Archive for August 3, 2009

Rewarding Bad Actors

August 3, 2009


Most progressive measures are being opposed by Obama, who’s quickly emerging as the main Fifth Column against true reform in all fronts.


Paul Krugman, left-liberal voice on the Times

Paul Krugman, left-liberal voice on the Times

Americans are angry at Wall Street, and rightly so. First the financial industry plunged us into economic crisis, then it was bailed out at taxpayer expense. And now, with the economy still deeply depressed, the industry is paying itself gigantic bonuses. If you aren’t outraged, you haven’t been paying attention.

But crashing the economy and fleecing the taxpayer aren’t Wall Street’s only sins. Even before the crisis and the bailouts, many financial-industry high-fliers made fortunes through activities that were worthless if not destructive from a social point of view.

And they’re still at it. Consider two recent news stories.

One involves the rise of high-speed trading: some institutions, including Goldman Sachs, have been using superfast computers to get the jump on other investors, buying or selling stocks a tiny fraction of a second before anyone else can react. Profits from high-frequency trading are one reason Goldman is earning record profits and likely to pay record bonuses.

On a seemingly different front, Sunday’s Times reported on the case of Andrew J. Hall, who leads an arm of Citigroup that speculates on oil and other commodities. His operation has made a lot of money recently, and according to his contract Mr. Hall is owed $100 million.

What do these stories have in common?

The politically salient answer, for now at least, is that in both cases we’re looking at huge payouts by firms that were major recipients of federal aid. Citi has received around $45 billion from taxpayers; Goldman has repaid the $10 billion it received in direct aid, but it has benefited enormously both from federal guarantees and from bailouts of other financial institutions. What are taxpayers supposed to think when these welfare cases cut nine-figure paychecks?

You can’t take the antisocial tendency out of Capitalism, because it defines it.

But suppose we grant that both Goldman and Mr. Hall are very good at what they do, and might have earned huge profits even without all that aid. Even so, what they do is bad for America.

Just to be clear: financial speculation can serve a useful purpose. It’s good, for example, that futures markets provide an incentive to stockpile heating oil before the weather gets cold and stockpile gasoline ahead of the summer driving season.

But speculation based on information not available to the public at large is a very different matter. As the U.C.L.A. economist Jack Hirshleifer showed back in 1971, such speculation often combines “private profitability” with “social uselessness.”

It’s hard to imagine a better illustration than high-frequency trading. The stock market is supposed to allocate capital to its most productive uses, for example by helping companies with good ideas raise money. But it’s hard to see how traders who place their orders one-thirtieth of a second faster than anyone else do anything to improve that social function.

What about Mr. Hall? The Times report suggests that he makes money mainly by outsmarting other investors, rather than by directing resources to where they’re needed. Again, it’s hard to see the social value of what he does.

And there’s a good case that such activities are actually harmful. For example, high-frequency trading probably degrades the stock market’s function, because it’s a kind of tax on investors who lack access to those superfast computers — which means that the money Goldman spends on those computers has a negative effect on national wealth. As the great Stanford economist Kenneth Arrow put it in 1973, speculation based on private information imposes a “double social loss”: it uses up resources and undermines markets.

Now, you might be tempted to dismiss destructive speculation as a minor issue — and 30 years ago you would have been right. Since then, however, high finance — securities and commodity trading, as opposed to run-of-the-mill banking — has become a vastly more important part of our economy, increasing its share of G.D.P. by a factor of six. And soaring incomes in the financial industry have played a large role in sharply rising income inequality.

What should be done? Last week the House passed a bill setting rules for pay packages at a wide range of financial institutions. That would be a step in the right direction. But it really should be accompanied by much broader regulation of financial practices — and, I would argue, by higher tax rates on supersized incomes.

Unfortunately, the House measure is opposed by the Obama administration, which still seems to operate on the principle that what’s good for Wall Street is good for America.

Neither the administration, nor our political system in general, is ready to face up to the fact that we’ve become a society in which the big bucks go to bad actors, a society that lavishly rewards those who make us poorer.

Did you like this? Share it:

Faint Praise for Obama’s health reform

Faint Praise, indeed


Co-Founder and Co-Editor of The American Prospect

President Obama wanted health insurance reform in the worst way. And at the rate things are going, he is likely to get it. PHOTO: Obama selling his concoction. Even at best–way before the potshotting began–the plan was a surrender to special interests. “Afford” is the tipoff we’re still talking private insurance.

Let’s review the bidding — first the substance, then the politics. America spends 15 percent of its GDP covering far less than the entire population, while other wealthy nations cover everyone, more effectively, for about nine percent. We under-insure tens of millions of others by leaving big loopholes in what’s covered. More than half of Americans who file medical bankruptcy nominally have insurance.

Why is our system so massively inefficient? Because it is run by and for private insurers, aided and abetted by for-profit drug companies and hospitals. Even if we insure more people, as President Obama hopes to, a fragmented, profit-oriented system dominated by these interests simply cannot yield the most efficient use of health outlays.

By contrast, a comprehensive system with a national health budget naturally looks for the most efficient way to spend health dollars. That means much greater investment in prevention, and in the comprehensive use of proven treatment protocols for the easy stuff that makes a big difference in heading off more expensive treatments later on, such as childhood asthma, high blood pressure, and diabetes. It means a more sensible breakdown of primary care doctors and specialists. It means not saddling med school grads with hundreds of thousands of dollars of debt, which turns them into profit machines rather than healers.

Private health insurers cannot get us to this outcome because they maximize their profits by targeting the young and the healthy, and avoiding the sick, the old, and the risky. They invent preposterous concepts such as exclusion of people with “pre-existing conditions.” Hendrik Hertzberg recently observed that we are all born with a pre-existing condition — mortality. In theory, HMOs were supposed to increase prevention and collaboration. But they rapidly deteriorated into merely a system where large panels of doctors are approved providers if they accept the HMO’s fee schedule, and physicians are under pressure to cut costs and see ever more patients in ever shorter appointments if they wish to maintain their incomes.

The “staff model” group practice — where doctors are salaried and a medical team of generalists and specialists works in close collaboration — is our closest equivalent of national health insurance, but it is being crowded out by the cherry-picking practices of the insurance industry. The exceptions invariably provide the best and most efficient care, such as the Cleveland Clinic and the Mayo Clinic.

The press commentary on the cause and cure of medical inflation has largely missed the point. The problem is not that “hospitals” and “doctors” in general make or charge too much money. The problem is feast coexisting with famine. The current system gives hospitals incentives to target the services that produce the most reimbursement at the least cost, such as complex cardiac interventions. So cardiology departments are gold-plated, while money-losing emergency rooms are threadbare. To make matters worse, specialty day-surgery hospitals, often owned by doctor-entrepreneurs, divert profitable patients from hard-pressed local general hospitals.

There is also a misallocation of resources according to medical specialty. As reimbursements are cut by insurers and by Medicare, primary care doctors are squeezed; likewise OB/GYNs, psychiatrists, and pediatricians. Meanwhile, some specialists such as oncologists (who are permitted to personally profit from the sale of cancer drugs), surgeons, dermatologists, and others, are still making out just fine. And standard practices and charges wildly vary by region.

The bottom line is that these structural problems cannot be fixed by what is likely to be approved by Congress as the Obama plan. Obama hopes that heavy reliance on new electronic record-keeping can somehow reduce medical inflation. But this is not where the problem (or the solution) lies — because the plan builds on the existing insurance industry, with all of its inefficiencies. The candid Doug Elmendorf, director of the Congressional Budget Office, recently testified that the design of the Obama approach did nothing that would fundamentally change the pattern of medical cost inflation.

Putting the best possible gloss on Obama’s approach, its inclusion of a public option will gradually move more and more people to a Medicare-style system; its much tougher regulation of private insurers will yield at least some of the efficiencies that we could get through true national health insurance, it will ban some of the worst practices such as exclusion for pre-existing conditions, and its “play-or-pay” feature for employers and subsidy of the near-poor will bring insurance to most Americans.

That is the best possible outcome. But it is not the likely one. That brings us to the politics.

President Obama set the terms of this legislative battle by proposing to work with, not against the insurance and drug industries. That added one lead weight to his feet. Then he added a second lead weight by trying to make the affair bipartisan, inviting Republicans to collude to produce an unacceptably weak plan. (Let’s seek what kind of bastard child emerges from the collaboration between the unreliable Democrat Max Baucus of the Senate Finance Committee and his Republican counterpart, Chuck Grassley.) Obama also waited until very late in the game to take his case to the country.

The result? The insurance and drug industry lobbies say they support Obama. They just happen to oppose all of the details that would make the reform meaningful. The bill that (barely) cleared the House Energy and Commerce Committee on Friday keeps alive a somewhat stripped down public option. It bans exclusions for pre-existing conditions. And it requires employers to provide at least standard insurance or pay a tax. But the proposed tax is far less than the cost of the insurance, shifting some costs onto government. And it remains to be seen whether the remaining teeth in the House bill can survive what will surely be a weaker Senate bill. The Democratic Blue Dogs remain sunshine patriots on health reform if there is a risk of increasing costs to business; and the Republicans have defined defeat of health reform as a strategy of handing Obama a disabling symbolic defeat.

Given the partial progress by the House, it seems almost churlish to criticize Obama for not having set the bar higher in the first place. The liberal commentariat has bent over backwards to find things in the bill to like.

The estimable Hertzberg writes, “The American health-care system is bloated, wasteful, and cruel. Under the health-insurance-reform package now being bludgeoned into misshapen shape on Capitol Hill, it will still be bloated, wasteful, and cruel — but markedly less so.” Yes, but the consequence will be that medical inflation will likely drive us to further cuts in care, further speed-ups on primary care doctors, and further cost-shifting to patients and taxpayers.

The New York Times, in another classic of faint praise, editorialized, “It seems hard to believe that over the long haul the introduction of electronic medical records will not save substantial money.” Actually, it is quite easy to believe. This editorialist must be extremely healthy. If he or she has been to the doctor lately, the medical records are already computerized and “charts” are electronic, not hand written. The problem is not the technology but the insurer-dominated system in which it reposes.

The behavior of Harry & Louise, the Republicans and Blue Dog Democrats is so odious that it’s hard not to put in a kind word for Obama. Paul Krugman was never a fan of the Obama approach. His latest column is a general tutorial on why we should thank government for the fact that health insurance functions at all. He declines to say anything nice about the Obama bill, but concludes, very graciously, with more faint praise: “Now Mr. Obama basically proposes using additional regulation and subsidies to make decent insurance available to all of us. That’s not radical; it’s as American as, well, Medicare.”

In my book, Obama’s Challenge, I argued that our new president should devote all his effort in his first year to getting the economy back on track. Then, armed with the gratitude of the people and an increased majority in Congress, he should offer a much more robust health reform such as single payer after the first mid-term election. It would be a huge mistake, I contended, to tackle the Mount Everest of domestic reform as a novice.

Well, President Obama didn’t take my advice (not the first time.) I can only join my fellow progressive journalists in hoping that something like the House version of the bill survives. But the likelihood is that whatever finally makes it through this session of Congress will reinforce and further bloat the current disaster of a health insurance system rather than fundamentally changing it. And if the decent elements of the plan are blocked, Obama should have the courage to pull the bill and take his case to the people.

As Shakespeare wrote, “Lilies that fester smell far worse than weeds.” The satisfaction of a Rose Garden signing ceremony is not worth it, if the plan is more thorn than rose.

Robert Kuttner is co-editor of The American Prospect, a senior fellow at Demos, and author of Obama’s Challenge.

Did you like this? Share it:

Important Notes on The French Health Care System

The French Health Care System

Editor’s Choice

Main Category: Health Insurance / Medical Insurance

Also Included In: Public Health

Article Date: 08 Jun 2009 – 15:00 PDT


SiCKO's Michael Moore alerted the US public to the existence of better, socialized health systems.  he's to be credited for putting the issue back on the front burner.

SiCKO's Michael Moore alerted the US public to the existence of better, socialized health systems. he's to be credited for putting the issue back on the front burner.

The public health insurance program in France was established in 1945 and its coverage for its affiliates have undergone many changes since then. One of the major changes has resulted in the expansion to all legal residents, under the law of universal coverage called la couverture maladie universelle (universal health coverage). It is based on the principle of solidarity, guarantying financial protection against life´s contingencies for everyone.

Originally, professional activity (being in employment) was the basis of the funding and benefits of the French public health insurance system known as the Sécurité Sociale (social security). The main fund covers eighty percent of the population. There are two additional funds for the self-employed and agricultural workers.

Reimbursement is regulated through uniform rates. The financing is supported by employers, employee contributions, and personal income taxes. The working population has twenty percent of their gross salary deducted at source to fund the social security system.

The contribution of financing through personal income taxes has gradually increased and its purpose is to make up for the fall in remuneration, reduce price changes on the labor market and allocate the system´s financing among citizens equitably.

Employer and union federations jointly control the funds under the State´s supervision. This involves an intricate collaboration between the various entities of the system.

About seventy five percent of the total health expenditures are covered by the public health insurance system. A part of the balance is paid directly by the patients and the other part by private health insurance companies that are hired individually or in group (assurance complémentaire or mutuelle, complementary insurance or mutual fund).

The State

The State sees that the whole population has access to care; it dictates the types of care that are reimbursed, and to what degree, and what the role is of the different participating entities.

The State is in charge of protecting patient´s rights, elaborating policies and enforcing them. It is responsible for public safety.

Health authorities plan the size and numbers of hospitals. They decide on the amount and allocation of technical equipment (such as MRI, CT scans…). Through its agencies, the State organizes the supply of specialized wards and secures the provision of care at all times.

In recent years, regional authorities have taken a growing role in policy-making and negotiation.


There are two general categories:

  • The public sector, which accounts for 65% of hospital beds. Public hospitals are responsible for supplying ongoing care, teaching and training.
  • Private hospitals are profit oriented. They concentrate on surgical procedures and depend on their fee-for-service for funding.

There is no significant difference in the quality of care between public and private hospitals.

In France, there are 8.4 hospital beds per 1,000 people.

Health Professionals

Health professionals and physicians usually work in both public hospitals and private practices. About 36 percent of physicians work in public hospitals or establishments. They are in essence public servants, and the amount they are paid is determined by the government. However, 56 percent of physicians work in private practices because of the difficult working conditions in hospitals.

Experts set the relative price of procedures that are then negotiated by physicians’ unions and public health insurance funds. Around ninety seven percent of practitioners conform to the Tarif de convention (tariff references) which sets prices. Tariff references are the fixed rates to be used by doctors set by the national convention for all health services. Medical practitioners and clinics/hospitals who are not conventions (complying with the tariff references) have to display their prices.

In some situations, certain medical practitioners (such as surgeons with extra qualifications or experience) can charge more than the Tarif de convention. The extra fee is called a dépassement.

There are 3.37 physicians per 1,000 people.

There was a reform in July of 2005 which put in place a process of coordinated care. The patient first visits his/her médecin traitant (general practitioner). This physician has been previously registered at the caisse d´assurance sociale as the one in charge of the coordination of care for the patient. In case the physician or his substitute is unavailable, the patient can consult another physician and inform his/her caisse d´assurance – this does not affect his/her entitlement reimbursement. The patient is free to change to another general practitioner but has to report the change.

The médecin correspondant (correspondent doctor) is the physician to whom the patient has been referred and is usually a specialist. With the authorization of the patient, this physician sends the relevant information to the médecin traitant in order to follow up and coordinate care.

Several specialists have direct authorization for passing on information relevant to care, such as gynecologists, ophthalmologists and psychiatrists.

The service of gynecologists, ophthalmologists and dentists are covered by the State without a referral by a médecin traitant (the patient does not have to go to his/her General Practitioner first).

The patient has to present his card called “Carte Vitale” which transmits all transactions to the caisse d’ assurance where he/she is registered. All medical procedures (hospitalization, laboratory tests, x-rays…) have to take place in the locality of his/her caisse d´assurance. However, the patient can buy medicines anywhere in France and have the reimbursement later deposited on his/her bank account, usually within a ten-day-period.

An average of 70 percent of the cost of a visit to a family doctor or specialist is refunded. Reimbursements are on average of: 95 percent for a major surgery, 80 percent for minor surgery, 95 to 100 percent for pregnancy and childbirth, 70 percent for x-rays, routine dental care and nursing care at home. Reimbursements for prescribed medicines depend on the type of medication and range from 15 percent to 65 percent.

The percentage that is to be paid by the patient and not reimbursed by the Sécurité sociale is called ticket modérateur. This fraction varies following each individual´s obligatory regime set by the tariff references allocated to various medical treatments and associated fees encountered.

A patient can receive 100 percent coverage under certain conditions, such as having a chronic or acute medical condition (including cancer, insulin-dependent diabetes, heart disease…), requiring long-term care, having a long-standing condition, requiring a hospital stay of more than 30 days.

Beneficiaries of the RMI (revenu minimum d´insertion, minimum revenue of introduction) are automatically affiliated to the social security system. They are several requirements to qualify, but essentially every legal resident in France who earn less than a certain amount are entitled to this financial aid. As soon as they are affiliated, they also entitled to the health coverage. Those individuals are entitled to a 100 percent reimbursement of medical and hospital costs.

Complementary Insurance

Since health expenditure is growing in France, there has been ongoing concern about the deficit of the Sécurité Sociale and governments have been inclined to reduce the degree of reimbursement. As a result, more individuals are turning to l´assurance complémentaire (complementary insurance). This health insurance covers all or part of the costs not reimbursed by the health system.

The complementary insurance offers an extensive range of plans. The patient has to select the one that is best suited to his situation and needs to take into consideration his/her state of health, medical consumption, family, income and place of residence.

Expatriates in France

Since 2007, there have been some changes for EU citizens residing in France, introducing restrictions in their access to the health care system. This affects inactive individuals (not in employment) that do not have a professional activity (not working) or are looking for work, or students. The reason for those limitations is that France has to conform to the European community rules, like the other countries in the community. The new conditions of the right of stay have direct consequences on the social benefits in France.

Right of stay for inactive residence (not in employment) depends on two conditions:

  • They need to have a reasonable level of income in order not to become a burden for the State.
  • They need to have health coverage.

The conditions for inactive EU residents already living on France before November 2007 remain the same.

Students and retired people need to have medical coverage. Students usually have medical coverage from their country of origin or through the French Social Security for students; this applies to students under 28 years of age. Retired individuals, in most cases have health insurance from the country where they worked.

If an EU resident becomes sick and does not fulfill those two conditions and has been residing in France for less than three months, this person is entitled to dispositif soins urgent (emergency care device ). If the person has been residing for more than three months, he/she is entitled to l´Aide Médicale d´Etat (state medical aid).

Inactive EU residents can receive the couverture maladie universelle (universal health coverage) known as CMU if they are legal residents (stable and uninterrupted).

CMU de base (basic CMU)

Basic CMU helps anyone living in France who is not covered by another type of insurance get access to medical care and reimbursement of services and medication. People from all levels of income are entitled to it. The affiliation is not automatic and the person has to apply for it. It covers part of the medical services for the legal resident and the people in his/ her household. It covers typically seventy percent of a doctor’s visit.

CMU complémentaire (complementary CMU)

Complementary CMU facilitates access to health care for people with low income residing in France for more than three months, in a stable and uninterrupted manner. These individuals have one hundred percent coverage without advance payment for the health services or medication (they are fully covered, no money upfront needed). The income of the individual´s household must not exceed a maximum amount. The spouse or partner of the individual, as well as the dependents under 25 years of age are also included in this coverage. It is renewable on a yearly basis.

If a person is a foreign national, outside EU member states or Switzerland, he/she must justify their right of residence in France in order to gain right to the State healthcare.

After five years of legal residence all EU nationals gain permanent right of residence and therefore become fully entitled to the CMU.

Any EU expatriate not officially retired (under retirement age), not working, and not having lived in France for more than five years will lose their right to the French state healthcare except for those who have been living in France since before November of 2007.

Life expectancy in France topped 80 years in 2004. The French health care service is certainly costly to maintain, but it remains one of the best in the world, offering a large choice of general practitioners and healthcare specialists.

Written by Stephanie Brunner B.A.

Original article date: 27 June 2004

Article updated: 8 June 2009



France’s model healthcare system

By Paul V. Dutton  |  August 11, 2007

MANY advocates of a universal healthcare system in the United States look to Canada for their model. While the Canadian healthcare system has much to recommend it, there’s another model that has been too long neglected. That is the healthcare system in France.

Although the French system faces many challenges, the World Health Organization rated it the best in the world in 2001 because of its universal coverage, responsive healthcare providers, patient and provider freedoms, and the health and longevity of the country’s population. The United States ranked 37.

The French system is also not inexpensive. At $3,500 per capita it is one of the most costly in Europe, yet that is still far less than the $6,100 per person in the United States.

An understanding of how France came to its healthcare system would be instructive in any renewed debate in the United States.

That’s because the French share Americans’ distaste for restrictions on patient choice and they insist on autonomous private practitioners rather than a British-style national health service, which the French dismiss as “socialized medicine.” Virtually all physicians in France participate in the nation’s public health insurance, Sécurité Sociale.

Their freedoms of diagnosis and therapy are protected in ways that would make their managed-care-controlled US counterparts envious. However, the average American physician earns more than five times the average US wage while the average French physician makes only about two times the average earnings of his or her compatriots. But the lower income of French physicians is allayed by two factors. Practice liability is greatly diminished by a tort-averse legal system, and medical schools, although extremely competitive to enter, are tuition-free. Thus, French physicians enter their careers with little if any debt and pay much lower malpractice insurance premiums.

Nor do France’s doctors face the high nonmedical personnel payroll expenses that burden American physicians. Sécurité Sociale has created a standardized and speedy system for physician billing and patient reimbursement using electronic funds.

It’s not uncommon to visit a French medical office and see no nonmedical personnel. What a concept. No back office army of billing specialists who do daily battle with insurers’ arcane and constantly changing rules of payment.

Moreover, in contrast to Canada and Britain, there are no waiting lists for elective procedures and patients need not seek pre-authorizations. In other words, like in the United States, “rationing” is not a word that leaves the lips of hopeful politicians. How might the French case inform the US debate over healthcare reform?

National health insurance in France stands upon two grand historical bargains — the first with doctors and a second with insurers.

Doctors only agreed to participate in compulsory health insurance if the law protected a patient’s choice of practitioner and guaranteed physicians’ control over medical decision-making. Given their current frustrations, America’s doctors might finally be convinced to throw their support behind universal health insurance if it protected their professional judgment and created a sane system of billing and reimbursement.

French legislators also overcame insurance industry resistance by permitting the nation’s already existing insurers to administer its new healthcare funds. Private health insurers are also central to the system as supplemental insurers who cover patient expenses that are not paid for by Sécurité Sociale. Indeed, nearly 90 percent of the French population possesses such coverage, making France home to a booming private health insurance market.

The French system strongly discourages the kind of experience rating that occurs in the United States, making it more difficult for insurers to deny coverage for preexisting conditions or to those who are not in good health. In fact, in France, the sicker you are, the more coverage, care, and treatment you get. Would American insurance companies cut a comparable deal?

Like all healthcare systems, the French confront ongoing problems. Today French reformers’ number one priority is to move health insurance financing away from payroll and wage levies because they hamper employers’ willingness to hire. Instead, France is turning toward broad taxes on earned and unearned income alike to pay for healthcare.

American advocates of mandates on employers to provide health insurance should take note. The link between employment and health security is a historical artifact whose disadvantages now far outweigh its advantages. Economists estimate that between 25 and 45 percent of the US labor force is now job-locked. That is, employees make career decisions based on their need to maintain affordable health coverage or avoid exclusion based on a preexisting condition.

Perhaps it’s time for us to take a closer look at French ideas about healthcare reform. They could become an import far less “foreign” and “unfriendly” than many here might initially imagine.

Paul V. Dutton is associate professor of history at Northern Arizona University and author of “Differential Diagnoses: A Comparative History of Health Care Problems and Solutions in the United States and France,” which will be published in September.

© Copyright 2007 Globe Newspaper Company.

Did you like this? Share it: