Posts tagged ‘IT’

The Real Health Insurance Shock Is Coming Next Fall

Obviously, the whole Obamacare implementation is in disarray.  Some of this I expected -- the policy cancellations -- and some of it I did not -- the horrendous systems implementation.  But I actually thought that most of this would be swept under the rug by a willing media.

What I really expected was for the true shock to come next fall.  And I think it is still coming.  I believe that despite rate increases, insurers are likely being overly optimistic about how much adverse selection and cost control issues they are going to have.  As a result, I expected, and still expect, huge premium increases in the fall of 2014.

Why?  The main benefit of Obamacare is for people who cannot afford health insurance but want it, and for people who are very sick and have lost their insurance.   Obamacare is a terrible plan as implemented because it futzes with virtually everything in the health care system when a more limited plan could have achieved the same humanitarian coverage goals.

Anyway, one reason Obamacare is so comprehensive is that it is based on a goal of cost control for the whole system.  Unfortunately, most all of its cost control goals are faulty.  From Megan McArdle, in an amazing article covering a huge range of Obamacare issues:

But I think it’s also clearly true that the majority of the public did not understand this. In 2008, the Barack Obama campaign told them that their premiums would go down under the new health-care law. And the law’s supporters believed it.

Q. Obama says his plan will save $2,500 annually for my family. How?

A. Through a combination of developing efficiencies in the system, expanding coverage to all Americans, and picking up the cost of some high-cost cases. Specifically:

-- Health IT investment, which will reduce unnecessary and wasteful spending in the health care system. Examples include extra hospital stays because of preventable medical errors and duplicative diagnostic tests;

-- Improving prevention and management of chronic conditions;

-- Increasing insurance industry competition and reining in the abusive practices of monopoly insurance and drug companies;

-- Providing reinsurance for catastrophic cases, which will reduce insurance premiums; and

-- Ensuring every American has health coverage, which will reduce spending on the “uncompensated” care of uninsured people who end up in emergency rooms and whose care is picked up by institutions and then passed through higher charges to insured individuals.

The part about reinsurance was always nonsense; unless it’s subsidized, reinsurance doesn’t save money for the system, though it may reduce the risk that an individual company will go broke. But the rest of it all sounded entirely plausible; I heard many smart wonks make most of these arguments in 2008 and 2009. However, it’s fair to say that by the time the law passed, the debate had pretty well established that few to none of them were true. “We all knew” that preventive care doesn’t save money, electronic medical records don’t save money, reducing uncompensated care saves very little money, and “reining in the abusive practices” of insurance companies was likely to raise premiums, not lower them, because those “abuses” mostly consist of refusing to cover very sick people.

The result?  Many of these things that supposedly reduced costs actually increase them.  So if you think the shock is high now, wait until next fall.  We will see:

  • Rates going up
  • Less choice, as insurers pull out of many local markets
  • Narrowing of doctors networks, and reduced choice in doctors
  • Companies dropping health care and dumping workers (and retirees if they can get away with it) into the exchanges and Medicare.

Bleg

Anyone use Paycom for payroll?  Considering switching there from ADP, both for cost and what I think is a better IT platform.

Intellectual Network Effects

John Scalzi writes:

I do get occasionally amused at being a poster child for Science Fiction's Digital Future when I live in a rural town of 1,800 people with agricultural fields directly to my east, south and west, and Amish buggies clopping down the road on a daily basis. It's, like, three cheers for cognitive dissonance.

I responded in the comments:

I would have had exactly the opposite reaction, that your situation is entirely representative.  For 500 years,  from the Italian Renaissance through the 20th century, intellectual thought moved forward mainly hand in hand with urbanization.  I am not really an expert in describing the ins and outs of this, but there is clearly a density and network effect to intellectual advancement, and given past communication approaches, this required physical proximity.  The promise of modern IT technology is that it may allow us to achieve this density without physical proximity.

Save XP!

InfoWorld is hosting a petition to Microsoft to save XP and continue to sell it past the middle of this year.  You can sign their petition here.  I signed the petition, but the real petition for MS may be the numbers coming in for XP sales, which are still strong.  On this Amazon bestsellers page, as of 2/1/08, places #1,2,3,5 where XP and only #4 was Vista. IT News builds on my Amazon analysis:

Gates, in
Las Vegas Sunday, boasted that Microsoft has sold more than 100 million
copies of Windows Vista since the OS launched last January.

While
the number at first sounds impressive, it in fact indicates that the
company's once dominant grip on the OS market is loosening. Based on
Gates' statement, Windows Vista was aboard just 39% of the PC's that
shipped in 2007.

And Vista, in terms of units shipped, only
marginally outperformed first year sales of Windows XP according to
Gates' numbers -- despite the fact that the PC market has almost
doubled in size since XP launched in the post 9-11 gloom of late 2001.

Speaking
five years ago at CES 2003, Gates said that Windows XP in its first
full year on the market sold more than 89 million copies, according to a Microsoft record of the event....

A survey published by InformationWeek last year revealed that 30% of corporate desktop managers have no plans to upgrade their company's PC's to Vista -- ever.

As de facto IT manager for my company, you can include me in that 30%.  My other posts on Vista here.

Update:  Face-saving suggestion for Microsoft:  Rename XP as Vista Lite or some such.  Then they can keep it and claim 100% acceptance of Vista.

Looming Problems at Fannie Mae

Maxed Out Mamma tells us that Fannie Mae may already have huge subprime exposure (emphasis added):

Maybe most voters believe
that FNMA and FHA are just in the conservative loan business.
HAHAHAHAHAHAHAHA. Certainly no "trained journalist" is going to ask any
questions about this topic.

Both Fannie and FHA will go to DTIs of over 60% in some cases. Especially refis. Try this thread on FHA.
If only I had saved down the 100 odd links or so I've run into over the
last year about how brokers were getting loans that the subprime
companies refused (who have since defaulted) through under FNMA!!! The
reason they did it as a last resort was only because FNMA paid less for
the loan. FNMA is already going to run into huge problems because of
the slopover into their portfolio in the interim between most of the
subprime lenders going down and FNMA's meaningful tightening of lending
standards. So FNMA already faces years of worsening financial trouble
without any new risks. Why does OFHEO oppose this? Hmmmm?

You can get information on Fannie's loan types at efanniemae.com. Believe me, they do high LTV, hybrids, 40 year etc. This page will show you information about Fannie's ARM products. Take a look. Take a good look. You want a 100% interest-only? They got it!! In fact, they'll take downpayment assistance, and go up to 105% with special programs. Chortle! Ya want interest-only ARM hybrids with DAP? Sure. BRING IT ON, cries Fannie. Simultaneous seconds? Sure 'nuff!!! (By the way, this is the escape from the refusal of the MI companies to play.)

The
bottom line is that every risk afflicting Alt-A lenders in high-cost
areas can afflict Fannie and really has. It's just that no one is
paying attention.

I Too Want A Big Picture Job

TJIC has a great link to an article about a guy who doesn't want to grub around in the details, but wants a job to help a company see the big picture and move forward.  LOL.  I can't tell you how many times I get a request for that job.  People are always saying they want a job doing "business development**" or "coordination" or "performance reviews."  The common denominator when I ask people to explain to me what these jobs actually would do is that they involve driving around a lot to different recreation sites I run or might run and "checking things out."

I tell people there is no such job.  I tell them I don't have that job, and I own the company.   It's a TV-inspired view of business, like Dynasty or Dallas, where the protagonists run around and do all kinds of stuff that doesn't look like real work.

Yeah, I get to enjoy some perks now and do some cool stuff running my company.  But how did I get here?   Well, the whole story is too boring to tell, but here is one vignette:  In March of 2003 I spent about 6 straight 90-hour weeks trying to get my new company registered on the fly in 12 states and about 30 counties for tax withholding, sales tax, occupancy licenses, unemployment taxes, workers compensation, and even egg licenses just so I could use the assets I just purchased.  This was at the same time I was programming some add-ons to Quickbooks so the finances could be tracked and setting up some of our first web sites.  All while I tried to keep an unfamiliar company running.  And, oh yeah, while I was thinking all that big picture stuff.  Yes, I think about the big picture - and in fact, I have radically reshaped the positioning of this company over the past five years.  But that is what you do in the shower or on the stationary bike.

I don't explain all of this, of course, I just tell people that I don't have a big picture job to offer them.   TJIC, as usual, is a bit more direct:

Or, phrased another way: you're a useless drama queen who - instead of
compromising your principals and taking a job that doesn't match the
job title you want, and then growing the job position around your
abilities - you'd rather stay home and live off your wife's salary.

** The world's one great moment for such jobs was in the late 90's Internet craze, when every soon-to-be-on-FuckedCompany.com startup employed hordes of business development guys who ran around making grand press-release inducing deals that generated absolutely no money.  "Let's trade our proprietary online merchant services framework no one wants to buy for your proprietary online price management algorithm no one wants to buy.  OK, cool."  When I came into the waning stages of several such companies, the first thing I did was blow all these guys away, followed by a quick inventory of our soft and hard assets to see if we actually had anything anyone wanted to, you know, pay money for.  I still think the whole IT world is tainted by the memory of these glory days for produce-nothings.  Everyone wants to be Steve Jobs without having to actually first produce a salable new technology with their own hands in their garage.

A Challenge to Lou Dobbs

Sorry posting has been light this week.  A reader was nice enough to point to the latest rant by Lou Dobbs here.  Apparently, he has decided to take the position that free traders are now elitists, while folks like him who want the government to pick and choose winners among American businesses and industries as "populist."  The obvious response of course is that beneficiaries of American protectionist legislation tend to read as the who's who of politically connected elitists.  It is also hilarious to equate free trade, whose benefits are backed by 100 out of 100 economists, with some irrational faith-based belief system.  But I will leave that aside to point to this line:

He and others completely disregard the $5 trillion in trade debt that
the United States has built up through 30 consecutive years of trade
deficits. That trade debt is rising faster than our national debt and
is simply economically unsustainable, no matter what any faith-based
economist would argue. Our political, business and media elites
continue to disregard reality.

Here is my very, very simple challenge for Lou Dobbs to help those of us who obviously don't get it:  Point to where this $5 Trillion of Debt is.   What private individuals or corporations owe it to whom?  That should be simple.  With the national debt, we can just go out and count all those government bonds.  But where is this trade "debt"?

Answer:  IT DOESN'T EXIST.  What he means is that over some time span of several decades, American has a cumulative trade deficit of $5 trillion.  But trade deficit does not mean debt.  I showed this in great detail here.  Calling it a "trade debt" is not a sloppy mistake on Dobbs part but an outright lie, meant to make the point that running deficits every year is unsustainable.  But America has become the wealthiest country in the world running trade deficits for the majority of the last 100 years.   In fact, one can argue that the trade deficit itself only exists as a phantom of the awkward and limited way in which we measure trade

Postscript:
I constantly get people who write me that the fact the Chinese are buying up a lot of US government bonds or corporate bonds with their trade profits is proof of a "trade debt."  No such thing.  The US Government bonds are evidence of a fiscal deficit of the federal government, also called the national debt, and exists not because of trade but because Congress has no fiscal discipline.  Corporate debt is growing to buy back stock, make corporate acquisitions, and to buy new plants and facilities.  The fact the Chinese help to fund these debts does not mean that trade caused this debt.  In fact, foreigners buying US debt securities depresses interest rates and actually keeps the national debt lower.

Here is a thought experiment:  Wal-Mart runs a multi-billion dollar trade deficit every year with China.  Why isn't it building up lot's of debt to the Chinese?

Broken Window Fallacy, On Steroids

Economics have a concept called the "broken window fallacy" that many of the media to this day do not understand.  Here is an example:  Every hurricane season, the media always writes a "silver lining" story about how recovery from a devastating hurricane spurred the local economy.  One might assume from this reasoning that it is good to go around breaking windows, since one will make a lot of work for glaziers and boost the economy.  The problem is what is not measured.  What would the money that was spent on window replacement have been spent on instead?  It is a safe presumption that had they not had to repair storm damage, they would have spent the money on something more productive  (test:  if this were not true, everyone would be breaking their own windows).  Advocating the broken window fallacy is a bit like saying that stealing money from banks would increase the savings rate, since people would have to deposit even more money to replace that which was stolen.

Anyway, I bring this example up because today I saw the most amazing example of the broken window fallacy I have ever seen, via Kevin Drum and Business Week:

 Business Week's cover story in their current issue tells us that healthcare inefficiency is what's keeping the American economy afloat:

The
very real problems with the health-care system mask a simple fact:
Without it the nation's labor market would be in a deep coma.  Since 2001, 1.7 million new jobs have been added in the health-care sector, which includes related
industries such as pharmaceuticals and health insurance. Meanwhile, the
number of private-sector jobs outside of health care is no higher than
it was five years ago.

.... The U.S. unemployment rate is 4.7%, compared with 8.2% and
8.9%, respectively, in Germany and France. But the health-care systems
of those two countries added very few jobs from 1997 to 2004, according
to new data from the Organization for Economic Cooperation &
Development, while U.S. hospitals and physician offices never stopped
growing. Take away health-care hiring in the U.S., and quicker than you
can say cardiac bypass, the U.S. unemployment rate would be 1 to 2
percentage points higher.

....Both sides can agree that more spending on information
technology could reduce the need for so many health-care workers. It's
a truism in economics that investment boosts productivity, and the U.S.
lags behind other countries in this area. One reason: "Every other
country has the payers paying for IT," says Johns Hopkins' Gerard
Anderson, an expert on the economics of health care. "In the U.S. we're
asking the providers to pay for IT" "” and they're not the ones who
benefit.

Let's go back to slow-motion instant replay.  What was that first line?

Business Week's cover story in their current issue tells us that healthcare inefficiency is what's keeping the American economy afloat

I am not seeing things, am I?  Did he really write that it is the inefficiency of one of the largest and most ubiquitous and perhaps most important industries in the country that is propelling the economy?  Do I really have to state the obvious?  Do you really think that if all those people were not hired to push paper around in health care they would be sitting unemployed today?  What about all the money either consumers or corporations would be saving from more efficiency -- would that really not have been spent on something else?

In a way, I guess this is sort of consistent with Drum's position on Wal-Mart.  If Wal-Mart is detroying the economy (according to him) by bringing increased productivity to retail, I guess this argument that health care inefficiency helps the economy is at least consistent.  Maybe if we could get our state drivers' license agency folks to take over the whole economy, we would have a boom! And the old Soviet Union must have been an economic powerhouse!

This is some of the worst economics I have seen in a while.  Lefties like Drum often rail against conservatives for being anti-scientific in their opposition to teaching evolution or approving the morning-after pill, but for God sakes the most fundamentalist Bible-belt home schooled conservative Christian probably knows more about the science of evolution than journalists understand about the science of economics.