02.26.09
Posted in Econ, Politics at 7:42 pm by Administrator
To get an idea about Medicare spending growth in your area, see the latest from the New England Journal of Medicine (Look at the interactive graphic.)
It shows what regions have higher spending growth and outlines some ways to alter the growth trajectories. Health care spending is likened to an arms race. There are no financial rewards for collaboration, coordination, or conservative practice in Medicare. The authors suggest changing the volume-based system to incorporate partial capitation, bundled payment, and/or shared savings. They point to needed reform in overuse of hospitals, and unnecessary visits, tests, and minor procedures.
From my research, tests and minor procedures were key culprits in even more increases in Medicare Part B spending (for which retirees have greater cost-sharing.) And we identify this trend in the latest white paper. The Obama administration will have a complex task ahead bringing together all the disparate groups in health care, but at least someone has posed real ideas with supporting evidence as to a solution.
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02.12.09
Posted in Econ, Politics at 8:24 pm by Administrator
Before I read John Taylor’s (famous for the respected Taylor rule of montary policy) take on how the financial crisis was created, I had come to my own macro view on the series of events that lead us to this point:
• A global savings glut was created by excess liquidity.
• Too much liquidity was chasing higher returns.
• This led to excess risk-taking.
• The truth of this was revealed, ie., over-leveraged economic growth/activity was shown to be unsustainable, thus the swelling dam burst.
• We are in a new reality with a more conservative-minded investing mentality.
• Concerns over government policy distorting economic sustainability because of fiscal stimulus are warranted. If recessions are forms of corrections and the housing market boom needed to bust, how does the market economy get distorted in the future by the intervention?
Taylor recently wrote in the Wall Street Journal, Feb 9, that government actions and interventions caused, prolonged, and worsened the crisis according to his research. Here are the points he makes:
• Monetary excesses were the main cause of the housing boom; the Fed’s target interest rate from 2003-05 was held too low based on historical standards of good policy.(the glut theory)
• The effects of the boom and bust were amplified by the excess risk-taking because of excessively low interest rates and the use of subprime mortgages and ARMs.
• Ratings agencies underestimated risks of securitized mortgages, and Fannie and Freddie were encouraged to buy these mortgage-backed securities.
• Government prolonged the crisis when they misdiagnosed the causes of the financial strains which were becoming apparent in August 2007.They believed the problem to be a liquidity problem when it was a counterparty risk problem. A counterparty risk problem required a focus on transparency and the quality of bank’s balance sheets rather than the liquidity response that occured.
• The Economic Stimulus Act of 2008 giving rebates did little to jump-start consumption.
• The subsequent interest rate cuts were sharper than Taylor’s rule (usually adhered to in policy decisions). The dollar thus depreciated sharply and a corresponding large increase in oil prices (traded in dollars) occured. High oil hit the economy hard.
• After a year of mistaken prescriptions, the crisis worsened in Sept/Oct 2008, with a credit crunch added in.
• The vague $700 billion TARP (Troubled Asset Relief Program) introduced by Treasury was considered ill-conceived, and the official story that the economy was tanking led to the panic seen over the next few weeks.
• Seamingly fear-based explanations of programs to address the crisis amplified worries along with ad hoc decisions about who would fail (Lehman) and who to bail (Bear, AIG).
His conclusion: it didn’t have to be this way. He urges sound principles of monetary policy, basing gov’t interventions on clearly stated diagnoses (something this stimulus misses a bit on) and predictable frameworks for government actions. Massive responses with little explanation make things worse (like the market reaction to Geithner’s additional financial system rescue), so the crisis has shown so far.
At least with the passage of the stimulus, this round of intervention will be done and people and business can begin to plan and adjust accordingly.
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