Author: David Dayen

photo: waynewhuang via Flickr

We’ve been covering the dangers of a pure regulatory structure to deal with insurance company abuses, rather than competition through a public option, for some time, mostly in real time during the health care debate. It didn’t take the insurance companies more than a few minutes once the Affordable Care Act was passed to dispute a key passage about pre-existing conditions for children; I suggested they were using the issue as an excuse to raise premium rates.

Dan Froomkin now sizes up the insurance industry’s next move, and agrees that they will scrap for every advantage to turn the ACA even more to their advantage. Froomkin quotes some experts in this long game from the insurance companies:

“This is what you’re going to see as each element in this plan comes up for implementation,” said Marcia Angell, a former editor of The New England Journal of Medicine who now teaches at Harvard Medical School. “This insurance industry is going to give up nothing.”

In the short run, companies are expected to keep doing what they’ve been doing, which means, among other things, jacking up their rates. “There’s nothing to stop them from raising their premiums, and that’s what they’re going to do,” said Angell, a supporter of “single-payer” health insurance […]

“In the meantime, they can continue to cherry pick the healthiest customers, while foisting the sick into the new high-risk pool,” said Wendell Potter, a former senior health insurance executive at CIGNA who went rogue and became a consumer advocate.

That’s only the beginning, though.

“They also will continue to try to shift more and more of the cost of health care from them to the people that are enrolled in their plans,” Potter said. That involves moving people currently in managed care, with its relatively modest co-pays, “out of those plans and into high-deductible plans that make people pay thousands of dollars before the company will pay a dime,” Potter said.

“Managed care was last decade’s silver bullet,” he told HuffPost. “The new silver bullet for the insurance industry is the high-deductible plan. More and more people will not get a dime from their insurance companies.”

Megan Carpentier helpfully lists ten ways the insurance industry will simply maximize profits at the expense of their customers. Among the more devious ways? Making it more difficult for doctors to fill out claims, reducing insurance company payouts (this is basically like skipping out on the check after a meal); marketing only to healthy people, like putting the insurance office on the top floor of a building with no elevator; using current overhead expenses as part of the “medical loss ratio” that’s supposed to direct premium dollars into medical treatment; and using the “unhealthy behavior” loophole to try and expand the community rating adjustment well beyond just smoking.

We’ve talked about all of these before. But I don’t think supporters of reform are ready for the bonanza of lobbying that will focus on implementation of the regulations. . . .

Thomas J. Donohue, the (US Chamber of Commerce’s) president and chief executive, sent a letter to the group’s board members late Monday detailing an aggressive strategy to blunt the impact of the new law. Mr. Donohue said the business lobby would seek changes to regulations to “minimize the potentially harmful impacts of this bill on our members and the country.”

If regulators “exceed legislative mandates or try for end-runs around the lawful rulemaking process,” he wrote, the chamber “will take legal action.”

“The Chamber is going to carry a message across the country that says the health care debate is not over,” Mr. Donohue wrote. The law “is a major step in the wrong direction and will prove to be a serious drag on our economy and the nation’s fiscal solvency.” […]

The chamber plans to assign a team of its most experienced staff “to participate in the years-long process of writing the thousands of pages of federal regulations that will implement the many provisions in the legislation,” Mr. Donohue wrote. While the chamber can’t actually write those provisions, it can lobby for certain language and technical corrections.

That’s the new battleground. The National Association of Insurance Commissioners have the task of writing many of the regulations that will govern insurance companies, and according to Wendell Potter, at a recent NAIC meeting he saw 1,700 representatives of the insurance industry, balanced by just 29 consumer representatives. Never mind the state-level regulations governing the exchanges that will have to be written; if anything those officials are even more captured by industry.

I don’t think you needed to be Nostradamus to figure this out. The regulations are the soft spot where industry lobbyists know how to navigate much better than anyone looking out for consumers. Basing the entire reform on a regulatory regime inevitably exposed it to this kind of danger.

Gov. Brian Schweitzer (D-MT)

Montana Gov. Brian Schweitzer has always been right at the forefront of the drug re-importation debate. In previous runs for Governor he highlighted the issue by actually busing senior citizens into Canada to purchase cheaper pills. A few weeks ago, Schweitzer sent a letter to the HHS Secretary, Kathleen Sebelius, calling for a waiver to allow Montanans on Medicaid and CHIP to get imported prescription drugs from Canada.

During this time of economic recession, states have made very tough choices to balance their human services budgets. There is one area where costs could be controlled without adversely impacting people who need health care. I am asking you to join me in my fight against unfair drug pricing by granting a Medicaid waiver allowing us to import prescription drugs from Canada for Montanans covered by Medicaid, Healthy Montana Kids (Montana’s CHIP program), our state employee health plan and our correctional systems. By allowing Montana to import medications from Canada we estimate we could save up to $40 million.

The Missoulian follows up on the issue today.

Montana Gov. Brian Schweitzer is still moving forward with his plan to import cheaper medicine from Canada, despite promises made in the health care reform recently passed by fellow Democrats in Washington D.C.

Schweitzer says the health care reform does far less than critics allege and supporters claim. He says prescription drugs will still be too expensive.

It’s impossible to counter Schweitzer’s argument. Indeed, it wasn’t so long ago that the Montana Governor was delivering the official Democratic radio address on this subject. The PhRMA deal in the Affordable Care Act has been universally recognized as ugly; just yesterday the AP credibly alleged that the drug lobby basically won out more than any other stakeholder. And even though Montana’s own Max Baucus can be credited with engineering the deal, Schweitzer continues to press for fair treatment for his constituents and a fair price for their medical care.

Good for him. No response yet from HHS.

President Obama and Secretary of Education Arne Duncan (photo: U.S. Air Force via Flickr)

Ezra Klein has some good words for the “Race to the Top” contest that the Education Department has been running for states to access $4.35 billion dollars in stimulus funds. He describes it here:

Race to the Top is a $4.35 billion grant program created in the stimulus package. You can read the official description here, but the short version is that the states submit proposals to improve their education system to the federal government, and if the Feds approve, the states get a pot o’ money with which to implement the plan. The idea isn’t just to fund public schools, but to use the promise of federal money in a time of strapped state budgets to empower reformers. The program has garnered bipartisan praise, including a glowing column from David Brooks.

Race to the Top just announced their first two grant winners, Tennessee and Delaware, yesterday.

I hope we can be honest about what this actually represents: blackmail. It forces states to change their education laws to fit particular notions about how to manage public education in America. And it does so at a time of crippling state budgets, when the Race to the Top funds mean the difference between thousands of teachers laid off or kept on the job, between class sizes expanding or shrinking. Basically, Arne Duncan and the White House are leveraging crisis to make preferred changes in education policy.

And let’s be very clear about this: the changes sought are entirely at the discretion of Arne Duncan and the Education Department. These changes include ideas typically advanced by “reformers” like charter schools, merit pay for teachers and many other “market solutions” for education. You can agree with these ideas or not; I’ve heard arguments on both sides, and it’s important to note that teacher’s unions largely agreed with the changes in Tennessee’s policies that draw the Race to the Top grant. And let’s not be naive in thinking that the federal government doesn’t leverage public money to garner preferred policies in the states all the time – that’s basically how the speed limit works.

But the metrics for winning these stimulus funds comes down to “what Arne Duncan likes about education policy.” I don’t think he’s somehow all-knowing about it, or has access to the best policy prescriptions for every school district in America. The data is not conclusive about the effects of charter schools, or merit pay, or test measurement, or any of the jumble of new ideas in the education sector. It’s just not, no matter what anyone on either side tells you. We could be experiencing “declines” relative to the rest of the world on education based purely by cultural factors and more funding for education in developing nations in Asia and elsewhere. I don’t believe we have the kind of “comparative effectiveness research” to cement that certain kinds of learning environments or school structures beat others; given all the variables, I don’t know that we ever will.

What we do know is that only one side of this debate is withholding funding until their preferred policy prescriptions are enacted. And they’re doing it at a time when the biggest obstacle to education in America in the near-term can be measured in dollars and cents. Giant budget shortfalls in the states mean layoffs for teachers and worse opportunities for students, whether your state has a cap on charter schools or not. The compassionate education policy at this time is not to shock-doctrine states into changing their ways, but in allowing them the means to survive and not fail a generation of students.

The Obama Administration wants to extend the Race to the Top program for the 2011 budget. And that’s their prerogative. But let’s not pretend that’s a decision entirely borne out of a desire for students to reach their educational goals. No, that would look more like giving schools what they need to maintain their current effort.

(photo: Rainforest Action Network)

We’ve been hearing about a looming crisis in commercial real estate (CRE) for a while, which has already been the cause of dozens of community bank failures. With nearly half of CRE loans – as much as $700 billion – underwater, a wave of defaults can be expected. And yesterday offered the first indication that Tim Geithner is aware of the issue. Speaking on CNBC, Geithner acknowledged the difficulties in the CRE market:

Mounting losses from commercial real estate loans will continue to be a problem for the U.S. and especially smaller banks, but it can be managed, Treasury Secretary Timothy Geithner said Monday.

“Commercial real estate’s still going to be a problem for the country,” Geithner said in an interview with CNBC. “But we can manage through this process.” […]

One way to help manage the commercial loan distress, Geithner said, is through the $30 billion fund proposed by President Barack Obama to provide money to midsize and community banks if they boost lending to small businesses. The program, which must be approved by Congress, would use Tarp money repaid by banks, which now has reached about $176 billion.

As Megan Carpentier notes, this is a completely irrelevant solution. How $30 billion sprinkled around community banks for them to lend out, with a return of far less than that over a period of years, can paper over $700 billion-plus in CRE loan defaults is mystifying.

In February, (Elizabeth) Warren noted that $1.4 trillion in commercial real estate loans would need to be refinanced between 2011 and 2014 when the shorter-term commercial real estate mortgages end, and a significant proportion of those are underwater already. More than $50 billion in commercial real estate mortgages are already in default or foreclosure — both figures are far larger than Geithner’s $30 billion plan to extend credit to small businesses. Sheila Bair, the chair of the FDIC, expects that commercial real estate defaults and losses will be the number-one factor that drives small and medium-sized banks into failure this year at a higher rate than they experienced in 2009. Extending credit to small businesses to the tune of $30 billion doesn’t seem like the best solution to the coming commercial real estate crisis or its downstream effects on businesses or the banks holding the loans.

Geithner went on in the appearance to tout the potential $8 billion dollar “profit” from the Treasury sale of Citigroup stock, a profit you can only derive through fantasy accounting.

If Treasury wants to pretend they have solutions to deep-seated problems in the economy, you’d think they’d invest in some better explanations. Or alternatively, do what’s needed to fix the problems.

Arkansas News columnist John Brummett has unkind words for Blanche Lincoln’s latest slash-and-burn campaign against her primary opponent Bill Halter. In a series of mailers, Lincoln has attacked Halter for his service on the corporate board of Threshold Pharmaceuticals, which was sued by shareholders for providing misleading information on their products. Lincoln took this information to whisper-campaign heights with a mailer that literally says Halter has a “prescription drug problem.”

Brummett didn’t appreciate that line of attack.

This is the cynical demonization process that is part of a cancer on our politics. It’s not enough to distinguish yourself from your opponent by performance and policy. You must delve into his past and overstate any association that might make him seem more than someone with whom you merely disagree, but someone who is a sinister threat, near-criminal.

Halter was not directly complicit in any of those matters. He is guilty of bumps in the road of business life — of associations with human beings who were less than pristine. None of it bears on his stand on the issues. He does not run for the U.S. Senate to move your job to India and sell you drugs that don’t work.

It’s Blanche, actually, who has a public record that is obliging to multi-national corporations and drug companies. That doesn’t make her a bad person. It makes her a bit of a Republican.

The most absurd part of Lincoln’s attack is that it came just a week or so after she attacked Halter for breaking his pledge to run a positive campaign – based on independent expenditure ads not coordinated with Halter, by law. After this dishonesty, Lincoln goes ahead and starts up a negative smear campaign herself. To quote her, “That didn’t take long.”

But the real news in the Brummett piece comes here:

By the way, I’m hearing that Arkansas corporate interests are talking among themselves about producing independent attack ads on Halter to counter the national labor assault on Lincoln. If these commercials occur, surely we can fully expect Lincoln to denounce them.

Welcome to the post-Citizens United world. This is why the reforms proposed by Democrats on transparency and stand-by-your-ad disclosure are so vital, and likely to be opposed by Lincoln. Because if corporate Arkansas would have to name themselves specifically on every ad coming to the defense of Blanche Lincoln, they’d simply be less effective means of shaping public opinion. I don’t know how the “Halter is a tool of corporate drug-makers” charge sticks when the biggest companies in the state mull over running ads on Lincoln’s behalf.

Halter, for his part, released a new ad yesterday presenting himself as a Senator who will “stand up to special interests.”

(photo: vasta)

After a week of wrangling, the health insurance trade group AHIP announced that insurers would agree to covering all children regardless of pre-existing conditions, though they added in the same breath that they could have to increase rates to accommodate such a change. This exposes the poor drafting of this late-to-the-game regulation, because without some form of price rating health insurers can raise rates with virtual impunity, and may now feel they have an excuse to do so.

Health and Human Services Secretary Kathleen Sebelius sent a letter to AHIP yesterday, attacking them for trying to alter the regulations passed by Congress within days of the bill becoming law. “Now is not the time to search for non-existent loopholes that preserve a broken system,” she wrote in the letter.

After the few days of bad publicity, AHIP appeared to retract their interpretation of the statute.

AHIP said de-linking the requirement to insure sick children from the law’s mandate that everyone buy health-insurance coverage, which goes into effect in 2014, could drive up prices in the meantime. But the group said it would do whatever HHS tells it to do.

In a letter responding to Ms. Sebelius Monday, Ms. Ignagi said her members recognized the “significant hardship that a family faces when they are unable to obtain coverage for a child with a pre-existing condition,” and pledged to fully comply with the regulations HHS is developing. The group is analyzing how much it would cost to take all comers under 19 years old.

You can pretty much figure out AHIP’s game here. With no restrictions on cost until 2014, the industry can raise their premium prices almost at will. Even the bad publicity suffered from that 39% rate hike of Anthem Blue Cross plan has not stopped that scheduled increase from taking effect in May. And when outrage is expressed by families facing double-digit rate hikes, AHIP will clear their throats and blame the pre-existing condition exclusion for children, forcing the poor insurance companies to take on a sicker risk pool and raise prices to survive.

Except covering kids is fairly cheap to begin with. And the universe of kids with a pre-existing condition who aren’t covered through SCHIP, Medicaid, or an employer plan is extremely small. So by making a big issue of this, AHIP potentially sets up large rate hikes in the 2010-2014 period that aren’t at all justified.

Though sicker children incur more health expenditures, additional costs to the industry were likely to be minimal as the number of children who would be affected by the broadest interpretation of the law could be relatively small. The Children’s Health Insurance Program is credited with extending coverage to about eight million low-income children who are not poor enough for Medicaid.

Roughly eight million children remain uninsured, according to the Kaiser Family Foundation, but just 1% to 2%—or 80,000 to 160,000—have a health condition such as cystic fibrosis or cancer that would disqualify them from private insurance coverage, said Sara Rosenbaum, chairwoman of the health-policy department at George Washington University and a children’s health-care expert. Many of those children’s families were unaware they could qualify for Medicaid or CHIP assistance or enroll in an employer plan, she said.

They’re fighting this so hard to let everyone know that the rate hikes aren’t their fault. This has been their M.O. since February, since the Anthem Blue Cross mess. It hasn’t “worked” in the PR arena, but they’ve quietly gotten their rate hikes, and that’s really all that matters to them, I gather.

graphic: Brooks Elliott via Flickr

You can tell that financial reform will be the next heavy lift in Washington because everyone’s chattering about it today, and proposing a variety of solutions. But they actually come down to something a lot simpler than what’s being proposed: regulators need a few clear rules, and they need to do their jobs. Mike Konczal elaborates:

People talk a lot about the “unregulated” shadow banking market, but it is important to remember that they were (poorly) regulated by the SEC. And the SEC gave an exemption to 5 firms – Goldman, Merrill, Lehman, Bear Stearns, and Morgan Stanley – to leverage up further in the 20-40 to 1 range, while commercial banks were still leveraged in the 8-12 to 1 range. The more leverage means the bigger the returns, but the harder the falls. This increased the regulatory arbitrage of the shadow banks, because these five firms could act as if they were commercial banks but could be significantly more leveraged, offering better deals and crowding out the market.

There is nothing in the Dodd Bill that would have stopped this other than the hope that regulators at the Federal Reserve are smarter, more resistant to lobbying, and will let their actions be more transparently monitored, critiqued and subject to democratic review by the public and the general community of investors than the SEC. Maybe this is true today, and maybe this is even true on a medium term time frame. By why take the chance, when we can simply put in a hard line of 15-to-1 like in the Frank Bill?

Exactly. Dodd’s draft leaves the rulemaking process largely up to regulators who proved themselves incapable of making those decisions to the good of the consumer and the taxpayer rather than the Wall Street titan.

It’s possible that capital requirements like that mentioned above from the Frank bill are insufficient for the current problem, and that size and not leverage must be attacked. But this is particularly true if the setting of those requirements are discretionary and put in the hands of regulators and officials who are susceptible to lobbying from the big banks.

What should concern everyone who thinks that laws can be written to successfully constrain size and risk is what Robert Reich argued today, that regulators have the ability today to enforce the laws on the books in such a way that would make the financial sector far less dangerous.

Before you wallow in hopeless cynicism, though, it’s worth noting that we already have a law against this. It’s called the Sarbanes Oxley Act of 2002. It just needs to be enforced […]

It requires CEOs and other senior executives to take personal responsibility for the accuracy and completeness of their companies’ financial reports and to set up internal controls to assure the accuracy and completeness of the reports. If they don’t, they’re subject to fines and criminal penalties.

Sarbox is directly relevant to the off-the-balance-sheet derivative games Wall Street has been playing. No bank CEO can faithfully attest to the accuracy and completeness of its financial reports when derivatives guarantee that the reports are incomplete and deceptive.

I’m not entirely hopeful that regulators will use whatever new tools they may be given any more effectively than they are using the tools from the last crisis.

The Nevada Senate race took an interesting turn when Scott Ashjian announced his intention to run as an independent “Tea Party” candidate. The presence of a third party taking votes from the substantial anti-Harry Reid faction could save Reid’s re-election by enabling him to win with less than a majority.

In recent days, however, Ashjian has been stung by felony theft charges over writing bad checks to local businesses. The fact that the head of the Clark County bad check unit seeking the arrest of Ashjian is also a former head of the Clark County GOP has led to dueling charges of political motivations on all sides.

The Tea Party Express, which just held a big rally in Reid’s hometown of Searchlight over the weekend, released a Web ad accusing Ashjian of being a “fraud” trying to split the vote and deliver the Senate seat back to Reid. They’ve threatened to run the ad on television if Ashjian doesn’t drop out of the race.

Now, it’s extremely rich to see the Tea Party Express accuse someone else of being a fraud. The term could not be applied more perfectly to anyone but them. In reality, the Tea Party Express is composed of California-based Republican political consultants, cashing in on the name “Tea Party” for personal gain. In fact, over two-thirds of their PAC money, over $850,000, went directly to their political consulting firm.

The spectacle of a Republican operative-run PAC calling a Tea Party candidate an inauthentic fraud is something special.

The name on the reimbursement slip for around $2,000 in “meals” at a bondage-themed nightclub in West Hollywood is Erik Brown. Turns out the guy has a profile as a California political consultant.

A California-based political consultant who charged the Republican National Committee nearly $2,000 for a night out at Voyeur – a risque West Hollywood nightclub now at center of the latest controversy surrounding RNC chairman Michael Steele – will return the money to the party, a committee spokesman told CNN Monday.

Erik Brown, president of the Orange County-based Dynamic Marketing, Inc., was re-imbursed in February for $1,946.25 worth of charges at the nightclub, according to the RNC’s latest filing with the Federal Election Commission.

Brown is also the Political Director of the Orange County Young Republicans. Here’s who he’s been working for in California lately:

Brown’s firm, which also has an office in Washington, D.C., has done direct mail and consulting work for GOP candidates in California including Assemblyman Chuck DeVore, now a candidate for Senate, and Steve Poizner, the state Insurance Commissioner now running for governor.

Brown did not respond to phone calls or e-mails seeking comment, but he has spent time with Steele in the past. In October, Brown tweeted: “Enjoying the football game with RNC Chairman Michael Steele. (Eagles vs Redskins at FedEx Field).”

Maybe Brown accompanied Steele to at this game (look at the :30 mark):

The Magritte classic via Nad Renre

The multi-state arrest of members of the Hutaree and other Patriot militia groups, carried out by the FBI’s Joint Terrorism Task Force, hasn’t yet resulted in the word “terrorist” being used in any of the stories about the raids.

Washington Post
NY Times
CNN
Associated Press

Funny how that word isn’t considered appropriate to describe an extremist group planning to kill police officers using weapons of mass destruction. In fact, the plan to kill a police officer and then attack his funeral using homemade bombs resembles nothing so much as the strategies of the Mahdi Army. But these are Christians, so they cannot be terrorists. Or something.

According to the indictment, Hutaree members view local, state and federal law enforcement authorities as the enemy and have been preparing to engage them in armed conflict.

The indictment alleges the Hutaree group planned to kill an unidentified law enforcement officer in Michigan and then attack officers who would gather for the funeral.

According to the plan, the indictment said, the Hutaree wanted to use improvised explosive devices to attack law enforcement vehicles during the funeral procession. The indictment said those explosive devices, commonly called IEDs, constitute weapons of mass destruction.

None dare call it terrorism.

This is pretty smart, IMO. Blanche Lincoln put out an ad touting her success in “saving” 1,700 jobs at the Cooper Tire and Rubber Company plant in Texarkana, AR. Instead of a response by the Bill Halter campaign with some well-paid VO narrator intoning “Blanche Lincoln is wrong… in fact, the company’s own workers claim otherwise… Blanche Lincoln, wrong for Arkansas, wrong for America,” the Halter campaign highlighted this video of some Steelworkers effectively rebutting Lincoln’s claims.

It greatly concerns me of Sen. Lincoln’s recent ads, where she’s taking credit for helping save the Cooper Tire and Rubber Company plant in Texarkana, Arkansas, and 1,700 jobs, when indeed the members of that plant took $31 million dollars in concessions to keep that plant open. And it’s Sen. Lincoln’s trade record and her votes on NAFTA and CAFTA that actually have cost us thousands of jobs throughout the state as well as hundreds and thousands and millions of jobs across this country.

It’s simply more powerful to hear from the workers themselves, with their personal story of sacrifice, making Lincoln’s claim about “saving” the Cooper plant absurd.

While this rebuttal was not officially connected to the Halter campaign (though they blasted it on their Twitter feed), it’s their use of microtargeting, long used on the Republican campaign side, that could prove innovative and effective in toppling Lincoln.

“The Halter campaign is smart to do this,” said Brent E. McGoldrick, a microtargeting expert who works for Financial Dynamics, a business and financial communications company. “And the Lincoln campaign would be wise to [do] something similar.” McGoldrick, who has developed microtargeting and market segmentation business for political campaigns and corporate and public affairs clients, added, “This is exactly the kind of race where a campaign needs microtargeting.”

In Arkansas, voters don’t register their party affiliation, which makes microtargeting both more difficult and potentially more rewarding. Moreover, campaigns typically look to past election data as a model for what to expect, but the high-profile nature of this race means past voter turnout numbers offer limited guidance.

“That makes turnout hard to predict,” McGoldrick said. “In that context, how does a campaign identify the true liberals and the conservative Democrats? Microtargeting helps answer of all these unknowns.”

It’s good to see Democrats trying something new to reach voters. Essentially this is an echo of the “snowmobile voters” kind of targeting campaigns used by Karl Rove in the Bush years.

You can read some of Halter’s issue positions here.

It's a-maze-ing that insurance companies see the law a little differently…. (longleat hedge maze photo by Howard Gees)

I wrote about the insurance industry’s attempt to delay the piece of the Affordable Care Act providing guaranteed issue for children back on Thursday. The New York Times hits this again today, describing how the industry considers it an issue of semantics and drafting:

Insurers agree that if they provide insurance for a child, they must cover pre-existing conditions. But, they say, the law does not require them to write insurance for the child and it does not guarantee the “availability of coverage” for all until 2014.

William G. Schiffbauer, a lawyer whose clients include employers and insurance companies, said: “The fine print differs from the larger political message. If a company sells insurance, it will have to cover pre-existing conditions for children covered by the policy. But it does not have to sell to somebody with a pre-existing condition. And the insurer could increase premiums to cover the additional cost.”

The key is that last sentence. Guaranteed issue doesn’t mean a whole lot on its own without accompaniment with some form of community rating. Otherwise, the insurer can increase premiums to such a degree for the particular family that they wouldn’t be able to afford insurance without keeping the child off the policy.

Top Democrats may be outraged by the insurance industry’s intransigence, but nowhere in the law – to my knowledge – did they add any community rating language to cover this initial guaranteed issue for children. There is modified community rating for all along with guaranteed issue when the exchanges start up in 2014.

Insurers want to do one of two things – exclude coverage for the particular pre-existing ailment of the child, or just exclude the child from coverage at all. Since children don’t buy their own policies, this gets mixed up with family coverage. And of course, if a child and a parent both have a pre-existing condition, that family will not be able to get coverage until 2014.

When members of the group tasked with writing the rules say something like this, you know something is wrong:

Experts at the National Association of Insurance Commissioners share that concern.

“I would like to see the kids covered,” said Sandy Praeger, the insurance commissioner of Kansas. “But without guaranteed issue of insurance, I am not sure companies will be required to take children under 19.”

The guaranteed issue for children provision came into the Affordable Care Act late in the game, and does not seem to have been well thought-out.

photo: dougtone via Flickr

The fallout from the global sex abuse scandal in the Catholic Church has created damage to the Vatican unheard-of in my lifetime. Even when the original cases of pedophile priests in America arose several years back, the moral authority of the Pope and the hierarchy at the Vatican was not challenged, only some of the archbishops and cardinals presiding over the cover-up. But then-Cardinal Ratzinger’s involvement in similar cases in Europe, from Germany to Italy, add a new dimension to this scandal. First of all, the abuse can be seen as systemic, as well as the response from the church leadership – to hide the problem, transfer the abusers and deny accountability. Ratzinger had primary responsibility for the cases for over two decades while serving at the Vatican, and his role in the scandals can therefore not be questioned.

Now Pope Benedict XVI, Ratzinger struck back in his Palm Sunday sermon, vowing not to be intimidated by “petty gossip.” But just the fact that the Pope has to go on the offensive in a fight for his own survival shows you how broken his pontificate has become. The cumulative effect of the scandals, across countries and continets, have sapped the pontiff’s ability to lead and blown a hole in any effort by the Church to raise morality in any context.

But Victor Simpson notes that this really isn’t localized to Benedict XVI, but has been how the Church has handled this case of evil within its ranks for a long time.

The Vatican is facing one of its gravest crises of modern times as sex abuse scandals move ever closer to Pope Benedict XVI — threatening not only his own legacy but also that of his revered predecessor […]

But as attention focuses on Benedict, a perhaps thornier question looms over how much John Paul II, beloved worldwide for his inspirational charisma and courageous stand against communism, knew about sex abuse cases and whether he was too tolerant of pedophile priests.

John Paul presided over the church when the sex abuse scandal exploded in the United States in 2002 and the Vatican was swamped with complaints and lawsuits under his leadership. Yet during most of his 26-year papacy, individual dioceses and not the Vatican took sole responsibility for investigating misbehavior.

Professor Nick Cafardi, a canon and civil lawyer and former chairman of the U.S. bishops lay review board that monitored abuse, said Benedict was “very courageous” to reverse Vatican support for the Legionaires of Christ, a sex scandal-tainted organization staunchly defended by John Paul.

What you really see here is a corporate, hierarchal response to crisis – characterized by cover-ups and payoffs and scandal management PR. Sinead O’Connor’s remarkable editorial, detailing her experience in one of Ireland’s infamous “Magdalene laundries,” is a testament to that.

The Catholic church is really experiencing a similar decline that other respected institutions have felt in recent years. And like those other declines, it’s entirely of their own making.

UPDATE: Postscript.

image by dpwolf (flickr)

If Chris Dodd is to be believed, his financial reform bill, which passed the Senate Banking Committee this week, will hit the floor of the Senate right after the two-week recess. Noam Scheiber reports that the Administration settled on financial reform as the next big push because of the opportunity it creates to squeeze Republicans.

The bill differs in certain respects from the version the House passed in December—one difference is the New York Fed provision, which the House bill lacks. But, on Wednesday, Obama told Dodd and his House counterpart, Barney Frank, that he could more or less live with either version, according to an official knowledgeable about the meeting. (Though he stressed that he’d like to combine the toughest elements of both, as with an exemption from derivatives regulation for non-financial companies, which is stricter in Dodd’s bill.) Mostly, he just encouraged them to press ahead, emphasizing the win-win dynamic at work. If Republicans dig in, the president argued, that’s a fight he’d welcome. (Administration officials have seen polling suggesting the public will assume Republicans are carrying Wall Street’s water, regardless of their arguments.) And if Republicans want to join in the effort to rein in Wall Street—well, no one at the White House would turn down a big, bipartisan victory.

I’m not denying the politics of the issue, particularly in the perception of taking on Wall Street. But disregarding the content in favor of the optics risks muddying the message, that Republicans are on the side of the banks. Because the Dodd bill simply lacks most of the fundamental reforms actually needed to solve the problems in our financial industry exposed by the 2008 meltdown, and pretty much every expert surveying the policy knows it. Mike Konczal cites some specifics:

The Senate bill is lacking in many of the essential areas for reform. Here are specific, targeted ways of strengthening the Senate bill:

Hard limits related to both size caps relative to GDP and leverage ratio must be specified in the bill. This will put a floor to the difficulty of resolution and the damage to the economy.

The Volcker Rule should be accepted outright, rather than through the decision of the Financial Stability Oversight Council.

The Bureau of Consumer Financial Protection must have full rule-making authority over non-bank lenders, including auto lenders.

The Bureau of Consumer Financial Protection must keep its lack of preemption over state regulation.

The derivatives section should be included to require all standardized derivatives to trade on an exchange with clearing, keeping with the original financial regulatory reform language introduced by President Obama in June of 2009.

The Financial Stability Oversight Council should not have the ability to alter the derivatives rules, override the Bureau of Consumer Financial Protection or change other regulations by a vote.

Early remediation requirements should be defined as to intervene earlier than the event of financial decline for a large systemically risky financial firm with a rule written by Congress.

There should be more focus on investing in high end, internationally focused position monitoring for large systemically risky financial firms.

In the light of recent scandals, there should be extra language included that targets fraud in accountancy and directly addresses issues of off-balance sheet reform.

Konczal perhaps puts the size and leverage caps right at the top because they represent the biggest failing in the Dodd approach. Frank’s legislation came out of the House with a hard cap on leverage, but in truth, both of them fail to break up the big banks, who can evade regulation and oversight with ease, and demand bailouts when they gamble their way into trouble. Tim Geithner also wants to use hard capital requirements as the basis for managing size, but while this would be preferable to the discretionary approach in the Dodd bill, it doesn’t totally get to the heart of the matter.

It’s beneficial to have resolution authority for financial firms when they fail, but that does nothing to prevent that failure, nor would it be sufficient for a multi-national, multi-connected financial firm. Dodd appeared to concede this earlier in the week, but his bill still misses the mark – too big to fail equals too big to exist. Quoting Sen. Ted Kaufman:

What walls will this bill erect? None. On what bedrock does this bill rest if the nation is to hope for another 60 years of financial stability? Better and smarter regulators, plain and simple. No great statutory walls, no hard divisions or limits on regulatory discretion, only a reshuffled set of regulatory powers that already exist. Remember, it was the regulators who abdicated their responsibilities and helped cause the crisis.

Thus far, on the central aspect of “too big to fail,” financial reform consists of giving regulators the authority to supervise institutions that are too big, and then the ability to resolve those banks when they are about to fail. Upon closer examination, however, the former is virtually the same authority regulators currently possess, while the latter – an orderly resolution of a failing mega-bank – is an illusion. Unless Congress breaks up the mega-banks that are “too big to fail,” the American taxpayer will remain the ultimate guarantor in an almost certain-to-repeat-itself cycle of boom-bust-and-bailout.

We have seen this boom-and-bust cycle in our history. Before the New Deal reform panics and bank runs were a central a central fact of American life. Those reforms made banking boring – reducing the system’s size relative to the economy and reducing overall risk. Deposits may be guaranteed now, but the banks have the ability to gamble with impunity – getting their risk socialized while they keep their profits. Perhaps we can tax size, perhaps we can cap size, but we have to do something along these lines, as Devilstower illustrates.

The problem is that the banks are still as large as they ever were. In fact, thanks to the buyouts of their failed neighbors using loans that we provided, they’re bigger. Citigroup currently has over $2.5

trillion

in assets. There’s absolutely no evidence that banks need to be even a twentieth of this size to compete internationally, and there’s certainly no evidence that the existence of such banks is good for the economy. The only thing that’s certain is that banks this large provide a huge and looming risk. They are able to take any chance no matter how ridiculous, ignore any warning, reward their executives with a lavishness that would make Caligula blush, and at the end of the day come cap in hand, sure that the government will bail them out.

The solution that Johnson and Kwak propose is one that has been suggested by many others — make the banks smaller. Use anti-trust regulation to break up these enormous banks, and set new limits so that no bank ever again has such a stranglehold on our nation that it becomes immune to its own stupidity.

Paul Volcker seems the most willing to attack the question of size, through his “Volcker rule” on proprietary trading (which according to David Leonhardt, would primarily prevent investment-oriented firms from taking cheap money in the discount window), which included a size cap. He’s speaking in Washington on Tuesday, and he may hold the key to a lasting soution for financial reform that is more than window dressing meant to score political points.

Obviously, reducing the size of the greatest behemoths in the economy will run into major resistance from those behemoths. Reducing the size of the financial industry benefits perhaps every other sector, including the bottom line of the federal government. But the banksters probably feel they can bully politicians into supporting their interests, with the lure of campaign contributions and the time bomb of blowing up the recovery as a carrot and stick, respectively.

We don’t need a banking industry at its present size; it actually restricts productivity across the economy in exchange for fattening bonus checks and stock portfolios. This is a battle worth having, if the President really wants to force a “win-win dynamic” with Republicans.

courtesy of NewsHour (flickr)

The group of people with the biggest right to grieve about unfair taxation and a lack of representation in Washington are not in the Tea Party movement, but are the roughly 600,000 residents of Washington, DC, who have no membership in Congress acting in their particular interest. For years Democrats have tried to remedy that problem, even offering a trade: a voting representative for DC in exchange for an extra House member from Utah, the state which came the closest to adding a member in the last Census. Now DC’s non-voting delegate, Eleanor Holmes Norton, expects a bill to come up in the House in a couple weeks:

Delegate Eleanor Holmes Norton said Friday that a bill to grant Washington D.C its first House seat is about two weeks away.

While she ultimately declined to say “what the bill looks like now,” she told WTOP radio that area residents would “find out very soon” — later noting that “soon” meant about two weeks.

“[I will] carry a bill to the floor that I think can pass the House and the Senate.” Norton added, later criticizing D.C. Mayor Adrian Fenty for not working closely with her on granting the District its first federal representative.

Republicans have sought to block the measure by tying DC voting rights to DC gun rights, adding an amendment last year to a similar bill that would have significantly expanded rules governing gun ownership in the District. The Democratic Party has basically left the playing field when it comes to gun control (they still have not reinstated the assault weapons ban after holding Congress for three-plus years and the Presidency for more than one), so they probably don’t have the votes to take out such a regulation, which the residents of DC absolutely disfavor.

They should think about the very real crime of having 600,000 American citizens without representation in their own government.

I’m skeptical this goes through, but as Norton recognizes, if DC voting rights fail again this year, they are likely not to get resurrected for some time. Rolling out a new representative for DC with the 2012 elections, based on new Census data, makes perfect sense – and the majorities of the Party committed to getting this done are probably at their high-water mark.

image courtsey of Tracy O

In a ruling that portends the unwinding of multiple campaign finance laws, a DC appeals court using the Citizens United ruling opened up certain independent expenditure committees to unlimited spending:

On the one hand there are federal political action committees (PACs) — folks getting together to raise money for and contribute money directly to political candidates. There are contribution limits in terms of how much they can raise per-source ($5000, whether it’s a person, another PAC or party committee) and in terms of how much each can directly contribute to a candidate — $5000.

On the other hand are independent expenditures — the right of an individual to spend unlimited sums of her own money to speak (and advertise) in support of a candidate’s election, so long as these communications are truly independent from and not coordinated with the campaign. It’s these communications which the Citizens United decision have allowed corporations to make on the federal level as well.

But that’s an individual right. If a group of people wanted to form a committee together to finance independent expenditures, and not to make direct contributions to candidates, should the limits which apply to PACs apply to them?

Today, a unanimous en banc opinion of the DC Circuit (i.e., all nine judges) held that such contribution limits cannot apply to such speech-only committees, though registration and disclosure requirements do.

I think we can analogize this to what corporate funders and PACs can do at the state level here in California. Corporations have purchased two slots on the June ballot – PG&E wants to make it virtually impossible for municipalities to start public power utilities, and Mercury Insurance wants to place a surcharge on drivers who allow their policies to lapse for any reason. They’ve not only spent millions to get on the ballot by usinng paid signature gatherers, but PG&E plans to spend $35 million dollars in ratepayer money to get it passed. This routine attempt to buy elections can now be ported over to federal candidates, as groups can spend unlimited amounts of money on independent expenditures.

In a separate ruling, a three-judge panel ruled that party committees could not seek unlimited contributions from individuals. That was traditionally known as “soft money,” and the McCain-Feingold closure of that loophole has thus far held up. But basically, individuals and corporations can band together to essentially replicate that soft money in an independent expenditure, and while it couldn’t be coordinated with candidate or party activities, it could still prove formidable.

We haven’t heard much from Congress since the initial flush of legislation proposed to deal with the Citizens United ruling. They’d better get into the game here, while a few campaign finance rules still exist.

No shortage of worms (photo: anujraj)

This is how it looked to be going all along, but the Senate made it official earlier today.

Moments ago, the Senate adjourned for a two-week-long spring recess. The last act of business was to schedule a cloture vote on a House-passed measure to extend COBRA and the filing deadline for unemployment benefits through April 30. The vote is slated for Monday, April 12 at 5:30 p.m.

Under current law, the deadline to file for additional unemployment insurance benefits arrives April 5. Without congressional action, an estimated 1 million jobless folks would lose their UI benefits in April.

The Majority Leader’s office says they will offer retroactive benefits to those who miss a payment. And that’s fine. But let’s be clear: this is a massively inefficient way to do business. Letting things like unemployment benefits expire means that the state offices must contact every individual in that category, tell them they’re done, only to have to tell them again when the benefits get restored, leading to mass confusion and uncertainty, as well as actual expenses for those states. Who picks up the bill for that?

And why should there be such a cost at all? Considering the Senate could have started the cloture process on Tuesday and wrapped the extension up by as early as Saturday, it seems that keeping members in town for a couple extra days trumped the needs of one million struggling families, or at least a lot of needless bureaucratic backtracking.

Tags: COBRA, filibuster, Senate, unemployment insurance

photo: L33tminion via Flickr

It appears I have to clarify a post I wrote earlier today in light of this Chris Bowers riposte. I was generally making a claim about the student loan bill being an unequivocal progressive victory, a statement with which he agrees. However, he argues that the claim of nothing being progressive about the health care victory is misguided:

However, the claim that there is nothing progressive about the health insurance reforms that passed into law doesn’t add up. Because of this legislation, it is estimated that 16,000,000 additional low-income Americans will receive public health insurance than they would have under previous law (CBO report, PDF, page 21). Millions of low-income, uninsured Americans received public health insurance is a straight-up, undeniable progressive victory.

Further, by moving much more of the cost of Medicaid to the federal level, the program becomes much more stable, and difficult for right-wing state governments to cut, over the long-term.

Yet further, the $11 billion in additional funding, over five years, for Community Health Centers in the legislation will, at current rates of service, provide primary health care to an additional 17.8 million low-income patients a year. (Current funding of $2.5 million a year (PDF, page 6) treats 20.27 million patients, so funding of $4.7 billion annually projects to 38.11 patients).

It’s possible that I’m being presumptuous in thinking this targets me. Because I’ve been writing about the Medicaid expansion and particularly the community health centers, which I called a revolutionary universal care program for low-income Americans back in December, for quite a while. I would throw in the CLASS Act, a voluntary, government-run long-term care insurance program, as a very progressive element.

I don’t think anywhere in that post I argued about this or that element of a very comprehensive health care bill. I argued that the student loan win was a more unequivocal victory. I like getting insurance for 32 million people. I like federal expansions of Medicaid to make that system palatable and viable. I like universal care, medical-home programs for the less fortunate.

But perhaps the larger point is the casual throwing around of the phrase “largest progressive victory in 45 years” attached to a bill that supporters have to then backtrack on and call a moderate effort that Republicans offered as a counterpoint to Clintoncare in 1993. Regardless of the pretzel logic that suggests anything that makes America somewhat better in outcomes than Nigeria, or something, can be reasonably described as progressive, the fact is that there are not only some really painful compromises in this bill, but the overall structure is by no means assured as an enduring policy triumph. Jon Cohn outlines just a few of the issues that will need to be wrestled with in implementation today:

DELIVERING THE DELIVERABLES President Obama promised that some of the benefits of reform would appear in the first year. For starters, within 90 days the Department of Health and Human Services must set up a high-risk pool as a temporary source of insurance for people who have pre-existing conditions.

Some of the new consumer protections will take effect within six months; first, though, federal officials have to translate that law into regulation. The government is also supposed to provide a new, easy way for consumers to compare benefits from insurer to insurer.

EDUCATING THE PUBLIC It’s one thing to create a health insurance program and quite another to get people to sign up for it. Today, many more people are eligible for Medicaid than actually enroll, in no small part because some states — wary of adding too many people to the rolls — make it hard to apply for and stay in the program.

That said, more than 97 percent of people in Massachusetts now have insurance, thanks in part to an aggressive public relations campaign that enlisted the Red Sox to raise awareness about the state’s own health care overhaul. A similar effort to increase public knowledge and to undertake direct outreach to individuals will be necessary. While states and nonprofit organizations will play vital roles, the federal government should probably take the lead.

These, and more of what Cohn describes in his article, are all good points. But I submit that it makes it exponentially more difficult to deliver positively on such issues when the liberal infrastructure keeps backslapping and telling everybody what an enormous progressive triumph this all is. There’s a tension between using the passage of the Affordable Care Act as an electoral tool, hyping it up, and the reality of delayed implementation, and potentially weak enforcement, and the pitfalls of exchange design, and everything else that can go wrong.

I think Claire McCaskill is absolutely right here:

The Missouri Democrat said her party has probably oversold the legislation that just became law.

“The side on which I’m on, that voted for the bill, probably is overpromising, [has] not been clear enough about the fact that this is going to be an incremental approach over time, [and] the benefits aren’t going to be felt by most Americans immediately,” McCaskill told MSNBC’s Morning Joe.

Nevertheless, the Republicans have been over the top in demonizing the health bill, McCaskill said.

Let’s just be honest about all this, OK? Student loan reform is smart and 100% defensible in concept. The Affordable Care Act involved legislative compromise and must be watched carefully to ensure it achieves the promise that many liberals are touting this week. Rather than labeling it, we have to work to make it actually operate properly.

Tags: Claire McCaskill, health care reform. SAFRA, implementation, progressives