (or perhaps otherwise) ought to be entirely the province of insurance or social safety net programs, rather than the courts, perhaps via a more robust version of Social Security, or mandatory comprehensive disability insurance, in lieu of separate regimes for work related injuries, general tort cases, sick leave policies, and cases covered partially by private disability insurance policies and social security. Subrogation cases could allocate fault in cases where it was necessary to provide the proper incentives not to engage in negligent conduct (although in a society where everyone is adequately insured, this is harder to justify, particularly for small cases where the burden of the risk faced by different insurance companies can be expected to average out over time). In a regime like this one, only "pain and suffering" and dignitary injuries would be left to litigate.

Less radically, health insurance companies would process all health care claims, regardless of the nature of the injury, and then would be reimbursed by casualty insurance companies, with their actual costs entitled to presumptive validity. Tort lawsuits might establish liability for medical costs, but simply order the insurer for the tortfeasor to pay those costs as they come due, avoiding litigation involving expert witnesses over the validity of medical costs incurred and the estimated future medical costs involved in a personal injury case. Casualty insurers and health insurers could resolve medical expense disputes in individual cases through intercorporate arbitration.

We could have had a single payer system for some conditions, perhaps mental health care, or pregnancy care, or congenitally disabled people whose high cost of care is a certainty at the outset, that are hard to deal with through individual insurance due to moral hazard issues, while utilizing the Affordable Health Care Act insurance regime approach only for more ordinary cases. Mental health care or pregnancy care could be quite affordable to provide via a single payer system since they are a small part of the total national health care expense.  Failure to provide adequate mental health and/or pregnancy care has immense externalities for the rest of society as well, so perhaps these need to be redefined as public health issues.

We could have medical care in all trauma cases handled by one program or insurance regime, and handle non-trauma causes in another regime.  The public interest in universal trauma care is greater than the public interest in many kinds of universal non-trauma care.
Pregnancy care could be insured not through employers, but on a basis similar to universal life insurance or long term care policies, with premiums made over a lifetime or many years, to cover a lifetime of coverage. Rather than expiring for want of premium payments, these policies could create non-dischargable debts, a bit like student loans, which insurers could collect with bad debt figured into their pricing. Alternately, we could have a system of guaranteed pregnancy care loans that is directly analogous to the student loan regime, allowing births to be paid for over the course of a decade or two, rather than all at once, and could focus on transparency in pricing as a way to control costs in this area.

Guaranteed medical care loans also make sense as a back stop to a regime with catastrophic coverage in which not all patients have funds in a health savings account or otherwise sufficient to pay their current out of pocket costs.

We could distinguish between catastrophic care, which might be handled by a government program or secondary tier of insurers (a bit like umbrella insurance), and ordinary health care which would de-emphasize risk sharing and emphasized price negotiating and cash flow management. The greater ability of patients to pay for non-catastrophic care would make more ordinary market-like arrangements such as those seen in the area of dental health, seem more workable.

If coupled with a system of guaranteed medical loans, non-catastrophic care could be optional, and only catastrophic care would have to be universal either because it is mandatory in some form, or is a tax financed government program. The downside of making this a mandatory form of insurance, is that compliance can be difficult to secure for a program that actually makes insurance payments to the people who pay the bills only very infrequently, while accounting for something on the order of half of the cost of health insurance. But, catastrophic care on an umbrella insurance model would have very low administrative costs relative to premiums, and relatively few of the really controversial insurance coverage issues involve catastrophic care cases. This could give a government program a fairly large economic role in health care without having much of a day to day administrative role in it that people would fear would interfere with doctor-patient relationships.

Medicare and Medicaid are currently mostly programs that pay providers directly on a fee for service basis, but could be organized to pay for a menu of health insurance options, or to pay providers on capitation or similar basis. The Ryan plan that would provide mere flat dollar vouchers to buy health insurance would be problematic standing alone, but if there was a core set of coverages that could be purchased with the voucher without additional expenses from a vendor of last resort who was required to provide it, this would not be worrisome.

It would be possible to structure health care claim processing a bit like the way we structure credit card progressing today, where cooperatives like Mastercard and Visa process claims and adjudicate billing disputes, but the loans are extended by member banks that set interest rates, set credit limits, and establish their own reward programs. The vast majority of health insurers could be united in a small number of cooperatives, which would receive claims from providers and process them in a standardized process, set provider compensation rates for member providers, and leave the actual health insurers with only a few key terms like copay amounts or deductibles being set by the actual health insurer which would bear the financial cost of claims processed for its insureds, but would not actually administer those claims. This could produce many market efficiencies even if the claim processing cooperative had no formal monopoly.

Of course, to some extent, this is the easy part of the equation. Once you have universal health insurance coverage, it is a relatively bloodless affair to reshuffle the expense from one pocket to another in the interests of more efficient administration and more sensible cost distribution that is consistent with ability to pay. The really hard part of the issue is figuring out which scenario is not going to be to reduce just administrative and marketing costs to a minimum, giving health care consumers the best value for their money. This is the low hanging fruit, which shouldn't be that hard to realize.

The truly hard part of the health care reform question, which still remains largely unanswered, is who is both willing and able to effectively negotiate lower compensation rates for providers that will translate into lower compensation for doctors, nurses, pharmacists, drug companies, medical equipment makers, hospital administrators, and so on. The deepest problem with the American health care system is that the people who are currently making these decisions, with other people's money, are leaving American providers much better compensated than those anywhere else in the world by a large margin, for the same or less or inferior work. And, very few people in the policy world are entirely clear on what precise flaws in the provider rate system is most to blame. Notably, the truly iconic seats of medical excellence in the United States, like Mayo and Bethesda, are not the ones with the most highly paid providers.

Even in a perfect world with high levels of transparency, the sick and the injured are simply not in a good position to bargain for lower provider costs at the time of treatment as one would with many goods and services. They need intermediaries to handle this for them. But, how do we get the intermediaries (who might be civil servants or insurance company bureaucrats that we have never met) the clout that they need visa-a-vis medical providers who we know and love and the incentive to do their job well?

READ MORE - Deconstructing the Concept of Health Care And Options For Dealing With It

Intensive Supervision Adult Probation in Colorado

A Denver Post story last Sunday noted that ten adult men on probation in Colorado have been charged with murder or attempted murder in the last nine months. Five of them were in adult intensive supervision probation, one was in sex offender intensive supervision probation, three were on ordinary adult probation (one for burglary, one for gang related burglary, and one for domestic violence and in each case producing an attempted murder rather than a successful one). Many of them were in violation of prrobation conditions but faced no consequences for their violations. The probation department is at 90% of authorized strength.

because they had been recognized as relatively high risk (and at least one of the ten who was not on intensive probation was guilty of attempted murder, but was not successful in completing his crime).

Is the program worth it? As their editorial today notes, this program is much less expensive than incarceration. But, the highest risk individuals on probation may belong in prison.

Felonies By Probationers

From a public safety perspective, the biggest concern is that probationers commit new felonies, particuarly serious new felonies. How common is this?

The number of felonies in 2010 by program participants divided by the program size is as follows:

Intensive Juvenile 44/452 (9.7%)
Intensive Adult 79/1,408 (5.6%)
Intensive Female 10/262 (3.8%)
Juvenile (ordinary) 135/5,946 (2.3%)
Intensive Sex Offender 22/1,301 (1.7%)
Adult (ordinary) 570/41,107 (1.4%)
Private Non-Drunk Driving 65/9,067 (0.7%)
State Monitored Drunk Driving 41/11,448 (0.4%)
Private Drunk Driving 34/14,126 (0.2%)

Total: 1,000/85,142 (1.2%)

People on probation commit about 3% of all felonies in the State of Colorado and make up about 1.7% of the state's population including children. Thus, overall, probationers (who are much more likely to be adults and much more likely to be non-elderly males) aren't particularly high risk as a whole compared to demographically similar non-probationers, particularly when the offense by high risk probationers are removed from the total. But, a subset of probationers, adult men in intensive supervision probation who make up about 3% of the total probation caseload, do appear to pose a considerably high risk to the general public.

Offenders who commit felonies while on probation are subject to sentences of at least the midpoint of the presumption range for the offense, and up to twice as much as the presumptive maximum for that offense, Section 18-1.3-401(8)(a)(III), Colorado Revised Statutes, in addition to having their probation revoked and facing a sentence of incarceration on the original crime. So, these offenses are committed despite an enhanced deterrent incentive not to commit them relative to an ordinary individual.

All of the murders and many of the attempted murders were committed by adults in the intensive adult and intensive sex offender program (6 out of 101 felonies compared to 4 out of the 570 felonies committed by ordinary adult probationers), suggesting that in addition to having a much higher felony termination rate than other probationers, that these offenders also commit, on average, more serious felonies than other probationers who have their probation revoked for felonies.

Policy Implications

This may mean that these high risk individuals simply need to receive even more intensive supervision than they already receive, or it may mean that they would be better incarcerated. Given the very high likelihood that an incarcerated felon will commit a new felony after being released, it isn't obvious that the public is safer with incarceration than it is with probation in intensive supervision cases. But, it may very well be that the public would be better protected by incarceration in this subset of cases.

More generally, if the reason to prefer probation to incarceration is that it reduces the risk that a convicted felon is less likely to commit a felony that harms a member of the general public, and to reduce the severity of the felonies that are committed by such people, it may make sense to put more of the high risk men who receive intensive supervision when on probation in prison, and to allow more low risk individuals to receive probation sentences.

In particular, many women, white collar offenders, and vice offenders in our prisons who aren't part of criminal gangs or organized crime enterprises may pose a lower risk to the general public than some of the more serious male "blue collar crime" offenders who receive probation in the current system. Even if the lower risk offenders do commit new felonies, these offenders are unlikely to commit the violent felonies that the public is most concerned about preventing.

It is also worth examining whether probation is too often imposed for minor offenses where the benefits resulting from the supervision element of the sentence is slight, because probation officers are spread so thin for low risk offenders. For example, it isn't obvious that the system has sufficient resources to adequately sanction the large number of offenders who abscond or commit technical violations in a consistent manner, or that even the minor probationers who do abscond or commit technical violations really do present a serious threat.

Perhaps the state needs an option in many cases that produce probation sentences today of imposing a significant fine and a sentence of "unsupervised probation" as all or part of the probation period for minor offenders, which is revoked only for new felonies or misdemeanors or non-payment of fines, which qualifies the individual for an enhanced sentence on the new offense and a sentence of incarceration on the old offense, if a new offense is committed within a certain time period, in addition to a fine, while not actually having the relatively elaborate conditions of probation with many opportunities for technical violations and absconding through mere flakiness, and the supervision costs, that are present in the typical probatioon case.

How common is probation?

At the end of the 2010 fiscal year, there were 3,423 people in an intensive supervision probation program in Colorado's state courts: 1,408 in the program for adult men, 1,301 in the program for sex offenders, 262 in a program for women, and 452 in a program for juveniles.

Other kinds of probation are much more common. There were 41,107 adults on regular probation, 5,946 on regular juvenile probation, 11,448 on state monitored probation for drunk driving offenses, 9,067 on private probation for non-drunk driving offenses, and 14,126 on private probation for drunk driving offenses.

The 41,107 adults on regular probation were further broken down as: 901 new probationers awaiting risk classification, 4,166 maximum risk, 10,173 medium risk, 8,911 miniumum risk, 5,758 adminstrative, 3,328 community corrections, 4,875 domestic violence, 1,137 sex offender, and 1,858 interstate transfers.

The 5,946 juveniles on regular probation were further broken down as: 176 new probationers awaiting risk classification, 920 (15%) maximum risk, 1,930 (32%) medium risk, 1,685 (28%) miniumum risk, 779 (13%) administrative, 20 in community corrections, 342 sex offenders, and 94 interstate transfers.

In all, there were 85,142 people on probation in Colorado on June 30, 2010. Probation includes community corrections.

Probation is a common sanction following a criminal conviction, indeed, it is the modal punishment for many offenses. There were 10,460 new felony probation sentences, 14,851 new misdemeanor probation sentences, 228 new petty misdemeanor probation sentences, 103 new traffic probation sentences, and 694 other new probation sentences (ordinance violations or lack of coding information) in the 2010 fiscal year. In all 26,336 new probation sentences were imposed in the 2010 fiscal year. Of completed probation sentences, 38% were for a year or less, 36% were for one to two years, 15% were for two to three years, and 11% were for more than three years.

There were 36,993 new felony offense prosecutions in 2010 in Colorado, 11,640 new juvenile delinquency prosecutions,, 69,695 new misdemeanor prosecutions (excluding traffic cases and drunk driving), and 28,429 drunk driving prosecutions.

How Often Is Probation Successfully Completed And Why Do Offenders Fail?

Of all people whose probation ended in 2010, 67% of adult regular probation sentences were completed successfully (including the 11% of the total who complete a community corrections sentence successfully), 15% of those on probation had their probation revoked for technical violation or a new crime while on probation, 13% absconded ("Absconded refers to probationers who became fugitives and are no longer compliant with probation supervision."), 3% were deported, 1% died, and 1% of cases were cloused out for administrative reasons. Of the 3,144 adult probation revocations in 2010, 570 (18%) were for new felonies, 756 (24%) were for new misdemeanors, and 1,818 (58%) were for technical violations of probation terms.

Of the 5,906 non-drunk driving private probation sentences terminated each year (a lower risk population), 4,590 are successful (78%), 614 are revoked (10%) (65 new felonies (11%), 146 new misdemeanors (24%), 66% technical violations) and 702 abscond (12%). For private probation related to drunk driving offenses, 82% complete their sentence successfully, 9% have their probation revoked (34 new felonies (4%), 288 new misdemeanors (31%), and 65% technical violations), and 9% abscond.

Among state monitored drunk driving probation cases, 73% complete successfully, 16% have their probation revoked (1,411) (41 which is 4% for new felonies, 136 which is 10% for new misdemeanors, and 87% for technical violations), and 11% abscond.

For regular juvenile probation, 73% successfully complete their sentences, 22% have probation revoked, and 5% abscond. Of the 989 juvenile revocations, 135 (14%) are for a new felony, 183 (18%) are for a new misdemeanor, and the remaining 68% are for technical violations.

In the adult intensive supervision program, 66% are successful terminations, 26% (317) are revoked, and 9% (108) abscond. Of the 317 revocations, 79 (25%) are for new felonies, 51 (16%) are for new misdemeanors, and 59% are for technical violations.

For sex offenders in intensive supervision, there are 22 new felonies (12% of revocations), 8 new misdemeanors (4% of revocations), and 158 revocations for technical violations (84%). Only 39% of sex offenders in intensive supervision successfully complete the program, while 53% have their probation revoked and 8% abscond.

In the female intensive supervision program, 69% of cases are successful, 22% (32) are revoked (10 which is 31% for new felonies, 3 which is 9% for new misdemeanors and 59% for technical violations), and 8% abscond.

For juveniles under intensive supervision, 46% are successful, 49% (232) have probation revoked, and 5% abscond. 44 juvenile intensive supervision revocations (19%) are for new felonies, 48 (21%) are for new misdemeanors and 60% are for technical violations.

After probation terms are completed there is considerable recidivism, although not nearly as much as that for offenders who complete prison terms.

Miscellaneous Background

When you are convicted of a crime in Colorado, a judge can fine you, a judge can sentence you to a period of incarceration, or a judge can put you on probation subject to a wide variety of conditions (there are a few other options as well, like community corrections and deferred judgments).

There are three main classes of people who are out in the community while involved in the criminal justice process. People on bond awaiting conviction, people on probation, and people on parole. The first two are supervised by the judicial branch, the last is supervised by the executive branch's parole system. (Incarceration prior to trial or after conviction for a misdemeanor is handled by the executive branch of county government, while incarceration after conviction for a felony is handled by the executive branch of state government together with parole). The probation department also does pre-sentence investigation of criminal defendants.

READ MORE - Intensive Supervision Adult Probation in Colorado

Feds Take Aim At Investment Banks

The National Credit Union Administration is a federal regulatory institution for credit unions roughly analogous to the FDIC for commercial banks. The credit union industry is structured in two main tiers. As the Wall Street Journal explains today:

The wholesale credit unions, also known as corporate credit unions, are at the heart of the nation's credit-union system. They not only invest customer deposits but also provide services such as check clearing for nearly 8,000 "retail" credit unions—member-owned cooperatives that act somewhat like banks for firefighters, teachers and other workers who have something in common. Such customers have a total of about $680 billion in deposits at credit unions.

In reality, the strength of the tie between what customers of credit union members have in common has declined for years. For example, I am a member of the Security Services Federal Credit Union, despite the fact that the only paying jobs that I have ever held in my life have been as a newspaper delivery boy, as a freight unloader in a university kitchen, as a tutor, as a math homework grader, as a continuing education instructor, as a professor, as a reporter and as a lawyer, none of which rightly qualify as security services unless you include the occassions when I've acted as bouncer at law firms where I have been employed. But, they remain member owned and tend to be more conservative in their lending and investments than commercial banks.

The NCUA put five wholesale credit unions into receivership as a result of the financial crisis. The Wall Street Journal, summed up the impact of those receiverships, three of which took place in September of 2010, and the other two of which were earlier.

Bad bets on mortgage-backed securities have now killed five of the nation's 27 wholesale credit unions since March 2009. The federal government, which now controls about 70% of the total assets at such credit unions, said the surviving institutions will be reined in so that they take fewer risks with their investments. . . . Members United Corporate Federal Credit Union in Warrenville, Ill., Southwest Corporate Federal Credit Union of Plano, Texas, and Constitution Corporate Federal Credit Union, Wallingford, Conn., which had a total of $19.67 billion in assets as of July, were taken into conservatorship by federal regulators. . . . Since the start of 2008, 66 retail unions have failed, compared with more than 290 banks or savings institutions. . . . Last year, regulators seized the two largest wholesale credit unions, U.S. Central Federal Credit Union, based in Lenexa, Kansas, and Western Corporate Federal Credit Union, San Dimas, Calif., after finding their losses were much larger than previously reported.

Losses on the mortgage-backed securities held by the five seized credit unions are expected by regulators to total about $15 billion. Wiping out the capital of the failed institutions will cover a chunk of those losses. But the remaining $7 billion to $9.2 billion eventually will be passed along to the nation's 7,445 federally insured credit unions in the form of future assessments.

The total number of failed banks and S&Ls has now risen to more than 350.

The $50 billion of mortgage backed securities bought by the wholesale credit unions which placed into receivership are now worth about $25 billion. WesCorp, which had 74% of its investments in mortgage backed securities has suffered a 31% on its mortgage backed security portfolio, the other four wholesale credit unions suffered losses of 10% to 16% on their mortgage backed securities portfolio which made up 31% to 57% of their respective portfolios of investments.

Of hundreds of bonds inherited by the NCUA in its rescues of wholesale credit unions, many were packed with subprime mortgages, interest-only loans or mortgages with other risky characteristics such as not requiring income verification. The mortgage-backed securities often carried Triple-A credit ratings at first. Many now have junk ratings.

Now, the NCUA and other federal agencies stuck with the bad loans are threatening suits to strike back at the investment banks that overhyped these mortgage backed securities:

The NCUA is accusing Goldman Sachs Group Inc., Bank of America Corp.'s Merrill Lynch unit, Citigroup Inc. and J.P. Morgan Chase & Co. of misrepresenting the risks of the bonds to wholesale credit unions. . . . agency officials recently issued an ultimatum to several firms that churned out the bonds: Either refund every dollar spent to buy the bonds when they were issued or face lawsuits seeking to recover the money. In a securities filing this month, Goldman said the NCUA "has stated that it intends to pursue. . . on behalf of certain credit unions for which it acts as conservator" claims that offering documents for certain securities Goldman sold "contained untrue statements of material facts and material omissions."

The NCUA claim is the classic securities fraud 10b-5 suit. The NCUA is claiming that the investment banks had to lie in very specific disclosure document in order to sell their bonds.

But, the economics involved in a securities fraud suit against an investment bank based on bond issuances are very different than the economics involved in the more typical securities fraud suit against a corporation brought by shareholders of that corporation based on stock issued long ago and were trading in the secondary market when the person who is suing bought them.

In a suit by a bondholder, the situation is very similar to an ordinary fraud suit where someone selling something lies about it to make a sale in exchange for immediate payment in which the seller has a direct and immediate financial interest. And, the pot of money from which recovery is sought is different from the one owned by the people bringing the suit.

The FDIC, the Treasury and the Federal Reserve, each of which holds similar securities acquired in the course of the bailout for which similar representations were made could bring similar suits.

[T]he Federal Deposit Insurance Corp.'s board has authorized the filing of lawsuits seeking to recover more than $3.5 billion from officers and directors at failed U.S. banks.

Last week, the FDIC accused the wives of Washington Mutual Inc.'s two top executives at the time of the big thrift's 2008 collapse of illegally moving cash and houses into trusts to shield the assets.

The executives called the suit seeking over $900 million baseless. . . .

Last year, the FDIC took over as plaintiff in a suit filed by Riverside National Bank of Florida, a bank in Fort Pierce that, before failing in April, had stuffed its portfolio with 27 collateralized debt obligations, or slices of bond pools. Riverside accused more than a dozen firms of misrepresenting the CDOs' value. At the time the FDIC stepped in, it owned parts of over 250 CDOs bought by small banks that subsequently failed.

Of course, investment bankers were the only one's at fault:

In November, an audit by the NCUA's inspector general concluded that the management and board of one wholesale credit union, called Western Corporate Federal Credit Union, or WesCorp, didn't properly manage the risk of its portfolio and bought too many mortgage securities. . . . The inspector general's review didn't analyze the possible role of underwriters, issuers or credit-ratings firms.

It isn't entirely clear from the newspaper report whether the investment banks were acting and underwriters or issuers in these sales. Credit ratings themselves are considered "opinions" which do not give rise to fraud liability, even though most bond traders rely on those ratings almost completely to the exclusion of prospectuses, and even though a triple-A rating was in fact completely inappropriate for securities that were as risky as the entire class of mortgage backed securities that were issued actually were in hindsight.

Establishing that facts in the prospectus were false or that facts existed that were omitted from the prospectus, and that those facts had a material impact on the value of the securities, is generally straightforward legally now that investigations have revealed what when wrong with these securities.

The unknowns in suits against investment banks are establishing that the investments banks a the proper parties to sue, rather than special purpose companies set up to issue the securities, because securities laws do not generally recognize "aider and abettor" liability for securities fraud. And, the party bringing the suit also has to establishing "scienter" at the time that the prospectus containing material fact or omitting material facts was prepared. In other words, it isn't enough to show that a statement included a false statement or omitted a material statement, the suit has to show that the company making the statement knew at the time that it was stating something that was untrue and material, or omitting a fact known to be material.

In defending the suits, the investment banks can either claim that it didn't know about the ugly details, or that they believed that the facts were not material because features of the bonds like guarantees from loan originators and credit default swap derivatives made problem with the underlying bonds irrelevant, and nobody realized that "counterparty risk" in these guarantees was as serious as it actually turned out to be in hindsight.

If a court finds that they lied, the investment banks are on the hook and their newfound post-financial crisis profits could evaporate. But, if a court finds that they weren't aware of the problems with their prospectuses, then they are off the hook. Post-financial crisis investigations which seem to show that there were insider communications showing that insiders at major investment banks knew that mortgage backed securities were really junk weaken the case of the investment banks on the merits, if they are not mere "aiders and abetters." Revisions to the bankruptcy code made in 2005 also makes it much harder for investment bankers found to have lied to protect their assets from those who prevail in securities fraud lawsuits.

Moreover, if one federal agency prevails in a securities fraud suit from a particular bond issuance, and appellate courts set precedents that clear legal obstacles to that theory of recovery by affirming those wins, other federal agencies and private bondholders who took losses in the same or similar deals can walk into court using the doctrine of collateral estoppel to apply the first winner's success to their own cases, leaving little more to be proved. As a result, there are huge incentive beyond those in these particular NCUA lawsuit for the investment banks to settle the cases to avoid setting a precedent to could be applied in many other cases.

Thus, it is very likely that the investment banks will have to pay record settlements that reduce taxpayer and innocent investor losses at the expense of the investment banks before the aftermath of the financial crisis is complete.

READ MORE - Feds Take Aim At Investment Banks

Dex v. Seattle

Dex, a distributor of phone books is challenging a Seattle ordinance allowing people to put themselves on a "no phone book" list, as a violation of its First Amendment rights in a suit filed November 15.

I have about eight phone books in a cabinet in my house that almost never get used for anything. My children show no interest in learning how to use one, my wife doesn't like the small print. I use one half a dozen times a year, and don't use three-quarters of the phone books I receive at all. I'm a phone book advertiser myself, but increasingly even they are pitching the Internet component of their business, rather than the paper copy element.

Opt-out laws, in general, have been upheld against constitutional challenge in multiple cases cited in the link above to a post by Venkat Balasubramani at Eric Goldman's blog including Rowan v. United States Post Office, 39 U.S. 728 (1970)(indecent junk mail); State of Mo. v. American Blast Fax, Inc., 323 F.3d 649 (8th Cir. 2003)(junk faxes); FTC v. Mainstream Marketing Services, 345 F. 3d 850 (10th Cir. 2003) (no call list).

The main constitutional objections raised by the Yellow Book companies to the statute are that:

- the statute singles out yellow pages from all other types of unsolicited pamphlets, without reference to the harms sought to be remedied;
- the City made exceptions to satisfy local business interests, such as business associations;
- the ordinance also contains a licensing scheme which is at best highly suspect;
- the statute compels the yellow pages publishers to publish an unwanted message (in the form of opt-out notices and messaging on the cover)
- the statute charges the yellow pages companies to dispose of the books even though the unwanted or discarded books are recycled or disposed of by the recipients;
- yellow pages companies already employ opt-out mechanisms and have no interest in delivering yellow pages to recipients who do not want them (there's no indication that the opt-out system set up by the City will be more effective).

The objection to a statute that involves yellow pages being a content based restriction that favors local interests isn't particularly strong, because the content basis ties into the resident choice to be on the opt-out list, and any flaws in it could probably be easily remedied with an improved definition (e.g. printed material of 150 pages or more with commercial content not expressly requested by the resident, not distributed by an organization of which the resident is a member, and not delivered by the U.S.P.S.).

Any problem with the requirement of a $100 license fee, the reporting requirement (to list the number of yellow pages distributed), or the unwanted message also seems doubtful, particularly to the extent that any defect in the definition of yellow pages is cured. All sorts of businesses are required to make disclosures about laws that have an impact on them, the reporting requirement is no more onerous than constitutional requirements applied to every periodical distributor, and the license fee is not out of line with business privilege licenses that apply to all businesses (and could be made a part of a general business privilege license by requiring the fee and disclosure of yellow book distributions to all business license holders). Allowing licenses of regulated businesses that don't comply to have their licenses yanked also seems constitutional.

No of the prior law on opt out has ever suggested that a private opt-out option makes it constitutionally impermissible to have a legally required opt-out option, and there is good reason to think that a government administered one would work beter.

The most interesting challenged provision is that one that provides for "a 'recovery fee' designed to recoup recycling costs ($0.14 per book and $148.00 per ton of yellow pages)." Similar costs are imposed on tire companies and oil change companies, and it is hard to see how this fee is materially different from a constitutional perspective. Arguably, this makes the content discrimination claim stronger, but one alternative would be to apply the fee of $148.00 per ton to all unsolicited paper (something on the order of 40,000 to 200,000 pages) distributed (for profit or in excess of a certain number of pages or both) outside the U.S. Postal System (where federal pre-emption probably applies). While this fee would be a notable burden on yellow page companies, it would still be a modest part of their total production costs, would be very modest when applied to other door to door flier distributors.

On the whole, the Seattle law seems either constitutional or easily remedied, sensible, and worth considering duplicated in Denver once constitutional concerns are resolved in Seattle's case.

READ MORE - Dex v. Seattle

Senate Considers Shrinking Plum Book

The Plum Book is the compliation of politically appointed posts in the United States Government, all of which, in the executive branch, require a nomination by the President or someone appointed by the President. It is a long publication. Indeed, an entirely too long publication.

The U.S. Senate is now considering the long term, bipartisan effort to thin that list.

Senior senators are negotiating to reduce the 1,400 presidential appointments subject to time-consuming Senate confirmation, hoping to streamline a system that has frustrated administrations of both parties. . . . 100 posts or more could be dropped from the list if discussions between Sens. Charles E. Schumer (D-N.Y.) and Lamar Alexander (R-Tenn.), result in an agreement that gains the support of the rank and file in both parties. Judicial appointments would not be affected, nor would the most senior positions at Cabinet departments or independent agencies. . . . The talks between Schumer and Alexander were set in motion by agreement between Majority Leader Harry M. Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.). . . . the number of core policy positions has risen from 295 in 1981 when President Ronald Reagan took office to 422 when President Obama arrived at the White House.

After selection by the president, each appointee for a post requiring confirmation generally submits paperwork to a Senate committee that will handle the review and then makes a series of courtesy calls on individual lawmakers, who sometimes use the opportunity to extract promises in exchange for speedy approval.

Nominees generally testify and answer question at a public hearing, the committee acts and then, in a final step, the entire Senate votes. The process can move speedily - or take months, even if there is no apparent opposition. The sheer volume can slow the pace.

The Senate Foreign Relations Committee has jurisdiction over 303 posts, including 185 ambassadors. The Senate Judiciary Committee oversees 252, including 92 U.S. attorneys and 92 U.S. marshals. The Senate Commerce, Science and Transportation Committee has control over 101, and the Senate Banking, Housing and Urban Affairs Committee over 83.

The biggest problem is that getting the U.S. Senate to do anything can take a long time, and getting it to handle 1,400 appointments can take a very long time, even if many are not controversial. The level of positions the negotiations would remove are deputy assistant undersecretaries and the like, not high level posts, and all of the positions removed would report to someone more senior. The filibuster's growing use and secret holds have effectively given a heckler's veto to every Senator concerning every such nomination.

READ MORE - Senate Considers Shrinking Plum Book

Falling Behind In Answering The Mail

The notion that private enterprises are efficient and well run is a persistent but profoundly inaccurate myth.

Falling Behind In Answering The Mail

Delta Airlines is about a month behind in opening and dealing with mail from its customers according to a customer service representative in its frequent flier mile department. Imagine what would happen to a typical law practice, or a typical household, if you were routinely opening mail received and dealing with it a month late. But, this seems to be business as usual at the moment at Delta.

Loan modification application processing by mortgage lenders and mortgage services is just as much of a morass. Papers sent to lenders are routinely lost. It is hard for borrowers to find out what more information or action is expected of them. And, completed files languish for months until the information in them becomes outdated.

Private Industry Not Precisely Fiscally Responsible Either

While large financial institutions, as well as companies and governments that issue bonds are considered to be at the brink of collapse if they make scheduled payments even a day or two late, it can be stunning how far behind on their accounts payable small and medium sized businesses and trade credit payments by large "real economy" firms can get on a fairly routine basis. Back in the days when I did defense work for casualty insurance companies, it was routine to have bills paid several months after they were submitted to these large, publicly held companies.

Few industries have escaped having entities that collapsed financially due to major missteps in their business plans. Among the major companies that have gone bankrupt, failed, or needed a bailout to survive (or to that didn't survive) in the last decade or so are: General Motors, Chrysler, Blockbuster, Enron, Circuit City, Adam Aircraft, Bennigans, eToys, Frontier Airlines, Crabtree & Evelyn, The Walking Company, Daphne's Greek Cafe, Old Country Buffet, Village Inn, Mrs. Fields Famous Brands, Ponderosa, Ritz Camera, Sportsman's Warehouse, Big 10 Tire Stores, Inc., Z Gallerie, Filene's Basement, Eddie Bauer, Dunkin' Donuts, Samsonite, Max & Erma's, Unos Pizza, Schlotzsky's, the Chicago Tribune, the Los Angeles Times, the Hartford Courant, the Orlando Sentinel, the South Florida Sun-Sentinel, the Baltimore Sun, The Morning Call, ForSaleByOwner.com, South Park, the Chicago Cubs, WGN 720 AM, KWGN, the Denver Post, the Rocky Mountain News, the Tucson Citizen, the Baltimore Examiner, the Cincinnati Post, the Albuquerque Tribune, the Honolulu Advertiser, Los Angeles Daily News, the Boulder Daily Camera, the Brush News-Tribune, the Fort Morgan Times, the Lamar Daily News of Lamar, the Sterling Colorado Journal Advocate, the Oakland Tribune, KTVA in Anchorage, The Augusta Chronicle, the Savannah Morning News, the Juneau Empire, AIG, Lehman Brothers, the Shane Company, the Mexicana Airline, Movie Gallery, Japan Airlines, Skybus, Northwest Airlines, Aloha Airlines, Delta Airlines, Mervyns, MCI, Montgomery Ward, MGM (movie studio), U.S. Airways, Air Canada, United Airlines, TWA, Washington Mutual, any subprime mortgage finance company, Six Flags Fannie Mae, Freddie Mac, Indy Mac Bank, the Bank of New England, the Arena Football League, Goldman Sachs, or any of a host of other major American businesses.

The Abyss Of Health Care Administration

Oh, and don't get me started about the arcane and mysterious world of health care billing and health insurance claims processing. It isn't uncommon for even the most routine preventative care visit to become mired in billing mistakes, and any medical condition of consequence is almost sure to require phone calls and correspondence that takes much longer than the medical care itself did to resolve. While these mistakes made by medical office administrative staff and insurance companies are worked out, often over a period of many months, medical office billing personnel (often outsourced) make dire threats to patients explaining that the patient will be held responsible and treated as a bad debtor if the insurance company fails to live up to its promises to the patient.

And, of course, the number of medical appointments that frequently take just a few minutes themselves, are often delayed beyond their scheduled times make the ontime rates of major airlines look absolutely stellar by comparison. An hour delay at a doctor's office for a three minute visit is routine.

There is little wonder that it is complex, because the distinctions made often make no sense at the patient level. For example, a specialist doctor's office that is independent of any hospital, and one that has some sort of hospital affiliation look identical from a patient's point of view in all respects. The waiting room, the interaction with the office staff, the treatment room, and what takes place in the visit with the doctor are the same. The hospital affiliation is rarely proclaimed loudly, there are no benefits in patient service that result, and the specialist doctor's office is often in a separate building from the hospital. But, the patient's share of the cost under an insurance contract is often much lower in a specialist doctor's office that is independent of any hospital than it is from one with a hospital affiliation.

Moreover, it isn't uncommon for a visit to a hospital affiliated specialist doctor's office to produce three or more separate invoices - once for the doctor, one for the hospital and one for laboratory tests. Actual inpatient stays at hospitals are even worse. It isn't unusual for a single brief inpatient stay to produce invoices from half a dozen different providers, each processed in a vacuum by the health insurance company and each with its own outsourced billing firm. Even huge law firms that keep track in itemized invoices of dozens of different kinds of costs and service providers over the course of work for a single client usually manage to consolidate their charges into one or two invoices (sometimes an expert witness or local counsel providing services at a separate geographic location sends separate invoices).

Needless to say, medical providers (with the sometimes exception of dentists) almost never make public their schedule of fees or even tell patients what their visits will cost in advance. And, medical providers routine charge wildly differing amounts to different people for the same service based on their insurance company and/or ability to negotiate a price based on a cash up front payment and/or ability to pay. Like the prices of hotel rooms that are publicly posted, almost nobody pays the "regular price" for health care services except those who are uninsured and can't pay in cash -- most of the "regular price" for health care services is really a hidden finance charge.

Health insurance companies provide more information, but since some of their charges depend upon what providers charge, and since rates negotiated with providers are not generally disclosed to patients until after services are provided, and since the distinctions health insurance companies make often make no sense to patients, even post-health insurance prices of health care are hard to predict. Frequently in hospitals and hospital affiliated situations, the patient doesn't even know who the providers managed by their physician or the hospital were until after the bill is received.

Don't forget that everybody, not just administratively competent college graduates, needs health care services, that health care needs are frequently urgent in ways that make comparison shopping for price (even if prices were available, which they aren't) impossible, and that many patients dealing with health care billing messes are sick themselves.

Is it any wonder that market based capitalism doesn't work well in these circumstances?

Health care reform, if House Republicans in Congress don't manage to derail it, will at least finally bring the United States much closer to a universal ability to pay for health care and will control some medical costs, but even this juggernaut of allegedly dramatic reform doesn't seriously deal with the absolute disaster that is medical billing in this country.

Government Bureaucracy Snafus

This isn't to say that large government bureaucracies are good examples either. Bill Johnson discusses in his Denver Post column the troubling delays that Colorado is experiencing in processing food stamp recertification. Colorado's unemployment office is almost as backed up as Delta is in dealing with claims. Mostly, these problems are due to ongoing problems with profoundly flawed execution of contracts to upgrade the state's computers made by very expensive private contractors who failed to deliver the services promised in prior gubernatorial administrations.

The IRS isn't even going to start processing certain kinds of tax returns until Valentine's Day because it's computers need to be reprogrammed to handle last minute changes in the tax laws (mostly due to the failure of Congress to pass tax laws for 2011 until the lame duck session in December). It is a rare day indeed that a major Department of Defense contract is performed on time and on budget. I've had the Patent and Trademark Office lose materials that I've properly submitted to them several times in a single application.

At a smaller scale, the Douglas County Schools in Colorado, as of this point in January already, have still provided no meaningful budget planning guidance to its employees for the coming year. Voucher debates and strategic planning have pushed the day to day business of running their district off the school board's agenda.

READ MORE - Falling Behind In Answering The Mail

Short Takes

* I went to the Burger King restaurant in Cherry Creek earlier this week to get a cheap breakfast sandwich while I waited for the bank to open. The location was previously famous for being the parking nazi of Cherry Creek North, aggressively booting people in its lot. This time, I had to wait several minutes for anyone who worked there to appear, even after calling out an "anybody home?" Their bathroom is also the skankiest in all of Cherry Creek.

* Radio stations in Denver are in a slump. I have twelve FM and six AM pre-sets on my car radio, which I regularly revise with the best available options on the airwaves. Yet, several times in the last week, the elevator music in retail stores around town has been fresher and more interesting than what I can hear on any of those eighteen stations.

* Science Fair is over for another year. Next up, History Day.

* What is with all of the little banks on and around 1st Avenue in Cherry Creek? There must be twenty of them in the neighborhood, most with just one or two locations. You'd think it was Bern, Switzerland, or Luxembourg, or the Cayman Islands. I almost never see anyone actually doing business there, but presumably they have enough customers to stay afloat. I presume that they are catering mostly to a high end, local market clientele making loans to businesses, real estate developers, wealthy individuals and medium sized businesses, but I'm really not entirely clear what the business model is, although it seems to be a very similar business model for all of the banks that are not retail customer oriented.

* Even though Denver was almost 20% below average in precipitation in 2010, the snow pack in all of the state's major river basins was well above average, and since that is what really matters most for both Front Range water users and for the Colorado tourism industry, it's all good.

* Justice Kagan wrote her first U.S. Supreme Court opinion on the subject of the proper way to calculate the car expense in Chapter 13 plan calculations. The ruling was 8-1 with only Scalia dissenting. I agree that her reading was the better interpretation of the statute (it disallowed the expense when there was no actual loan or lease on a vehicle that had to be paid). The court took the case because there was a circuit split on the issue.

* The Article I immigration court based in Denver has a new judge who is married to one of the ICE prosecutors in the Denver office who presses these cases. The new administrative law judge must "must recuse herself from any case directed by her husband" but I have real doubts about whether that is sufficient to remove the appearance of impropriety in this situation.

In an ordinary court, only part of the docket involves cases brought by the government. But, all of the cases before this administrative law judge will be brought by the office of which her husband is a part. The pervasive association the new immigration judge has with one side of every single case before her creates a clear appearance of impropriety. I can't imagine how I could possibly be impartial in her shoes. Immigration judges have immense discretion. Statistically, the judge a person with a case in immigration court is assigned to is the single most important factor in determining the outcome of the case. Inappropriate use of that discretion by immigration judges, mostly to the detriment of immigrants, has flooded the federal appellate courts in recent years, and has cast grave disrepute on the credibility of the immigration courts as institutions where any meaningful kind of due process exists. This development certainly doesn't help the situation. If the recusal were from all cases with ICE involvement, that would probably resolve the problem, but that isn't a viable option for an immigration court judge.

I feel for the couple, who are no doubt both very smart, competent immigration lawyers, each of whom has a good federal government jobs. Neither has personally done anything wrong. But, maintaining this kind of status quo, even with recusals from cases where the other is personally involved really doesn't cut it. In government contexts the concern is not primarily ex parte communications about particular cases or personal gain (the government lawyers don't win or lose anything as a result of the outcome of particular cases), but about bias towards one side or the other on the part of the office, which is just as strong even without personal involvement in the same cases. We are not such a parochial backwater in Denver that we have no choice but to have a conflicted immigration court system because no one else is up to the job.

* Once again, Denver cops are being sued in a police brutality case and fraudulent police report case arising from a January 2009 traffic stop. Westword has more details.

* Marginal Revolution is a superior blog that I will add to my sidebar in due course.

* The percentage of women in Colorado's General Assembly (41 out of 99) is the highest of any state in the United States. The national average is 23.4%.

* Republicans are constantly accusing liberals of inventing constitutional rights that aren't supported by the language of the constitution. But, these days, the shoe is on the other foot. John Tomasic at the Colorado Independent nails it with this headline:

King to Polis: Healthcare law infringes on right to have babies in garbage cans

He goes on to explain:

Iowa Rep. Steve King today on Capitol Hill at a Rules Committee hearing on the GOP plan to repeal the healthcare reform law. He ended up telling Colorado Rep. Jared Polis that the law is unconstitutional because, for instance, it forces uninsured women who deliver babies in garbage cans to buy health insurance. Polis, aghast, searched for words.

Isn't funny how the rights Republicans want to invent always seem to be ones you have no desire to actually exercise?

READ MORE - Short Takes

Bureaucratic Bloat Revisited

The driving force behind the growing number of federal regulatory employees can be explained with one very simple reason: 9-11.

Almost all of the Homeland Security growth, moreover, is due to the federal socialization of the previously private sector and state and local government function of passenger air traffic security in the federal Transporation Security Administration. Also note that the Tea Party faction in Congress has pledged not to make cuts to Homeland Defense, a pledge that clearly extends to the TSA.

Via Rortybomb.

READ MORE - Bureaucratic Bloat Revisited

The Drivers And Costs Of CEO Pay and Inequality

I've written before about the pay of superstars in sports and entertainment, and the portion of a New York Times article discussing that point covers little new ground. The shorter version is that their performances reach a very large number of people.

Entity Size And Profits Drive Corporate Pay

The article's analysis of high corporate pay, however, bears closer attention. It attributes rising pay for the executives in the "real economy" to the increasing scale of big business, and rising pay inn the finance sector to profits made possible deregulation.

In 1977, an elite chief executive working at one of America’s top 100 companies earned about 50 times the wage of its average worker. Three decades later, the nation’s best-paid C.E.O.’s made about 1,100 times the pay of a worker on the production line. . . . in the 1970s found that executives in the top 10 percent made about twice as much as those in the middle of the pack. By the early 2000s, the top suits made more than four times the pay of the executives in the middle. . . . Two economists at New York University, Xavier Gabaix and Augustin Landier, published a study in 2006 estimating that the sixfold rise in the pay of chief executives in the United States over the last quarter century or so was attributable entirely to the sixfold rise in the market size of large American companies. . . .

In 2007 . . . . financial companies accounted for a full third of the profits of the nation’s private sector. Wall Street bonuses hit a record $32.9 billion, or $177,000 a worker. . . . Financiers had a great time in the early decades of the 20th century: from 1909 to the mid-1930s, they typically made about 50 percent to 60 percent more than workers in other industries. But the stock market collapse of 1929 and the Great Depression changed all that. In 1934, corporate profits in the financial sector shrank to $236 million, one-eighth what they were five years earlier. Wages followed. From 1950 through about 1980, bankers and insurers made only 10 percent more than workers outside of finance, on average. . . .

By 2005, the share of workers in the finance industry with a college education exceeded that of other industries by nearly 20 percentage points. By 2006, pay in the financial sector was again 70 percent higher than wages elsewhere in the private sector. A third of the 2009 Princeton graduates who got jobs after graduation went into finance; 6.3 percent took jobs in government.

The authors attribute the gains in the tides of financial industry pay largely to government regulation, which tightened during the Great Depression and on through about 1959, and then was relaxed in the late 1980s and 1990s.

A critical point to keep in mind is that the increased pay have top executives in big business or finance has a great deal to do with ability to pay and very little to do with actual competence.

Big businesses and financial firms offer an amount based on the scale of their enterprises and the amount of profit their firm creates, in the hope of attracting the best talent. But, while there is considerable evidence to indicate that better pay does lure better rank and file professionals to an industry or enterprise, there is very little evidence to indicate that big businesses are able to accurately discern which applicants for exhorbitantly paid top jbs are actually the best one, and there is considerable evidence to indicate that big businesses do an absolutely mediocre job of removing top executives who have failed to live up to the expectations upon which they were hired from their posts.

The Diminishing Marginal Returns Of Winner Take All Compensation

Put another way, if big businesses had hired someone from the same pool as the person actually hired who was willing to work for half a much compensation, there is very little to indicate that the business would be run any less well. One can find very compentent managers willing to work for $1,000,000 a year, and the marginal benefit accrued by offering $10,000,000 a year instead is not at all obvious.

This concern is particular great in the case of successor CEOs. One can argue that founders of firms have earned their great wealth by creating the firms that generate it. But, this point is much harder to make when a successor is appointed to manage to wealth created by his or her predecessors.

The divide between the rich and the megarich is driven by the concentration of economic activity into a smaller number of firms that is largely a product of economy of scale incentives in the economy, not by the fact that there is an immense divide in talent between the rich and the megarich.

Indeed, the concentration of rewards at the very top can actually create counterproductive incentives:

If only a very lucky few can aspire to a big reward, most workers are likely to conclude that it is not worth the effort to try. The odds aren’t on their side. Inequality has been found to turn people off. A recent experiment conducted with workers at the University of California found that those who earned less than the typical wage for their pay unit and occupation became measurably less satisfied with their jobs, and more likely to look for another one if they found out the pay of their peers. Other experiments have found that winner-take-all games tend to elicit much less player effort — and more cheating — than those in which rewards are distributed more smoothly according to performance.

Counterproductive winner take all effects are the private sector equivalent of the Laffer Curve, the notion that at some very high marginal tax rate (far in excess of anything found in the U.S. or even European economies), increasing taxes reduces tax revenues because it creates an disincentive to work. There is a point at which increasing compensation to top performers actually decreases the productivity of the economic unit as a whole.

The Drivers and Economic Impacts Of Income Inequality

The article also notes the trend towards exceptionally high income inequality in the American economy, and its tenuous relationship to economic growth (emphasis added):

Since 1980, the country’s gross domestic product per person has increased about 69 percent, even as the share of income accruing to the richest 1 percent of the population jumped to 36 percent from 22 percent. But the economy grew even faster — 83 percent per capita — from 1951 to 1980, when inequality declined when measured as the share of national income going to the very top of the population.

One study concluded that each percentage-point increase in the share of national income channeled to the top 10 percent of Americans since 1960 led to an increase of 0.12 percentage points in the annual rate of economic growth — hardly an enormous boost. . . . Since 1980, the weekly wage of the average worker on the factory floor has increased little more than 3 percent, after inflation. . . . According to the Organization for Economic Cooperation and Development, the average earnings of the richest 10 percent of Americans are 16 times those for the 10 percent at the bottom of the pile. That compares with a multiple of 8 in Britain and 5 in Sweden. . . . There is a 42 percent chance that the son of an American man in the bottom fifth of the income distribution will be stuck in the same economic slot. The equivalent odds for a British man are 30 percent, and 25 percent for a Swede.

Keep in mind tha the 3% real increase in wages for factory workers since 1980 has not been 3% per year, but instead is 3% total. On an annualized basis, that is an increase of about 0.1% per year -- for example, a rate of about $40.00 per year for someone making $40,000 a year.

What the international comparisons citred by the New York Tiems do not reveal is the root causes of the differences in income inequality between the United States and continental Europe. It turns out that the bulk of the difference is due to government policy. The less well off are better in Europe because the net deal of taxes paid v. transfer payments received there is better than it is in the United States.

The pre-tax, pre-transfer payment earnings of the less well off are just as stagnant in Europe as they are in the United States, but Europeans have sweetened the pot for the average person to share the wealth their economies have grown, while the Americans have not.

This analysis tends to suggest that the poor in America have a comparatively wretched and insecure existence not because they are less able to contribute economically, but because our political system does not see everyone as being in the same boat to the same degree. It is plausible to hypothesize that this, in turn, has a lot to do with the fact that the less well off are far more likely to participate politically in Europe than in the United States. In Europe, the share of the voting aged population that votes is 50% to 100% greater than in the United States. Non-voters are ignored politically, and the correspondence between those who don't vote (the poor and uneducated, particularly minorities, and children) and those who receive meager governmental support by international standards, is probably not coincidental.

Notably, forcing the beneficiaries of economic growth to share their gains with the rest of the nation has not, as conservative economic intuition would suggest, had any significant effect on the rate of economic growth. In countries with mixed economies where one's earnings still significantly impact one's socio-economic well being, even significant taxation to fund transfer payments doesn't distort the economy very much, because insuring that that there are real economic incentives in earnings for economically productive conduct turns out to be much more important than the intensity of those economic incentives. The ability to capture much of your contribution to economic growth is very nearly as motivating as the ability to caputre almost all of your contribution to economic growth.

READ MORE - The Drivers And Costs Of CEO Pay and Inequality