So as we move into the endgame that may be more we thought we'd take one more shot at trying to level-set the playing field and explain what's going on here. Starting with the realities of cost, performance and value. This composite of two charts is taken from a study by the McKinsey Global Institute and confirms a lot of what a lot of folks have been saying all along. First off healthcare in the US is more expensive by far than in any other developed country. Secondly, our results are NOT at the forefront on standard measures of effectiveness. That shibbolethic statement that America has the best healthcare is just flat not true when you look at overall results for most of the population, which is IOHO the only valid measurement. It is true that for very advanced treatments at great expense American capabilities are the best in the world and for the 1% who might need them and the .01% who can afford those treatments more power to you. For the rest of us what this tells us is that we should be spending about 1/2 what we spend and getting about 2X better performance.

The Economic Impact: Private Insurance

Of course that's not the only problem either. Kaiser did a study late last year that looked at trends and consequences in Health Insurance costs, as anybody who's facing surging premiums should now be aware. Costs have been racing ahead of inflation by huge margins over the last decade and, as a result, family coverage has ballooned to almost $14K/year. There's nothing slowing any of that down either so it's no surprise that the estimate is that over the next ten years annual costs are estimate to near $30K/year for family coverage.

Does anybody think that's affordable? Better yet does anybody think it's affordable now? Certainly not business which is busy lopping off coverage for retirees and reducing coverage for current employees. The part where we can keep deferring these issues for future debates is over. The great bye and bye where rising HC costs become 50% of GDP and bankrupt the country is still a ways away but the part where everybody's choking to death in the dark because they can't afford coverage is here now.

The Economic Impact: Alternative Misfeasances

Like we, and many others, have said. We can't keep deferring this, if we don't resolve us it's going to kill us shortly and by avoiding coming to gripes with it it's already damaged the economy, the individual and the competitiveness of small and large businesses. In fact it's one of the great ironies of this whole debate that the strongest supporters of reform should be business but instead they're looking at short-term impacts and, strangely for supposedly rational and analytical folks, not doing their homework.

Reviewing some more old and new evidence in this last decade incomes were stagnant because of healthcare costs. Yet (on the bottom) when you look at it we're well on our way to "socialized" medicine - the government already pays 50% of per capita spending and that'll go up as all these other trends play out. But the most important part of this whole chart is the UR corner - take a real good luck. NONE of this had to happen if we hadn't indulged ourselves in political gamesmanship and special interest pandering, absolutely none of it. And the LL corner reinforces the point - too many other countries are spending less for more by taking different approaches (and for the record many of them are as or more "market--oriented" as is the US Switzerland or Germany, or even Japan, for example). Frankly the chart suggests to us that we set a "concerted national goal" of reducing spending to ~10% of GDP AND improving overall performance in the next two decades. Think what that would do for freeing up l.t. debt, funding for Education, Energy, or Infrastructure, investment in new industries, corporate profitability or the ability of small businesses to hire and create new jobs! It continues to amaze us that all of this has gotten shunted aside.

What the Existing Proposals Actually Accomplish

To reach that end state our fundamental requirement is to figure out how to slow, then reduce and perhaps eventually reverse, the growth of health costs. We're truly headed for the edge of a cliff otherwise and we're headed for that cliff because of the dysfunctional dynamics of a system that encourages over-consumption of health resources and a political system that allows special interest groups to protect those dysfunctions to create rents for themselves, instead of value for the rest of us. One of the great myths going around is that the current proposals don't control costs. That has two major flaws. First off it takes all the necessary steps that we need to get started AND that we know how to do. As somebody keeps pointing out this is 17% and growing of the US economy (2X what it should be) and you don't change it on a dime. Especially when we don't actually know exactly what works or how to scale it up across an entire continental economy.

But what we do know how to do is done. All previous debates have largely concentrated on expanding coverage as a matter of social justice. This is the first one where cost control was as much a part of the discussion from the get-go as coverage (NB: and a universal national program was off the table from the beginning). That's actually the first step in controlling costs, not just fairness, because you need the largest possible population to spread total costs across and reduce rates. That's a bedrock part of the proposals. It also feeds forward to a critical important feedback that is created by the combination of exchanges and reimbursement standards.

The biggest problems we've got are that all the incentives are to maximize consumption of healthcare because providers are paid for treatments administered not care realized. And also because the consumers of healthcare don't see the total costs because they're hidden behind tax barriers that create implicit subsidies. Despite all the free-market rhetoric of the Republicans they didn't actually put anything substantive on the table and certainly not something as radical as moving healthcare out in front of the tax shelter. Like John McCain did in the campaign or the Whyden-Bennet proposal does no. That really gets to the heart of the problem - after the summit it's been made chrystal clear that the Rips are more interested in winning than in fixing.

But wait there's more! What we think is nicely setup by the exchange and standards combination are two things. First off it becomes very straight-forward to migrate coverage and make it portable, once we find out how to implement the exchanges. The other thing it makes possible is many....many field experiments. In fact the great strength of a market economy is that no one size fits all and as long as common standards for services are set it'll be possible to try a lot of different approaches. We think the ultimate fix though is to migrate toward a flat fee for service, say a flat monthly charge for basic coverage with riders for special circumstances. This is already being tried in a lot of places and again would fit nicely on the foundations that are laid in these proposals. Especially after we get some experience.

The real key difference that's then set up is an entire structural shift to a different engineering design philosophy of HC management from detailed standards, which required lots of work, inspections, administrative overhead, payment and adjustment methods, etc. etc. to a flat fee structure. On that path lies the ability to more than just bend the curve.On that path lies the ability to get costs headed back downward on an apples-to-apples basis.

But then again, we obviously lead a rich fantasy life. But don't say we haven't warned you about the consequences, the causes, the alternatives or the pragmatics, please!

 BtW - the underlying feedbacks aren't something we entirely made up. If you want to see the collection of our previous work that lies out the bad cycle vs. the good cycle as the bad poltiics vs. the worse politics see this whitepaper collection: The Great Healthcare Reform Debates: Understanding the Causes, Complexities, Policy, Politics and Consequences

PBS recently covered the history and long-term implications in an interview with The Atlantic reporter who did an excellent story on the future of the middle class, and it's not good on current course and speed. That was the day it was made clear that the "world had stopped turning" for everybody, and the last two years have driven it home. But this time it wasn't a single act of violence but recognition of a fundamental breech in the American Social Contract, the glue that holds us all together.

Re-visiting Deficits, Debts and Outlooks

Shortly after we put up our last really serious policy post (Real State of the Deficits/Debts, Politics and Governance Changes) there was an outstanding panel roundtable on Charlie Rose discussing exactly the same issues. The panel included Paul Krugman, David Walker (ex-Comptroller of the US and current head of the Petersen Institute), Paul Auerbach (an economist from UC-Berkley), Rep. John Spratt (of Ways & Means) and Mohamed El-Erian(co-head of PIMCO). One Nobel, one deeply experienced policy economist and executive, a leading academic expert on the deficits, THE major House congressional player and the co-head of the world's largest bond fund who created the whole idea of the "New Normal". You'd be hard pressed to come up with a different group than that. Despite some differences here and there however we have some good news, bad news and interesting news. The good news is that their take on the world is almost identical to the one we sketched out (stimulus is VITAL in the short-run, deficits and debts are NOT a problem in the intermediate run and the current budget does as well as possible bringing them back under control, deficits in the outyears are a serious, must-solve problem, tax increases will be necessary but the single biggest problem is Healthcare costs. You either control that or you're not serious, period, end-of-story). The catch is that then they petered out with no serious proposals for how to proceed. As opposed to our 3+1 proposal: modest tax increases, bend the cost curve on HC, get the economy growing and invest in innovation). But in any case we really aren't kidding when we say this is serious. You'll find this complementary interview with Peter Orzag is worth your time as well.

Contrary to popular whining NBC is actually providing the most extensive coverage ever, not just entirely on TV, but on it's web site. And it's not just news coverage per se but complete standings and results as well as a huge collection of video clips. One way or another you can find about everything you could ask from stories, to expert summaries, to medal ceremonies, background stories, discussions of the sports science to expert commentary to selected clips, full programs/games and shorter ones. Go to the results section and select an event/sport and then look for the video links. Or go the video section, see what comes up as highlights and recaps or search on a sport. If you want to watch the final skates of the pairs for just the final three it's there. Or anything else. After the break we present a selected set of clips.

If you'll click on thru the picture you'll get a clip of the greatest moments of the first week from the Opening Ceremonies to key events. BtW the full opening is online and it's one of the best programs we've ever seen - quiet, restrained, moving and brilliant - along with some outstanding music. You'll find the links to both after the break. But the picture raises the question what is the Olympics and to whom? And what does it take to get there? A lot of pieces make up this puzzle but at the end of the day we think this athlete's expression captures it all - it's about pushing to the limits of human capability, endurance and mental capacities to reach a sublime moment of touching the best that is in us. Can we even say, reaching to touch the Divine by giving our all?

Just So You Know: the Real Economic Situation Once Again

So, speaking of the stimulus, let's try and take one more level set of how things actually worked out when it turned out we weren't going to become the USSA. The UL graphic on the impacts of the stimulus is taken from a recent column by Leonhardt in the NYT (review by Menzies Chin) but consistent with what Menzie, I and many others have been saying for over a year. The bottom line is that it saved us but, in the UR graphic, we're a long way from being out of the woods. As bad as it was it'll take a long time to recover the lost jobs. Especially with the LR corner that tells us (btw that one's from Goldman Sachs!) how weak this recovery is and will be. The LL corner puts it all in strategic context - the question is how we keep things from tipping back over, move onto a self-sustaining basis, re-establish growth and then, the hardest challenge if we get, re-establish a new long-term path back toward prosperity. There's the rub, as they say!

Defining the Baseline: Crisis and Reactions

Let's start by defining the baseline of what happened, in somewhat simplified terms, using charts drawn (as they all are almost) directly from the Report. The details are more complicated of course but here's the gist. In the UL corner you see Housing prices stretching back to 1900. Just by inspection you can see the "mother of all bubbles". Housing prices will always go up indeed - talk about complacent self-delusion. Or that the smartest people in the world couldn't read simple charts! When the bubble began unraveling it took the credit markets down, largely because of leverage and coss-linkages. In the UR you see the spread between 3Mo Treasury bonds and commercial ones (TED) and the BAA-AAA spread between higher risk and low risk commercial paper. Normally the TED spread is infinitesimal. When it goes up people are worried and when it goes to far the money doesn't flow - no car loans, no working loans for businesses, credit cards and money markets are frozen, business and the ordinary business of life STOPs! You can how it got increasingly scary thru 2008 until it blew up into a life-threatening situation. Fortunately the Fed and Treasury have brought things back down into more normal ranges, the the BAA-AAA spreads are still elevated, but at least the markets are alive if not working well.

That's not the end of the story because the financial crisis leaked into the real economy and turned an already weak and accelerating slowdown into a major economic downturn greater than anything since the 1930s. Which you can see in the huge drops in Employment in the LR corner, which while still bad, are coming back as the result of stimulus and other policy actions. In fact in the LL corner you can see the differences in GDP with and without the policy interventions. Despite everything you've heard the stimulus worked, was the largest peacetime effort, was well constructed - especially when you allow for the speed with which it was put together and an act of real political courage and skill. Without it we'd have had Stalingrad instead of Pearl Harbor.

Now we love this song and wholeheartedly admire and agree with the sentiments but there has to be more than mere sentiment here. After you've hopefully re-listened to this new version we'll remind you that the results of the original were some money but no lasting change. And it may be entirely revealing that the Compassion that's so central to the heart of the song, a compassion that ask you to see the Other as an I and then a Thou is sadly a little short-shrifted by the performers who keep checking out their appearances on camera or considering the amount of time the credits take. No matter, let's talk substance - the heart of I and Thou! (Frontline Lessons Brought Home: Others, Selfs and Manners).

The Task of Our Time: Restoring Compassion

The adjacent clip is Karen's recent short speech to the TED audience thanking them but more importantly discussing the role and importance of compassion. Why it's so important to restore the central tenet of every single major religion AND make it active and constructive in the world. Restoring it from the dustbin as it were.

It is rather short but telling but it might be interesting and more important to listen to her original TED Prize Wish speech in which she discusses the nature and role of compassion and why she thinks it's so important. Her's a women who's ended up as one of the most respected thinkers on Religion in the modern world who got there by accident. She was a Catholic nun but left the church to become a literature professor. After some trials and troubles she got involved with the BBC and stumbled into reporting on religion and in the process learned more about Judaism and Islam than she ever had before, either as nun or professor. And found that, at their hearts, the all had similar, almost identical, tenets. There's a certain great irony here wouldn't you say? A women of great faith but a faith of orthodoxy and dogmatic practice leaving and then slowly re-discovering the real roots  that lay behind all the facades.

Last week after a long and convoluted exchange with a conservative (self-id'd libertarian) friend of mine a discussion that was intended to be evidence-based turned into a null set stoppage. At the end of the day there was no data, evidence, argument or other form of persuasion that was acceptable. Things were broke, it was the fault of the Administration, which had screwed everything up, nothing had worked or would work and Barry was a screaming socialist radical who would destroy the country. This despite a chain of analysis, data and so forth both stretching back (literally) for years which had been used to defend some of Bush's agenda! So what's going on here - and btw all this talk about unconscious decision-making and the lizardbrain is just nonsense and insulting to boot. The catch is my friend is far from alone for reasons we've discussed before and will re-review later. But if we don't figure out to hang together then we will surely all hang separately! My friend would likely disagree vehemently with everyone of these cartoons as being pejorative and distortionate. Yet each one, aside from our own biases, reflects evidence we've presented before and propose to carry forward.

Jon Stewart and Bill O'Reilly: Framing the Naysayers

One of the more interesting exchanges we've heard recently is the full interview between Jon Stewart and Bill O'Reilly of Fox News. Ironic isn't it when two entertainers are some of the better sources. This takes a few minutes but is well worth your time to listen to frame the situation out. You really do need to listen to this and make your own judgments but what we heard from Stewart was a reasonable man in difficult and complex circumstances trying to figure out what's going on. Admittedly from a left of center position but willing to inquire, test and engage in civil discourse. What we'd argue we heard from O'Reilly was someone with a hard position who led with "quit beating you sheep" questions, cut them off when he didn't like the answers, sidestepped any counter-evidence, contradicted his own position several times and seemed more interested in his position than in any facts. And he is, as Jon noted several times, what passes for the King of Reasonableness and Moderation on Fox and among similar venues. The problem of course is that ideology is no substitute in the long run for being right - it just disguises the real problems with a high fever and makes you feel better until you get blindsided by that selfsame reality.

The Parable of the Stray

In some ways what brings such events home even more than terrible images is heartfelt words and here we look to the words of Haitian ex-pat poet Michele Voltaire Marcelin who's lament for the lost children of Haiti will bring it home. Equally she laments the deep fissures and breakdowns in Haitian society and governance, the legacy of centuries of malfeasance, and applauds the resilience and spirit of the Haitian people.

Were you ever walking down the street when a stray dog came up to you wagging their tail? Hoping for a handout but really looking for a friendly pat on the head and some sense of security and future. How many times did you reach down in pity and sadness to do the feelgood thing? 50%, 75%, 90%, all the time? One of our great epiphanies was the realization that the after petting the dog we'd have to chase them away. In fact the only person in this exchange who'd end up feeling good was ourselves, not the dog. Unless we were prepared to take them home, take care of them and nurture them for a long time. Instead most of us had our "moment" and walked on. Stop and think about that for moment or three. Our hearts may be moved to pity, we may write a check or we may text a contribution but are we really prepared to do for Haiti what needs to be done? In the long run?

Those multiple fields are built on shock, fear, distortion by partisans, sound byte presentations by the punditocracy and sheer dismay at the magnitude of the challenges, the difficulties of solving them and the raw ugliness of the political process. Welcome to the real world. In some ways these times remind me of the Oxford Debating Union's anti-war resolutions in the late 30's where the peace now and at any cost sorts found themselves a short while later on the beaches at Dunkerque or in Spitfires over Britain or sinking ships or burning tanks in the Mediterranean a few short years later. The general sense of things, defining a baseline if you will, is pretty done by this recent Daily Show episode with Doris Kearns Goodwin.

And the Great Debate we're having is what is the form of government that best suits us? We spent blood and treasure settling the ideological wars of the 20thC. Now we need to decide how to govern a market economy - how to balance commercial interests with the requirements of guardianship. Neither functions well in the long-run without the other and we still haven't figured that out or accepted it. Nor have we figured out how to get there. That will be THE challenge of THIS century!

"The dogmas of the quiet past, are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise with the occasion. As our case is new, so we must think anew, and act anew. We must disenthrall our selves, and then we shall save our country. Fellow-citizens, we cannot escape history. We of this Congress and this administration, will be remembered in spite of ourselves. No personal significance, or insignificance, can spare one or another of us. The fiery trial through which we pass, will light us down, in honor or dishonor, to the latest generation."

Annual Message to Congress (1 December 1862) – A. Lincoln

We'll set this up by proving a hint - there are two head fakes here, using Randy Pausch's definition of a head fake as something you learn as the real consequence, not the ostensible purpose of an activity.

Can You Here US Now?

The MA. election is being read, and we agreed earlier, as a signal to just how feed up the American people are with business as usual in Washington. Actually we've argued that several other things are going on as well. Fear, the ugliness of the sausage-making that's become so visible, a little local politics and a lot of economic pain.

But when you look around at these four cartoons it certainly captures a part of the zeitgeist, doesn't it? But as you look at each one of them, after you get your chuckle in - and they are admittedly pretty funny - ask yourself how true and accurate they are? Is that the real message and is what's shown what's actually going on?

We face tough challenges, we can either walk away from them and they'll get worse. Or we can face up to them, collectively, and pull together, not walking away from them and doing what's right instead of what's popular. Well, based on our analysis - which we're willing to debate on the facts and the frameworks but not on the ideologies or shallow misinterpretations - he's met every challenge head on and done his level best to do the right thing. The MA. backlash is people looking for simple, magic answers and quick fixes, the pundits wringing their hands and the political opposition selling doom to the lizardbrains. 

In the readings you'll find four complete essays collections linked in - two that cover the entirety of the 2008 elections but do it within a policy framework and two reviewing economic policy over roughly the same time period, extended to now. You'll also find two posts URL's from that time period and the entire "Renewing America" series we've been working our way thru but we'll draw your attention to this one in particular:It's Your Life: Change Is Hard, Change We Must, Changing We Are!

The video clip is taken from "The Patriot" which, allowing for dramatic license, is not historically inaccurate. The hero is a Scots-Irish settler who organized his fellow backwoodsmen into an effective and fighting force that was one of the main underpinnings of America's successes in the Revolutionary War (the book to read is Born Fighting: How the Scots-Irish Shaped America by James Webb). But one of the things the Scots-Irish brought with them was an innate distrust of authority and government - largely because thruout 2,000 years of history governments had tried to exterminate them (the Romans twice, the English three times) and then betrayed them multiple times, after exploiting their qualities as fighters (the English again). That populist strain has become infused thruout America and is one of the main under-currents of our culture. The question would then seem to be what behaviors are appropriate in what circumstances and who's likely to pick what? There times when you need a tomahawk and times when you need to "reason together".

There are two bad pieces of news however. The first is that our biggest challenge, common to all the big problems, is that we need to re-think and re-engineer our institutional framework. The second is that this will required patience, understanding and support from the population at large, in addition to leadership. Changing our institutions will be hard because it calls for re-invention of organizations that have grown up over a century since they were first created and they have accumulated lots of "plaque" and interests. Changing ourselves will be harder. The composite Gallop Poll pretty well captures the disenchantment of the American people. Of course there weren't polls to look at in 1860, 1880 or 1930 so what did we do for guidance then?