Coburn: Failure to cut spending will be worse than sequestration

Deep cuts to the federal government will almost certainly take effect at the end of the week, Sen. Tom Coburn (R-Okla.) said Sunday, and that's not such a bad thing.

“Sequestration is a terrible way to cut spending – I don't disagree with that – but to not cut 2 and 1/2 percent out of the total budget over a year when it's twice the size it was 10 years ago? Give me a break,” Coburn, the top Republican on the Senate Homeland Security Committee, said on “Fox News Sunday.” “There's easy ways to cut this money in ways the American people will never feel. What you hear is an outrage because nobody wants to cut spending."

Coburn said the sequester cuts were preferable to the harm from not addressing the nation’s spending problems.

“It will be somewhat painful, but not cutting spending is going to be disastrous for our country,” he said.

Democrats and Republicans have been swapping blame for the pending cuts as the March 1 deadline looms without any sign of a deal to avert sequestration. Senate Democrats are expected to introduce legislation this week that would replace the $1.2 trillion in automatic cuts over the next 10 years with a mix of cuts and tax hikes, but the Republican-controlled House has already rejected President Obama's calls for new tax revenues to offset some cuts.

The White House has sought to pressure Republicans by warning of the real-world effects of the sequester cuts.

The administration has said the cuts force teachers to be laid off and hurt the military's preparedness as well as force delays for air travelers.

Sen. Claire McCaskill (D-Mo.), appearing on the same program, agreed that the cuts are likely to kick in, but said the fault lay with congressional Republicans.

“Unless the Republicans are willing to compromise, and do a balanced approach, I think it will kick in,” she said.

Coburn, who unlike McCaskill voted against the sequester proposal and the debt-ceiling increase last year, said the cuts in the coming year would be prorated and only add up to a little more than $40 billion. He said the federal government had the flexibility to deal with the cuts.

McCaskill, who sits on the Senate Armed Services Committee, disagreed. The Pentagon has warned it will have to furlough 800,000 employees in the coming year if sequestration isn't avoided.

“There's no question that these cuts are going to be painful, and they are thoughtless,” she said. The deputy Defense secretary, she said, has warned that “even if we did some kind of flexibility move at the 11th hour, it's too little too late.”

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James Hansen Slams Joe Nocera For Failure To ‘Understand Basic Economics’ And Selective Quotation

You might think an A-list business reporter for the NY Times would know basic economics. But not in the case of Joe Nocera.

His umpteenth confused post on the Keystone XL pipeline suggests that when he talks to people like, say, James Hansen, he doesn’t really listen:

On Monday, I finally spoke to Hansen. His knowledge and sincerity are easy to admire, even if his tactics are not. He told me he would like to see oil companies pay a fee, which would rise annually, based on carbon emissions. He said that such a tax could reduce emissions by 30 percent within 10 years. Well, maybe. But it would also likely make the expensive tar sands oil more viable. If you really want to eliminate expensive new fossil fuel sources, the best way is to lower the price of oil, which would render them uneconomical. But, of course, that wouldn’t exactly lower demand either.

#FAIL. Just how admirable is it to interview a world-class expert, mis-state his position, get the economics of his plan exactly backwards, and then disparage his tactics in the pages of the NY Times?

Hansen, as I would assume everyone knows, wants all fossil fuel providers to pay a fee, not just oil companies. Further, Hansen has published what he emailed Nocera:

An economic analysis indicates that a tax beginning at $15/tCO2 and rising $10/tCO2each year would reduce emissions in the U.S. by 30% within 10 years. Such a reduction is more than 10 times as great as the carbon content of tar sands oil carried by the proposed Keystone XL pipeline (830,000 barrels/day). Reduced oil demand would be nearly six times the pipeline capacity, thus rendering it superfluous.

How precisely would a high and rising CO2 tax make the dirty tar sands more viable? In an epic blunder of basic economics, Nocera has apparently confused a higher market price for oil — which would make the tar sands more viable — with what Hansen has actually proposed, a higher price to the consumer and businesses for using carbon-based fuels (but no direct change in the market price).

Ironically, Nocera’s economics are so backwards that he fails to realize that his final lines of snark are also utterly dead wrong. The carbon tax Hansen proposes would clearly lower demand for oil overall, and thus lower the price of oil, which would also undermine the tar sands viability.

And as Brad Plumer notes in his debunking, “No, a carbon tax wouldn’t be good for Canada’s tar sands,” tar sands oil “would be at an even greater disadvantage” since it “is more carbon-intensive than other types of crude, creating 14 percent to 17 percent more greenhouse-gas emissions over its lifespan.”

It is a sad commentary on the state of (lack of?) basic editing at the NY Times that it ran this error-riddled piece.

Finally, if you were seduced by Nocera’s “maybe” into wondering whether a CO2 price rising to $115/tCO2 in 2023 would cut U.S. CO2 emissions by 30%? Well, the Energy Information Administration says that a mere $25/tCO2 would cut CO2 emissions 20% in 10 years. So I think it is rather obvious that another $90/tCO2 on top of that would easily cut emissions 30% (especially since Hansen doesn’t want to stop the CO2 price rise after just 10 years).

As Hansen writes:

Joe Nocera was polite, but he does not understand basic economics.  If a rising price is placed on carbon, the tar sands will be left in the ground where they belong.

Hansen explains why he posted his email to Nocera: “Joe Nocera quoted a private comment from a note explaining that I could not promise I would be back in New York to meet him.  But he did not mention the contents of the e-mail that I sent him with information about the subject we were to discuss.  The entire e-mail is copied below.” In a cover email, Hansen explains, “Apologies to Bill McKibben for the comment that could be misconstrued — I do not question the efforts to wake up the public to the situation at hand, and pressure elected officials to serve the public interest, not special interests.”

Last year, Nocera took exception to my saying he joined “the climate ignorati,” asserting that I was casting him as a “global warming denier.” But as I noted at the time, the ignorati are, as Google reveals, “Elites who, despite their power, wealth, or influence, are prone to making serious errors when discussing science and other technical matters.” The shoe fits.

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The Coming Failure of 'Accountable Care'

Spurred by the Affordable Care Act, hundreds of pilot programs called Accountable Care Organizations have been launched over the past year, affecting tens of millions on Medicare and many who have commercial health insurance.

The ACOs are in effect latter-day health-maintenance organizations—doctors, hospitals and other health-care providers grouped together to provide coordinated care. The ACOs assume financial responsibility for the cost and quality of the care they deliver, making them accountable to patients. With President Obama's re-election making it certain that the Affordable Care Act will begin taking full effect next year, the number of ACOs will continue to increase.

We believe that many of them will not succeed. The ACO concept is based on assumptions about personal and economic behavior—by doctors, patients and others—that aren't realistic. Health-care providers are spending hundreds of millions of dollars to build the technology and infrastructure necessary to establish ACOs. But the country isn't likely to get the improvements in cost, quality and access that it so desperately needs.

The first untenable assumption is that ACOs can be successful without major changes in doctors' behavior. Many proponents of ACOs believe that doctors automatically will begin to provide care different from what they have offered in the past. Doctors are expected to adopt new behavior that reduces the cost of care while retaining the ability to do what's medically appropriate. But the behavior of doctors today has been shaped by decades of complicated interdependencies with other medical practices, hospitals and insurance plans. Such a profound behavior shift would likely require re-education and training, and even then the result would be uncertain.

To give one example, if ACOs are to achieve their cost-saving goals and improve medical care, most doctors will need to change some of their approaches to treating patients. They'll need to employ evidence-based protocols more often to determine optimal treatment—for instance, in prescribing medication or deciding whether certain kinds of surgery are necessary. Doctors will also have to find ways to move some care to lower-cost sites of service, such as more surgery in ambulatory clinics instead of a hospital. ACOs aren't designed or equipped to transform physician behaviors on the scale that will be needed.

Associated Press President Obama signs the Affordable Care Act at the White House, March 2010.

The second mistaken assumption is that ACOs can succeed without changing patient behavior. In reality, quality-of-care improvements are possible only with increased patient engagement. Managed care, as formulated in the 1990s by the HMO model, left consumers with a bad taste because the HMOs acted as visible gatekeepers to patient access to care. ACOs, seemingly wary of stirring a similar backlash, allow Medicare patients to obtain care anywhere they choose, but there is no preferential pricing, discounting or other way for ACOs to steer patients to the most effective providers.

The Everett Clinic in Washington state has taken steps to plug this hole by deciding not to become a full-fledged ACO. Last year, the clinic told patients that to remain with Everett, they must shift to Medicare Advantage—which encourages preventive care and supports disease-management programs. Those who want to remain on regular Medicare were required to obtain their care elsewhere.

Accountable Care Organizations are also on the hook for patients who don't comply with recommended treatment or lifestyle changes. Patients can even decide not to share their claims data or medical history with the ACO. If a woman from, say, Massachusetts, spends half the year in Florida and receives care there, the Massachusetts ACO is still responsible for managing the patient's medical costs, though it in no way was able to manage the Florida care. The seems to be unfair both to the responsible ACO provider and to the patient, who will likely not receive optimal care in these transitions.

In other words, ACOs hold caregivers accountable without requiring patient accountability. How can this work?

The third and final flawed assumption of the Affordable Care Act is that ACOs will save money. Even if the pilot Medicare Pioneer ACOs—as the 32 most advanced Medicare ACOs are called—achieve their full desired impact, the Congressional Budget Office estimates that the savings would total $1.1 billion over the next five years. This is insignificant in a total annual Medicare budget of $468 billion. As for the commercial and Medicare ACOs that are operating outside these pilot programs, even the most optimistic assumptions come up with relatively small reductions to annual health-care spending nationally.

The architects of the ACO initiative somehow assume that making the existing system more efficient will make health-care affordable. But slowing the rise of health-care costs can't address the challenge of adding 50 million uninsured to the system while keeping expenditures the same or even somewhat lower than the unsustainable percentage of national wealth that they already represent. No dent in costs is possible until the structure of health care is fundamentally changed.

How can that level of change be achieved? We beseech policy makers in Washington to study a range of reform approaches that aren't burdened by as many untenable assumptions as Accountable Care Organizations, and go well beyond them in their aspirations.

• Consider opportunities to shift more care to less-expensive venues, including, for example, "Minute Clinics" where nurse practitioners can deliver excellent care and do limited prescribing. New technology has made sophisticated care possible at various sites other than acute-care, high-overhead hospitals.

• Consider regulatory and payment changes that will enable doctors and all medical providers to do everything that their license allows them to do, rather than passing on patients to more highly trained and expensive specialists.

• Going beyond current licensing, consider changing many anticompetitive regulations and licensure statutes that practitioners have used to protect their guilds. An example can be found in states like California that have revised statutes to enable highly trained nurses to substitute for anesthesiologists to administer anesthesia for some types of procedures.

• Make fuller use of technology to enable more scalable and customized ways to manage patient populations. These include home care with patient self-monitoring of blood pressure and other indexes, and far more widespread use of "telehealth," where, for example, photos of a skin condition could be uploaded to a physician. Some leading U.S. hospitals have created such outreach tools that let them deliver care to Europe. Yet they can't offer this same benefit in adjacent states because of U.S. regulation.

These and other innovative approaches have potentially large payoffs in how health care is delivered and what it will cost. By contrast, Accountable Care Organizations over the long haul may ease the path to slightly lower reimbursements or redistribute physician compensation among specialties. But what ACOs most assuredly will not do is deliver the disruptive innovation that the U.S. health-care system urgently needs.

Mr. Christensen is a professor of business administration at Harvard Business School and co-founder of Innosight Institute, a think tank focusing on disruptive innovation. Dr. Flier is dean of the faculty of medicine at Harvard University and professor of medicine at Harvard Medical School. Ms. Vijayaraghavan is a senior research fellow at Innosight Institute.

A version of this article appeared February 19, 2013, on page A15 in the U.S. edition of The Wall Street Journal, with the headline: The Coming Failure of 'Accountable Care'.

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Congress In Contempt, Part 1: The Fiscal Cliff Is Only One Example Of Congressional Failure

by Bill Becker

There was a moment when the Founding Fathers considered putting a provision in the Constitution that would allow citizens to recall members of Congress. The proposal failed.  As a result, only members of Congress can remove other members of Congress from office.

It’s a pity.  As the 112th Congress passes into an ignominious history and a not-much-different 113th Congress takes over, one wishes the citizenry had the right to kick members out of office not just during an election year, but any time they don’t do their jobs.  Clearly, members of Congress are not doing their jobs today. By one measure, 95% of Americans think lawmakers are doing a lousy job.  One suspects the other 5% are the members of Congress themselves, along with their staffs and families.

The fiscal cliff debacle is merely the latest case in which our derelict and dysfunctional Congress has put the nation’s families, businesses and the overall economy at risk.  Even though Congress reached a last-minute agreement on the fiscal cliff last night,  significant damage already has been done by the politics of brinkmanship. From failing to fund Superstorm Sandy relief to outright denial of climate change, Congress has proved itself particularly inept.

Consider: While Congress went home for Christmas without reaching an agreement on taxes and spending, some 12 million Americans spent the holiday jobless. Two million of them lost their unemployment compensation when the crystal ball in Times Square hit bottom at the cusp of the New Year.

The health of America’s small businesses was a significant campaign issue in 2012, but it doesn’t seem to be a concern on Capitol Hill now that the election is over. The prospect of higher taxes and deep cuts in government programs caused consumer confidence to plummet six points in December, the most important time of year for business earnings, even more important this year as the economy continues climbing out of the pit created by the recession.

Think back over the last two years.  The genesis of the fiscal cliff was Congress’s standoff on raising the national debt ceiling in 2011. Legislation finally was approved only hours before the federal government defaulted on its debts.  Citing this “political brinksmanship” as a sign that Congress is “less able, less effective and less predictable” in managing the nation’s fiscal affairs, Standard & Poor’s took the unprecedented step of lowering America’s credit rating.

After last November’s election, in which voters seemed to signal they wanted an end to block-headed partisanship, congressional leaders expressed optimism they’d reach a deal  on taxes and spending before the end of the year. The fiscal cliff debacle indicates, however, that Congress didn’t get the message from voters or from Standard & Poor’s.  And another big cliff is just ahead: The need to raise the debt ceiling again in the next few weeks. The possible consequences of another standoff have been described by Jonathan Masters of the Council on Foreign Relations:

Many analysts say congressional gridlock over the debt limit will likely sow significant uncertainty in the bond markets and place upward pressure on interest rates. Rate increases would not only hike future borrowing costs of the federal government, but would also raise capital costs for struggling U.S. businesses and cash-strapped homebuyers. In addition, rising rates could divert future taxpayer money away from much-needed federal investments in such areas as infrastructure, education, and health care…Speaking to the Economic Club of New York in November 2012, Fed Chairman Ben Bernanke warned that congressional inaction with regard to the fiscal cliff, the raising of the debt ceiling, and the longer-term budget situation was creating uncertainty that “appears already to be affecting private spending and investment decisions and may be contributing to an increased sense of caution in financial markets, with adverse effects on the economy.”

Masters points out that for all the rhetoric about economic stability and fiscal discipline, the debt ceiling standoff in 2011 actually added to government waste and the economy’s jitters:

A 2012 study by the non-partisan Government Accountability Office estimated that delays in raising the debt ceiling in 2011 cost taxpayers approximately $1.3 billion for FY 2011. BPC (the Bipartisan Policy Center in Washington D.C.) estimated the ten-year costs of the prolonged fight at roughly $19 billion.

The stock market also was thrown into frenzy in the lead-up to and aftermath of the 2011 debt limit debate, with the Dow Jones Industrial Average plunging roughly 2,000 points from the final days of July through the first days of August. Indeed, the Dow recorded one of its worst single-day drops in history on August 8, the day after the S&P downgrade, tumbling 635 points.

Lawmakers in the modern era have been inept at timely decisions on spending in general.  American families found something new in their stockings this Christmas: The threat that milk prices would double after Jan. 1 because Congress failed to reauthorize the nation’s farm program when it expired earlier in the year.  Worse, farm experts warned the nation’s agricultural sector would be thrown into turmoil. As the year ended, lawmakers extended the program temporarily for one year, pushing the milk can down the road.

Last June, Congress finally approved a national transportation bill three years after the old bill expired, but only after 130 mayors from 36 states petitioned congressional leaders to finally get the job done.

Congressional cowardice is on full display when it’s time to approve the federal government’s annual budgets. Members avoided making tough budget decisions just before the November election by failing to approve a new budget when old one expired on Oct. 1. Congress finally approved a temporary budget bill just a week before the federal government would have been forced to shut down.  The temporary budget – still in effect today — essentially puts federal agencies on hold until at least next March, after the 113th Congress has been seated and when the next election is still 20 months away.

Stop-gap budgets have become a tradition in Congress.  As Brendan Greeley reports on Bloomberg Businessweek:

Since 1952, according to the Congressional Research Service, Congress has completed its spending bills by its own deadlines only four times—in 1977, 1989, 1995, and 1997. Year after year, lawmakers enact continuing resolutions to tide agencies over until appropriations bills pass. Fiscal year 2011—all 365 days of it—was paid for this way. Though a hyperpartisan year on Capitol Hill, it was by no means exceptional.  According to the CRS, 178 days every year, on average, have been funded through continuing resolutions since 1977. Basically, half the time there is no budget.

What are the consequences? More wasted money and government inefficiency. Greeley continues:

The uncertainty creates all kinds of inefficiencies,..(F)ederal contractors build a risk premium into their fees, charging back to taxpayers the extra uncertainty of potential funding disruptions. Agency leaders also have trouble staffing for new projects when there’s no budget. They have to resort to signing contracts on a monthly rather than an annual basis. Because every contract costs money to close, more contracts mean greater administrative and legal costs…

And the inefficiencies don’t end when the appropriations finally come through. Contractors or hires with critical skills may already have found other work. Agencies have trouble spending what they then receive before the end of the fiscal year.

Congress doesn’t tell us how much its tardy budgeting costs taxpayers, but it sometimes can’t hide the costs of partisan grandstanding.  For example, with important legislative work languishing, House Republicans held 33 votes to repeal Obamacare by July of last year, even though it was clear the Senate would never agree.  As Huffington Post reported:

While Republicans lambast the cost of implementing health care reform, a new report shows that their efforts to repeal the law have come at a major cost to taxpayers — to the tune of nearly $50 million…Republicans’ many fruitless attempts at repealing the Affordable Care Act have taken up at least 80 hours of time on the House floor since 2010, amounting to two full work weeks. As the House, according to the Congressional Research Service, costs taxpayers $24 million a week to operate, those two weeks amounted to a total cost of approximately $48 million.

In large part because of delays in the Senate’s confirmation of President Obama’s appointments, Chief Justice John Roberts reported on Dec. 31 that “judicial emergencies” have developed in 27 jurisdictions where judicial vacancies have not been filled.   “The pattern throughout (President Obama’s) tenure has been uncontroversial judicial nominees…going nowhere on the Senate floor,” according to Jennifer Bendery’s analysis of last year’s Senate confirmation process on Huffington Post.

While extreme weather caused unprecedented levels of damage to communities across the United States in 2012, the 112th Congress avoided discussing, let alone acting on, global climate change. It failed to pass the Violence Against Women Act. Red and blue states have lost thousands of jobs in the emerging wind energy industry because Congress stalled on passing the Production Tax Credit for utility-scale wind development by year’s end.  And while bargaining to cut spending on programs such as Medicare and Social Security, lawmakers refused to touch sacred cows like the billions of dollars of unnecessary taxpayer subsidies Congress gives the oil industry.

Last November’s election was an opportunity for voters to discipline Congress for all of this. But even with public approval of Congress at one of the lowest levels ever,  91% of the members up for reelection in November were returned to office.

We appear to be a masochistic electorate and Congress appears to count on it and to holds us in contempt.  That’s not likely to change until we impose the discipline on it that it’s unwilling to impose upon itself.  How? I’ll offer some suggestions in Part 2.

Bill Becker is the Executive Director of the Presidential Climate Action Project. For more specific information about the Soldiers Grove experience and its lessons for other disaster-affected communities, see Becker’s report,  “Rebuilding for the Future”.

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