Monday, December 6, 2010


I have been having major difficulties with the Obama Administration. I really hate to blow in the wind, although truthfully, like the majority of people (by definition!), I catch myself doing that all the time. A careful reader might remember that I blew against the wind last spring when everyone thought the Democrats would do poorly in the fall elections. I bravely stood up and said, “Not so!” I predicted that Obama would rally the troops, show leadership, and pull a Roosevelt 1934. So much for spitting into the wind.

I now find myself blowing with the wind instead of against it. I conclude that Obama is not much of a leader. He has a very small coterie of old friends – who the hell is Valerie Jarrett, and what is she doing in the President’s inner circle, I ask you? – and as my wife says, he really misses Ted Kennedy, who could have steered him right, who knew how to fight and when to cooperate. As Krugman says, he bargains with himself time and time again. And who knows what he really stands for? It’s just not clear. The policies of the Justice Department seen only to veer somewhat from the Bush years, and not bringing to justice the CIA people who destroyed the tapes is just ludicrous. It has become a nation of people and not of laws.

If I had been him, I would have been on TV every Saturday morning after cartoons, up there with a cabinet member or a chief adviser, questioning him or her, making the points about what we are trying to do, how we have to save the system, although we hate to reward people who brought it down. How we need to reach out to the soldiers in the economic field, “Main Street,” and take care of that aspect simultaneously, and how hard it is to do. How we have to find “shovel ready” projects and make sure that we are not shoveling shit, as governments are want to do. I would have gone into it in detail, and not worried if we looked like it was difficult to grapple with – let people feel the problems along with us. That’s what he promised to do, and it wasn’t a bad promise, either ideologically or practically politically. But he wilted.

Maybe I’m wrong. Maybe this “let’s all get along” President will yet turn the tide to civility. Maybe the Republicans, their honor restored by an historic victory, will now be able to deal with a Democratic President without seeming craven. Who knows? Just when I turn and blow with the wind, maybe that’s the capitulation the market was waiting for, to suck me in before it turns.

But here, look at this from the Incidental Economist blog [I have resisted a blog quoting a blog for a long time, but here I am, with the wind again! Oh, my.] The Obama Administration caves yet again:

Obama’s quiet $49 billion gift to America’s Health Insurance Plans
Posted: 06 Dec 2010 01:00 AM PST
America’s Health Insurance Plans (AHIP) is a trade association representing private health insurance companies including those that operate most Medicare Advantage plans. AHIP opposed the Affordable Care Act (ACA), spending heavily on ads that criticized the President and Democrats for supporting cuts in Medicare Advantage payments. These cuts, which Austin and I have shown would fall mostly on plans, not on beneficiaries, were scored by the CBO as worth $136 Billion over 10 years. They are the backbone of the financing for expanding coverage to the uninsured and one of the few real cost control measures in the law.
In the mid-term election the Democrats fared poorly. Many Democratic candidates had difficulty explaining their votes in favor of ACA, particularly to elderly Medicare beneficiaries concerned about Republican and AHIP charges that it will cut their Medicare benefits. On Veterans’ Day, just 8 days after the election, the Obama Administration quietly released a new regulation expanding quality bonuses to Medicare Advantage plans that receive only average quality ratings. Julie Appleby of Kaiser Health News reported a few days later that some analysts interpreted this as a gift to the plans worth about $1.3 billion over 3 years ($5.3 billion over 10 years). Austin and Brad Delong both expressed concern that this could be the beginning of the political unraveling of one of the few cost controls in the ACA.
How could a $5.3 billion give-away make a meaningful dent in $136 billion in savings? It couldn’t. But the $5.3 billion figure is probably wrong. A more realistic estimate is almost ten times larger.
The original quality bonus program written into ACA targeted bonuses to plans receiving 4 or 5 “stars”, representing approximately 23% of enrollees according to Brian Biles and Grace Arnold of George Washington University who analyzed the data last April. The new regulation will grant bonuses to plans receiving 3 or more “stars”, representing 84% of enrollees (3.7 times as many). Biles and Arnold estimated the cost of the original bonus program at $1.4 billion per year as long as plans don’t respond to the bonuses by improving their quality ratings. The details of the expanded bonuses have not yet been released, but if we assume the new program will be similar to the old one, we can make a rough calculation of the cost: 3.7 times $1.4 billion is $5.1 billion per year. Accounting for expected cost growth, that’s a $49 billion difference over 10 years. If plans respond to the incentive, the spending will be higher. That’s a heck of a stocking stuffer.
Do you remember when the President stood firm against withering opposition last year and rallied his party to achieve an historic expansion of health insurance coverage while insisting that the bill be fiscally responsible and reduce the long run deficit? Sure was inspiring. If I were one of those members of Congress who did the right thing, voted for the bill and just lost my seat, I don’t think this latest example of the President’s generosity toward his adversaries would lift my holiday spirits.

Budd Shenkin

1 comment:

  1. Budd-
    Welcome to the Light! Although a gifted speaker, he does not seem to
    Be a leader! Just another Chicago style politician. Medicare Advantage
    Plans don't seem to ad value. Just skim 10% off the top that could
    Have gone to physicians. Maybe if medicare paid with less hassle there
    would be a few people going into Internal Medicine. There are none now.
    Big future problem.