naked capitalism

As readers probably know, the health care reform bill passed the House tonight, by a thin margin and with the Democrats offering a large concession by limiting reimbursements on abortions.

Thomas Frank has a good piece in the New York Times tonight, in which he argues that health care reform might lead more doctors to be salaried rather than in an entrepreneurial format in a system that is piecework and therefore rewards more procedures, and therefore encourages doctors to run tests and procedures, adding to healthcare costs.

If you don’t think this happens, I have a bridge I’d like to sell you. I had had a very good doctor before I went overseas for two years, but when I came back, he was no longer practicing (he had taken an job with a small drug company). I had surprising trouble finding a doctor I liked remotely as much as him (and I found doctors I liked in Syndey pretty readily, so I don’t believe I am unduly fussy). I also have a a good insurance policy, it allows me to see anyone with a 20% copay. I can go directly to a specialist, no gatekeeper nonsense. But a 20% copay is also enough to make me sensitive to overtesting.

One doctor I was referred to had his own townhouse. Bad sign. Decorated like that of a plastic surgeon. Second bad sign. He interviewed patients (by then in a gown) in a surprisingly cavernous office for a townhouse behind a large desk that I swear reminded me of Nazi Gemany (and I am a WASP and therefore not inclined to that line of thought). It read to me as an effort to intimidate, and he confirmed that by looking at my file and sneering, “XXX [my address] That’s a rental, isn’t it?”

Even though I am basically healthy, he proceeded to order $2000 worth of bloodwork and have me take an highly sensitive echocardiogram in his office (a $1300 test). Now mind you, my last doctor, a board certified cardiologist, said, “You would be immortal based on your heart.” There was not reason to run a costly test on my heart, but I didn’t know it was costly until I got the bill. I did have an idea what the damage on the bloodwork would be, though, and refused to have that done.

I also had an incident earlier where an orthopedic surgeon was particularly eager to operate on my knee despite a pretty ambivalent radiologist’s report on an MRI. Even though the report said, “possible false positive” his reaction was, “Oh, I’ll just go in, have a look, clean whatever I find up, you’ll be in on a Friday and walking by Monday. ” A second opinion (by a team of radiologists on the same MRI) found my knee was “perfectly normal.”

I hate to give personal anecdotes, but if as a pretty healthy person who does not see doctors often, I have had two clear experiences of doctors pushing to overtreat (and a few borderline cases too), how often does this happen to the average Joe, who might not be in as good general health and less of a constitutional skeptic than me?

Most patients are not able or wiling to buck their doctors if they order unnecessary tests or procedures. Frank describes the general case:

Most doctors undoubtedly recommend only those tests and procedures that they sincerely believe to be in their patients’ best interests. Yet those interests are seldom completely clear. And when doctors know that their incomes will be higher if they recommend additional procedures, many may tilt in that direction.

Physicians, like everyone else, are also subject to herd behavior. If some doctors in a given city begin prescribing additional procedures, others may feel pressure to follow suit — not just because patients expect it, but also to keep pace with colleagues’ incomes.

Yves here. There are most decidedly national as well as regional differences in practice. I noticed when I was in Australia, doctors were up on the current research, but were not inclined to swallow it hook, line and sinker. They were, far more than US doctors, very cognizant of the limits of recent studies (for instance, if it was a small sample size, or was a particular population, and thus not necessarily generalizable). And they were much less eager to operate and prescribe drugs.

Frank does point out that some approaches to cutting the test-happiness of US medicine have yielded positive outcomes:

In an article in The New Yorker, for example, Atul Gawande described an entrepreneurial medical subculture in McAllen, Tex., in which doctors prescribe roughly half again as many tests and procedures as those in otherwise similar Texas communities. McAllen, he argued, is where American health care is heading.

Current reform bills do little to curtail such spending, and all include subsidies to help meet insurance mandates, which would shift substantial existing health spending onto the federal budget. So enacting one of these bills would intensify pressure to cut costs.

The good news is that Dr. Gawande also identifies at least some health plans, like that of the Mayo Clinic in Minnesota, that have sidestepped the incentive problem by putting doctors on salary and operating their own hospitals. Such plans, which provide superb care and high patient satisfaction at significantly lower cost than conventional fee-for-service plans, would become more attractive under the proposed legislation.

But Frank asks the obvious question, and provides his own answer:

But that raises a puzzling question: If the Mayo model is better and cheaper, why hasn’t it swept the market like wildfire?

Part of the answer lies in the so-called adverse selection problem, a market failure that explains why so many Americans remain uninsured. When the decision to buy insurance is left to individuals, the young and healthy often opt out, thinking — generally correctly — that their premiums are likely to far exceed any reimbursement they will get.

But that means that the remaining members of the insured pool, on average, are significantly less healthy, so premiums must rise further. This puts pressure on the healthiest remaining members to drop out, causing still further increases in premiums, and so on…

But adverse selection can’t explain why the Mayo model hasn’t gained ground faster in the employer-provided health insurance market. That market doesn’t suffer from adverse selection, because insurance is tax deductible only if insurers accept all employees on equal terms.

Dr. Gawande reports that Mayo has recently opened a clinic that serves employers in the high-cost Florida market. But given how bitterly businesses complain about rising health care costs, we might have expected much more movement.

One explanation may be residual prejudice against the for-profit H.M.O. wave of the 1990s, which entailed a conflict of interest of a different sort. Patients paid a fixed annual fee, which meant that H.M.O.’s made more money each time they avoided prescribing a procedure. Because clinics like Mayo’s are nonprofits, they may avoid this conflict.

Another factor militating against quick expansion of the Mayo model is that many current doctors chose their profession hoping to earn lucrative pay, which they might not be able to do in a nonprofit clinic. But across the economy, we see talented professionals whose career choices are driven by concerns far broader than pay. Many top graduates from elite law schools, for example, turn down lucrative positions in corporate law to work for public-interest groups paying a third as much.

I suspect Frank is right on the pay issue, but for the wrong reasons. I am always staggered when I hear of law school and business school graduates being in debt to the tune of $100,000, even $200,000. I have no idea what the level for MDs is, but I imagine it is even worse.

And you cannot discharge student debt in a bankruptcy. You have no choice but to pay it (or I suppose flee the US or go underground, there are always extreme options). So the fee for service model may remain intact despite the fact that it produces poor outcomes for society as a whole because the current generation of doctors needs high incomes to so they can service their debts.

It should come as no surprise that those at the top of the food chain get preferential treatment on all levels. But this still stinks to high heaven. Employees of the Goldman, the Fed, Citigroup, and other banks are getting H1N1 vaccine allotments out of proportion to what can be justified from a public health standpoint. In particular, Goldman has gotten more than Lenox HIll hospital, which needs it not just for the sick but more important, for workers (not only does the public need to keep front-line health care workers in as good shape as possible, but if they get the infection, they become disease vectors fast, given the number of people they see).

Then again, banks have become parasitic, so why should we expect anything different? And although Business Week broke the story, it did it press release style:

To the list of hundreds of schools, hospitals, and community health centers that have received limited allocations of the H1N1 swine flu vaccine, you can now add some of New York’s largest employers. In the past week or so 13 companies, including Citigroup (C) and Goldman Sachs (GS), have begun receiving small quantities of the vaccine, according to city health authorities.

Citigroup has been supplied with 1,200 units and Goldman with 200, says Jessica Scaperotti, press secretary for the Department of Health & Mental Hygiene. The agency has so far approved orders by 29 employers—including 16 that have yet to receive any vaccine—after they were cleared by the U.S. Centers for Disease Control & Prevention (CDC). Big employers that have received or are scheduled to receive vaccine so far include Time Warner (TWX), JPMorgan Chase (JPM), Memorial Sloan-Kettering, New York Presbyterian Healthcare System, and New York University.

Health-care workers at those employers are bound by the CDC to distribute the vaccine only to populations deemed to be at high risk of developing serious complications from swine flu: pregnant women, children and young people aged 6 months to 24 years, people who live with or provide care for infants under 6 months (who cannot be vaccinated), people aged 24 to 64 with medical conditions that put them at higher risk for flu-related complications, and health-care workers and emergency medical personnel.

Yves here. Welcome to the class system in action. If you don’t work for a big, influential company, go to the back of the queue. Why should companies be the nexus of distribution for vaccines? I guarantee no Goldman MD gets much of his routine medical treatment from the GS health workers on staff (emergencies or a fast diagnostic like a strep test are different). But if you work for a less privileged employer or are self-employed or between jobs, tough luck, go to the back of the queue, you have to try to get yours (assuming you can) from vaccination centers in New York City. How easy do you think that will be? The difficulty and queuing are certain to be much worse than for any of the big financial players.

And please, it strains credulity to think that someone on the payroll at these companies won’t bend to pressure to make allotments at the margin according to who is most powerful. Do you think if Lloyd Blankfein or another member of the management committee was in a risk category that he would be denied it, assuming the firm did not have enough to go around? (and that is likely). Now given the brouhaha, Goldman may bend over backwards not to abuse this overmuch now that there is media pushback. But this serves to illustrate how the system has been suborned on just about every front. To wit, Goldman is getting 200 doses of the vaccine, the same number as Lenox Hill Hospital.

A fascinating and somewhat disturbing article at the New York Review of Books by Jerome Groopman looks at what counts for progress in medical diagnosis and finds it to be more of a mixed bag than most readers would assume. This won’t come as much of a surprise to those who know a bit about the field (one of my colleagues who worked at the National Institutes of Health called it “a medieval art”). But what is a tad disconcerting is that the efforts to make medicine more scientific may not in fact be a plus.

That may sound simply bizarre to readers. Isn’t evidence based medicine a good thing? Well, maybe not.

One of the reasons this piece struck a chord with me is that some of the efforts to make medicine more scientific parallel, in their negative aspects, the push to make economics more scientific. In medicine, this means developing more rules and tools for diagnosis; in economics, the course chosen was to impose more “rigor” which meant make greater use of mathematical exposition (proof-like theoretical papers) and to have “empirical” papers centered around statistical analysis of data sets.

Now while this all may sound well and good, in fact, both are methodological choices that limit investigation. For instance, evidence based medicine seeks to gather symptoms and then use that to determine what the ailment might be. Well, the problem is these protocols have been developed from people with only one thing wrong with them. Many people who show up in doctor’s offices have multiple pathologies. So a lot of effort is being expended to develop an approach that has limited value in the field, and worse, doctors are increasingly expected to conform to it.

An analogous problem in economics is the discipline has to ignore of finesse the role of uncertainty (unknown unknowns, as opposed to risk, outcomes that can be estimated with some precision). Frank Knight and John Maynard Keynes were both leery of undue reliance on math (and both were skilled in the art) for that very reason.

Another way that the desire to systematize medicine may not represent progress is that it limits doctors’ observational methods. Doctors look at a number of elements of a patients’ condition: skin tone, energy level, the quality of their breathing. Some of these do not fit neatly into diagnostic scoring methods and are thus discarded, resulting in information loss. There is in particular in medicine a distaste for seemingly old fashioned diagnostic methods even when they are more accurate than tests. My favorite pet peeve here is mammograms. A manual breast exam, whether done by the patient herself or by an experienced examiner, is far more successful at picking up the fast moving, dangerous cancers that pose a health risk. Mammograms are in fact a lousy test, good at picking up benign or slow moving growths (the ones patients will die with rather than of) and poor at picking up the deadly type. But women are hectored to have mammograms and they are falsely treated as a gold standard. Again, the analogy in economics is the preference for using data sets, and not having much interest in analyses that include hard and qualitative data (an author might include some discussion in a narrative section of his paper, as illustration or qualification, but there is not much receptivity to using qualitative analysis to supplement data sets with gaps).

Perhaps most important, Groopman stresses that the focus on methodology is dehumanizing medicine.

The ability to recognize complex patterns is one of our highest forms of intelligence, and one both disciplines seem inclined to devalue. Admittedly, as Malcolm Gladwell demonstrated in his book Blink, this faculty can be remarkably accurate or wildly wrong. Somehow, embracing technology too often leads to a rejection of older approaches, rather than figuring out how to use the best of both methods.

From Groopman:

Carrying the Heart: Exploring the Worlds Within Us
by F. González-Crussi
Kaplan, 291 pp., $26.95

The Deadly Dinner Party and Other Medical Detective Stories
by Jonathan A. Edlow, M.D.
Yale University Press, 245 pp., $27.50

Several months ago, I led a clinical conference for interns and residents at the Massachusetts General Hospital…

The subject of the conference centered on how physicians arrive at a diagnosis and recommend a treatment—questions that are central in the two books under review. We began by discussing not clinical successes but failures. Some 10 to 15 percent of all patients either suffer from a delay in making the correct diagnosis or die before the correct diagnosis is made. Misdiagnosis, it turns out, is rarely related to the doctor being misled by technical errors, like a laboratory worker mixing up a blood sample and reporting a result on the wrong patient; rather, the failure to diagnose reflects the unsuspected errors made while trying to understand a patient’s condition.[1]

These cognitive pitfalls are part of human thinking, biases that cloud logic when we make judgments under conditions of uncertainty and time pressure. Indeed, the cognitive errors common in clinical medicine were initially elucidated by the psychologists Amos Tversky and Daniel Kahneman in their seminal work in the early 1970s.[2] At the conference, I reviewed with the residents three principal biases these researchers studied: “anchoring,” where a person overvalues the first data he encounters and so is skewed in his thinking; “availability,” where recent or dramatic cases quickly come to mind and color judgment about the situation at hand; and “attribution,” where stereotypes can prejudice thinking so conclusions arise not from data but from such preconceptions.

A physician works with imperfect information. Patients typically describe their problem in a fragmented and tangential fashion—they tell the doctor when they began to feel different, what parts of the body bother them, what factors in the environment like food or a pet may have exacerbated their symptoms, and what they did to try to relieve their condition. There are usually gaps in the patient’s story: parts of his narrative are only hazily recalled and facts are distorted by his memory, making the data he offers incomplete and uncertain. The physician’s physical examination, where he should use all of his senses to try to ascertain changes in bodily functions—assessing the tension of the skin, the breadth of the liver, the pace of the heart—yields soundings that are, at best, approximations. More information may come from blood tests, X-rays, and scans. But no test result, from even the most sophisticated technology, is consistently reliable in revealing the hidden pathology.

So a doctor learns to question the quality and significance of the data he extracts from the medical history of the patient, physical examination, and diagnostic testing. Rigorous questioning requires considerable effort to stop and look back with a discerning eye and try to rearrange the pieces of the puzzle to form a different picture that provides the diagnosis. The most instructive moments are when you are proven wrong, and realize that you believed you knew more than you did, wrongly dismissing a key bit of information that contradicted your presumed diagnosis as an “outlier,” or failing to consider in your parsimonious logic that the patient had more than one malady causing his symptoms…

I worried aloud about how changes in the delivery of health care, particularly the increasing time pressure to see more and more patients in fewer and fewer minutes in the name of “efficiency,” could worsen the pitfalls physicians face in their thinking, because clear thinking cannot be done in haste…

Like all doctors educated over the past decade, the residents had been immersed in what is called “evidence-based medicine.” This is a movement to put medical care on a sound scientific footing using data from clinical trials of treatment rather than on anecdotal results. To be sure, this shift to science is welcome, but the “evidence” from clinical trials is often limited in its application to a particular patient’s case. Subjects in clinical trials are typically “cherry-picked,” meaning that they are included only if they have a single disease and excluded if they have multiple conditions, or are receiving other medications or treatments that might mar the purity of the population under study. People are also excluded who are too young or too old to fit into the rigid criteria set by the researchers.

Yet these excluded patients are the very people who heavily populate doctors’ clinics and seek their care…

At the conference, an animated discussion followed, and I heard how changes in the culture of medicine were altering the ways that the young doctors interacted with their patients. One woman said that she spent less and less time conversing with her patients. Instead, she felt glued to a computer screen, checking off boxes on an electronic medical record to document a voluminous set of required “quality of care” measures, many of them not clearly relevant to her patient’s problems…

During my training three decades ago, the team of interns and residents would move from bedside to bedside, engaging the sick person in discussion, looking for new symptoms; the medical chart was available to review the progress to date and new tests were often ordered in search of the diagnosis. By contrast, each patient now had his or her relevant data on the screen, and the team sat around clicking the computer keyboard. It took concerted effort for the group to leave the conference room and visit the actual people in need…

The two chief residents seemed deeply engaged by their patients’ lives and struggles, yet deeply frustrated, because that dimension of medicine, what is termed “medical humanism,” was, despite much lip service, given short shrift as a consequence of the enormous change in how medical care is being restructured.

What I heard from the residents at the Massachusetts General Hospital was not confined to that noon meeting or to young physicians. A close friend in New York City told me how his wife with metastatic ovarian cancer had spent six days in the hospital without a single doctor engaging her in a genuine conversation….no one attending to her had sat down in a chair at her bedside and conversed at eye level, asking questions and probing her thoughts and feelings about what was being done to combat her cancer and how much more treatment she was willing to undergo. The doctors had hardly touched her, only briefly placing their hands on her swollen abdomen to gauge its tension. The interactions with the clinical staff were remote, impersonal, and essentially mediated through machines.

Nor were these perceptions of the change in the nature of care restricted to reports from patients and their families. They were also made by senior physicians. My wife and frequent co-writer, Dr. Pamela Hartzband, an endocrinologist, reported conversations among the clinical faculty about how a price tag was being fixed to every hour of the doctor’s day. There were monetary metrics to be met, so-called “relative value units,” which assessed your productivity as a physician strictly by measuring how much money you, as a salaried staff member, generated for the larger department. There is a compassionate, altruistic core of medical practice—sitting with a grieving family after a loved one is lost; lending your experience to a younger colleague struggling to manage a complex case; telephoning a patient and listening to how she is faring after surgery and chemotherapy for her breast cancer; extending yourself beyond the usual working day to help others because that is much of what it means to be a doctor. But not one minute of such time may be accountable for reimbursement on a bean counter’s balance sheet.[5]

Still, I wondered whether my diagnosis of the ills of modern medicine was accurate. Perhaps I was weighed down by nostalgia, my perspective a product of selective hindsight. Certainly, coldly mercenary physicians were familiar in classical narratives of illness. Tolstoy satirized “celebrity doctors” who were well paid for offering Ivan Ilych ridiculous remedies for his undiagnosed malady while ignoring his suffering. Turgenev in “The Country Doctor” depicted an unctuous provincial physician whose degree of engagement with the sick was tied to the size of their pocketbook. Molière repeatedly lampooned the folly of pompous and greedy physicians.

Such doctors have been members of the profession since its founding. And it would be naive to believe that money is not one part of the exchange between physician and patient. But only recently has medical care been recast in our society as if it took place in a factory, with doctors and nurses as shift workers, laboring on an assembly line of the ill. The new people in charge, many with degrees in management economics, believe that care should be configured as a commodity, its contents reduced to equations, all of its dimensions measured and priced, all patient choices formulated as retail purchases. The experience of illness is being stripped of its symbolism and meaning, emptied of feeling and conflict. The new era rightly embraces science but wrongly relinquishes the soul.

n his book Carrying the Heart, Dr. Frank González-Crussi, a professor of pathology at Northwestern University, has made a sharp departure from medicine as a cold world of clinical facts and figures. Rather, he asks us to return to a view of the body not as a machine but as a wondrous work of creation, where both the corporeal and the spiritual coexist. His aim, he writes, is

to increase the public’s awareness of the body’s insides. By this, I do not mean the objective facts of anatomy, for most educated people today have a general, if limited, understanding of the body’s parts and functions. I mean the history, the symbolism, the reflections, the many ideas, serious or fanciful, and even the romance and lore with which the inner organs have been surrounded historically.

This précis captures the beauty and charm of his book. I learned from González-Crussi that for centuries the stomach was considered the most noble of organs, directing all important physiological functions. The ancients, González-Crussi tells us, called the stomach “the king of viscera,” “the senate or the patrician class; the bodily parts were the rebellious plebeians.” Shakespeare repeats this fable in Coriolanus, where the stomach lectures the rest of the body’s organs about the importance of its function.

Our gastric elements were seen as having a leading part in joy and adversity, and were the seat of the soul—predating the belief that the spirit was housed in the heart or the brain. This regal position was ultimately relinquished through the observations of Dr. William Beaumont in 1822. Beaumont studied a young French-Canadian named Alexis St. Martin, who suffered an accidental musket shot to the belly. He was left with a perforation some two and a half inches in circumference, through which the doctor could look into the living stomach and perform experiments on its workings. Via this “stomach window,” the physiology of the organ was gradually deciphered, and its fabled status faded.

No part of our anatomy, González-Crussi recounts, has failed to fascinate poets, priests, and philosophers—including the working of the colon. In the chapter on feces, we learn that the Chinese had a divinity of the toilet. “This was Zi-gu, ‘the violet lady.’ She was not entirely fictional,” González-Crussi writes,

but took her origin from a flesh-and-blood woman who lived about AD 689. To her misfortune, she was made the concubine of a high government official, Li-Jing. The man’s legitimate wife, overcome by jealousy, killed Zi-gu in cold blood while she was visiting the toilet. Since then, her ghost has haunted the latrines, “a most inconvenient circumstance for anyone in a hurry.”

The colon and its product also were part of the theology of the Aztecs. They believed that excrement

was capable of bringing ills and misfortune, and associated with sin, but also powerful and beneficent, able to ward off disease, to subdue the enemy, and to transform sexual transgressions into something useful and healthy.

Gold was termed “the sun’s excrement” and the sun god Tonatiuh deposited his own feces in the form of this precious element in the earth while he passed through to the underworld.

González-Crussi also reminds us that there was an inordinate fixation on one’s bowels during the Victorian age, which honored values of order, temperance, respect for tradition, and sexual repression. Personal self-control, the mark of British culture, was at odds with that urgent process of expelling air and waste:

Perhaps no greater ambivalence has ever existed toward the bowel than in Victorian England, where this organ was viewed with simultaneous skittish embarrassment and fascination, shame and fixed interest, shy modesty and hypnotic engrossment.
A shocking consequence of this cultural tension is that one of the most proficient surgeons of the era, William Arbuthnot Lane, who devised procedures to successfully set compound fractures, concluded that without a colon, man would free himself from inner toxins and extend his health and longevity. A natural physiological function became a pseudodisease. Initially, Lane devised operations to bypass the large bowel, and he then moved on to perform total colectomies. Patients flocked to him from all over Great Britain and abroad, certain that their lives would be more salubrious and fulfilling without their large intestine.

González-Crussi treats with similar scholarship and playful insight the uterus, the penis, the lungs, and the heart. He melds history with literature, religion with science, high humor with serious concerns. The sum of his narrative shows that medicine does not exist as some absolute ideal, but is very much a product of the prevailing culture, affected by the prejudices and passions of the time…But our culture, with its worship of technology and its deference to the technocrat, risks imposing an approach to medical care that ignores the deeply felt symbolism of our body parts and our desperate search for meaning when we suffer from illness…..

Jonathan Edlow is concerned with the doctor not as poet or philosopher or priest but as detective. An emergency room physician at the Beth Israel Deaconess Medical Center, a Harvard teaching hospital in Boston where I also work…Both detective and doctor not only assemble evidence but must judiciously weigh what they have found, seeking the underlying value of each clue. The successful doctor-detective must be alert to biases that can lead him astray. This was the message of the clinical conference those months ago; and in Edlow’s tales of difficult diagnoses, we can observe detours that are due to “anchoring,” “availability,” and “attribution.”…

In his chapter “An Airtight Case,” Edlow implicitly shows why so many of the standard formulas that policymakers promulgate fall short when answers are not obvious. He describes how an office worker (whom he calls Philip Bradford) thought he had developed “the flu—the usual cough, fevers, chest pain, just feeling lousy….” What appeared to be the symptoms of a typical viral illness did not spontaneously disappear. A chest X-ray showed pneumonia, but treatment with antibiotics proved ineffective. The presumptive diagnosis changed from infection to cancer, and Bradford was told by his doctor that he needed his chest opened to resect a piece of lung and identify the tumor.

Fortunately, the patient sought a second opinion, from a senior thoracic surgeon, and the diagnosis was again thrown into doubt—the specialist believed that the problem was neither infection nor an abnormal growth. Over the ensuing months, the mysterious pneumonia spontaneously cleared up, but after a year Bradford again started coughing and running a fever. “His chest X-ray blossomed with ominous nodules,” Edlow writes, “then, as with the previous episode, after a few weeks his symptoms mysteriously vanished.”

It was the good fortune of this ill office worker with the mysterious lung problem to see Dr. Robert H. Rubin, an infectious disease specialist at the Massachusetts General Hospital….what is striking is his “low-tech” thinking: “I was immediately impressed by three aspects of the case,” Rubin recalled.

First was that Bradford appeared healthy and athletic, not the picture of someone with a chronic disease. Second, between episodes, he continued to jog over five miles with no apparent problem. And third, his physical examination was normal.

With such comments, we are a universe away from sophisticated blood tests and CT scans, and deeply rooted in the world of the physician’s five senses. The most seasoned clinicians teach that the patient tells you his diagnosis if only you know how to listen. The clinical history, beyond all other aspects of information gathering, holds the most clues. And it is this part of medicine—the patient’s narrative, the onset and tempo of the illness, the factors that exacerbated the symptoms and those that ameliorated them, the foods the patient ate, the clothing he wore, the people he worked with, the trips he took, the myriad of other events that occurred before, during, and after the malady—that are as vital as any DNA analysis or MRI investigation.

Rubin concentrated that kind of questioning and listening on Bradford. He did not quickly dispatch him for more tests, but instead sharply shifted his focus to investigate clues in Bradford’s environment that could reveal what was causing inflammation in his lungs. Edlow goes on to write in clear and fluid prose about how Rubin systematically pursued what could be the agent provocateur in the case. The lengths to which Rubin went are extraordinary, his skill in eliciting and interpreting the patient’s narrative exemplary, and certainly not part of the rushed practice of today’s clinic. I won’t spoil the end of the story; what is important is that the solution came about only by dogged thinking that required the kind of time and inquiry that is absent in much of modern medical care.

The other detective stories in Edlow’s compilation transmit the same message: we most need a discerning doctor when a diagnosis is not obvious, when the clues are confusing, when initial tests are inconclusive. No simple technology can serve as a surrogate for the probing human mind. Edlow’s book is a welcome complement to González-Crussi’s. Both show us that medicine is truly an art and a science that requires doctors both to decipher the mystery and illuminate the meaning of the body in health and disease.

In the early days of this blog, I would often wind up comparing coverage of news between the Financial Times and the Wall Street Journal because the offender (almost without exception the Journal) had done a job so poor or misleading that it merited comment. Then the credit crisis forced the Journal to up its game, and the FT appeared to slip a bit (I wondered if it was catering, as in pandering, to US readers).

This time, the dubious reporting object lesson is the New York Times, on what is supposedly its most prized beat: Washington DC political reporting. The Times ran two articles that verged on sycophantic in its coverage of the health insurance industry as it moved its chess pieces on the health care reform game board. The Times acted as close to a PR outlet. From an early August post:

A similar charade is in motion on the health care front. My bullshit meter went into high alert earlier this week with this New York Times story, “For Health Insurers’ Lobbyist, Good Will Is Tested,” which was clearly a PR plant. It featured Karen Ignagni, a $1.6 million-a-year earning lobbyist to the health insurance industry as a heroine (I started getting nauseaous as soon as I saw the deliberately low-key picture of her in her office). And why should we see a representative of one of the biggest forces undermining democracy in America, the usually-successful efforts of well-funded industry groups to steam-roll legislative process, as a good guy, or in this case, gal? Because she supposedly talked a mean and obstructionist industry into playing nice.

Towards the end of August, in “New York Times Runs Yet Another Fawning Story on Health Insurance Industry,” I noted:

The latest salvo in the health care industry charm offensive is another story humanizing the health insurance industry, this one on the front page of the New York Times website, “Dealing With Being the Health Care ‘Villains’”

So what is the story about? The author, Kevin Sack, interviewed a bunch of employees at Humana, the fourth-largest insurance company.

Let’s start with the basics. Why is this even a reasonable premise for a story? This is a perverse twist on a type of story the Times runs periodically, of dropping into a particular community, often in the heartland, to get the populace’s view on a pressing political or social issue.

Since when is it legitimate, much the less newsworthy, to get a company’s perception on its embattled status, at least without introducing either some contrary opinion or better yet, facts, to counter the views of people who will inevitably see what they are doing as right? I hate to draw an extreme comparison to make the point, but staff in Nazi concentration camps also thought they were good people. It is well documented that for all save the depressed, people’s assessments of their own behavior is biased in their favor.

Similarly, I don’t recall many examples of industries under attack having prominent members get flattering front page pieces. The now-famous AIG Financial Products “I Quit” letter was an op-ed. I will admit I could have missed it, but I did not see any New York Times front page pieces during the auto bailouts featuring GM or Chrysler execs and workers saying they were misunderstood. and were being maligned.

So what do we have here? You have a bunch of people whose livelihood depends on Humana. Of course they are gong to see the industry as benign.

And nowhere in this fawning piece do you see mention made of the ugly fact that as recently as the early 1990s, 95% of every dollar spent on insurance claims went to medical care. It is now only 80%. That is a simply stunning change, and shows how completely fact free the industry’s defenses are. The insurers are a major culprit in America’s high medical costs.. But no, we are supposed to take the mere opinion of employees who are deeply vested in the current system as views worth considering.

Back in the days when I did M&A, one of my clients was a frighteningly good negotiator. He knew part of his reason for success was that he did not look the part: he was short, genial, a bit rotund, and bespectacled. He would (to those who he was certain would not spill the beans on him) describe himself as the Antichrist and say things like ” I rub their bellies and only years later do they realize what I have done to them.” And I have to say, he was masterful in getting people to think his self serving view of things was the only sensible way to see a situation.

The insurance industry is not so adept, or more accurately, is less concerned about appearances than my old client. The Financial Times reports tonight that the health insurance industry, after its great show of making nice to the Obama administration, backstabbed it on the eve of a key vote. Do we see any coverage of this duplicity in the US media, much less the New York Times?

From “Health insurance lobby attacks reforms” in the Financial Times:

The White House and the health insurance industry on Monday descended into open conflict on the eve of a critical Senate vote that could determine the fortunes of Barack Obama’s healthcare reform plans.

Supporters of President Obama accused the health insurance industry of attempted “sabotage” after it issued a report by PwC, which estimated that premiums would rise much faster under the proposed reforms than they would have done otherwise.

The 26-page report marked an abrupt end to the unlikely alliance between Mr Obama and America’s Health Insurance Plans – the main industry lobby group, which has spent about $100m on advertising to support the reforms….

A spokesman for Max Baucus, chairman of the Senate finance committee, which is to hold a key vote on Tuesday on its $829bn 10-year healthcare reform plan, described the report as a “hatchet job, pure and simple”.

The Wall Street Journal did report on the insurer “push back” and indicated that the industry had cooperated earlier, ” attracted to the effort, in part, by the prospect of gaining millions of new customers.” So the Journal’s staff recognized this as a mere marriage of convenience from the get-go.

Update 4:30 AM: Robert Reich is more optimistic about the implications than I am, see “The Audacity of Greed: How Private Health Insurers Just Blew Their Cover.”

By Marshall Auerback, an investment strategist who writes for the New Deal 2.0.

A history of failed attempts to introduce universal health insurance has left us with a system in which the government pays directly or indirectly for more than half of the nation’s health care, but the actual delivery both of insurance and of care is undertaken by a crazy quilt of private insurers, for-profit hospitals, and other players who add cost without adding value. A Canadian-style single-payer system, in which the government directly provides insurance, would almost surely be both cheaper and more effective than what we now have. And we could do even better if we learned from “integrated” systems, like the Veterans Administration, that directly provide some health care as well as medical insurance.

Yet Obama is not prepared to grasp the nettle. His speech was even weaker than the spin preceding the joint address to Congress suggested. I thought the Obama people were lowering expectations with a view toward a big positive surprise and they managed to go even lower than the bar they set. He took caricatured positions on single payer in order to create a false “centrist” option. The President has basically has reduced the public option to a marginal welfare style program for 5% of the population, rather than seeing it as a way to break the monopoly of the private health insurance companies, thereby helping to reduce costs. He’s basically forcing everybody into a private health insurance run program

The bad news is that Washington currently seems incapable of accepting what the evidence on health care says. The Obama Admininstration remains under the influence of the health insurance and pharmaceutical industry lobbyists, and is captive to a free-market ideology that is wholly inappropriate to health care issues. As a result, it seems determined to pursue policies that will increase the fragmentation of our system and swell the ranks of the uninsured.

We need affordable health care, not health insurance. Just look what is happening in MA. It’s not solving the problem at all, because there was no mechanism introduced to REDUCE HEALTH INSURANCE COSTS. Physicians for a National Health Program’s (PNHP) study of the Massachusetts model found that the state’s 2006 reforms, instead of reducing costs, have been more expensive than expected. The budget overruns have forced the state to siphon about $150 million from safety-net providers such as public hospitals and community clinics:

“We are facing a health-care crisis in this country because private insurers are driving up costs with unnecessary overhead, bloated executive salaries and an unquenchable quest for profits – all at the expense of American consumers,” said Dr. Sidney Wolfe, director of Public Citizen’s Health Research Group. “Massachusetts’ failed attempt at reform is little more than a repeat of experiments that haven’t worked in other states. To repeat that model on a national scale would be nothing short of Einstein’s definition of insanity.” (http://www.pnhp.org/news/2009/february/massachusetts_is_no_.php )

Yet Massachusetts seems to be the implicit model. Despite the obvious popularity of Medicare, there was no serious discussion of expanding it as a possible public health care option (as we had suggested earlier http://www.newdeal20.org/?p=4220) and there was no attempt to use the public option as a means of expanding choice and competition if a worker was unhappy with the health care program offered by his employer.

The Clinton health care version at least tried to deal with the issue of portability, so that health care did not get tied in directly to employment (a highly germane consideration in a time of double digit unemployment and mounting economic insecurity). There is no hint of that in the Obama plan. If anything, it represented a retrograde step from what was on offer in last year’s campaign via the Clinton or Edwards health care proposals. Most advanced countries have dealt with the defects of private health insurance in a straightforward way, by making health insurance a government service. Through Medicare, the United States has in effect done the same thing for its seniors. We get the status quo The paucity of imagination of the proposals themselves were completely at variance with the President’s soaring rhetoric, something which is unfortunately becoming a recurrent theme of the entire Obama Presidency.

In the waning days of Lehman, this blog described a particularly avid defender of the beleaguered bank at CNBC as “the favorite outlet of those who aspire to paint the tape.” That was not terribly well received, needless to say.

The New York Times seems to be adopting a similar fawning posture towards health insurers. A few weeks ago, it ran a story that was an obvious media plant, a flattering, or more accurately, one-sided portrait of a health insurance industry lobbyist, one Karen Ignagni.

The latest salvo in the health care industry charm offensive is another story humanizing the health insurance industry, this one on the front page of the New York Times website, “Dealing With Being the Health Care ‘Villains’”

So what is the story about? The author, Kevin Sack, interviewed a bunch of employees at Humana, the fourth-largest insurance company.

Let’s start with the basics. Why is this even a reasonable premise for a story? This is a perverse twist on a type of story the Times runs periodically, of dropping into a particular community, often in the heartland, to get the populace’s view on a pressing political or social issue.

Since when is it legitimate, much the less newsworthy, to get a company’s perception on its embattled status, at least without introducing either some contrary opinion or better yet, facts, to counter the views of people who will inevitably see what they are doing as right? I hate to draw an extreme comparison to make the point, but staff in Nazi concentration camps also thought they were good people. It is well documented that for all save the depressed, people’s assessments of their own behavior is biased in their favor.

Similarly, I don’t recall many examples of industries under attack having prominent members get flattering front page pieces. The now-famous AIG Financial Products “I Quit” letter was an op-ed. I will admit I could have missed it, but I did not see any New York Times front page pieces during the auto bailouts featuring GM or Chrysler execs and workers saying they were misunderstood. and were being maligned.

So what do we have here? You have a bunch of people whose livelihood depends on Humana. Of course they are gong to see the industry as benign.

And nowhere in this fawning piece do you see mention made of the ugly fact that as recently as the early 1990s, 95% of every dollar spent on insurance claims went to medical care. It is now only 80%. That is a simply stunning change, and shows how completely fact free the industry’s defenses are. The insurers are a major culprit in America’s high medical costs.. But no, we are supposed to take the mere opinion of employees who are deeply vested in the current system as views worth considering.

So back to the lame New York Times article. We get a full 11 paragraphs of stuff like this:

“I’m certainly not villainous or immoral in any way, shape or form,” said Mr. Shireman, 40, a project manager for Humana, the country’s fourth-largest health insurer.

Yves here. Not immoral in any way, shape or form? The Ten Commandments list lying as a sin.I would say it is pretty much impossible for form Mr. Shireman to function in commerce in America and have never told a lie, which means his statement to the NYT is an amazing bit of self-delusion.

But we get more in that vein: :They do not save lives. They just pay the bills.”

Help me. Insurance companies do not passively “just pay the bills.” Not only do they make a great sport of denying routine claims, but if you need a major procedure, you run the risk of having your insurer go over your records to see if they can find a basis for rescinding your policy. The usual grounds is that the patient perpetrated a fraud by failing to report a pre-existing condition, no matter how minor and unrelated to the expense at hand.

So we get 11 paragraphs before we read a peep of dissent, which is immediately undercut:

Such assertions may paper over the industry’s record of double-digit price increases, medical underwriting to exclude applicants from coverage, cancellation of policies for incidental causes, denials of claims, deceptive marketing and generous executive compensation.

But Humana workers and executives said the industry tended to absorb blows that should be directed elsewhere.

And then we get this bit:

The workers said they found the political attacks surprising given the insurance industry’s engagement in this year’s debate. The companies have agreed to stop rejecting applicants with pre-existing health conditions if the government will mandate health coverage, creating vast new markets.

Every Humana employee interviewed, including Mr. McCallister, predicted that a public plan would place private insurers at an impossible disadvantage, without duplicating their efficiencies.

Mr. Obama regularly argues that such a plan is needed to “keep the insurance companies honest.” He has personalized the message by telling of his mother’s struggle with her insurance company as she was dying of ovarian cancer.

Ms. Tidwell observed, “If they don’t have a villain or enemy, how do they sell a story?”

Yves again. Is the only reality in this piece the funhouse mirror world of personal beliefs? We have the employee’s self serving opinions versus Obama’s story of his grandmother. The story appears crafted to support Tidwell’s argument that that all we have are competing narratives. And if you take that perspective, you really ought to take the Humana workers’ view as gospels, since lots of them think the same way, and their views are based on tons of day-in, day-out experience, while all we have on the other side is Obama with his story of his mother. One tragic story clearly cannot stand up against so much collective experience.

Next we get this:

Humana’s profit margin was 2.2 percent in 2008 on revenues of nearly $29 billion. Its revenues have more than doubled since 2004, with almost all of the growth coming from the sale of privately administered Medicare Advantage plans. Those plans now account for the vast majority of Humana’s business, a real vulnerability if Mr. Obama succeeds in cutting Medicare Advantage because of its comparatively high administrative costs.

Humana has 28,000 employees, including 10,000 in Louisville, many of whom work in a monumental headquarters tower constructed of pink granite. It is the second-largest employer here and has built good will through philanthropy to the arts, the schools and health care.

Yves here. Again, the same message: Humana is nice, new rules could damage it.

Now the next in this series is that ” Kevin Sack will visit a struggling nonprofit health clinic in Milwaukee.” But a report on how a particular health care operation is faring is a separate piece, and does not counteract the one-sidedness of this treatment.

From Marshall Auerback, an investment management and commentator who writes for New Deal 2.0.

No more free passes. A number of the President’s supporters who expressed concerns about the pro-Wall Street tilt of his early administration decisions were prepared to give him the benefit of the doubt so long as he came through on healthcare. Obama’s statement over the weekend that the public option for insurance coverage was “just a sliver” of the overall proposal, and the suggestion by Health and Human Services Secretary, Kathleen Sebelius, that a direct government role in a system intended to provide virtually universal coverage was “not the essential element“, appear to provide conclusive evidence of this administration’s capitulation to corporatist interests. The “change you can believe in” President now looks more like a Manchurian candidate of the right.

The disturbing thing about Obama taking the Rubinite path is that he now leaves government exposed as the lightening rod for everyone’s problems, rather than the solution. If he had taken a more populist tack, more public anger could have been directed at the right people from the start — as occurred under the FDR administration.

Extending the Bush/Paulson bailout policies (and, indeed, expanding them) and ignoring the needs of the productive economy, have largely discredited government fiscal activism. Obama no longer appears willing to let the fiscal position of the federal budget grow as needed to meet current challenges.

When one adds extreme income imbalances and a comparatively weak social safety net (in contrast to those supposedly horrible “socialists” in Europe), then one has the makings of major social unrest, slowly manifesting itself in town hall meetings across the country this August.

Growing social unrest is something we have warned about this for months…but it’s not being taken seriously by Obama’s people. The eruption over the AIG bonuses was the tip of the iceberg. The “experts” said it was “beside the point”, but it wasn’t. It was a basic issue of fairness that could be readily understood by the vast majority of Americans in a way that complex credit default swaps could not be.

And the experts, who derided the eruption over AIG as a sign of irresponsible populism, are now being similarly dismissive of the town hall protests ostensibly being directed against a “government takeover of health care”. True, Obama has responded ineffectively to the absurd distortions of his plan (well, what we’ve seen of his ‘plan’ as he has delegated much of the writing of it to Congress). But when government is no longer perceived as an instrument serving the general good, one can understand the susceptibility to the gross distortion of today’s healthcare proposals, however irrational they might appear to the “experts”. The rage reflects a large, inchoate sense that the government is heading in a horribly wrong direction: At its most basic level, it looks increasingly as if the government is simply rewarding bad behaviour, particularly given how the housing situation and banking bailout has been handled.

In a recent post, we discussed debt repudiation as one manifestation of American citizens’ growing sense of helplessness. Could tax non-compliance be far behind? Certainly, it is a possibility (although one we would certainly NOT advocate), given the underlying perception of unfairness. Both debt repudiation and tax non-compliance come when citizens collectively arrive at the decision that the entire power structure has no legitimacy because it no longer serves the broader population’s needs and interests.

I am quite sympathetic to the “functional finance” view that there is no inherent “value” in money (not even gold), except insofar as one imparts a value to it via a commercial or private-public transaction. Indeed, the ultimate transaction in today’s world is payment of taxes (you don’t pay them, you go to jail). The sanction is so high because the entire legitimacy, indeed functioning of a state depends on its citizens offering their labour in exchange for goods and services. Abba Lerner also suggested:

The modern state can make anything it chooses generally acceptable as money…It is true that a simple declaration that such and such is money will not do, even if backed by the most convincing constitutional evidence of the state’s absolute sovereignty. But if the state is willing to accept the proposed money in payment of taxes and other obligations to itself the trick is done.

But the quid pro quo is that there must be tax compliance.

If debtors’ revolt extends to tax non-compliance, then you’ve got the makings of a severe inflationary problem. Hyperinflations often occur when the government can print ever increasing quantities of money, but find little for sale, even as resources sit idle. The brief history of the Confederacy during the US civil war is an excellent illustration of this phenomenon. This does not require full employment; indeed, most hyperinflations take place with lots of unemployment because once hyperinflation sets in, it is virtually impossible to undertake ‘money now for money later’ operations..

The printing press, then, becomes a symptom of the problem, not the cause because it is the breakdown of the tax system which causes the government’s fiat money to become worthless, not the running of the printing presses per se. Tax gives value to a fiat currency. When one has widespread tax avoidance, it marks the beginnings of true political dysfunction.

To be sure, we haven’t come close to this point yet. But it becomes an increasing risk for an administration that seems determined to recreate the financial conditions that led to the disaster we face now. It risks destroying its legitimacy whilst the rest of its political agenda is hijacked by a small group of wealthy plutocrats at the top. In the words of Yves Smith, “All Team Obama has done on the banking front is write a lot of blank checks, hold some bogus “stress tests” in lieu of doing the real thing, and raise a stink on a few symbolic issues to try to paper over the failure to embark on real and badly needed reforms.”
Similarly, having Big Pharma enlisted in the negotiations to construct a health care plan (as reported in the NY Times last week) is akin to Dick Cheney using Enron executives to construct Bush’s national energy policy.

It is almost as if Obama’s pledge to not deal with lobbyists was never made. His “teflon” is wearing off faster than a hot frying pan.

As Howard Dean notes, without a direct government role in health care, you cannot achieve real reform. And, as Professor James K. Galbraith argues, the intrinsic costs of providing public health insurance are considerably lower than those for private health insurance. In The Predator State, Gailbraith observes,

There are no expensive inputs to purchase, not uncertainties of design or technology with which we have to concern ourselves. The major inputs are personnel and computing capacity. There are few major issues of innovation; unlike the rapid changes characteristic of medical practice, the service of providing insurance to pay for them does not evolve rapidly. A successful private insurance company follows an ancient formula: it stratifies its clientele by risk class and charges minimums adapted to each class. The most successful companies are generally those that manage to exclude the riskiest clients.

Public health insurance entities such as Medicare do not evaluate risk because they are universal. Therefore, they save the major cost associated with private health insurance. They pay their personnel at civil servant salary scales and are under no obligation to provide a return to shareholders via dividends or meet a target rate of return.

Selective provision of private health insurance is invariably inferior to universal public provision. There are ample examples of successful, publicly supported (but privately administered) healthcare programs overseas in Europe and Asia. Yet, we appear to be heading in the opposite direction. Given the inappropriate premises under which the Obama Administration has continued to operate (e.g. credit flows from the top down, rather than the bottom up, banks are suffering from illiquidity, not insolvency, we “can’t afford” a public health insurance option), we may expect that today’s many problems will continue to languish.
All of which will heavily constrain the capacity of the US economy to recover and may well lead to a Japanese-style lost decade of economic stagnation.

One of the guest bloggers here, the esteemed Ed Harrison, was initially more hopeful about Obama than some of us (I an sufficiently cynical that I find it hard to get excited about any politician, although I will confess to falling for Australia’s Kevin Rudd) but is now calling him a black Herbert Hoover.

Even that is not quite sufficient, but is directionally correct. One of the defining characteristics of Team Obama its preference for spin in lieu of substance. Admiittedly, the Bushies had a variant of that, in their obsession with the visual staging of any presidential appearance (the attention to props and lighting detail would do Annie Liebowitz proud).

But with the Obama cohort, the focus is Orwellian, the use of language to misrepresent substance. Recall the totally mislabeled “stress tests” which were not tests. The tests were self-administered and the result pre-determined, since Administration officials said repeatedly that the point of the exercise was to show that the banks were sufficiently well capitalized. And since there were doubts about the seriousness of the exercise, it was helpful to the PR process that the banks got pissy and pushed back, which gave the misleading impression that they were being handled roughly (as opposed to they were given a yard and wanted to see if they could take a mile).

A similar charade is in motion on the health care front. My bullshit meter went into high alert earlier this week with this New York Times story, “For Health Insurers’ Lobbyist, Good Will Is Tested,” which was clearly a PR plant. It featured Karen Ignagni, a $1.6 million-a-year earning lobbyist to the health insurance industry as a heroine (I started getting nauseaous as soon as I saw the deliberately low-key picture of her in her office). And why should we see a representative of one of the biggest forces undermining democracy in America, the usually-successful efforts of well-funded industry groups to steam-roll legislative process, as a good guy, or in this case, gal? Because she supposedly talked a mean and obstructionist industry into playing nice.

This NYT article thus manages to be a two for one, trying to re-image both the health insurance industry and lobbyists. Consulting my Divine Comedy, I find lobbyists are relegated to the eight circle of hell no matter how you cut and slice it, as either flatterers (second bolgia) or false advisors (bolgia eight) or falsifiers (bolgia ten, along with alchemists and perjurers). This puts them on the same general level as corrupt politicians (bolgia 5), although one could make a case they belong in the ninth circle, traitors.

To the Times’ puff piece:

For the insurance industry, long an opponent of health care reform, it was a striking change: with a new administration coming to Washington, insurers agreed to abandon some of their most controversial practices, like denying coverage to applicants with pre-existing medical conditions.

The truly offensive bit of the piece was the Grey Lady running full bore with the line that they were being unfairly castigated, they really had turned a new leaf, and those people who were Calling Them Bad Names were risking breaking up Ms. $1.6 million woman’s fragile coalition:

For a while, it seemed to be working — until recently, when the insurance industry re-emerged as Washington’s favorite target. “Villains,” Nancy Pelosi, the House speaker, called health insurers. And Mr. Obama derided the industry for pocketing “windfall profits.”

Taken aback, Ms. Ignagni, the 55-year-old chief executive of the trade group America’s Health Insurance Plans, wondered on Tuesday why insurers were being singled out when, in her view, they had accepted that change was necessary.

“Attacking our community will not help get anyone covered,” she said.

The last statement was very revealing. It’s tantamount to “We still hold the whip hand.” And it appears they do.

The “nice” act by the insurance industry could mean only one of two things. First would be that they see that reform really is coming, and they will have more leverage if they try to shape legislation, which means being part of the process rather than in the wilderness in a losing battle to stop it. Or else they have already won and want to make sure no one connects the dots before legislation is passed.

It turns out the latter theory is correct, that the insurers come out of this faux reform even better than before. And since one of the reasons the US has the highest health care costs in the world is that we have far and away the highest administrative costs,. All those fights to get care you thought you were entitled to just serve to make the overall tab higher. The parasites will suck even more from the host.

From Business Week:

As the health reform fight shifts this month from a vacationing Washington to congressional districts and local airwaves around the country, much more of the battle than most people realize is already over. The likely victors are insurance giants such as UnitedHealth Group (UNH), Aetna (AET), and WellPoint (WLP). The carriers have succeeded in redefining the terms of the reform debate to such a degree that no matter what specifics emerge in the voluminous bill Congress may send to President Obama this fall, the insurance industry will emerge more profitable. Health reform could come with a $1 trillion price tag over the next decade, and it may complicate matters for some large employers. But insurance CEOs ought to be smiling…

Impressing fiscally conservative Democrats like [Jim] Matheson, a leader of the House of Representatives’ Blue Dog Coalition, is at the heart of UnitedHealth’s strategy….big insurance companies have quietly focused on what they see as their central challenge: shaping the views of moderate Democrats.

The industry has already accomplished its main goal of at least curbing, and maybe blocking altogether, any new publicly administered insurance program that could grab market share from the corporations that dominate the business. UnitedHealth has distinguished itself by more deftly and aggressively feeding sophisticated pricing and actuarial data to information-starved congressional staff members. With its rivals, the carrier has also achieved a secondary aim of constraining the new benefits that will become available to tens of millions of people who are currently uninsured. That will make the new customers more lucrative to the industry….

Yves here. So did you get that what the $1.6 million woman was selling was a crock? According to Dante, flatterers are steeped in human waste. Sure, the industry isn’t fighting extendinf coverage, because it will collect fees for covering bupkis. Back to the article:

[Mike] Ross is frustrating the Obama White House by opposing proposals for a government-run insurance concern that would compete with private-sector companies. The President argues that without a public plan, premiums and medical bills will remain prohibitively high. Ross and Matheson have given strong voice to the industry’s contention that such a public insurer would actually reduce competition by undercutting private plans on price and driving them out of business. “We have concerns about a public option if it’s not done on a level playing field,” Ross says….

The several competing bills pending in Congress would guarantee all Americans access to health coverage, addressing the plight of the 47 million who are now uninsured. Congress plans to achieve that by expanding Medicaid, the government program for the poor and disabled; requiring insurers to accept all applicants regardless of their health; and mandating that everyone purchase coverage. Government subsidies would make the obligatory coverage more affordable. The legislation would do little, however, to slow spending by Medicare, the public program for senior citizens, or cut overall medical costs. Congress is considering taxes on the wealthy and on benefits now provided to many white-collar workers.

During the UnitedHealth road show in July, Democrat after Democrat clambered into the company’s promotional vehicle beneath a sign declaring: “Connecting You to a World of Care.” Judah C. Sommer, who heads the company’s Washington office, looked on with satisfaction. “This puts a halo on us,” he explained. “It humanizes us.”

And that Democratic proposal to tax insurance companies? It seems to be fading after the industry said it would raise rates for workers and their families.

I strongly suggest you read the piece, It is well reported and quite nauseating.

Submitted by Edward Harrison of Credit Writedowns.

As you all know, Yves has been swamped writing her book, a work we all await with anticipation. So I have stepped into the breach to add my voice to hers on this site from time to time. This week I will also try to help pick up the slack for Leo as he is off stuffing his face and sunning in Greece (lucky devil). So I want use this opportunity to thank you all for your comments and suggestions since I started guest posting here. I hope you have enjoyed my contribution.

Below is a blurb I just wrote over at my own site. I wanted to run it by you here in order to motivate a discussion about the trade-off between short-term deficit spending and longer-term plans for deficit reduction. There has been a lot of talk about how reckless the U.S. has become with the deficit ballooning to unheard of proportions in the trillions. About this time last year I thought Bill Gross was crazy when he was already talking about trillion dollar deficits. But, he was quite prescient.

Here’s the question: can the U.S. run up a huge deficit now as long as it shows a credible plan to reduce it over the long-term? I have suggested that healthcare (and social security) be a main target of that longer-term deficit reduction plan. But, is this a trade-off that can actually work? Your comments are appreciated.

Here is the original post. Enjoy. (Note: I filed this post under the categories Health care and Banana Republic.)

I think a technical recovery will happen in the Q4 to Q1 timeframe. But this recovery is likely to be weak, if it happens at all. Downside risk remains. Unfortunately, the Obama administration has fired all its bullets, spending huge political capital bailing out the big banks and putting together a weak stimulus package we all knew was going to fail.

Now, Joe Biden is trying to save face, talking as if recovery is guaranteed and no further stimulus is necessary. Yet, on the eve of the G-8 summit, it takes Gordon Brown to remind us that the Great Depression II meme is still at play. If the United States wants to keep deflationary forces at bay, it will need to support the economy with fiscal stimulus.

The problem is the U.S. government budget deficit. In April, in a post called “The Cult of Zero Imbalances,” Marshall Auerback made the case for stimulus, aware of the downside risks for the dollar and bond prices because of that deficit. Yes, there are risks for America associated with deficit-inducing stimulus in the short-term, but they can be mitigated if the Obama Administration actually showed a plan to reduce the longer-term deficit. But, as David Leonhardt has argued, Obama’s team has no deficit reduction plan whatsoever.

So now we must contemplate America’s fiscal train wreck; and that is exactly what Richard Berner at Morgan Stanley is doing. Here is an excerpt of his research note published today.

America’s long-awaited fiscal train wreck is now underway. Depending on policy actions taken now and over the next few years, federal deficits will likely average as much as 6% of GDP through 2019, contributing to a jump in debt held by the public to as high as 82% of GDP by then – a doubling over the next decade. Worse, barring aggressive policy actions, deficits and debt will rise even more sharply thereafter as entitlement spending accelerates relative to GDP. Keeping entitlement promises would require unsustainable borrowing, taxes or both, severely testing the credibility of our policies and hurting our long-term ability to finance investment and sustain growth. And soaring debt will force up real interest rates, reducing capital and productivity and boosting debt service. Not only will those factors steadily lower our standard of living, but they will imperil economic and financial stability.

Later in his missive, Berner, rightly admits that economists warning about deficit spending in America have been singing this tune for quite some time. And, as with the boy who cried wolf, no one believes them any longer. No less than former U.S. Vice President Dick Cheney said “deficits don’t matter.”

Well, they do matter. Eventually, the day of reckoning will come. Berner puts it this way.

Some are concerned that our reckless fiscal policy will trigger a downgrade of the US sovereign debt rating, making the financing of our burgeoning deficits more difficult. While worries that the US will default on its debt are illogical, global investors and officials are concerned about the credibility and the sustainability of our fiscal policies. So am I. They fear that we will adopt policies that will undermine the dollar and the domestic value of dollar-denominated assets through a combination of risk premiums and inflation. I worry about that too, although such policies probably would be accidental rather than deliberate. As a result, interest rates may have to rise significantly to compensate investors, including reserve portfolio managers and sovereign wealth funds, for such dangers. While the dollar will for now retain its reserve-currency status, such concerns put it at risk.

Definitely read his piece which is linked below. He does an excellent job of demonstrating that healthcare is a large part of the problem and sounding the alarm for fixing it once and for all.

Source

America’s Fiscal Train Wreck – Dick Berner, Morgan Stanley

Submitted by Edward Harrison of Credit Writedowns.

Just when you thought things couldn’t get any more questionable in Washington, then along comes this (hat tip Tom).

Washington Post publisher Katharine Weymouth said today she was canceling plans for an exclusive "salon" at her home where for as much as $250,000, the Post offered lobbyists and association executives off-the-record access to "those powerful few" — Obama administration officials, members of Congress, and even the paper’s own reporters and editors.

This is not a joke, it was a serious plan whereby the Washington Post was set and ready to use its publisher’s home to bring together lobbyists on the one side and White House and congressional people on the other. Boy, I wish I had that kind of access. But, then again, I would have to pay a lot of money. On second thought, maybe it’s not a good deal. But, hey, if you are a health care lobbyist (the type of lobbyist this event was designed for), then you’ve got the dosh. Why not? Apparently, not every lobbyist felt that way.

The astonishing offer was detailed in a flier circulated Wednesday to a health care lobbyist, who provided it to a reporter because the lobbyist said he felt it was a conflict for the paper to charge for access to, as the flier says, its “health care reporting and editorial staff."

To sum up, the Washington Post, which last nearly $20 million in the first quarter, has made bringing people together another proposed revenue source. In this case, it was to bring together lobbyists and government and was to be paid by the lobbyists for doing so. When some invited lobbyists felt this was a conflict of interest, Politico was able to get its hands on an invite. As a result, the Post cancelled the event.

Oh, and by the way, if you think that U.S. health care reform proposals are not heavily influenced by lobbyists, you might want to read the full account below.

Source

Washington Post cancels lobbyist event amid uproar – Politico

Update 940AM: Below are some additional sources with reports of damage control by the Washington Post.

Washington Post Flap: How They Played It – Karen Tumulty, Swampland
Pay-for-Chat Plan Falls Flat at Washington Post – NY Times
Post Co. Cancels Corporate Dinners – Washington Post