Wednesday, March 31, 2010

Judging Bloggers by Their Books

Cross-posted from @TAC.

Earlier this month, Tyler Cowen posted the ten books that have influenced him the most, and “encourage[d] other bloggers” to do the same. Ross Douthat of the New York Times called Cowen’s invitation “irresistible,” which, judging by the number of bloggers who responded, it was. The Top Ten Influential Books Game gave bloggers easy material — namely, themselves — for a quick post. It also gave them a chance to prove that they are part of the club (that is, the club of influential bloggers).

Most importantly, Cowen’s Influential Books Game gave bloggers an excuse to promote themselves by composing lists designed to excite the maximum of reader admiration. Which is not to say that any lists were insincere: on the contrary, the top bloggers ended up sounding all very smart and thoughtful precisely because they really are just the sort of people whose lives were changed by reading Nietzsche. Still, as vehicles of self-promotion, some lists were better than others. To succeed, an Influential Books List needs to satisfy several competing criteria, namely: erudition (it should show how widely the blogger has read), plausibility (it should not claim that the blogger read Principia Mathematica at age 10), inventiveness (it should be unpredictable), freedom of thought or freedom from dogma (it should not unwittingly depict the blogger as an ideologue) and gumption (it should show that the blogger is unafraid to defend unpopular opinions).

Given these constraints, it is not surprising that bloggers generally agreed on what types of books should be included. I list them below. Who came up with the most impressive list? Let’s take a look! The contestants: Bryan Caplan, Matt Continetti, Tyler Cowen, Ross Douthat, Arnold Kling, Will Wilkinson, Matthew Yglesias. The categories, identified by the “signal” each is designed to send:

1. “I admit that I was pretty silly at age 18.”
  • Caplan: Ayn Rand, The Virtue of Selfishness
  • Continetti: None
  • Cowen: None (Cowen cites Ayn Rand but, showing gumption, does not express any adult reservations about her.)
  • Douthat: G.K. Chesterton, Orthodoxy. “What Ayn Rand is to young libertarians,” Douthat writes, “Chesterton is to teenage Catholic conservatives.”
  • Kling: None
  • Wilkinson: Frank Herbert, Dune; Ayn Rand, Atlas Shrugged
  • Yglesias: Maxine Hong Kingston, Tripmaster Monkey. Kingston, Yglesias explains, convinced him not “to be the kind of jerk who thought education was being ruined by PC demands to represent more women and minority writers.”
Best choice: Yglesias. Showing both erudition and freedom of thought, Yglesias conquered at age 18 a dogma that is uncritically accepted by seasoned intellectuals. Second prize goes to Douthat, whose early discovery of Chesterton shows erudition.

Worst choice: Continetti. Continetti admits that he grew up reading Ayn Rand and Rush Limbaugh, but still cites big conservative names such as Russell Kirk and Irving Kristol on the sophistic grounds that Rand and Limbaugh are “where you start, not where you end up.” Excluding Rand and Limbaugh, even though they influenced you, betrays dogmatism (only Russell Kirk is worth of serious attention!) and lack of gumption. If you like Ayn Rand or Rush Limbaugh, say so!

Ideal Choice: The best youthful obsession I can think of is C.S. Lewis’s obsession with the Sagas of Icelanders and other Norse legends. For a libertarian, love of Icelandic sagas has the added benefit of plausibly leading to an interest in stateless societies.

2. “My interests are more diverse than you know!”

  • Caplan: Thomas Reid, Essays on the Intellectual Powers of Man
  • Continetti: Herman Wouk, War and Remembrance
  • Cowen: Proust, Remembrance of Things Past
  • Douthat: Roger Angell, Late Innings
  • Kling: Bill James, The Baseball Abstract, 1987
  • Wilkinson: Stephen Hawking, A Brief History of Time
  • Yglesias: Maxine Hong Kingston, Tripmaster Monkey (doing double duty here)
Best Choice: Cowen. A prolific writer and academic economist, he’s also read all of Proust! Now there’s a cosmopolitan. Second prize goes to Douthat and Kling, although they lose points for lack of inventiveness, as it’s slightly cliche for writers to love baseball.

Worst Choice: Several bloggers show questionable literary taste, but Caplan shows none at all. Scottish philosopher Thomas Reid appears seemingly at random as the only book on his list (apart from Zarathustra) that isn’t ideological or related to economics, and then, as it turns out, only because Reid helped cure Caplan of his Randianism. As Yglesias notes, Caplan’s interests are strikingly narrow.

Ideal Choice: Proust is hard to beat, though I think the best choice might be Rabelais. A taste for Rabelais is as plausible as a taste for Proust yet requires even more erudition. Someone like Yglesias could have plausibly cited Borges, another good choice. Many of these bloggers could have done simply by citing a volume of poetry.

3. “I have read deeply enough in the Western Canon to consider the Great Books my friends.”
  • Caplan: Nietzsche, Thus Spoke Zarathustra
  • Continetti: Plato, The Republic; Smith, The Wealth of Nations
  • Cowen: Plato, Dialogues
  • Douthat: Francis Fukuyama, The End of History and the Last Man
  • Kling: None
  • Wilkinson: Aristotle, Nicomachean ethics
  • Yglesias: Nietzsche, Genealogy of Morals
Best Choice: Yglesias. Wilkinson also cites the Genealogy of Morals, but in Yglesias’s case you can tell that Nietzsche really got him thinking. Wilkinson’s choice of the Nicomachean Ethics and Continetti’s choice of The Republic lack inventiveness, as they rank too high on the list of best books of all time.

Worst Choice: Douthat. Douthat tries a shortcut by citing Fukuyama as a “gateway drug to Plato and Aristotle, Machiavelli and Nietzsche.” If you were truly intoxicated with the Great Books, however, you would not lump them together so blithely. Douthat’s choice shows lack of erudition and suggests Great Books curriculum dogmatism. Second worst is Continetti’s choice of Adam Smith, which lacks plausibility. Does Continetti really expect us to believe that he has read and pondered the entire Wealth of Nations?

Ideal Choice: Genealogy of Morals is good, but a bit too obvious for a young intellectual. I would go with another difficult but compelling philosopher such as Spinoza or Pascal (with a slight preference for Spinoza, as Jeeves’s favorite philosopher).

4. “I am not afraid to defend a book that you may hate.”
  • Caplan: Rand, Rothbard, Mises; Paul Johnson, Modern Times; Murray and Herrnstein, The Bell Curve
  • Continetti: Robert Kagan, Dangerous Nation
  • Cowen: Ayn Rand, Capitalism: The Unknown Ideal; Camille Paglia, Sexual Personae
  • Douthat: Aldous Huxley, Brave New World
  • Kling: Amity Shlaes, The Forgotten Man
  • Wilkinson: Ayn Rand, Atlas Shrugged; Murray and Herrnstein, The Bell Curve
  • Yglesias: None.
Best Choice: Douthat missed a chance to score big here. When a religious conservative praises Brave New World, it’s almost certain that he picked up his admiration from biotechnology skeptics such as Leon Kass and Francis Fukuyama. If I am right, then Douthat should have showed more gumption by citing the oft denounced Leon Kass.

Worst Choice: Caplan. Caplan, showing dogmatism, lists a panoply of libertarian ideologues whom non-true-believers find tedious.

Ideal Choice: Herbert Spencer might work for a libertarian. Conservatives have no shortage of hated writers, from Joseph de Maistre and George Fitzhugh to Carl Schmitt. I could not find a liberal blogger citing anything very radical. I suppose only moderate progressives such Yglesias and Ezra Klein read Tyler Cowen’s blog.

5. “I may have my biases, but I have still learned from the other side.”
  • Caplan: None
  • Continetti: None
  • Cowen: John Maynard Keynes, General Theory
  • Douthat: Christopher Lasch, The Revolt of the Elites
  • Kling: None.
  • Wilkinson: Rawls, A Theory of Justice
  • Yglesias: Fyodor Dostoevsky, Notes From the Underground
Best Choice: Cowen’s choice of Keynes is excellent, but Yglesias truly shines here. By citing Dostoevsky, the religious anti-utopian, Yglesias shrewdly overcomes the problem that conservatives have not produced great works to rival those of Mill, Locke or Rawls. Yglesias acknowleges the aesthetic power of reactionary ideas — which shows freedom of thought — but ultimately dismisses them with the memorable epigram, “sober thinking about big issues is boring.” An outstanding performance.

Worst Choice: Douthat’s choice of Christopher Lasch shows lack of inventiveness, as Lasch has long been conservatives’ favorite leftist. But Continetti and Caplan show no interest in understanding the other side whatsoever. When asked to cite your influences, you should at least try to establish that you’ve considered other points of view!

Ideal Choice: You can’t beat Yglesias’s choice here. A liberal would also do well to cite Joseph Schumpeter, the most brilliant conservative of the past century. Conservatives and libertarians could be more inventive than to cite Rawls. Charles Taylor, Foucault, Habermas, Amartya Sen — any of these would be more interesting choices.

6. “I have a well-formed, coherent worldview.”
  • Caplan: Rothbard, Mises, Richard Posner
  • Continetti: Burke’s Reflections; Russell Kirk, The Conservative Mind; Irving Kristol, Neoconservatism
  • Cowen: Hayek, Individualism and the Economic Order
  • Douthat: Chesterton, Orthodoxy; C.S. Lewis, The Screwtape Letters
  • Kling: None.
  • Wilkinson: Hayek, Law, Legislation and Liberty; Cowen, In Praise of Commercial Culture
  • Yglesias: Derek Pargit, Reasons and Persons; Susan Moller Okin, Justice, Gender and the Family
Best Choice: This is a dangerous category, as being enamored with the canonical writers of your ideology shows lack of freedom of thought. I like Kling here, none of whose choices seems to have been chosen for ideological reasons. Cowen and Yglesias also excel by making clear that the lessons they have learned from various books are narrow, not ultimate.

Worst Choice: Caplan and Continetti again show dogmatism by citing a string of works popular only among like-minded readers.

Ideal Choice: The best strategy is not to cite a famous worldview-forming work at all.

7. “Gosh, I sure was precocious as a kid!”
  • Caplan: Rothbard
  • Continetti: None
  • Cowen: Plato’s Diaologues
  • Douthat: James Hibbert, Wolfe at Quebec
  • Kling: None
  • Wilkinson: Stephen Hawking, A Brief History of Time
  • Yglesias: Nietzsche, Genealogy of Morals
Best Choice: Cowen. In Cowen’s case, you really can believe that at age 12 he had his nose buried in the Apology of Socrates.

Worst Choice: None is really a bad choice here. Douthat’s tale of how he learned so much “historical arcana,” however, seems artificial, as it turns out that the book in question did not actually make a deep impression on him.

Ideal Choice: Plato’s Dialogues. It’s surprising that not more teenagers read Plato, whose dialogues are often very entertaining. Other plausible and erudite choices would be lively classical historians such as Herodotus or Suetonius. For the blogger with a reputation for braininess, Godel, Escher Bach would work nicely.

8. “I’ve got some serious candlepower up here.”
  • Caplan: Hard to say, since the most difficult works are all in his field
  • Continetti: None
  • Cowen: Quine, Word and Object
  • Douthat: None
  • Kling: Again, it’s hard to say, as the most difficult works are all in his field.
  • Wilkinson: David Armstrong, Universals: An Opinionated Introduction
  • Yglesias: Daniel Dennett, Consciousness Explained; Richard Rorty, Philosophy and the Mirror of Nature
Best Choice: Cowen. Though an economist by training, Cowen has still read some rather hefty philosophy. (Yet he somewhat undercuts his victory in this category by drawing a “meta-lesson” from Quine about how to arrive at a deeper understanding than the one you already have. This often means that the reader has not actually understood the book in question.) Yglesias’s choices are good, but he loses points for lack of inventiveness by picking the two recent works of analytic philosophy that non-philosophers might have actually read.

Worst Choice: This category isn’t really fair to Continetti and Douthat, since they’re competing against academic economists and amateur philosophers. Still, apart from Continetti’s implausible choice of Adam Smith, neither selected any book that would really strain the old bean.

Ideal Choice: The ideal choice would separate the real brains from the pretenders by revealing that the blogger understands and could independently derive, say, Godel’s incompleteness theorem. The ideal blogger would cite Roger Penrose’s The Emperor’s New Mind, while making clear that he doesn’t accept the conclusions.

9. “There’s no way the rest of you guys have read anything as obscure as this.”
  • Caplan: None (works in his own field don’t count)
  • Continetti: None
  • Cowen: Susan Love Brown, The Incredible Bread Machine
  • Douthat: None
  • Kling: None
  • Wilkinson: None
  • Yglesias: Thomas Kuhn, The Copernican Revolution
Best Choice: Surprisingly, only Yglesias and Cowen compete in this category, which is ripe for displays of inventiveness. Yglesias cleverly picks a famous author’s less famous book. Cowen admits that he picked up libertarianism very early on, but from a surprising source.

Worst Choice: No bad choices here. Continetti, Kling and Wilkinson picked science fiction books, but only the most popular within their genre.

Ideal Choice: So many possibilities! I’m going to go with an actual personal choice, namely, Chateaubriand’s Genius of Christianity, a monumental apology for Western civilization that is hard to find in English translation.

10. “I may be highly literate but I’m not a snob.”
  • Caplan: Ayn Rand, Atlas Shrugged
  • Continetti: Harlan Ellison, Deathbird Stories
  • Cowen: None
  • Douthat: Tolkien, Lord of the Rings
  • Kling: Neal Stephenson, The Diamond Age
  • Wilkinson: Frank Miller, The Dark Knight Returns
  • Yglesias: None.
Best Choice: I’m not competent to judge comic books, fantasy or science fiction, so I’ll have to call a tie between Continetti, Kling and Wilkinson. Douthat’s choice of Tolkien lacks inventiveness. Also, his defense of fantasy goes a bit overboard. Sure, fantasy “re-enchants” the world (read: it’s about gods and spirits and stuff) but that’s a far cry from saying that it captures “more reality” than the alternatives. At most, it captures a neglected piece of reality. In fact, while it does re-introduce supernatural spirits, fantasy also simplifies natural human spirits, so the results is actually a net loss of enchantment.

Douthat’s re-enchantment theory also fails to account for the appeal of its cousin genre, science fiction, which is fantastical but not supernatural. Finally, both genres appeal almost exclusively to geeky males who (as our blogging contestants themselves prove!) normally prefer non-fiction. This suggests that the appeal of fantasy is not in its supernatural elements but its elaborate system-building.

Worst Choice: No bad choices here. Ironically, Cowen, a leading anti-snob, is the least tempted by popular culture!

Ideal Choice: It may not be a perfect choice, but you couldn’t go wrong by citing P.G. Wodehouse. An admiration for Wodehouse is highly plausible and also shows erudition, since all voracious readers love him. Surprisingly, no took up the obvious challenge here, namely, to make a plausible defense of an author whom everyone else thinks unworthy of consideration. Douthat, however, gets extra credit for defending Stephen King as a “runner up” influential author.

Overall Winners: Tie between Yglesias and Cowen. (Cowen, however, should be handicapped since he started the “contest” and thus may have designed it so he would win.)

Just so there’s no misunderstanding, I should acknowledge that the Top Ten Influential Books Game was not set up as a competition nor was it taken as such (at least not explicitly). In “judging” the winners, I have my tongue in cheek. Still, this exercise confirms some general impressions, in particular that Cowen is a freakishly clever polymath and that, of those who have made blogging their trade, Yglesias has the most depth. The others are all very smart, worth reading, and brilliant in their areas of comfort, but not of the same general caliber.

Thursday, March 25, 2010

Is The Healthcare War Ending, Or Beginning?

Rasmussen Reports: 55% favor repeal of Obamacare.

Conventional wisdom holds that, now that the Patient Protection and Affordable Care Act of 2009 is law, it will be politically, if not mathematically, impossible for Republicans to repeal it. Republicans will need a majority in the House, a filibuster-proof majority in the Senate, and the Presidency—which seems impossible. On top of that, as I write in my previous post, Democrats believe that the law's immediate benefits will outweigh any drawbacks.

But a surprising development over the past few days has been the coalescence in the conservative blogosphere of a movement to repeal Obamacare, and replace it with better reforms. This stance initially elicited resistance from elected Republicans, but is gaining consensus among them as well. For his part, the President says, "Go for it."

But now, there is data that suggests that the "Repeal and Replace" campaign is not as crazy as it sounds. Rasmussen Reports, a prominent Washington polling service, finds that 55% of Americans favor repeal (h/t The Weekly Standard):
The latest Rasmussen Reports national telephone survey, conducted on the first two nights after the president signed the bill, shows that 55% favor repealing the legislation. Forty-two percent (42%) oppose repeal. Those figures include 46% who Strongly Favor repeal and 35% who Strongly Oppose it.

In terms of Election 2010, 52% say they’d vote for a candidate who favors repeal over one who does not. Forty-one percent (41%) would cast their vote for someone who opposes repeal.

Not surprisingly, Republicans overwhelmingly favor repeal while most Democrats are opposed. Among those not affiliated with either major party, 59% favor repeal, and 35% are against it.

Most senior citizens (59%) also favor repeal. Earlier, voters over 65 had been more opposed to the health care plan than younger adults. Seniors use the health care system more than anyone else.

A number of states are already challenging the constitutionality of that requirement in court, and polling data released earlier shows that 49% of voters nationwide would like their state to sue the federal government over the health care bill.

Rasmussen Reports will track support for the repeal effort on a weekly basis for as long as it remains a significant issue. The next update will be released Monday morning.
Stay tuned.

Wednesday, March 24, 2010

The Top Ten ‘Benefits’ of Obamacare, Seven of Which Aren’t

Cross-posted from Critical Condition on National Review Online.

Democrats, such as Sen. Dick Durbin (D., Ill.), say they are eager to campaign against Republicans who seek to repeal their health-care legislation. "The Republicans will have to stand up and say we want to repeal those things and I think that will be hard, because people will begin to realize these are commonsense changes," said Durbin.

Indeed, as Grace-Marie Turner mentioned in National Review, Democrats have posted a list of the "Top Ten Immediate Benefits" that they argue that individuals will gain from the legislation.

But there is no such thing as a free lunch, and many of these "benefits" are accompanied by unmentioned costs. If you require that every restaurant serve Kobe beef instead of USDA Choice, diners might see that as a "benefit" — until their waiter gives them the check.

Let's go through the Democrats' top ten, point-by-point:
  1. Prohibit pre-existing condition exclusions for children in all new plans. This will increase the cost of insurance for everyone else. Net negative.
  2. Provide immediate access to insurance for uninsured Americans who are uninsured because of a pre-existing condition through a temporary high-risk pool. High-risk pools are a good way to improve coverage of those with pre-existing conditions, which is why John McCain advocated them in the 2008 Presidential campaign. Unfortunately, the Democratic bill doesn't do enough to make them feasible. Net neutral to positive.
  3. Prohibit dropping people from coverage when they get sick in all individual plans. Insurers shouldn't drop people when they get sick, unless they have an extremely good reason, such as misrepresentation of a pre-existing condition. The onus should be on insurance companies, therefore, to investigate these things up front before taking consumers' money. This mandate will have the side effect of making applications for insurance more onerous. Net positive.
  4. Lower seniors' prescription-drug prices by beginning to close the donut hole. As a flat-out subsidy, yes, this will appear to seniors to be a straightforward benefit. But it is accompanied by a far larger cut: the obliteration of Medicare Advantage. Net negative.
  5. Offer tax credits to small businesses to purchase coverage. The tax credits will not be enough to compensate for two things: (1) an Obamacare-driven acceleration in the rise of the cost of health insurance; (2) the employer mandate, which requires that any small business with more than 50 employees provide health insurance to every employee or pay a fine equal to $2,000 multiplied by the entire number of employees in that company. Net negative.
  6. Eliminate lifetime limits and restrictive annual limits on benefits in all plans. Yet another mandated "benefit" that will drive up the cost of health insurance. Net negative.
  7. Require plans to cover an enrollee's dependent children until age 26. See #6, though if this provision increases the number of young people with health insurance, it could improve the risk pool and have a salutary effect on insurance costs. Net neutral to positive.
  8. Require new plans to cover preventive services and immunizations without cost-sharing. See #6. Another clumsy mandate that will drive up the cost of insurance. Most plans already encourage prevention — but prevention has no impact on long-term health care costs, since we all have to eventually die of something. Net negative.
  9. Ensure consumers have access to an effective internal and external appeals process to appeal new insurance plan decisions. Yeah, except that a new government agency, the Independent Medicare Advisory Board, is now empowered to bar reimbursement for any insurance claims it deems fit. And its decisions, enacted by unelected bureaucrats, can't even be appealed by Congress, let alone consumers. We know from experience that once Medicare stops reimbursing for something, private insurers usually follow. Net negative.
  10. Require premium rebates to enrollees from insurers with high administrative expenditures and require public disclosure of the percent of premiums applied to overhead costs. Once again, this is a mandate that will only drive up insurance costs. If an insurer is required to spend 85 percent (say $850 of every $1,000) of premiums on patient care (hence $150 in "overhead"), but the company needs to spend $200 on administrative costs to ensure that its plans run effectively, they will simply raise premiums by $333 in order to ensure that the percentage of premiums spent on overhead remains the same. Net negative.
So, of the Democrats' top ten "benefits," seven have direct, opposing costs of an even greater magnitude. The remaining three provisions, if we're lucky, might work out. But we haven't even gotten started with all of the other mandates and tax increases in the law for which there are no upsides. The Democrats' list demonstrates that we have a long way to go before our political class understands the very basics of how insurance works.

Tuesday, March 23, 2010

Progressives Hate the Bill, Too

Cross-posted from Critical Condition on National Review Online.

For those who are dismayed by yesterday's outcome, and are thinking about what to do next, read this piece in the Huffington Post. In it, Firedoglake founder Jane Hamsher describes 18 myths about the health care bill, from the progressive point of view.

Her criticisms of Obamacare are withering, and are important to understand. Her 18 myths (with detail in the full article) are:

  1. This is a universal health care bill.
  2. Insurance companies hate this bill.
  3. The bill will significantly bring down insurance premiums for most Americans.
  4. The bill will make health care affordable for middle class Americans.
  5. This plan is similar to the Massachusetts plan, which makes health care affordable.
  6. This bill provides health care to 31 million people who are currently uninsured.
  7. You can keep the insurance you have if you like it.
  8. The "excise tax" will encourage employers to reduce the scope of health care benefits, and they will pass the savings on to employees in the form of higher wages.
  9. This bill employs nearly every cost control idea available to bring down costs.
  10. The bill will require big companies like Wal-Mart to provide insurance for their employees.
  11. The bill "bends the cost curve" on health care.
  12. The bill will provide immediate access to insurance for Americans who are uninsured because of a pre-existing condition.
  13. The bill prohibits dropping people in individual plans from coverage when they get sick.
  14. The bill ensures consumers have access to an effective internal and external appeals process to challenge new insurance plan decisions.
  15. This bill will stop insurance companies from hiking rates 30%-40% per year.
  16. When the bill passes, people will begin receiving benefits under this bill immediately.
  17. The bill creates a pathway for single payer.
  18. The bill will end medical bankruptcy and provide all Americans with peace of mind.

As she summarizes, "Real health care reform is the thing we've fought for from the start. It is desperately needed. But this bill falls short on many levels, and hurts many people more than it helps."

Bloated General Hospitals: One Problem Obamacare Would Make Worse

Cross-posted from Critical Condition on National Review Online.

As I recounted in an earlier post, Democrats have attempted to portray health insurers as greedy and cruel as a way of building political support for their health-care legislation. The implication has been that insurers, ever hungrier for profits, have jacked up rates in order to exploit vulnerable Americans.

But Democrats have a strong political incentive to distract the public from one of the real villains of rising health-care costs: bloated general hospitals.

In an excellent article in today’s Wall Street Journal (subscription required), Avery Johnson and Suzanne Sataline describe how hospitals have demanded dramatically higher reimbursement rates from insurers — as much as 54 percent — and routinely threaten to cut off patients covered by those insurers if they don’t get their way. Because many large hospitals have monopolistic positions within their local areas, they usually do get their way.
Health insurers are fighting demands by hospitals for sharply higher reimbursement rates by threatening to drop the hospitals from their health-plan networks, and blaming them for higher insurance premiums.

“We’ve never seen the kind of increases we’re seeing right now” from hospitals, says Aetna Inc. President Mark Bertolini. Five years ago, a typical rate increase was about 5 percent, but this year Aetna granted 50 “must have” rate increases of more than 20 percent, Mr. Bertolini says.

In a fresh battle, Stellaris Health Network, a four-hospital system in Westchester County, N.Y., just asked a unit of health insurer WellPoint Inc. to increase its payments by 16 percent this year-in part, so that Stellaris could fund a new cancer center, according to the insurer...

Hospitals argue that low Medicare rates and cuts to Medicaid mean that hospitals have to get money from elsewhere, and increasingly that is private insurers. Rising ranks of uninsured Americans have led to more uncompensated care and have swelled the rolls of Medicaid, exacerbating the problem.

But insurers contend that in recent years big hospital systems have been buying up smaller medical centers and using their dominance in a region to demand big rate increases. America’s Health Insurance Plans, a trade organization, points to data showing hospital markets are 47 percent more concentrated than they were 13 years ago...

Even tense negotiations usually result in a last-minute accord, but in some cases they fall apart. In 2008, Saint Luke’s Health System, based in Kansas City, Mo., with 11 locations in Missouri and Kansas, initially asked UnitedHealth for a 54 percent increase over four years, the insurer said. Last year, the contract ended without an agreement. UnitedHealth lost the hospitals from its network.
While it is true that hospitals are increasingly burdened by underpayments from Medicare and Medicaid, they regularly attempt to get others to bail them out of their own inefficient practices. Hospitals are the largest employers in many congressional districts, and they use their political sway to squash entrepreneurial competitors, such as specialized, physician-owned hospitals.

Indeed, the Senate bill would bar the construction of new physician-owned hospitals and would restrain existing specialty hospitals from expanding. These specialty hospitals, by focusing on a specific disease area such as heart surgery, usually offer better-quality care at lower prices than do their larger counterparts. Those lower prices translate into lower health-care costs, and thereby lower insurance premiums, and thereby broader access to health care.

Instead, by protecting large hospitals from competition and innovation, the Senate bill will increase health-care costs and insurance premiums, and thereby even further squeeze those individuals, families, and employers who struggle to afford health insurance.

Anthem Blue Cross: Not So Greedy After All

Cross-posted from Critical Condition on National Review Online.

Last month, it came out that Anthem Blue Cross, California’s largest for-profit health-insurance company, was planning to raise health-plan premiums this year by as much as 39 percent. The White House seized on the news to pillory health insurers and claim that the need for Obamacare was greater than ever.

Health and Human Services Secretary Kathleen Sebelius said she was “very disturbed” by the increases, and accused the company of cruelty and greed: “These extraordinary increases are up to 15 times faster than inflation and threaten to make health care unaffordable for hundreds of thousands of Californians, many of whom are already struggling to make ends meet in a difficult economy. [Anthem’s] strong financial position makes these rate increases even more difficult to understand.” Congress called hearings. Even California Insurance Commissioner Steve Poizner, a Republican running for governor, decided to launch an investigation.

Today, Anthem’s parent, Wellpoint Inc., held a conference call with investors to discuss its 2010 financial outlook. On the call, they said that because of lower revenues and higher expenditures on patient care, and despite lower administrative costs, they would earn 11 percent less in 2010 than in 2009.

To be specific: Wellpoint projected a 3 percent decline in operating revenue; a 0.7 percent increase in the percentage of premiums to be spent on patient care (from 82.6 percent to 83.3 percent); administrative costs of 14.4 percent (down from 15.9 percent in 2009); and profit margins of 4.4 percent (down from 4.8 percent). And their margins are only that good if the proposed rate increases, that have been so ardently criticized, go through.

What Wellpoint’s disclosures demonstrate is that the rate increases they are seeking are not a result of ruthlessness, but of rising health-care costs. They must pass the majority of these costs on to policyholders, or the company will lose money. Unfortunately, the biggest cause of rising health-care costs is poorly conceived government policy, a problem that Obamacare will accelerate.

Monday, March 22, 2010

I Have Resurfaced!

Okay, so my last apology was insincere, but I really mean it this time.

So, here is the story of why this blog, after a brief but energetic start, went nowhere.

In April, I took a job as a healthcare equity research analyst at Monness, Crespi, Hardt & Co., where my views on healthcare stocks are available to paying clients of the firm. Given that I was just starting up, I felt it necessary to focus all of my energies on getting up and running at MCH.

Now that I am up and running at work, and now that Obamacare is the law of the land, it is more important than ever that Americans involve themselves in the debate about healthcare policy.

I have been fortunate to find two first-rate platforms for my thoughts on healthcare: National Affairs, where I have published a 6,526-word thought piece on "Health Care and the Profit Motive" in the Spring 2010 issue; and Critical Condition, the healthcare blog of National Review Online. I owe a great debt to Yuval Levin, editor of National Affairs; and Rich Lowry, editor of National Review, for what they do to improve my work.

My plan for the foreseeable future is to write long-form articles for journals like National Affairs, supplemented with daily thoughts at National Review Online. I will link to all such entries at this site, so you can track my writings either by visiting here or via my RSS feed and/or Twitter.

I have noticed a few out-of-date links around the site, and I will correct those posthaste. I want to assure my handful of readers that this blog is back.

One housekeeping matter: as I am a registered securities analyst, licensed by the U.S. Financial Industry Regulatory Authority (FINRA), I will not be making recommendations to buy or sell securities on this blog, or in any other forum, unless it is expressly provided for in the policies of FINRA and the U.S. Securities and Exchange Commission. My intent is to focus my public writings on the public interest, irrespective of what I think of healthcare stocks. I don't seek any compensation for my policy writings.

Thanks for your patience, and I look forward to your future comments.

Saturday, March 20, 2010

Sorry, But When I Said “Vast” I Really Meant Vast

Cross-posted from @TAC.

Dismissing as “balderdash and poppycock” my claim that “government planning makes sprawl ubiquitous,” Randal O’Toole of the libertarian Cato Institute* admonishes me and other sprawl critics to “get their noses out of [James Howard] Kunstler‘s biased diatribes.” My nose now lifted, I cannot see how O’Toole has even rebutted my post, much less exposed it as “balderdash,” not to mention “poppycock.” O’Toole quotes me as saying that sprawl is “mandated by a vast and seemingly intractable network of government regulations, from zoning laws and building codes to street design regulations.” That vast network includes but is not limited to:

  • Physical destruction of cities through urban renewal projects, public housing and highways;

  • Massive government spending on highway building;

  • Subsidizing of new home construction by government-sponsored entities;

  • Tax law benefits of home ownership;

  • The interstate highway system;

  • Minimum parking space requirements;

  • Traffic engineering and road construction codes that make it unlawful to make pedestrian-friendly streets;

  • Land use codes, including minimum setbacks;

  • Minimum lot zoning; and

  • “Euclidean” zoning that segregates residential, commercial and industrial uses.

(See Michael Lewyn’s work, to which O’Toole himself has linked.) In response, O’Toole addresses only one of these policies, namely, Euclidean zoning. Developers, he argues, generally have no trouble getting zones reclassified. Hence, Euclidean zoning operates in practice as a licensing regime rather than a flat prohibition on varying land uses. Licensing regimes, of course, restrict supply by definition. At most, therefore, O’Toole has shown only that Euclidean zoning does not prevent mixed use development as much as commonly supposed.

But so what? Let’s concede the Euclidean zoning does not cause sprawl; let’s even concede (as seems unlikely) that it has no actual effect on land use whatsoever. Euclidean zoning is still just one set of strands in the vast network of laws mandating sprawl. To produce the opposite of sprawl — that is, the walkable neighborhood — the government needs to let developers do a lot more than just mix uses. Jane Jacobs identified the features of a functioning urban neighborhood fifty years ago: in addition to mixed uses, you need (at a minimum) short blocks, narrow streets, and a facade enclosure creating a legible public space. As an example, here’s a on old picture of Crown Street, an undistinguished street in New Haven (taken before New Haven was physically destroyed by I-95 and urban renewal). Many people would pay dearly to live near a street like that today — if it were allowed to be built.

Yet most jurisdictions in the United States make it illegal to build anything like Crown Street. O’Toole cites Houston, which has no formal zoning but is notoriously sprawling, as proof that central planning does not cause sprawl. Houston, however, requires streets to be at least twice as wide as Crown Street, blocks to be many times longer, lots to be several times bigger, and all buildings to provide free parking spaces. Worst of all, Houston requires all buildings to be set back at least 25 feet from the street, thereby making a facade enclosure impossible and all but guaranteeing that Houston will consist of a wasteland of parking lots. Houston is in reality a textbook case of how government mandates sprawl. As I noted a week before O’Toole’s reply to my original post, sprawl is legally over-determined. That is, any number of government policies — of which Houston, even without formal zoning, has several — in themselves are enough to produce sprawl.

And O’Toole knows it. He concedes that “Houston regulates such things as setbacks and building heights,” yet he somehow thinks it matters that “you can build a 7-Eleven in the middle of single-family homes.” Ye gad, nobody wants to live next to an asphalt-girdled 7 Eleven! The only commercial development allowed in Houston is strip mall centers where no pedestrian would ever go. Hence, Houston residents have no choice but to locate as far away from commercial development as they can possibly afford. O’Toole quotes approvingly John Stossel’s claim that sprawl opponents want to prevent poor people from having a back yard. That is not actually true, whatever Kunstler might have said, but in any case O’Toole leaves unmentioned that sprawl defenders want to force everyone to have a car (or multiple cars). The expense of keeping a car is an indirect tax that hits the poor the hardest.

Just to be clear, I am not arguing everyone should live in traditional neighborhoods, any more than that everyone should live in sprawling subdivisions. I have no objection to Europeans moving into sprawling areas — provided that their governments are truly giving them the choice (I wouldn’t know). Many sprawl critics have environmentalist, aesthetic, or even geo-strategic reasons for opposing sprawl. I oppose it simply because I believe Americans other than SWPLs and the super-rich should have a choice of something else. Free market defenders of sprawl, if Randal O’Toole is any indication, have not shown that they do.

UPDATE: A friend writes: “To any discussion of sprawl and planning in Houston I would add the concept of frontage roads. These are what we would call service roads in and around NY. They were required on all freeway construction with certain recent exceptions (Hardy Toll Road, etc.) The freeway builders in Houston wanted to encourage commercial strip development along the freeways. The inspiration was supposedly the L.I.E in Flushing, Queens. I highly recommend Erik Slotboom’s ‘Houston Freeways.’

I second the recommendation. Behold the mighty works of the free market! Look on these freeways, Socialists, and despair!

* Ironically, I was first persuaded of the libertarian case against sprawl at a Cato Institute event in the mid-1990s featuring former Milwaukee mayor John Norquist.

Wednesday, March 10, 2010

Sprawling Misconceptions

Cross-posted from @TAC.

James Howard Kunstler doesn’t think highly of libertarian newsman John Stossel. Assuming this is what Kunstler is talking about (see No. 2), you can’t blame him. Stossel defends suburban sprawl and accuses its opponents — like Kunstler — of forcing lifestyle choices onto others “by limiting where they can build.” The fallacy of this view has been pointed out about 100 times. For the 101st time: sprawl — an umbrella term for the pattern of development seen virtually everywhere in the United States — is not caused by the free market. It is, rather, mandated by a vast and seemingly intractable network of government regulations, from zoning laws and building codes to street design regulations. If Stossel wants to expand Americans’ lifestyle choices, he should attack the very thing he was defending, namely, suburban sprawl.

It’s odd that self-described libertarians such as Stossel are so slow to grasp that government planning makes sprawl ubiquitous. You would think that libertarians would instinctively grasp the deeply statist nature of suburban development. First of all, with a depressingly few exceptions, virtually every town in America looks the same. That is, it has the same landscape of arterial roads, strip malls, and residential subdivisions, accessibly only by car. Surely, given America’s celebrated diversity, you would also see a diversity of places. As it turns out, all but a few people live the same suburban lifestyle. Government, as libertarian assumptions would predict, is the culprit.

Second, the few places in America that have a distinctive character are also exceedingly expensive. John Stossel himself admits to living in an apartment and walking to work most days. Now, I don’t know where exactly Mr. Stossel lives, but it sounds as if he lives in Manhattan, where residential space costs over $1000 a square foot (that means a two-bedroom apartment where a family of four could fit costs at least $1.5 million). If Mr. Stossel’s lifestyle, as he puts it, is less popular than the suburban lifestyle, then why does his cost so much more? He apparently never asks himself the question. Had he done so, he might have discovered that government artificially restricts the supply of Manhattan-like places but artificially increases the supply of sprawl. That’s the reason Americans “prefer” to live in the suburbs. They don’t have a choice.