3 Things on Health Care Reform We ALL Can Agree On

Obamacare is the law of the land and it’s here to stay. That is one of the small points made in a lecture I attended yesterday from the Institute of Humane Studies held at Clemson University.  The panel brought together  four interesting individuals, some liberal, some conservative, some libertarian–all with different backgrounds and different fields.  One worked as a Public Health Administrative, one an Emergency Room Doctor, one for the Center for American Progress and the last for the Insurance Commission in South Carolina.  Some argued we need the government to fix health care and some argued we only need the Altogether it was an excellent forum to here many different opinions.

The Obamacare discussion occurred in my classroom this week as well, with my mother on the phone and even for nearly two hours on some carry-over points from last night’s forum with a colleague whose office is across the hall.  (He researches on health care efficiency and I thoroughly enjoyed what he had to say.  Some of his points influenced what I am about to say as well.) The Obamacare debate is also probably one that you see politicians bicker about on a daily basis and perhaps even one that you may have argued for or against. I am not trying to argue about what is right or wrong. I am here to talk about 3 basic truth’s behind health care reform and what individuals, from either side of the political spectrum, DO agree on.

 

1. The system was broken before the law was passed. The Affordable Care Act, or what been dubbed Obamacare, is a law that actually was passed in 2010. There is a lot of stir in recent months because some parts of the law are just now being phased in. Few individuals truly feel that this act will solve all of our problems, but the prior system to 2009 was not good.    However, “we all [can] agree what we’d like to see: Health care needs to become efficient, innovative, and provide high quality care at reasonable cost,” John Cochrane, Professor of Finance at the University of Chicago. This act may NOT make things more efficient or less costly, and some may argue it will make it worse, but one thing we can agree upon is that the system was broken and we need a lower cost, more efficient system. What we disagree on is how we get to that point, what we we agree upon is that we need to get to that point.

2. Either President Obama lied and said individuals who had private plans could keep their insurance plans OR his economists lied to him. Basic economics will tell you that when you add a constraint to a problem (i.e. a government regulation that says you cannot drop those who have pre-existing conditions or you cannot screen against them) then the entire problem changes. If a private corporation is going to take on more sickly people or at least those with a higher probability of being sick, their entire business model must change in order to make profit and stay in business.  This means that some costlier plans that private insurers previously offered may get cut or premiums must increase for the healthy to cover the potential, and likely, outpour of dollars to cover those with pre-existing conditions. In some cases, both happened. Although I am not sure who lied to whom initially, I am less inclined to believe that President Obama lied to the American people so openly. This is not to say that politicians do not lie, this is more to say that his entire presidential legacy rests on Obamacare. Openly lying about something that cost millions of Americans their insurance plans is detrimental to his career.  Rather, I think his economists, who are educated in some of the best economic institutions in the world, lied to him to please the Democratic party.  President Obama was just the one who delivered the false information.  (Don’t kill the messenger?)

 

3. Both sides will not agree on health care reform.  Plain and simple, both sides see two different solutions to the problem.  A more libertarian argument may suggest that government interference has caused prices to rise in the health care industry. More government regulation and interference causes these prices to rise higher than they would if the private market was allowed to just compete together. An example of a proposed solution would be to have no employer insurance and no government insurance, just individuals buying their own plan.  The hope would be that this would cause costs to decrease, increased competition and better health care efficiency. A more liberal argument would suggest that the government should be the only provider of health care, which would equalize all forms of treatment and services.  This will allow those with pre-existing conditions to have the same care at the same cost to those who are healthy.  The hope would be that this causes costs to decrease, less competition and better health care efficiency.  There are also solutions that many favor that are less extreme to either end or solutions that are a hybrid  private and public solution.  Regardless, both sides believe there are different means to come to the same end. Both sides do not agree. This is not to say that there can not be compromise, but to get full support of one solution is near impossible. Let’s stop trying to pretend that there is ONE golden solution we all will agree on.

 

In sum, the Affordable Care Act is the law of the land. Will it solve all of our problems? Only time will tell. I am less inclined to think that it is the be-all-end-all fix to health care reform, but a movement to start discussing BETTER ways to cut costs and make health care more efficient.  Although everyone can disagree on the BEST solution  to fix the problem, the three things we all can agree on is that the health care system was broken before, both sides will not agree on one solution, and there was no way it made financial sense for private insurance companies to keep old plans in face of the new ACA regulation.  (Unless of course, there is executive order and a government promise to pay for the losses if private insurance companies reinstate old plans.  However, this is another issue that A.K. will touch upon in a post later this week. )  In the meantime, listen to other’s opinions on health care reform and continue to educate yourself.  This debate is far from over and as more possible solutions are thrown around you want to understand why it may work and why it may not. My colleague, Richard Gearhart, enlightened me to one  proposed solution where we are given health care insurance when we are born and can “opt out” of health care starting at age 26 and private health savings accounts can be carried over year to year. The poor would get private health savings accounts with a fixed amount of gov’t money per year, which would eliminate a need for Medicaid and some other hotly contested welfare programs. His solution is a private and public one.   I’m not saying I’m convinced (or ever will be), but health care reform is not over.

 

To show you the strong debate between both sides and how one golden solution is near impossible, here are some blogs on Obamacare:

Four Score and Seven Years Ago..

Although the best U.S. presidential speeches can be subjective, Lincoln’s Gettysburg Address, is most likely to appear on everyone’s top 10 list.  Its popularity only escalates each time an American or foreigner goes to the National Mall and walks past Lincoln’s memorial where the wonderful words are written.

Only five copies of his speech were written by Abraham Lincoln., but the most popular was given to Colonel Alexander Bliss. The only hand-written and signed copy of his Gettysburg Address sits in the Lincoln room of the White House. The Gettysburg Address that you have seen in textbooks is the copy given to Bliss and in the White House. Read it below:

 

Four score and seven years ago our fathers brought forth on this continent, a new nation, conceived in Liberty, and dedicated to the proposition that all men are created equal.

Now we are engaged in a great civil war, testing whether that nation, or any nation so conceived and so dedicated, can long endure. We are met on a great battle-field of that war. We have come to dedicate a portion of that field, as a final resting place for those who here gave their lives that that nation might live. It is altogether fitting and proper that we should do this.

But, in a larger sense, we can not dedicate — we can not consecrate — we can not hallow — this ground. The brave men, living and dead, who struggled here, have consecrated it, far above our poor power to add or detract. The world will little note, nor long remember what we say here, but it can never forget what they did here. It is for us the living, rather, to be dedicated here to the unfinished work which they who fought here have thus far so nobly advanced. It is rather for us to be here dedicated to the great task remaining before us — that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion — that we here highly resolve that these dead shall not have died in vain — that this nation, under God, shall have a new birth of freedom — and that government of the people, by the people, for the people, shall not perish from the earth.

Abraham Lincoln
November 19, 1863

A great blog with facts about the Gettysburg Address that you may not have known: http://blog.pennlive.com/gettysburg-150/2013/11/seven_things_you_may_not_have.html

Fear the Boom and Bust

If you want to understand two different ideologies within economics watch this rap video about Hayek vs. Keynes. It is accurate and the rap is pretty funny.  And if you already understand the differing economic ideologies and haven’t seen this video yet, you’ll love it!

 

From the video: In Fear the Boom and Bust, John Maynard Keynes and F. A. Hayek, two of the great economists of the 20th century, come back to life to attend an economics conference on the economic crisis. Before the conference begins, and at the insistence of Lord Keynes, they go out for a night on the town and sing about why there’s a “boom and bust” cycle in modern economies and good reason to fear it.

 

 

 

I Love Veterans Day!

Federal law (5 U.S.C. 6103) establishes public holidays for Federal employees. If the holiday falls on a non-workday (Saturday or Sunday)—the holiday is observed on a weekday. To be clear, in the U.S.A we have 10 federal holidays: New Year’s Day, MLK’s Birthday, Washington’s birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, Christmas Day.

If you are a federal employee, or one that works in a union and fights for these paid days off, you are overjoyed at these holidays. Particularly, you may be more overjoyed when you get off on federal holidays that don’t require a lot of family, food or fun, but perhaps just a relaxing day in bed catching up on the DVR. Veterans Day may be one of them.

All of my life I have gotten off from school on Veteran’s Day until senior year of high school and this is the first year I have had to work on this holiday. At my high school, we ‘observed’ Veteran’s Day conveniently when it allowed the school board to bundle Election Day, teacher’s conventions etc. together to give students and faculty a whole week off. I now work at a university, a public one nonetheless, that gives only TWO federal holidays to faculty and students in the traditional Fall and Spring semesters—Thanksgiving Day and MLK Day. Yes, no Labor Day, no Columbus Day, and no Veterans Day.

However, this really bothers me. I don’t like “moving” holidays for convenience to bundle a week together when it is actually not the correct date nor do I like not giving public employees these holidays (who get paid from states funds, in which some is received initially from the federal government for schools). But, perhaps it is more efficient.

In an article from BBC, the Centre for Economics and Business Research (CEBR) estimates that business lose 19 billion pounds a year if Britain scraped their 8 bank holidays in England and Wales, 9 in Scotland and 10 in Ireland. However, in Britain 5 holidays occur in April, May and June. Although retail shops and restaurants are found to have an increase in revenue, factories and offices lose money on these days. Their argument, though, is not for a reduction of holidays by the economists, but rather a spreading out of public holidays. Besides the obvious fact that no one wants to lose paid days off, the economists find that spreading the holidays out would help boost GDP.

If this is truly correct, than perhaps we don’t need to bundle up Election Day and Veteran’s Day together with teacher’s conferences. However, another BBC article that quotes a professor of statistics at CEBR states that:

“there is no easy relationship between having a bank holiday and the rate of GDP... when calculating the impact of an extra days off, it is important to distinguish between what is genuinely lost from the economy and spending that has just been delayed. For instance, a car owner who might otherwise have taken their vehicle for its annual service on 5 June, only to find the mechanics were having a day off, would most likely reschedule soon after.Likewise, many office workers could avoid a drop in productivity by anticipating the extra day off, working overtime to compensate for the lost shift.”

Their article actually produces a mixed result after June 5, Britain’s Diamond Jubilee Day, in which some professors are quoting an estimated higher GDP due to the holiday and some a lower GDP.

However, an article from China Business indicates that the holiday effect is really one in which people spend more money, but not on items that they otherwise would not. He states that not all holidays produce a holiday effect and only working “holidays” such as Valentine’s Day, Chinese New Year etc. produce this effect since businesses are open. If they are not open, like on Christmas, this does not have such an effect.

The truth of the matter is that little economic work has been done to uncover the impacts of federal holidays and there is no firm answer as to the actual ‘costs’ to federal holidays.  The little work that has been done, however, shows some evidence that moving the holidays to spread them out might increase our economy’s GDP. However, these are not results I firmly stand by. I do, however, want to make an argument to observe Veterans Day on its natural holiday due to historical reasons. Let me example more.

On the 11th hour on the 11th day on the 11th month, fighting from WW1 stopped despite the Treaty of Versailles being signed on June 28, 1919. Since fighting persisted until November 11, 1913 it is regarded as the end of “the war to end all wars”. President Wilson proclaimed November 11 as the first commemoration of Armistice Day with the following quote:

“To us in America, the reflections of Armistice Day will be filled with solemn pride in the heroism of those who died in the country’s service and with gratitude for the victory, both because of the thing from which it has freed us and because of the opportunity it has given America to show her sympathy with peace and justice in the councils of the nations…”

Further, the U.S. Congress stated that November 11 is a legal holiday on May 13, 1938 in a resolution and as such the date should be “commemorated with thanksgiving and prayer and exercises designed to perpetuate peace through good will and mutual understanding between nations”.

Particularly, the Uniform Holiday Bill was signed on June 28, 1968. This bill intended for three-day weekends for all federal employees on 4 holidays: Washington’s Birthday, Memorial Day, Veterans Day and Columbus Day. The intention was to extend weekends to encourage travel, recreation and cultural activities. The states did not agree with this and continued to celebrate the holidays on their original dates.  In 1978, President Ford signed into Public law that the annual observe of Veteran’s Day actually be on November 11 due to historical significance. Most state legislatures agree that no matter what day of the week it falls, it shall continue to be on that day.

Then why do school districts and state move or not observe these dates? (Okay, South Carolina does not recognize Columbus Day as a holiday at all, fair enough… but Labor Day?) The truth is that state and local governments, including schools, are not required to follow federal Office of Personal Management (OPM) closure policies and may choose to close or remain open.

So, unfortunately for you and me, we may not work for the federal government so we are working today. I love Veteran’s Day and what it stand for and I wish we kept its natural date observance.  However, I also wish I had a paid day off today because it is my birthday.  Happy Veterans Day!

 

FUN FACTS:

1. Memorial Day is for all military personnel who died in service, Veterans Day is for all those who served honorably in military, in wartime or peacetime, living or dead.

2. Red poppies are given out today because of the poem “In Flanders Fields,” written in 1915 by John McCrae.

 

In Flanders fields the poppies blow
Between the crosses, row on row,
That mark our place; and in the sky
The larks, still bravely singing, fly
Scarce heard amid the guns below.

We are the Dead. Short days ago
We lived, felt dawn, saw sunset glow,
Loved and were loved, and now we lie,
In Flanders fields.

Take up our quarrel with the foe:
To you from failing hands we throw
The torch; be yours to hold it high.
If ye break faith with us who die
We shall not sleep, though poppies grow
In Flanders fields.

John McCrae

 

No Time to Wine

News broke last week of a pending wine shortage across various media outlets, but first reported by Morgan Stanley wine analysts.  Their story is simple, consumption is exceeding production of wine and we should all fear that wine will be too expensive to buy in the future and we may have shortages.

wine

At first look this sounds depressing as wine is commonplace for many households on Sunday dinners, or every dinner for that matter, and certainly for special occasions.  However, taking a closer look at the analysis it reveals that perhaps world wine is not being produced less all over the world, but rather Morgan Stanley’s analysts were a bit off.

Here’s how the report went wrong:

  1. The Morgan Stanley report was released by Morgan Stanley Australia in which case the analyst projected that net exports for Australian wine would increase and production is likely to stay the same, hence a “shortage” of wine. Further, this was a prediction for an investment pick for wine.
  2. The prediction for production and demand is a Morgan Stanley estimate not an  Organisation Iternationale de la Vigne et du Vin (OIV) estimate which is the leading economic data collection organizations for wine.  Going into the OIV report myself, it reveals that Spain has a record high level of wine production this year; Italy has already produced 2% more wine than in 2012, France 7%, Portugal 7% and Romania 79%.  What the Morgan Stanley analyst may have misread was that planted areas in vineyards in the U.S., South America, South Africa and China’s have slowed, but remained positive. So, yes, there are less vineyards, but vineyards are more productive due to technology and therefore, wine should not be in “shortage”.
  3. The OIV further predicts that world wine production will be between 7.1% and 10.5%, yet Morgan Stanley predicts no such increase.
  4. “Shortages” are only realized if there are price ceilings which prohibit prices from rising to equate demand and supply. So long as price rises to meet losses in production, if there was any, there will never be a shortage.

Below is the real chart of wine production and consumption from the OIV, as reported by Reuters.

wine consumption wine production

How to read this chart: the OIV is measuring wine in million hectoliters, which is 100 million liters. In 2013 it is forecast that consumption will be approximately 245 mhl and production could either be 285 mhl or 280 mhl, both clearly revealing that production exceeds consumption.

To access the full OIV report and see the data yourself, please go to their website and look at their neatly assembled data and report. Note at the bottom of this table the OIV predicts a 9% increase in the production of wine from last year.

wine table

Nation, State, and Democracy

This weekend, I leave you with a quotation from Henry Kissinger‘s 1994 magnum opus, Diplomacy. Following a penultimate chapter on the end of the Cold War, Kissinger looks ahead to the complexities of the “New World Order” even as he contemplates the nature and origins of liberal democracy:

The growth of democracy will continue as America’s dominant aspiration, but it is necessary to recognize the obstacles at the moment of its seeming philosophical triumph. Curbing the power of the central government has been a principal concern of Western political theorists, whereas, in most other societies, political theory has sought to buttress the authority of the state. Nowhere else has there been such an insistence on expanding personal freedom. Western democracy evolved in culturally homogeneous societies with a long common history (even America, with its polyglot population, developed a strong cultural identity). The society and, in a sense, the nation preceded the state without having to be created by it. In such a setting, political parties represent variants of an underlying consensus; today’s minority is potentially tomorrow’s majority.

diplomacy_kissinger

 

A.K.