American Elephants

It’s All About Incentives. by The Elephant's Child

Conservatives recognize that people usually act in accordance with their own self-interest. Hardly a startling revelation. Of course they do. Politicians claim to have the best interests of the people at the forefront, but support for large businesses or special interests in their district may trump “the people.” That’s not a startling revelation either. Votes can be bought, influence pedaled, interests horse traded. So how do we get things done in such an atmosphere?

When the Affordable Care Act was devised in the back rooms of Congress, Democrats tried to include favors for their supporter groups. Much was made of free contraceptives, for example. Democrats wanted it for their women voters.

Sandra Fluke gained her 5 minutes of fame by speaking in favor of it before a faux congressional committee. The Catholic church objected strenuously because it included the morning-after pill, an abortifacient, which is abhorrent to their religion, and required anyone offering health care to offer it to their workers. Conservatives, who are more apt to have taken Economics 101, noted that contraceptives were available for under $10 for a months’ supply, and the taxpayers shouldn’t have to pay for them. You see the conflict of self-interest. Cases are still working their way through the courts.

The incentives created were perverse. An unnecessary favor to attract women voters has the effect of making health insurance unnecessarily more expensive. The law is loaded up with nice things for voter groups, benefits for which everyone must have coverage whether they need it or not. Because insurers were told what they must include in every policy, it meant 60 year-old women had to pay for maternity care and well-child visits. The cost of a policy is based on what is included. To keep premiums as low as possible deductibles are higher than what most people are used to, networks of doctors and hospitals skimpier, and lifesaving drugs not on the insurers’ formularies.

Under the Affordable Care Act, insurers are required to charge the same premium rate to anyone who wants to sign up, regardless of health status; and they are required to accept anyone who applies. This means that to make ends meet they must overcharge the healthy and undercharge the sick. It also means insurers have strong incentives to attract the healthy (on whom they make a profit) and avoid the sick (on whom they incur losses) by, in effect, making their plans less appealing to the sick.

Here’s how they seem to be doing it: In structuring the plans they offer on the exchanges, the insurers apparently assumed that the healthy will choose the plan they buy based on its price, while ignoring other features of the plan. It makes sense: If I am healthy why wouldn’t I shop for the lowest price? If I later develop cancer, I can move to a plan that has the best cancer care. By law, these plans will be prohibited from charging me more than the premium paid by a healthy enrollee.

Insurers also assume that people who already are ill or otherwise expect to use a lot of health care pay much closer attention to the cost of deductibles and which doctors and hospitals are in the insurer’s network. To have any hope of balancing their books, insurers must then attract the maximum number of customers who are likely to stay healthy and thus not use so much of the care they paid for, while unhealthy people in effect use more than they paid for. This is why most plans are apparently designed to attract people willing to overlook high deductibles and less access to health care in return for lower premiums.

Cities and towns have unfunded health-care commitments, and they will be dumping their retirees on the state exchanges. High cost older people. Some people are working only to get health insurance because they are uninsurable in the individual market. Their incentive is to quit and rely on the exchanges. A lot of high-cost patients will enroll through the exchanges.This will drive premium costs and deductibles higher.

The incentives are all wrong. We can do better.

The Socialist Scandinavian Paradise Is Turning Away From The Welfare State — Unaffordable! by The Elephant's Child


Trends. It’s always hard to decide what is a trend and what is just a temporary aberration, but the Nordic countries are increasingly turning away from the welfare state. Swedes in the supposed socialist paradise are  turning to private health insurance to reduce long wait times and rationed health care services. The country started cutting government spending as a percentage of GDP in the 1990s, and that has continued.

Throughout the Nordic countries the size and scope of government are being cut back as nations find themselves strapped for cash. In Denmark, when Prime Minister Helle Thorning-Schmidt’s government took power in 2011, there was little to suggest that she would make any dramatic changes to the country’s welfare state which is funded by the world’s highest tax burden.

However, the center-right government raised the retirement age and reduced the period for unemployment benefits from four years to two years. Corporate taxes were cut to 22 percent from 25 percent. Young people on  benefits are required to undertake training and student aid is withdrawn from those taking too long to finish their studies.

Finland is moving to trim similar sorts of programs. Only Norway is unlikely to tackle serious reform because of its vast oil wealth and ironically, it has a conservative government. The new center-right Prime Minister Erna Solberg has pledged to preserve the welfare state.

About one in ten Swedes now has private health insurance, and the numbers are increasing. “It’s quicker to get a colleague back to work if you have an operation in two week’s time rather than having to wait for a year” privately insured Anna Norlander told  Sveriges Radio on Friday. “It’s terrible that I, as a young person, don’t feel I can trust the health care system to take care of me.”

The Local noted that “visitors are sometimes surprised to learn about year-long waiting times for cancer patients.” Is that before or after they decide how aggressive the particular cancer is?

The welfare-state period may be regarded as a brief interlude. Until the 1970s, Sweden had strong market-oriented policies in place that increased wealth and standards of living, because of reforms introduced at the end of the 19th century. Light regulation and property rights were enforced, government was limited, and a private banking sector flourished. The cradle to grave socialist services implemented in the 1970s proved to be unaffordable.

Sweden has deregulated whole industries and encouraged the privatization of public services. Income tax in Sweden is lower than France, Belgium and Denmark, though that’s not saying much. Public spending as a share of GDP has declined from 71.0 percent in 1993 to 53.3 percent last year.

It is important to keep in mind that the Nordic States are all small homogeneous countries, though they have had significant Muslim immigration. Sweden is the largest with just over 9 million population, followed by Denmark  5.5 million, Finland 5.2 million and Iceland 308,000. Sweden’s population is roughly the same size as North Carolina, and Denmark is similar to Minnesota, if that helps to put things in perspective.

Daniel Hannan Warned Us in 2009. We Didn’t Pay Attention. by The Elephant's Child

I posted this warning from Britain’s Daniel Hannan, Member of the European Parliament way back in 2009, about imitating their National Health Service. He urged us then not to copy their system. But we didn’t have a choice. Democrats controlled both houses of Congress and the Presidency. They drew it up in Congressional back rooms, behind locked doors, and passed it without a single Republican vote and without any Republican input. It’s just kind of interesting to see how far we have come since 2009.

If you remember, many on the right posted this diagram of the enormous bureaucracy that was necessary to administer ObamaCare added on top of the networks of insurance companies and the medical profession. Each of these offices and agencies and bureaus is filled with bureaucrats who have to be paid high Beltway salaries and whose healthcare and pensions have to be paid for with taxpayer dollars. They expected to pay for this by taking $500 billion out of Medicare, paying doctors and hospitals less, limiting networks of providers, and eliminating your ability to get care if you travel. ……….(click to enlarge)

ObamaCare flow chart

Milton Friedman on Socialized Medicine by The Elephant's Child

I love Milton Friedman’s clear explanations of simple economic principles. Do any of those on the Left ever watch any of these? Silly question, of course they don’t. Could we get all of these videos into the schools?  Never mind, I’m fantasizing.


Finally, Someone in The Media Fesses Up! It’s Not Affordable. by The Elephant's Child

USA Today passed out a nugget of truth as a Boxing Day Gift:

More than half of the counties in 34 states using the federal health insurance exchange lack even a bronze plan that’s affordable — by the government’s own definition — for 40-year-old couples who make just a little too much for financial assistance, a USA TODAY analysis shows.

Many of these counties are in rural, less populous areas that already had limited choice and pricey plans, but many others are heavily populated, such as Bergen County, N.J., and Philadelphia and Milwaukee counties.

More than a third don’t offer an affordable plan in the four tiers of coverage known as bronze, silver, gold or platinum for people buying individual plans who are 50 or older and ineligible for subsidies. …

The prices of exchange plans have shocked many shoppers, especially those who had plans canceled because they did not meet the ACA coverage requirements. But experts are not surprised.

“The ACA was not designed to reduce costs or, the law’s name notwithstanding, to make health insurance coverage affordable for the vast majority of Americans,” says health care consultant Kip Piper, a former government and insurance industry official. “The law uses taxpayer dollars to lower costs for the low-income uninsured but it also increases costs overall and shifts costs within the marketplace.”

The law’s name notwithstanding! That’s why we call it “ObamaCare” not the Affordable Care Act.

“It’s Going to Be a Glorious Thing.” Can She Possibly Believe That? by The Elephant's Child


House Minority Leader Nancy Pelosi (D-San Francisco) says December has been a “great month” for ObamaCare sign-ups, and she says things will only get better as more people enroll. “It’s worth the trouble. It’s going to be a glorious thing,” Pelosi told a conference call on Monday.

“It’s about life, a healthier life, liberty, the freedom to pursue our happiness. It honors the vows of our founders. A person can follow his or her passion and not be chained by a policy, so they could start a business, be self-employed, change jobs. It’s a very, very exciting thing. And it’s about wellness and prevention. It’s about the health of America, not just the health care for Americans. So we’re very proud of it, and our enthusiasm for it…strengthens our determination to make sure it works.”

Pretty amazing, huh. Do  you think she actually believes that?

“Comedy of Errors” is Way Too Tame a Phrase for This Mess. by The Elephant's Child

Oregon is standing out in a field of ObamaCare failure. So far, they have spent $160 million on an ObamaCare website and signed up exactly zero people. None, zero, zilch. The head of Oregon’s ObamaCare Exchange has resigned for, um, personal reasons. Carolyn Lawson, chief information officer at the Oregon Health Authority, decided that the state could manage the complex exchange itself, rather than hire a private-sector systems integrator, a decision since criticized by her superiors.

She was apparently close to Oracle Corp, the California technology giant that has been blamed for shoddy work and missing deadlines. Now, nearly three months after the federal deadline, Oregon’s exchange has emerged as a technological train wreck and a public relations nightmare. A fully functional website remains many weeks or months away.

State officials have been forced to spend even more money gearing up a system of temporary employees and contractors to manually process paper applications for health insurance.

Lawson began her job with the State of Oregon on July 1, 2011. The stat paid her $178,992 a year. Unfortunately Oregon’s leaders bragged for two years that it would have one of the most advanced insurance marketplaces. Then were embarrassed when the online system wasn’t ready to launch on schedule in October. As Ben at Ace of Spades said: “Everyone should work for the government, they over pay and don’t expect results.”

Democrats In Denial! They Think It’s Just The Website. by The Elephant's Child

(click to enlarge)
Every day the news about ObamaCare gets worse, and we’re still in the Please sign up phase. People have not yet focused on what comes next. There is progress however. During a trip to the Miami area, Secretary of Health and Human services Kathleen Sebelius admitted that some people will pay higher premiums under Obama Care. (Don’t laugh.) She said:

There are some individuals who may be looking at increases. I think you cannot make a statement based on cost unless you compare what they had to what they’re going into.

I’m beginning to think that Democrats are in a state of pure denial. They think the problem is the rollout of the website, which is of course a complete fiasco. Instead of the promised average savings of $2,500 per family, the opposite has been true in most cases as deductibles have increased and premiums have risen sharply. But they believe the coverage will be much better. For most people it means unnecessarily more expensive, depriving them of their doctors and reassigning them to a narrower network, and other facilities, while forcing them to pay for benefits Democrats assume are wonderful, but which most people don’t want. Here’s Washington Post blogger Greg Sargent:

“the GOP outrage about Americans supposedly ‘losing’ coverage is largely just more of the same old misdirection. It’s a subset of a larger Republican refusal to have an actual debate about the law’s tradeoffs—one in which the law’s benefits for millions of Americans are also reckoned with in a serious way.”

Once a law is passed by Congress, even one without a single Republican vote, and signed by the President, it becomes law. But apparently it all works differently now and the administration is busily rewriting deadlines, insurers are being told to cover people anyway, even if they haven’t paid, to cover prescriptions and the government will pay them back for any losses. Secretary Sebelius has reportedly engaged a PR firm to help HHS to keep from looking stupid in the face of the debacle. The part where you lose your doctor was apparently written in sometime after the bill became law. This isn’t the way things are supposed to be done. It’s illegal as all hell. 

It seems that every day we learn something new about the insurance plans. And this is a big one. The ObamaCare exchanges that so many Americans are being forced into provide only local medical coverage. Spend part of the winter in the South to escape the cold? Sorry, you may not be covered, Most of the policies offered on the ObamaCare exchanges are not national networks, so “if you need routine medical services, they will not be covered when you leave your local area,” as they were before.

Unrestricted movement as a natural right of our American liberties? Nobody expected that. The Democrats writing ObamaCare into law obviously didn’t understand insurance. To make their grasp for more power over the people, they threw in all sorts of unnecessary benefits — free contraceptives, free diagnostic tests, keep  your kids on your policy until they are 26, and I don’t know what else. Each of these things has a cost, in many cases a big cost. To cover those expenses, insurance companies had to rein in costs elsewhere, which meant restricting the networks of physicians and facilities, and apparently not covering anything out-of-network.

The people who were writing up the legislation in the back rooms of Congress were politicians. There’s a lot of expertise in insurance companies. They pay very big salaries to actuaries who can do studies to tell how frequently a particular disease or medical incident occurs in the country, and they pay the big salaries because those people are very good at math and worth every cent. Did the Democrats writing the Affordable Care Act have some Actuaries in to help them figure out how to set the thing up? Does anybody think that members of Congress are really good at math? We have rather an extensive list of proof that they are reasonably clueless in that department. They’re not much good at economics either. They are politicians. They make promises. Mostly by the time you find out they’re not going to keep the promises, the world has moved on, and it’s all forgotten.

I don’t think they have any understanding of what a dreadful mess they have created, and think that as soon as they get the website fixed, all will be well. Who doesn’t want free contraceptives?

Having Fun With ObamaCare Parodies! by The Elephant's Child

ObamaCare was passed without input from Republicans, and without a single Republican vote. Ever since, Republicans have been attempting to defeat, dislodge, disparage, dump and repeal the noxious bill. The effort continues, but in the meantime, they are having great fun with parodies.  Here’s one from The News Junkie at Maggie’s Farm called “ObamaFlowers:”

(Receptionist) Hello, Welcome to ObamaFlowers. My name is Trina. How can I help you?

(Customer) Hello, I received an email from Professional Flowers stating that my flower order has been canceled and I should go to your exchange to reorder it. I tried your website, but it seems like it is not working. So I am calling the 800 number.

(Receptionist) Yes, I am sorry about the website. It should be fixed by the end of  November. But I can help you.

(Customer) Thanks, I ordered a “Spring Bouquet” for our anniversary, and wanted it delivered to my wife’s work.

(Receptionist Interrupting) Sir, “Spring Bouquets” do not meet our minimum standards, I will be happy to provide you with Red Roses.

Do read the whole thing, it’s a good one!

“The Rescue of the Planet Gets Cancelled.” by The Elephant's Child


The Frankfurter Allgemeine Zeitung (FAZ) has written a blistering criticism of climate activists’ efforts to impose a green authoritarian society over the rest of the world. They  overshot and missed the curve. The introduction reads:

The rescue of the planet gets cancelled. The climate advisory council to the government played high stakes poker. And lost. They failed at tricking their way past democracy.

A new study claims Britain’s climate change initiatives are both “staggeringly costly and excessive.” Britain’s £85 billion bill for climate policies is coming under attack. The Daily Mail has performed the valuable service of exposing the corruption that is rampant among British environmentalists; specifically, global warming alarmists.

The Mail on Sunday today reveals the extraordinary web of political and financial interests creating dozens of eco-millionaires from green levies on household energy bills.

A three-month investigation shows that some of the most outspoken campaigners who demand that consumers pay the colossal price of shifting to renewable energy are also getting rich from their efforts.

Here at home, the media are claiming that the 113th Congress is on track to be “the least productive” on record — as if that is a bad thing. But the Wall street Journal suggests that if gridlock lasts, Congress can still save a bundle by just not acting to extend the 20-year-old wind energy subsidy which provides a taxpayer gift to wind companies of 2.3 cents per kilowatt hour. Congress can accomplish something for taxpayers by doing nothing. Congress is also considering cutting back on the subsidies for corn ethanol. About time.

Greenpeace has tried to get some attention with a video showing a sad, bedraggled Santa telling the kids that Christmas will be cancelled this year because there isn’t enough snow and ice at the North Pole. Unfortunately, there is plenty of ice and snow and it’s growing. It melts in the summer and grows in the winter. And what melting there is in the  Antarctic is because of volcanoes under the ice, not climate.

It is no secret that President Obama’s green energy  ventures have not gone well. But the media has largely ignored the extent of the failure. The problem is widespread. The media notices a bankruptcy, but garner attention only when it happens and it is not linked to past failures. Governments cannot pick winners and losers. It has cost taxpayers billions, and the numbers of failures, the cronyism and the corruption are not getting attention.

I wrote just below about the collapse of China’s green energy economy. Nations worldwide put a lot of hope into wind turbines and solar arrays, but the technologies are beset by the same problems that they have always had. The wind is intermittent. It does not blow at the right speed all the time, and when the wind does not blow, the turbines require backup, 24/7,  from a conventional power plant. Solar arrays depend on the sun shining. Solar energy is diffuse. The sun sinks beneath the horizon at night, and does not power anything on cloudy or rainy days, and also requires 24/7 backup from a conventional power plant. The energy produced is not competitive with the energy from a conventional power plant, it is far more expensive.

Well, cronyism, corruption, help your political friends to get rich, make lots of millionaires. Sooner or later it all comes tumbling down. And it is tumbling down all over the world.

ADDENDUM: I said that Congress is considering cutting back on the subsidies for corn ethanol, which was really a misstatement. They are considering cutting back on the amount of corn ethanol put into gasoline. The subsidies were ended some time ago. The EPA wants 15% ethanol, which is damaging to older cars, and all kinds of smaller engines like leaf blowers lawnmowers, boats — and corn ethanol is not an environmental improvement over plain old gasoline, but just another wrong turn.

The rescue of the planet gets cancelled. The climate advisory council to the government played high stakes poker. And lost. They failed at tricking their way past democracy.” – See more at:
The rescue of the planet gets cancelled. The climate advisory council to the government played high stakes poker. And lost. They failed at tricking their way past democracy.” – See more at:
The rescue of the planet gets cancelled. The climate advisory council to the government played high stakes poker. And lost. They failed at tricking their way past democracy.” – See more at:

Milton Friedman on the Economics of Socialized Medicine by The Elephant's Child


I just found this, and it seems appropriate to listen carefully, once again, to Milton Friedman. It often seems to me that economics is simply the art of trying to quantify common sense, but I do recognize that my “common sense” is someone else’s heresy.

The theory is that if you repeat something often enough, after a while it will sink in. I remain hopeful.

Pay Attention to The Bitter Truths About NHS — And Our Future? by The Elephant's Child

I refer frequently to Britain’s National Health Service, which is the oldest of the “single payer” health care plans, initiated right after World War II, when Labour returned to power. When Obama’s health care advisers began talking about health care, they all expressed their admiration for NHS. In devising a health care plan, they talked a lot about how the big costs all came from old people in their final years. And they talked about things like life years and useful life, and did a lot of comparing a vigorous young person with many life years ahead — contrasting it with useless old people.

Well, I had this strange idea that that’s what the practice of medicine was all about, caring for people and their health problems throughout their lives, from every kid’s broken arm to the failing health of someone who has lived a long and valuable life. The Inuit supposedly left their old people to die out on the ice when they were no longer useful, and there have been tribes who eat their enemies as well. Are we still struggling to find an ethical way to deal with life?

Britain still has private health care for those who can afford it. The NHS provides care that is free at the point of service, and just what every liberal wants as their most cherished goal. But it doesn’t work. The incentive for the people immediately becomes to use as much as they want because it has no (visible) cost. This inevitably drives costs up sharply. The incentive for the government immediately becomes to control costs. The government who hires, fires and pays for the medical establishment, cannot do much about the people whom they urged to use all the medical care they want, but they can put a lot of pressure on the medical establishment to cut costs.

Escalating problems and the inevitable results should be obvious to the dimmest intelligence, but  politics and ideology get in the way. Not everyone believes in incentives, in spite of  overwhelming evidence that they are what moves events.

Can’t have people piling up waiting to get into the emergency room, ordered to fix that, hospitals took to holding people in ambulances so admissions would be spread out more equally. Cut costs more, and pretty soon hospitals were saving money by keeping the same sheets on the bed. When all the incentives become to cut costs, the old folks don’t get clean sheets or fresh water, and start dying of dehydration and starvation in the hospital.

ObamaCare incentives are just the same. We are just taking our first stumbling steps down the same long road to perdition. Nobody has even experienced actual ObamaCare yet. So far it’s all just the incredible fiasco of the rollout. The exposure of Obama’s lies about the law is just the surface. Everybody’s insurance is getting cancelled, if not this year — just wait until next year. Premiums are drastically higher, deductibles reach levels that almost make insurance useless. People don’t know if they are actually enrolled. They don’t know if their doctor will still be available to them, or who will be in their physician network. They don’t know if the drugs they need will be in the formulary. All is uncertainty. Much of the details of enrollment and payment have not yet been written.

A panicky HHS is just making up new ObamaCare ‘laws’ on the spot. They’re extending deadlines for making payment for coverage, requiring insurers to accept premium payments, changing due dates, ‘strongly encouraging”  insurance companies, HHS won’t release real numbers, and those numbers include those who haven’t paid anyway. Glenn Reynolds asks: “Where, exactly, do they get the authority for all these exemptions, waivers, and extensions?” Good question.

Please read this article from yesterday’s Telegraph, and do read the whole thing. This is the state to which the NHS has fallen, and it is our future if we don’t fight to stop it. See the related articles listed in the column. They are not just talking about dirty sheets, they are talking about lives lost unnecessarily.  Unnecessarily!


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