There's a bull in the china shop we call Health Care, and most pundits are studiously avoiding glancing at it. But if it is not controlled, it will bring the whole system, in any form, crashing down. The real problem with the health industry is...
SKYROCKETING COSTS!
Who's to blame? EVERYONE!
We can't just pin the blame on the insurance companies. There is plenty of blame to go around.
Consider the major players in the industry:
Doctors: they like getting paid as much as possible.
Insurers: They try to reduce costs, but get to be the "bad guy" as a result.
Medical Industry: newer drugs = high prices = more profit.
Consumer: They just pay their set "co-payment" which is the same no matter how much the drug or procedure costs.
Lawyers: Yes, we need tort reform too, but I don't know what form it would take.
Who is trying to keep costs down? Only the "evil" insurance companies, and they face pressure from millions of consumers complaining, "but I NEED my viagra!"
What if all those millions of consumers had to face the fact that some things cost more than other things? Imagine millions of consumers asking their doctor for cheaper alternatives. Imagine drug companies not being able to sell the latest and greatest drug because doctors are taking the time to check and realizing it doesn't work any better than last year's drug which is a tenth of the price.
That could happen if consumers paid a (perhaps small, but not zero) percentage of the actual cost of the drug instead of a flat co-pay.
A small change in the way consumers pay for their drug could put enormous pressure on the industry to reduce costs. The percentage could be chosen so the average consumer pays about the same as they do now on flat co-payments, but now they would an opportunity to reduce that cost. Those who end up paying more have more incentive to talk to their doctors about finding cheaper alternatives.
03 November 2009
10 September 2009
Bailout Verdict
James Steele and Donald Barlett have an article analyzing where the money for the government bailout of the banks went. The answer is "nobody knows" because of a delinquent lack of oversight.
This quote from a democracy now interview pretty such sums it up:
This quote from a democracy now interview pretty such sums it up:
"The outcome would have been exactly the same had there been no bailout and bankruptcy court had been allowed to take its course."
23 June 2009
Lies, Damn Lies, and Public Education
Standford University just published a study which claims that charter schools are not doing as well as traditional public schools. What most people who repeat the claims of this report do not understand is that it is not a measure of actual performance of the respective schools. It only measures how much students of comparable backgrounds improved test scores over previous years.
The differences in improvement which are measured are tiny: between 1 and 3 percent of a standard deviation. And they admit it: "This small difference — less than 1 percent of a standard deviation — is significant statistically, but is meaningless from a practical standpoint. Differences of the magnitude described here could arise simply from the measurement error."
To get some better looking results, they break out the measurements into lower, middle, and high school levels, and find that charter school students in high schools improve 2-5% of a standard deviation less.
I can get a negative result if I throw out the 1st and 12th grade scores, which show charter schools doing very much better compared to other grade. I'm not sure what happened with the 1st graders, but 12th grade is when students are taking college entrance exams and all, so while testing may be optional at the other high school grade levels, we should have a much larger sample size from 12th grade because they are taking SATs and ACTs. Yet the only way I can get results similar to those alleged by this report is to assume a very tiny sample size of 12th graders. The words "deeply flawed" come to my mind here.
Personally, I don't think charter schools are going to solve any big problems. They are still public schools, after all. But it is really depressing to see the education unions going to such lengths to try to stifle the one prospect we have for some healthy competition in public education. Charter schools give us an alternative to throwing more money at traditional public schools when they are failing. Not that its really better, but at least the administrators can see the students (and the per-student funding) leaving their school.
The differences in improvement which are measured are tiny: between 1 and 3 percent of a standard deviation. And they admit it: "This small difference — less than 1 percent of a standard deviation — is significant statistically, but is meaningless from a practical standpoint. Differences of the magnitude described here could arise simply from the measurement error."
To get some better looking results, they break out the measurements into lower, middle, and high school levels, and find that charter school students in high schools improve 2-5% of a standard deviation less.
"we did look at performance at elementary, middle, high school and multi-level schools and found that actually elementary and middle schools were actually outperforming their traditional public school peers.Wait, did he just say testing is only generally available through eight grade, and they are still able to assert they have good measurements for high schools somehow? This deserves a closer look. On page 7 of the technical appendix there is a table showing the measurements for math and reading broken down by grade level. 8 of 12 of the grades improved in math, and 7 of 12 of the grades improved in reading. If I take a simple average of their numbers, for all grades, for grades 3-8 (when the test scores are most available), or even for high school only, I get positive results! What isn't included in their table is the sample sizes for each grade, so a simple average is not exactly accurate, but I find it incredulous that their sample sizes in the negative scoring grades would be so much larger as to throw the actual results that far off the average.
The way—the measure that we used is growth on their—each state’s test. And because testing is generally from third to eighth grade, so we can’t even really look at the schools who just have kindergarten through third grade, because we haven’t gotten a growth score on those yet."
(Kenneth Surratt, assistant director of the Center for Research on Education Outcomes at Stanford University and one of the lead authors of their report, in an interview on Democracy Now)
I can get a negative result if I throw out the 1st and 12th grade scores, which show charter schools doing very much better compared to other grade. I'm not sure what happened with the 1st graders, but 12th grade is when students are taking college entrance exams and all, so while testing may be optional at the other high school grade levels, we should have a much larger sample size from 12th grade because they are taking SATs and ACTs. Yet the only way I can get results similar to those alleged by this report is to assume a very tiny sample size of 12th graders. The words "deeply flawed" come to my mind here.
Personally, I don't think charter schools are going to solve any big problems. They are still public schools, after all. But it is really depressing to see the education unions going to such lengths to try to stifle the one prospect we have for some healthy competition in public education. Charter schools give us an alternative to throwing more money at traditional public schools when they are failing. Not that its really better, but at least the administrators can see the students (and the per-student funding) leaving their school.
19 March 2009
Stop Rewarding Failure
There has been a lot of talk in the news lately about the outrage over the bonuses (165Megabucks) AIG is giving its employees. But the most surprising thing is that all the talk, from congress, from AIG, and from the media, is about how they cannot avoid giving the bonuses because of contractual obligations. What a load of disingenuity that is!
Many, many employers are currently forcing their workers to take paycuts during this downturn. My own employer is compensating us with unpaid leave, which is very nice of them, but we didn't have any options about the temporary paycut. AIG could do the same thing. But they say these are "retention bonuses," not performance bonuses. They also say these people are only working to shut down the company, which contradicts the "retention" bit.
These bonus are a giant fraud, and congress is complicit by putting up with such lame excuses. The media is also complicit by spending so much time reporting on the lame excuses, instead of pointing out how lame they are.
Even worse than the excuses, however, is the proposed solutions. Congress is proposing to withhold the bonus amounts from the next payment to AIG, or to tax the company to recover the amount. All the solutions have one theme in common: the people get to keep their bonuses, and the company pays the penalty for them. This means that no one is being punished. Fining a company does not hurt those to make the poor decisions, because they just deduct the amount from the balance sheet and spread the harm over all the shareholders, while their own salary and bonuses remain unchanged.
The only real solution to the crises we face is simple: STOP REWARDING FAILURE. If the banks were allowed to fail because of the bad types of loans they made, those loans would stop and bankers would remember the lesson. The bailouts just reward the decision makers for their bad decisions, and teaches them they can continue making bad decisions and count on the government to bail them out next time too. The automakers are talking up how poorly their companies are doing so that they can get bailout money too. And the lesson all big business owners are learning is that failure pays big dividends from the government.
But that's nothing new. The public education system has been practicing that policy for decades already.
Many, many employers are currently forcing their workers to take paycuts during this downturn. My own employer is compensating us with unpaid leave, which is very nice of them, but we didn't have any options about the temporary paycut. AIG could do the same thing. But they say these are "retention bonuses," not performance bonuses. They also say these people are only working to shut down the company, which contradicts the "retention" bit.
These bonus are a giant fraud, and congress is complicit by putting up with such lame excuses. The media is also complicit by spending so much time reporting on the lame excuses, instead of pointing out how lame they are.
Even worse than the excuses, however, is the proposed solutions. Congress is proposing to withhold the bonus amounts from the next payment to AIG, or to tax the company to recover the amount. All the solutions have one theme in common: the people get to keep their bonuses, and the company pays the penalty for them. This means that no one is being punished. Fining a company does not hurt those to make the poor decisions, because they just deduct the amount from the balance sheet and spread the harm over all the shareholders, while their own salary and bonuses remain unchanged.
The only real solution to the crises we face is simple: STOP REWARDING FAILURE. If the banks were allowed to fail because of the bad types of loans they made, those loans would stop and bankers would remember the lesson. The bailouts just reward the decision makers for their bad decisions, and teaches them they can continue making bad decisions and count on the government to bail them out next time too. The automakers are talking up how poorly their companies are doing so that they can get bailout money too. And the lesson all big business owners are learning is that failure pays big dividends from the government.
But that's nothing new. The public education system has been practicing that policy for decades already.
06 March 2009
Bailout/Stimulus mania
Just in case anyone has not noticed this pattern, I wanted to spell it out clearly.
Congress passes the bailout on Oct 3, 2008. Between Oct 3 and Oct 9, the DOW drops 20% and stays down.
The senate OKs the stimulus on Feb 9, 2009, making it clear that it will pass shortly, which it does on Feb 14. Between Feb 9 and now, the DOW has dropped 21%.
Lesson: government meddling in the economy is the worst thing that can possibly happen.
The next worst drop in the DOW is Nov 18-20, 2008, when congress was discussing bailing out the automakers. The DOW dropped 10%, but congress decided against the bailout and the DOW quickly recovered.
What would happen if we let the insolvent banks fail without government interference?
On Mar 7, 2008, Bear Stearns stock lost 80% of its value, the failed company, and was acquired by JPMorgan. The DOW was down 4% between Feb 29 and Mar 10, and quickly recovered.
Lehman Brothers filed for bankruptcy on Sept 15, 2008. The DOW dropped 7% from Sept 12 to Sept 17, but regained that 7% two days later. I cannot call it an actual recovery, because the bailout was only 2 weeks after that.
Lesson: Business failures, even big ones, are minor blips in the economy.
So the word "mania" in the title is meant in the sense of "dementia", not "craze".
Congress passes the bailout on Oct 3, 2008. Between Oct 3 and Oct 9, the DOW drops 20% and stays down.
The senate OKs the stimulus on Feb 9, 2009, making it clear that it will pass shortly, which it does on Feb 14. Between Feb 9 and now, the DOW has dropped 21%.
Lesson: government meddling in the economy is the worst thing that can possibly happen.
The next worst drop in the DOW is Nov 18-20, 2008, when congress was discussing bailing out the automakers. The DOW dropped 10%, but congress decided against the bailout and the DOW quickly recovered.
What would happen if we let the insolvent banks fail without government interference?
On Mar 7, 2008, Bear Stearns stock lost 80% of its value, the failed company, and was acquired by JPMorgan. The DOW was down 4% between Feb 29 and Mar 10, and quickly recovered.
Lehman Brothers filed for bankruptcy on Sept 15, 2008. The DOW dropped 7% from Sept 12 to Sept 17, but regained that 7% two days later. I cannot call it an actual recovery, because the bailout was only 2 weeks after that.
Lesson: Business failures, even big ones, are minor blips in the economy.
So the word "mania" in the title is meant in the sense of "dementia", not "craze".
10 January 2009
Socializing 401k plans
Democracy Now had a story about a proposed plan to have the government take over the 401k pension plans all over the country and run it as "a mandated, a universal supplement to Social Security" where the individual wouldn't exposed to the risks of the stock market and would get a guaranteed return.
The socialists were ecstatic about the idea, of course, and it is hard to imagine legislators passing up another cash cow the size of social security.
Fortunately, its mere proposal is an admission of the utter failure of Social Security, since a guaranteed retirement pension is exactly what Social Security is supposed to be doing for us. So if we admit that Social Security is failing to do what it was designed to do, why should we expect yet another government sponsored pension plan to fare any better?
The socialists were ecstatic about the idea, of course, and it is hard to imagine legislators passing up another cash cow the size of social security.
Fortunately, its mere proposal is an admission of the utter failure of Social Security, since a guaranteed retirement pension is exactly what Social Security is supposed to be doing for us. So if we admit that Social Security is failing to do what it was designed to do, why should we expect yet another government sponsored pension plan to fare any better?
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