Health and Human Services Secretary Doesn't Understand What Insurance Is

Health and Human Services Secretary Doesn't Understand What Insurance Is - The Daily Beast var _sf_startpt = (new Date()).getTime(); Follow @thedailybeast TUMBLR Home Politics Business Video Entertainment Fashion Books Art Women in the World Newsweek Featured: WITW Summit Travel The Royalist Howard Kurtz David Frum Newsweek Subscriber Help Content Section Health and Human Services Secretary Doesn't Understand What Insurance Is by Megan McArdle Mar 27, 2013 10:13 AM EDT Kathleen Sebelius thinks insurance isn't really insurance unless it covers routine expenses. This is exactly backwards.

How can insurance make everyone better off?  

After all, the insurance company has to make money.  That has to mean that the expected value of the claims they pay out is lower than the expected value of the premiums their customers pay in.  In some sense, then, the expected value of your insurance premium is negative.  

But insurance does make everyone better off, because it covers very large costs that most people would have trouble paying.  Even most really good savers would have a hard time replacing the value of their house, or paying off a $250,000 judgement for an auto accident.  The expected value of those incidencts is very, very negative--more than just the value of the cash, you have to factor in the horror of being homeless or bankrupt.  When you factor in the homelessness, the bankruptcy, and so forth, the slighly negative expected financial value is more than outweighed by the positive value of being protected against personal catastrophe.  Not to mention the peace of mind one gets from not having to worry about homelessness, etc.  

This is the magic of risk pooling.  But notice that it's the catastrophe which makes insurance a good deal.  You wouldn't get much value from buying "grocery insurance".  At best, you'd be paying an extra administrative fee to route your routine expenses through an insurer, rather than paying them directly.  At worst, you'll end up with bills skyrocketing as all sorts of perverse incentives appear.  After all, if the insurer is paying all your grocery claims, why not load up on filet mignon instead of ground turkey?

But insurers try very hard never to sell insurance for less than the cost of your expected claims.  If you expect to buy $10,000 worth of groceries next year, it will not charge you less than that for a "grocery policy".  And if we all drive up the costs of grocery insurance by consuming more, the insurer can do one of two things: raise everyone's "insurance premiums" to cover a filet mignon budget, or create a list of "approved groceries" that it will cover, and start hassling anyone who tries to file an excessively expensive claim.

Sound familiar?

This is why you should always have liability insurance, but should think twice about collision damage coverage.  It's why high deductibles are a good idea--for small expenses, it's better to self insure.  And it's why "catastrophic" health plans, which only cover the sort of extremely expensive events that most people would have difficulty financing, are a much better deal than the soup-to-nuts plans that most people get through their employers.  Those plans are expensive, both because they're paying for a higher percentage of your expenses, and because they drive up utilization--which means that they drive up next year's premiums even more.  Imagine what your car insurance would cost if it covered gasoline, routine maintenance, and those little air freshener trees you hang from the rearview mirror.  Then stop asking why health insurance costs so much.

But Kathleen Sebelius, the Secretary of HHS, thinks that catastrophic insurance isn't really insurance at all.  

At a White House briefing Tuesday, Health and Human Services Secretary Kathleen Sebelius said some of what passes for health insurance today is so skimpy it can't be compared to the comprehensive coverage available under the law. "Some of these folks have very high catastrophic plans that don't pay for anything unless you get hit by a bus," she said. "They're really mortgage protection, not health insurance."

She said this in response to a report from the American Society of Actuaries arguing that premiums are going to rise by 32% when Obamacare kicks in, as coverage gets more generous and more sick people join the insurance market.  Sebelius' response is apparently that catastrophic insurance isn't really insurance at all--which is exactly backwards. Catastrophic coverage is "true insurance".  Coverage of routine, predictable services is not insurance at all; it's a spectacularly inefficient prepayment plan.

Now, it occurred to me that Sebelius might be thinking about the scam insurance that is all too often sold to naive, mostly lower-middle-class folks who labor in the service industry.  That stuff isn't insurance at all; it's a fraud, and the people who sell it will richly deserve any justice that is meted out to them in either this life or the next.  But that stuff doesn't protect your mortgage, either; they're almost-worthless discount plans or very-limited-coverage insurance sold by fly-by-night operations who tend to evaporate as soon as claims have to be paid.  So I don't think that's what she's talking about; I think she's talking about catastrophic plans.

Nor do I think that Sebelius is responding awkwardly to a report that the administration would like to wish away.  I think she's sincerely confused about the difference between insurance, and prepayment.  Which explains a lot about the new health law.  

Last week, I was at a health care conference where the subject of catastrophic plans came up.  Obamacare has, unfortunately, sharply curtailed the ability to offer these plans; very high deductible plans are now effectively illegal.  Which is a great shame, because these plans, combined with a dedicated health savings accounts, were showing real promise at controlling costs.  

A liberal policy professor at the event explained this as a result of the toxic political environment surrounding policy these days; since Republicans wouldn't cooperate on Obamacare, Democrats stuck the knife in one of their favorite programs.  

But Sebelius' answer suggests another explanation: the Democratic opposition to castrophic plans was not strategic, or vengeful, but entirely heartfelt.  The Secretary of Health and Human Services genuinely believes that health insurance should do more than just, well, protect your ability to keep paying the mortgage.  Unfortunately, "more" is very expensive and inefficient.

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Megan McArdle is a special correspondent for Newsweek and The Daily Beast covering business, economics, and public policy. A former senior editor at The Atlantic and writer for The Economist, Megan has a diverse work history including three small startups and a disaster recovery firm at Ground Zero.

For inquiries, please contact The Daily Beast at editorial@thedailybeast.com.

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Exxon’s Duck-Killing Pipeline Doesn’t Pay Taxes To Oil Spill Cleanup Fund

A technicality has spared Exxon from having to pay any money into the fund that will be covering most of the clean up costs of its Arkansas pipeline spill.

The cleanup efforts themselves took a sobering turn as crews found injured and dead ducks covered in oil.

The environmental impacts of an oil spill in central Arkansas began to come into focus Monday as officials said a couple of dead ducks and 10 live oily birds were found after an ExxonMobil Corp. pipeline ruptured last week.

“I’m an animal lover, a wildlife lover, as probably most of the people here are,” Faulkner County Judge Allen Dodson told reporters. ”We don’t like to see that. No one does.”

Exxon has confirmed that the pipeline was carrying “low-quality Wabasca Heavy crude oil from Alberta.” This oil comes from the region of Alberta where the controversial tar sands are located. Heavy crude is strip mined or boiled loose from dense underground formations that often contain a large amount of bitumen. This oil is very thick and needs to be diluted with lighter fluids in order to flow through pipelines. Reports have stated that at least 12,000 barrels of oil and water spilled into the town.

A 1980 law ensures that diluted bitumen is not classified as oil, and companies transporting it in pipelines do not have to pay into the federal Oil Spill Liability Trust Fund. Other conventional crude producers pay 8 cents a barrel to ensure the fund has resources to help clean up some of the 54,000 barrels of pipeline oil that spilled 364 times last year.

As Oil Change International said in a statement today:

“The great irony of this tragic spill in Arkansas is that the transport of tar sands oil through pipelines in the US is exempt from payments into the Oil Spill Liability Trust Fund. Exxon, like all companies shipping toxic tar sands, doesn’t have to pay into the fund that will cover most of the clean up costs for the pipeline’s inevitable spills.”

Whatever you call it, as Judge Dodson says, “Crude oil is crude oil. None of it is real good to touch.”

The smell of the spilled oil (similar to asphalt) has reached residents five miles out in the country, and will likely keep residents of 22 nearby homes evacuated for several days.
Surreal video:

The Enbridge tar sands pipeline spill in Michigan happened in 2010 and parents are still concerned about the long-term health effects of having such toxic substances seep into areas where children play.

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Heritage in Focus: How the HHS Mandate Revision Doesn't Stack Up

Recorded on February 11, 2013

Research Associate Sarah Torre discusses how the new HHS Mandate revisions don't quite stack up to what the President promised in terms of becoming more acceptable to religious groups and others who have moral objections to it on Heritage in Focus. Jackie Anderson hosts.

To get regular updates on Heritage in Focus podcasts, visit our RSS feed or subscribe on iTunes.

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GOP Congressman Says Supreme Court Doesn’t Actually Get To Decide Whether Laws Are Constitutional

Rep. Jim Bridenstine (R-OK)

Still smarting over last year’s ruling upholding Obamacare, freshman Rep. Jim Bridenstine (R-OK) dismissed the idea that the Supreme Court decides whether or not laws are constitutional.

“Just because the Supreme Court rules on something doesn’t necessarily mean that that’s constitutional,” Bridenstine said in a Daily Caller interview posted Sunday. After accusing Democrats of “stacking the courts in their favor” — five of the current nine justices were appointed by Republican presidents — Bridenstine dismissed the idea that Congress must write laws within the boundaries set by the Supreme Court. “That’s not the case,” the Oklahoma congressman said.

The interviewer, Supreme Court Justice Clarence Thomas’s wife Ginni Thomas, didn’t have the heart to correct Bridenstine’s peculiar view of the Court’s role.

BRIDENSTINE: Just because the Supreme Court rules on something doesn’t necessarily mean that that’s constitutional. What that means is that that’s what they decided on that particular day given the makeup of the Court on that particular day. And the left in this country has done an extraordinary job of stacking the courts in their favor. So what we have to do as a body of Congress is say, “look, just because the courts” – and I hear this all the time from Republicans – they say that the court is the arbitrator and after the arbitration is done, that’s the rules we have to live under and we can go forth and make legislation given those rules. That’s not the case. A perfect example if Obamacare. Obamacare is not constitutional, the individual mandate.

Watch it:

There is certainly good reason to doubt the way this Supreme Court reads the Constitution — Citizens United alone proves that point. Our current court gave sweeping legal immunity to wealthy corporations. It took away Lilly Ledbetter’s right to equal pay for equal work. It shrinks reproductive freedom because women may “come to regret” the choices they make if they have control of their own bodies. And it appears poised to strike down a key provision of the Voting Rights Act.

But the idea that this particular Court distorted the Constitution to uphold Obamacare does not even pass the smell test. In the words of Judge Laurence Silberman, a leading conservative who received the Presidential Medal of Freedom from President George W. Bush, the case against the Affordable Care Act has no basis “in either the text of the Constitution or Supreme Court precedent.”

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Sad But True: WSJ Editorial Saying Obama Administration Doesn’t Drill Enough Is Wrong

Today, the Wall Street Journal editorial board published a gem of an editorial titled “Drill, Barack, Drill.” You might be able to guess what it’s about from the title.

It takes a report from the Congressional Research Service about drilling on public lands, engages in some flagrant cherry picking, shoots out some outright falsehoods, and concludes that the Obama Administration has been standing in the way of fossil fuel development on federal lands.

The truth, while sobering, is very different from the creative accounting performed by the Wall Street Journal ed board. Here’s the reality.

WSJ Says: “All of the increased [oil] production from 2007 from 2012 took place on non-federal lands.”

That’s one cherry to pick. There’s a whole tree though. Looking at the whole CRS report gives you the full story:

When comparing fiscal year 2010 with 2007, growth in the federal share of production was about 82 percent of the total.

That’s a lot of growth in production not on private and state lands. The report also says that crude oil production will continue to be significant, and “could remain consistently higher than previous decades.”

WSJ Says: “Federal share of total U.S. oil production has slid under Mr. Obama to 26% in fiscal year 2012 from 31% in fiscal 2008.”

In fact, oil production from federally owned places was higher in every one of the past four years compared to 2008, when oil hit a record high price of $142.50 per barrel. In fiscal year 2008, total crude oil production was 1,550 thousand barrels per day. The rate of production for the next four years has been: 1,731, 1,989, 1,715, and 1,627 thousand barrels per day. The Wall Street Journal may be trying hard here, but none of those numbers is smaller than 1,550.

The domestic boom is driven by ample tight oil (shale oil) and shale gas resources on private lands. In 2012, Adam Sieminski, the Administrator of the Energy Information Administration testified before the House Energy and Commerce Committee that:

Because the shale resource basins are largely outside of the Federal lands, so too is shale production. In this case, the geology is working in favor of non-Federal landowners.

The rapid increase in natural gas production from shale resources, found largely outside the Federal lands, over the last 5 years has significantly reduced natural gas prices and the relative attractiveness of conventional natural gas resources, including those of Federal and Indian lands. (EIA)

Also, most oil and gas shale plays in the contiguous U.S. are on private lands:

WSJ Says: “The sharp drop in production on federal lands is a direct result of Obama Administration policies. They include a drilling moratorium imposed after the 2012 Deepwater Horizon Spill…”

The CRS report helpfully points out that “offshore, most of the 1.7 billion acres of federal water are no longer under leasing and development moratoria.” Since the new standards were put into place, the Obama administration has approved over 600 permits for activities at hundreds of wells in the Gulf of Mexico. Drilling is nearly up to pre-Deepwater Horizon levels.

Specifically, per the Energy Information Administration Short Term Energy Outlook released last month:

During 2012, oil production in the Federal GOM [Gulf of Mexico] is projected to have increased from about 1.31 million bbl/d [barrels per day] in January to about 1.39 million bbl/d in December (up 6 percent). … EIA expects Federal GOM production to increase from an average 1.27 million bbl/d in 2012 to an average 1.39 million bbl/d in 2013.

WSJ Says: “Average time to process a federal application for a drilling permit increased 41% from 2006 to 2011—to 301 days”

Again, the CRS report contains information that the Journal must have missed:

In 2006 it took the BLM [Bureau of Land Management] an average of 127 days to process an APD [application for drill permit], while in 2011 it took BLM 71 days. In 2006, the industry took an average of 91 days to complete an APD, but in 2011, industry took 236 days.

The delay in the permitting process is not the in the federal government’s court, but rather the oil and gas industry. The BLM is almost twice as quick in processing permits as it was in 2006.

The report also helpfully puts in context the claim that private lands permitting takes less time than public lands permitting:

“Some critics of this lengthy timeframe highlight the relatively speedy process for permit processing on private lands. However, crude oil development on federal lands takes place in a wholly different regulatory framework than that of oil development on private lands…. A private versus federal permitting regime does not lend itself to an ‘apples-to-apples’ comparison.”

WSJ Says: “The few leases he has put up for auction contain land that is of little value to drillers”

Since FY 2006, there has been nearly a 67 percent decline in the amount of public land nominated by the industry in the Rocky Mountain States. And remember, the Administration has approved more than 600 permits in the Gulf of Mexico alone.

Last year, a report from Rep. Ed Markey showed that 131 oil and gas companies had 3,684 idle leases in the Gulf of Mexico alone. That means oil companies are not using 72 percent of offshore acres, and 56 percent of total offshore acres. This is 20.7 million acres we’re talking here — not small potatoes.

WSJ Says: “Readers may recall that Mitt Romney raised this issue in the second presidential debate. Mr. Obama responded that “What you’re saying is just not true. It’s not true.” The Congressional Research Service now documents that it is true….”

Mitt, it’s still not true. Read the report — all of it.

* * *

It would be great for the climate if federal oil and gas production were slowing as we transition to renewables. The takeaway of this sad state of affairs is that we continue to pursue hydrocarbons to burn, at rates equal to or greater than historical rates.

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No, Batwoman’s Engagement Doesn’t Solve DC Comics’ Orson Scott Card Problem

Over at io9, Rob Bricken asks whether Batwoman’s in-costume proposal to her girlfriend Maggie Sawyer will earn DC Comics good-will that it lost by hiring National Organization for Marriage board member and virulent homophobe Orson Scott Card, or “is this too little, too late for the company”?

I’m 99% sure the only reason DC hasn’t mentioned Batwoman’s marriage to the press is because it would call attention to the furor caused by the company’s recent decision to hire Orson Scott Card, scifi author and ardent detractor of gay rights, to write Adventures of Superman. Angry fans and retailers alike are planning to boycott the Superman comic in general, and some DC in particular unless Card is removed.

It’s too early to tell if Batwoman’s proposal will at all mitigate DC’s public relations problems with Card, or even if Card might have a problem collecting a check from a company whose works seemingly condone gay marraige. But at the moment, at least Kate Kane and Maggie Sawyer are happy, even if nobody else is.

I’m always delighted to see more, and richer depictions of gay characters, especially in a medium where they were marginalized by the Comics Code and the disapprobation of Congress, a panic fed by cooked research. But this plot development won’t save DC Comics, and not just because a proposal on the page doesn’t really outweigh the harm Card’s speech and actions cause in the real world. Who gets hired to create content and what content ends up on the page are issues that are often related, but that function separately. People who care about where their money goes and the values of the content that they consume are going to care about both of those elements.

Something I wish I’d said more clearly the first itme I wrote about DC’s decision to hire Card to write Superman is that calls to fire him don’t appeal to me that strongly because it separates out his hiring from DC’s other hiring practices, which among other things, have produced a staff with very few women and no lead African-American writers on any comics titles. A decision by comics stores not to stock the title, demonstrating that Card’s values turn them off from a product that otherwise might have been profitable for them, makes more sense. And what would be most interesting to me is an explanation from DC about what process lead to Card’s selection. What made his pitches’ stronger than other writers? How did they weigh the likely publicity challenges from his employment against what appears to be a larger institutional imperative to modernize the brand by telling stories about committed gay couples? If DC Comics wants its image to be gay-friendly, then it should have been expected to be evaluated for consistency. More same-sex engagements doesn’t eliminate the appearance of a glaring contradiction in DC’s image.

If all DC wants is our money, rather than our social approval, that’s fine. But it needs to recognize that fishing for money on the grounds that it’s producing progressive and game-changing content is going to be a more difficult task if there’s a disconnect between what the content is, and who the money spent on it ends up going to.

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Why Manny Pacquiao Refusing To Fight In Vegas Doesn’t Prove A Problem With American Tax Policy

Conservatives are overjoyed at the news that boxer Manny Pacquiao is refusing to fight his next bout in the United States because he doesn’t want to pay taxes, and anti-tax groups like Grover Norquist’s Americans for Tax Reform are already using it as an example of how America’s “punitive” tax policy makes it less competitive with other countries around the world.

ATR first worries that the American tax code will make it more likely that other boxers follow Pacquiao’s lead, then expands into a broader critique of taxes on ordinary American investment:

Fewer boxing matches per year would mean fewer vendors, a decrease in tourism, and less money being spent in host cities. Hosting a major sporting event has proven to create jobs and insert economic life within the city. The federal government needs to follow the examples being set by GOP governors seeking to reduce their respective state’s income tax burden or risk losing investments across every industry.

At the end of the day, people migrate and invest in places where they will receive the most for their services and skills. The higher the income tax, the less return these same people will see. By continuing to have this excessively high income tax, the U.S. continues to discourage businesses and workers looking to make profitable investments.

The most obvious problem with this thinking is that the Marquez-Pacquiao fight is somehow going to bring great benefit to Las Vegas. It won’t. Fight or no fight, Vegas hotels and casinos are going to be full of high-rollers and ordinary gamblers and non-gamblers alike, because it’s Las Vegas. The utility of a sporting event in that type of economy is almost certainly even smaller than the utility of bigger sporting events, and gearing tax policy toward the attraction of sporting events is a terrible idea anyway.

The real problem, though, is the idea that tax policy is somehow the only factor in where future fights will take place. Fight promoters are going to lose a substantial amount of money if Pacquiao and Marquez fight in Asia, because more people will pay to watch if they fight in the U.S. That means there is an advantage for promoters and even most boxers to fighting in the U.S. even if they have to pay higher tax rates. It even extends in Pacquiao’s case, since lower tax rates aren’t the only reason he wants to fight in southeast Asia: nearing the end of his career, the Filipino boxer sees it as an opportunity to broaden his global fan base.

And that hits at the fallacy of ATR’s broader critique of American tax policy. Conservatives aren’t necessarily wrong when they argue that “people migrate and invest in places where they will receive the most for their services and skills.” Where they go wrong is in assuming that tax rates are the only or even the dominant determinant in that equation, and in assuming that people and their investments automatically flow to the lowest tax rate attainable. Place matters to people, and the United States is still a more advantageous place to do business, make social and business connections, and live than many other countries with lower tax rates. That’s why rich people don’t flee high-tax states like California and New York en masse, because California and New York still offer business and social advantages to many of the people who choose to live there that other states don’t have. And it’s why businesspeople and their investment don’t just up and leave the U.S. even though we charge a higher personal tax rate than many other countries. There’s no evidence backing up the claim that taxing the rich hurts growth or drives away investment, and in the U.S., periods of higher marginal tax rates actually featured higher rates of economic growth.

There are any number of reasons why people choose to live, invest, and do business in the places they do, and taxes fund many of the things, from education to infrastructure to law enforcement that protects against the graft and corruption that are the price of doing business in Macau, that make certain places advantageous to others. Conservatives don’t like to acknowledge that reality, though, because it makes it obvious that race-to-the-bottom tax policy, in which wealthy people like Pacqiuao benefit at the expense of everyone else, is a fallacious idea.

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No, Chicago Isn’t Proof That Gun Regulation Doesn’t Work

Hadiya Pendleton, a 15-year old Chicagoan recently killed by gunfire.

Friday afternoon, President Obama will speak on gun violence prevention in Chicago. Charles C.W. Cooke, writing for National Review, previews the conservative spin, arguing that because Chicago has a high murder rate and relatively strict gun laws, it “defies belief” that the President would defend gun regulations there.

But Cooke and the other conservatives who will invariably make this argument today are wrong. Chicago’s gun laws aren’t the cause of the recent uptick in violence, nor does it prove that gun regulations are ineffectual. If anything, it underscores the need for tighter federal laws.

Most significantly, it is important to understand that Chicago is not an island. Although Chicago has historically had strict gun laws, laws in the surrounding parts of Illinois were much laxer — enabling middlemen to supply the criminals in Chicago with guns they purchased elsewhere. Forty three percent of the guns seized by law enforcement in Chicago were originally purchased in other parts of Illinois. And even if the state had stricter gun laws, Illinois is not an island either. The remaining fifty seven percent of Chicago guns all came from out of state, most significantly from nearby Indiana and distant Mississippi — neither of which are known for their strict gun laws.

It’s also important to put Chicago’s very recent increase in gun violence in perspective. Data from the University of Chicago Crime Lab’s Harold Pollack shows that this uptick, while certainly worrying, isn’t anything like a return to the historic peaks during America’s crime wave. Pollack notes that “Chicago ranks 79th on Neighborhood Scout’s list of the 100 most dangerous places to live in America…the idea that Chicago faces a unique or unprecedented rise in homicides is incorrect. Our problems are all too familiar and chronic throughout much of urban America.” Chicago, following the national trend, has experienced a significant downturn in homicides in the past decade and a half:

Chicago had an outright ban on handguns from 1982 until 2010, when the Supreme Court declared it unconstitutional. So there’s no reason to believe that strict regulations on gun ownership were responsible for a spike in gun homicides in 2012, two years after Chicago was forced to loosen its gun laws. Moreover, there’s simply no credible evidence that wider gun ownership or looser gun laws reduce crime.

So why did Chicago’s homicide rate increase in 2012? Pollack says “there’s no simple answer.” But he points to three factors are particularly important: escalating gang conflict as a consequence of police crackdowns and shifting gang territory, outdated law enforcement practices, and — yes — access to guns.

According to Pollack, access to guns significantly increase the risk that a conflict between two gang members escalates to homicide, as weapons designed to kill people (shockingly) make it easier to kill people. Chicago’s streets are flooded with guns: it has roughly six times as many guns as New York City per capita, despite its restrictive laws. So if gang conflict escalates, and the gangs have easy access to guns, the homicide rate should rise. This explanation fits with the fact that 87 percent of Chicago homicides in 2012 were gun-related. New York, by contrast, did not experience a surge in homicides in 2012.

The guns that fueled this fire came from a small number of individuals bringing guns into the city. A study of Chicago’s gun market (which, incidentally, concluded that tight enforcement of Chicago’s gun ban and restrictions significantly disrupted illegal gun markets) found that most of guns in high-crime neighborhoods entered through a small, tight network of suppliers and middlemen: “Gun suppliers report that 60-80% of their sales are negotiated through brokers (we assume the 80% figure) and by our own estimates gun suppliers account for around half of all gun sales in the GB community.” Because most criminals weren’t comfortable going out of their neighborhoods to buy guns, and Chicago had no gun stores in the city, they relied on this network to get them guns from outside of Chicago.

As explained above, the fact that suppliers could acquire guns so easily is a byproduct of the state’s lax laws. Illinois does not license or regulate gun dealers, require gun registration, limit the number of guns that can be sold at one time, or require background checks on private sales that aren’t conducted at gun shows. Chicago law doesn’t fill in all of these gaps. As a consequence, crooked firearm retailers have very little problem distributing their guns to dealers and police have fewer tools to deal with intermediaries who sell guns privately without background checks.

This is a national problem. Illinois laws, loose as they are, are the eight-strictest in the nation. Broader data suggest that 50 percent of all crime guns come from one percent of dealers. Since illegal guns can travel across state boundaries, federal legislation targeting crooked dealers, traffickers, straw purchasers, and private sales without background checks is the best way to address gun violence in cities like Chicago. Which is exactly what the President is going to Chicago to stump for.

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Discussion on Future Energy Mix at NARUC Celebrates Natural Gas and Coal, Doesn’t Mention Climate

By Adam James

The National Association of Regulatory Utility Commissioners recently held a session titled “Getting It Right: Gas, coal, and the Future Generation Resources Mix.” In an embarrassingly one-sided panel discussion featuring David Carroll, President and CEO of the Gas Technology Institute and Mark McCollough, Executive Vice-President of Generation at American Electric Power, the verdict came in:

The future of the American generation mix should (prominently) feature natural gas and coal.

Put a pin in that for a second, and you may also be interested to note that the word “climate” did not come up once in the entire session.

Why is one of the most powerful groups of energy regulators in the United States having a conversation about the future of energy in American that doesn’t include consideration of climate change? This is by no means an unintelligent group. They are used to optimizing for economic and environmental concerns. They have a wide range of legal and regulatory experience, and access to the best scientific data available. They should be a high priority target for local environmental activists for education and influence. And yet….

In the generation game, it is a simple fact that if you don’t mention climate, renewables are just another special interest. Although they are rapidly reaching cost competitiveness (in fact, they are competing on an even footing in some markets), renewables have one crucial selling point: They are zero-carbon, and as a result, do not contribute to climate change.

Regulators will play a massive role in shaping the conditions under which new generation projects get built — and as two panelists emphatically noted, the risks associated with investing billions of dollars in projects that span 30 or more years are huge. They called for certainty about the policies that would govern these future projects. Regulators have a responsibility to get educated about the science of climate change, and create the appropriate disincentives for high-carbon generation. In other words, if costs really are going to be the bottom line, regulators should begin by translating the “externalities” from high carbon generation, that means gas and coal, into the cost analysis and decision making process around approving new plants. If climate change is never mentioned, though, and you write off the costs of pollution and climate change as non-factors, fossil fuels will continue to win the day.

This becomes incredibly important because, again as the speakers noted, utilities are making investments today that will guide decisions in 20 years. Allowing new fossil fuel generation to come online — whether because a natural gas supply glut has clouded their vision or because the costs are not appropriately integrated — forces us down one of two paths. The first path is utilizing high-carbon generation well into the future, exacerbating climate change and its impacts. The second is creating a pitched battle between the utilities who have sunk costs into these projects and the environmental advocates who are trying to take them offline. The losers in that fight will ultimately be ratepayers, who pay the costs of these generation projects over long periods of time.

The foxhole for these speakers, as would be expected, is reliability. Clean technology is great, they say, but it isn’t reliable enough to meet our needs. Furthermore, the customers foot the bill for those projects which are higher cost than fossil fuels.

A few notes here. First of all, NREL (and many others) have shown the grid can operate reliably on very high penetrations of renewables and other clean energy resources (such as biomass, hydropower, and geothermal). Second, customers also foot the bill for the health impacts of dirty air and will pay for the worsening impacts of climate change on their daily lives. Third, when customers cannot afford to pay those bills, they are covered by the taxpayer via higher healthcare costs or FEMA appropriations; a strategy that fuels the deficit. Finally, the risks associated with fossil fuel plants are actually shifted to the consumers in a way that they are not with renewables. This is because fuel costs (coal and gas) are variable and paid by the consumer, whereas the initial investment is fixed. Renewables are the opposite, fuel costs (wind and sun) are zero, whereas the initial investment is higher. This means that, as a consumer, you are assuming more risk in fossil fuel projects than renewables because you are at the beck and call of historically turbulent price fluctuations.

The speakers of course point to the higher costs associated with renewables, but forget that a transition to a clean energy economy would create millions of jobs and a higher quality of life for us and future generations.

In any case, NARUC can do much better. Educating our nations regulators about the real costs associated with the investments they are overseeing is a top priority in the absence of federal legislation. As Renewable Portfolio Standards have shown, states can lead on clean energy and drive actual transformation — even as the federal government falters. Regulators will be linchpins of the success or failure of initiatives at the state level to transition to a clean energy economy, and must rise to the occasion.

Adam James is a Special Assistant for Energy Policy at the Center for American Progress. You can follow him @adam_s_james or email him at ajames@americanprogress.org

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ObamaCare Math Doesn't Add Up to a Healthier U.S.

Many people in health care saw passage of the Patient Protection and Affordable Care Act in 2010 as an historic achievement, a reshaping of how health care is practiced in the U.S.

In truth, the new law has remarkably limited objectives. Its single goal is insurance expansion. An additional 32 million Americans are to be covered by private insurance and Medicaid. Integrated medicine, best practices and promotion of primary care get only “pilot program” treatment. The ACA doesn’t mandate enough change to have risked the political opposition of industry interests.

Indeed, the law’s most obvious characteristic is its continuity with our existing system. Step away from the sound and fury of politics, and the 2010 health-care law is laid bare as a technocrats’ approach to saving our current system while expanding it to cover more people. At the end of the day, it is unlikely to change much at all.

Americans spend an enormous amount of money on health care -- two and a half times as much as was spent 20 years ago. Medicare and Medicaid represent 23 percent of federal spending, up from 15 percent in 1993. And employers pay an average insurance premium of $15,073 for a family of four, up from $4,404 two decades ago.

We also pay a physical toll for our system’s carelessness. In the past 20 years, medical errors have killed 1 million to 3 million people -- more than have died in all of America’s wars combined.

The fundamental flaws in our system are familiar: perverse incentives that encourage excess treatment, high prices, poor service (even dangerous sloppiness), incomprehensible complexity and a flawed safety net. But to all such problems the new health-care law has the same two answers: more insurance and Medicaid and more top-down cost control.

Supporters may believe that the ACA will be worth it even if it only expands our insurance system to cover many people who are not now covered. But if the law places more of the burden of health care on the poor and the middle class, diverts resources into waste and unnecessary treatments, reinforces an industry culture of dangerous sloppiness and crowds out all other social priorities, then it will have actively hurt the very people it was intended to help.

Nothing better illustrates the flaw at the heart of the ACA than its treatment of Medicaid. There may be no element of our current system more dysfunctional or plagued by runaway costs, quality issues, unimaginable complexity and outright corruption. But the ACA mandates a massive expansion of the program. Indeed, Medicaid’s growth is expected to account for roughly half of the 32 million newly covered.

Medicaid is already very expensive. In 2010, the states and the federal government spent a combined $405 billion on their Medicaid programs, up from $206 billion only a decade earlier. It doesn’t seem to make sense that a population that is getting richer, that has greater access to better food and cleaner water than it used to have, that works in less physically dangerous occupations, that doesn’t smoke or drink as much should need so much more health care. But Medicaid’s growth is an inevitable consequence of the undisciplined demand for care that pushes up prices.

Furthermore, Medicaid coverage is already no guarantee of actual care; because of low reimbursement rates, many physicians refuse to treat Medicaid patients. A Medicaid card may provide “access” to high-volume procedures, but not to the more time- intensive care, such as primary services. All health care is not equally valuable.

For proponents of the ACA, expanding our insurance system is a simple moral issue; they believe it will keep people alive. But the reality is far more complex; we cannot even be sure that when you consider all its effects, the uninsured are more helped than hurt by the ACA.

Keep in mind that the uninsured are not a monolithic group. The most recent estimate is that about 50 million people lack insurance at any one time. (This number is expected to shrink to 18 million under the new law.) But “at any one time” is not the same as permanently. Almost 20 percent of our population lacks insurance at some point during a given year, but 40 percent of these people are uninsured for less than a year.

In addition, people aged 18 to 30 make up about a third of the uninsured. They are less likely to have jobs with coverage and more likely to consider insurance an unnecessary expense. Remember that virtually no senior citizens are uninsured, because they receive Medicare, while most of the uninsured who suffer disabilities become eligible for Medicaid or Medicare. Strangely, then, the uninsured may be healthier than the general population; 90 percent of them describe their own health as good to excellent.

For the long-term uninsured, the story is likely to be quite different. Roughly half the uninsured at any one time -- 25 million people -- are estimated to be without coverage for three years or more. These people are disproportionately poor, suffering long periods of unemployment and often working in low- wage jobs without health benefits. Furthermore, low-income people are more likely to suffer from chronic health problems relating to lifestyle: hypertension, diabetes and heart disease.

If viewing the uninsured as a monolithic high-risk group clouds our understanding of the issue, viewing them as having no access to care is even more deceptive. A 2008 study estimated that those uninsured for a whole year averaged $1,686 in health- care spending, a little more than 43 percent of what was spent by those privately insured ($3,915). Lacking health insurance is not the same as lacking health care.

Overall, the uninsured receive less care than the insured, especially preventive and chronic-condition care -- but certainly not so much less as to explain the cost of the ACA’s efforts to expand insurance. The government has estimated that the law will provide coverage for 32 million at a cost of $200 billion in government funds plus $100 billion of the newly insured’s own money. That’s $6,250 per newly insured person.

Now consider how the uninsured currently pay for their care. Their own money accounts for some of it -- the 2008 study estimated $583 per uninsured person a year (compared with $681 spent out-of-pocket by the insured). And the uninsured receive $56 billion worth of “uncompensated” care annually, the 2008 study found. Mostly, this is treatment provided by hospitals for free.

But this care is at least partially compensated under a variety of state and federal programs. A recent estimate is that hospitals provide $34 billion in uncompensated care and receive roughly $25 billion to help them deal with the burden.

The assumption has been that the hospital and pharmaceutical industries supported the ACA because it will bring them new customers. But a better explanation is that reform will turn their discount customers into full-price ones. A recent investment research report suggests that hospital profits will rise 43 percent with the implementation of the ACA.

Now, I don’t want to get carried away with this; there is no question that many uninsured face an impossible burden in managing certain ongoing conditions and that the ER safety net is not the most desirable option for many kinds of treatment. All other things being equal, I -- and probably everyone -- would rather have insurance.

But all other things aren’t equal. The most vulnerable uninsured are most vulnerable not just because of insurance issues but because of low incomes, financial insecurity and the lifestyle choices and stress associated with poverty.

You may ask, even if the ACA may do more for hospitals and drug companies than for the uninsured, doesn’t society have a moral responsibility to include everyone in our health-care system? So what that we may spend $200 billion more to get our neediest only $70 billion in additional real care -- isn’t it worth it?

As a liberal, I would have answered yes even a few years ago. Now, I suspect, the questions are out of date. Our system no longer neatly divides between the insured and the uninsured. Your odds of getting appropriate care -- rather than excessive and uncoordinated care -- depend more on the professional culture of your providers than on your insurance status. And your chances of avoiding a serious medical error are mainly a matter of luck.

The ACA is just the latest in a long line of laws that drive resources from all other goods into health care. The $100 billion a year in additional government spending could, for example, buy gym memberships for 42 million Americans and pay them $10 an hour to exercise three times a week, or put fresh vegetables on the table daily for every child in the U.S. This doesn’t even include the $100 billion now in Americans’ pockets that the ACA will make them spend on health insurance.

If health-care costs were a reasonable percentage of our economy, then the money-is-no-object argument might make sense. But with these costs making up 18 percent of our economy, the decision to shovel more money into health care will have a powerful impact on job creation, wage growth and disposable income. All of these issues are more important to the well-being of the long-term uninsured -- even to their health -- than more health care.

(David Goldhill is the president and chief executive officer of the cable TV network GSN. This is the second in a series of three excerpts from his new book, “Catastrophic Care: How American Health Care Killed My Father -- and How We Can Fix It,” to be published Jan. 8 by Alfred A. Knopf. The opinions expressed are his own. Read Part 1 and Part 3.)

To contact the writer of this article: David Goldhill at .

To contact the editor responsible for this article: Mary Duenwald at mduenwald@bloomberg.net

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Eric Cantor Doesn’t Want You. He Wants Democrats.

This is more offensive than Cantor throwing his weight behind Adam Kinzinger’s re-election bid against Don Manzullo. He was successful there, but we need to shut him down in Indiana.

The Republican Leader in the House of Representatives is not backing down from trying to drive up Democrat turnout in the Indiana Republican Primary.

First, you have to wonder why a House guy is getting involved in a Senate race.

Second, you have to wonder why a Republican Leader is using Republican donors’ money to drive up Democrat turnout in a Republican race.

I wonder if the Republican donors to the Young Guns Network know their campaign donations to a Republican group are going to aid and abet Democrat turnout in a Republican race. And I hope House conservatives know their own supposedly leader is not just using their own money to pick and choose between them in the House, but to also help Barack Obama’s favorite Senator.

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Why Doesn’t Marcy Kaptur Respect Veterans?

From the diaries.

Not long ago, my opponent, Congresswoman Marcy Kaptur used her Congressional website to take Republicans to task for not being “sensitive” about “the plight of unemployed returning veterans.” She was angry that the House of Representatives had rejected her proposed amendment to the 2013 budget.

The amendment would have established a Veterans Job Corps, which she claims “would employ at least 20,000 veterans over 5 years in projects to preserve and restore America’s national parks, state parks, and other public lands.”

This idea may sound good on paper. But it ignores several important questions that involve sensitivity, common sense and responsible government.

Number One: Who was being more sensitive, thoughtful and responsible here? House Republicans who want to reduce out-of-control federal spending, borrowing and deficits – and reduce the size and intrusiveness of a federal bureaucracy that has become a massive legal and regulatory drag on our economy and job creation?

Or an out of touch Democrat politician who is determined to keep borrowing, spending and growing our government – and who rejects our veterans’ military backgrounds and wants to turn them into federally employed landscapers and groundskeepers?

Is Kaptur suggesting that the military training and hands-on experience our veterans acquired during their time in service isn’t good enough? Or that these jobs are the best they should expect? Or does she just not respect their service and training?

Kaptur and her campaign staff certainly don’t respect my own military training. That’s obvious from the way they call me a “faux” plumber. Are all our other veterans “fake” in their jobs too? Marcy’s campaign has denied my military experience several times before, each time proving that she and her staff don’t respect veterans and our military experience.

This lack of respect goes a long way toward explaining why Kaptur is so willing to turn this nation’s soldiers into landscapers and groundskeepers, when instead they could be transitioning to productive civilian lives in trades for which they have already received training. Heck, a few might even make pretty good plumbers.

Number Two: What this nation needs – and what our veterans need, so that they can find good jobs – is an economy that is growing. Last year, growth didn’t even reach a lousy 2 percent. Our economic growth needs to get back to 4 or 5 percent a year, every year.

For that to happen, government needs to stop borrowing and spending the money the private sector needs – the money private businesses would invest in new equipment, new hires and new ideas far better than government ever can. Government also needs to stop taxing and regulating everything in sight, dragging our economy down, far too often for no health or environmental benefit.

Congress and the federal bureaucracy also need to stop wasting taxpayer money on worthless fake-energy wind, solar and algae schemes – and start letting companies drill again for oil and gas that power our economy and create real jobs and revenues.

Just over the past few years, oil and gas “fracking” on state and federal lands created 600,000 jobs! It generated real energy that we can use, and billions of dollars in revenue! And here Kaptur is upset that the House rejected her proposal to borrow more money to create a lousy 20,000 menial jobs.

According to the Bureau of Labor Statistics, “young male veterans” between the ages of 18 and 24 had an unemployment rate of 29.1 percent last year. Non-veteran males in the same age group had “only” a 17.6 percent unemployment rate – which is also intolerable, insensitive and unnecessary.

It’s clear that America is in a crisis – which almost everyone outside of Washington, DC realizes. Ms. Kaptur, along with most other Washington politicians and bureaucrats, however, is isolated and insulated from this crisis. Both they and we should all be asking: Why are veterans, with all their training and experience, so much worse off than non-veterans, after having served and sacrificed so much for their country? And how much longer can we tolerate this destructive situation?

Yes, Congress has tried repeatedly (and failed repeatedly), to “fix” the unemployment problem. But little has been accomplished beyond partisan bickering and political grandstanding. While our political “heroes” keep talking about unemployment, America’s real heroes continue returning home to live it.

We need to focus on getting excessive government out of the way, so that the private sector can create jobs for our veterans and the millions of other Americans who so desperately want to work again.

A soldier understands one thing above all others: results. Congress, as history continues to prove, doesn’t understand this concept. Worse, too many politicians keep coming up with crazy ideas that they think will get them votes – when what they will really do is make sure the problems remain unsolved. They obviously have no clue what they’re doing.

Veterans deserve better than a 29% unemployment rate. Veterans deserve better than politicians who don’t respect what they went through and what they learned from military life. Veterans deserve respect, and an appreciation for what they’ve done for their country.

Most of all, veterans deserve to be represented in Washington by people who understand and respect what they did, what they do, what they know, and what they have to offer their country when their military service is over.
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Samuel “Joe the Plumber” Wurzelbacher is a Republican candidate for Congress in Ohio’s ninth congressional district. Samuel Wurzelbacher rose to national fame as “Joe the Plumber” when he challenged then-candidate Barack Obama on his plans to increase taxes for the middle class. Since 2008, Wurzelbacher has spoken nationally in support of blue collar workers, encouraging voters to get engaged in the political process. Learn more at http://www.JoeForCongress2012.com/

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