Gimme money, that’s what I want

Kevin Drum made an interesting observation this morning – a lot of major central banks would like to see more inflation right now, but so far no one has pulled it off. A bunch of people replied that maybe one of the central banks should try printing a lot of money, so Drum pointed out that Japan already did that.

So the conclusion is…free money is really free? Can we print out the entire federal deficit? Alexander Hamilton would roll over in his grave, but think of the positive side. America would finally qualify for a decent mortgage rate. The Fed could mail fat envelopes of cash to everyone with a social security number. I bet that would poll pretty well.

I would guess* the answer has more to do with the psychological side of finance. Maybe printing money has no effect as long as everyone thinks that the bank is still being responsible. If international investors get nervous that the bank is really shooting the moon, maybe they will all get worried at the same time and all the bad stuff we associate with an inflation spike will kick in irreversibly all at once. Or maybe it’s not enough for the Fed to print money. Rich folks mostly just squirrel excess cash away in in some foreign account where it gathers fees and puffs up investment bubbles and generally doesn’t do anyone much good.

Perhaps you also need to get that scratchola into the hands of people who will reliably stimulate the economy with it. That is to say, poor people. If you give a poor person ten dollars they will spend most of it right away, in America, on stuff that supports jobs in America. Poor people all having enough money to buy eggs (and a refrigerator) will pretty much a priori make eggs (and refrigerators) more expensive. In my happy fantasy world where Republicans return the value of the air they consume, I can imagine coupling a major QE push with a comparable surge in infrastructure/jobs and safety net spending. Betcha ten bucks we would hit two percent inflation pretty quickly, and without the likely very bad consequences of the Fed just leaving the presses running until China and Europe hit the panic button.

(*) Professor Krugman is trying to knock a stuck bag of Welch’s fruit snacks free from a vending machine, so I’m just going to sit in his chair here for a minute and write this. Don’t tell him, ok?



Gimme Brains for Breakfast Baby

Jump

Holy shit, Senator Elizabeth Warren apparently murdered a bankster in the Senate today:

I’m honest to goodness physically aroused.



A President Trump’s Foreign Policy Preview: For Sale, To the Highest Bidder

This is just a quick pointer to the essential read of the day.  If Kurt Eichenwald’s brutal, beautiful story on the Trump Organization’s seemingly limitless overseas conflicts of interest with US policy doesn’t become the dominant campaign story for the day and much longer, then, again, we’ll know who and what our media are.

One of the best minor pleasures of this deeply important piece is the way Eichenwald brutally dismisses the false equivalence crap that so many in the press promise us doesn’t exist.  A sample:

The Trump Organization is not like the Bill, Hillary & Chelsea Clinton Foundation, the charitable enterprise that has been the subject of intense scrutiny about possible conflicts for the Democratic presidential nominee. There are allegations that Hillary Clinton bestowed benefits on contributors to the foundation in some sort of “pay to play” scandal when she was secretary of state, but that makes no sense because there was no “pay.” Money contributed to the foundation was publicly disclosed and went to charitable efforts, such as fighting neglected tropical diseases that infect as many as a billion people. The financials audited by PricewaterhouseCoopers, the global independent accounting company, and the foundation’s tax filings show that about 90 percent of the money it raised went to its charitable programs. (Trump surrogates have falsely claimed that it was only 10 percent and that the rest was used as a Clinton “slush fund.”) No member of the Clinton family received any cash from the foundation, nor did it finance any political campaigns. In fact, like the Clintons, almost the entire board of directors works for free.

On the other hand, the Trump family rakes in untold millions of dollars from the Trump Organization every year.

A_Peasant_Girl_buying_an_Indulgence

Much of that comes from deals with international financiers and developers, many of whom have been tied to controversial and even illegal activities. None of Trump’s overseas contractual business relationships examined by Newsweek were revealed in his campaign’s financial filings with the Federal Election Commission, nor was the amount paid to him by his foreign partners.

That should (but probably won’t) leave a mark in a certain building on 8th Ave between 40th and 41st st.

One more sample, just to get a sense of how utterly at odds with US national interest a Trump presidency would be:

With Middle Eastern business partners and American allies turning on him, Trump lashed out. Prince Alwaleed bin Talal—the billionaire who aided Trump during his corporate bankruptcies in the 1990s by purchasing his yacht, which provided him with desperately needed cash—sent out a tweet amid the outcry in Dubai, calling the Republican candidate a “disgrace.” (Alwaleed is a prodigious tweeter and Twitter’s second largest shareholder.) Trump responded with an attack on the prince—a member of the ruling Saudi royal family—with a childish tweet, saying, “Dopey Prince @Alwaleed_Talal wants to control our U.S. politicians with daddy’s money. Can’t do it when I get elected. #Trump2016.”

Once again, Trump’s personal and financial interests are in conflict with critical national security issues for the United States. During the Bush administration, Abu Dhabi, the UAE’s capital, and Washington reached a bilateral agreement to improve international standards for nuclear nonproliferation. Cooperation is particularly important for the United States because Iran—whose potential development of nuclear weapons has been a significant security issue, leading to an international agreement designed to place controls on its nuclear energy efforts—is one of the UAE’s largest trading partners, and Dubai has been a transit point for sensitive technology bound for Iran.

Given Trump’s name-calling when faced with a critical tweet from a member of the royal family in Saudi Arabia, an important ally, how would he react as president if his company’s business in the UAE collapsed? Would his decisions in the White House be based on what is best for America or on what would keep the cash from Dubai flowing to him and his family?

There’s tons more at the link — and yet Eichenwald says, correctly, that this article only scratches the surface. This is (truly) disqualifying stuff, folks. That it almost surely won’t drive Trump from the race is an indictment of him, his party, and a political process, shaped in part by a flawed media culture.  That just leaves us as a last line of defense.

You know, voters.

The common clay…

[Had to leave that hanging curve out for the Balloon Juice Jackals, right?]

Seriously. Eichenwald has done really important work here.  Go read what he’s found, then get it out to everyone you can.

Image: Marius Granet, A Peasant Girl Buying an Indulgence 1825



Risk Adjustment:Vox::Narrow Networks:538

There are two recent health policy articles by interested lay expertise sites that have me scratching my head. In Vox’s case, I am seeing a conclusion without context. For 538, I can not figure out the model that leads to a core assumption. These sites’ jobs are to inform the public and in these cases I think they can do a better job of their job.

Let’s start with Vox as Sarah Kliff looks at a Society of Actuaries analysis of risk scores on the individual market. She draws a very strong conclusion.

Between 2014 and 2015, SOA finds that Obamacare’s average risk scores went up by 5 percent. This means that the overall pool of people on the marketplace were sicker in 2015 than 2014. You can see the data here, in a table from the report.

The Society of Actuaries draws a much weaker conclusion

Risk measures published in the CCIIO release show that the average measure of risk increased from 2014 to 2015. Increased risk scores may be a combination of identification through better coding as well as a measure of the actual population health….

The program is still too immature to draw conclusive inferences about the future of the pool or marketplaces.

Vox saw a number that went up (bad) and wrote a story with no context.
Read more



Oscar lays off their underpants gnomes

 

February:

Oscar is able to get young and healthy people on an expensive network and high risk adjustment payments.  I can’t figure out their business model past the buzzwords.

March:

Oscar is incurring losses of roughly $145 Per Member Per Month (PMPM) in its biggest market.  It is charging roughly $190 PMPM in net premiums.  Some of the loss is due to risk adjustment (~$20 PMPM) as Oscar’s entire business strategy is to cater to tech savvy individuals who tend to be young and healthy…

I think there are two take-aways.  First, I still can’t figure out Oscar’s business model.

Secondly, setting up an insurance company or expanding an incumbent carrier into new lines of business and new areas is tough.

 May:

Oscar’s strategy has been to use their web/mobile technology platforms to be the hip/cool/disruptive insurer for the next generation.

The market segment that both of these plans seem to be aiming for are people who are fairly young, active, technologically savvy and very healthy….

Assuming a hypothetical individual could be covered by both insurers for the same treatment, Centene is paying significantly less per service than Harken because Centene’s basing its provider contracts on Medicaid rates instead of commercial or Medicare rates.

Centene and other Medicaid like Exchange providers are targeting roughly the same type of population but since they are much cheaper post subsidy, they are probably getting a far larger population to amortize their fixed costs over plus any service that they do need to pay for, they are paying for at a lower rate.

From here, I am having a hard time seeing how plans that have a “lifestyle” component can compete against Medicaid like Exchange providers.  Maybe it is different off-Exchange where everyone is paying full premium and “cheapness” is not a strong selling point.

June

I’ve been skeptical about Oscar as I can’t figure out their business model besides build a cool app and then profit???

Ohhh… no one has ever thought about medical management and early chronic care intervention.  My cube wall mate spends 90% of her time working on our algorithms to identify members who are likely to be expensive before they become expensive so that we can intervene. …

Oscar is trying to go narrow network or quasi-TPA support for health systems that want to run a home host insurance product that should allow them to control costs. But those strategies are common.  That is what I spent most of 2013 working on building hyper narrow networks for both Exchange and Commercial ESI.  That is what my 11:30 meeting tomorrow is about.

And August from Bloomberg:

Oscar, which pitches itself as a tech-savvy alternative to traditional health insurers, plans to end sales of Affordable Care Act plans in Dallas, a market it entered this year, and New Jersey. It’s part of a more conservative approach by the New York-based company as it plans to introduce insurance products for businesses next year….

The company said it’s quitting New Jersey mainly because its network of doctors, hospitals and other health providers isn’t a “narrow network” — a relatively closed, but lower cost, group of providers that many in the industry see as a way to keep expenses down….

In the interview, Schlosser said the company’s new plans focus more on Oscar’s strengths, particularly narrow networks. Along with lower costs, using more narrow networks gives the company a larger role in coordinating the care of its customers…

By the end of next year, Oscar wants to begin offering health plans for larger employers, Schlosser said.

I have not been able to figure out Oscar’s business model.  It was always a flashy app/front end with loads of good marketing and Venture Capital buzzword bingo, handwaving about disrupting the marketplace and then PROFIT!!!

The little bit about Oscar trying to go to the large group market segment is interesting as in some ways that is the easiest segment to operate.  Bills get paid on time, there is no risk adjustment payment flows to worry about and the population is comparatively health with comparatively low variance.  It is also a segment that is most inclined to want big networks and is the least price sensitive.  It is a hard market to get into but a fairly easy market to set up the plumbing for.

But as the reality that being an insurer is HARD sinks in, let us all have a moment of silence for all of the now laid off underpants gnomes who have nothing to do between deploying cool frontward facing tech and PROFIT.  They have a rough life so let us appreciate those gnomes.



APTC Hacks, BHP and 1332 Waivers

The ACA has two non-Exchange means of significantly expanding and configuring coverage.  The Basic Health Plan (BHP) allocated 95% of the combined funding of the Advanced Premium Tax Credit (APTC) and Cost-Sharing Reduction (CSR) subsidies of a state that would have been paid to cover people earning between 138% and 200% of the Federal Poverty Level (FPL).  Those funds are then used to create a low cost network (usually paying provider Medicaid plus something rates) to offer high actuarial value coverage.  New York and Minnesota and currently the only states offering BHPs.

The other method a state can use to rejigger their coverage arrangements is through a 1332 State Innovation Waiver.  These waivers allow states to re-arrange minimal acceptable coverage, eligible populations, subsidies and most other ACA requirements as long as the end result covers at least as many at least as well for no more federal cost than the traditional Exchange based methodology.

Right now, most of the 1332’s (with the exception of a potential Colorado single payer 1332) that are being proposed are fairly technical back-end fixes.  For instance, Massachusetts wants to re-align merged risk pool provisions for the small group market.  That is valuable.  It is not a system transformation effort.

Both of these alternative pathways have strong budget constraints.  The BHP program must cost the federal government no more than 95% of the traditional effort.  The 1332 process must be budget neutral.

States that want to engage in large scale systemic experimentation with either the BHP or 1332 waiver processes need to be aware of what strategies carriers are offering in their market.  If a state’s markets are dominated by Silver Spam strategies, the budget flexibility to engage in large scale reform will be severely constrained.  Silver Gap strategies will give states significantly more budgetary resources to use for BHP and 1332 demonstration projects.

Let’s go below the fold to explore why.

Read more



APTC Hacks, Non subsidized plans and choice revelation

Advanced Premium Tax Credits (APTC) are only relevant for people who buy policies on the Exchanges.  However the subsidized universe is only about half of the entire individual market.  The non-subsidized and off-Exchange universes will help us determine how carriers embark on their Silver pricing strategies.

If an individual would have qualified for an APTC but buys an off-Exchange policy for whatever reason, they do not get any subsidy to help offset the premium.  They pay full price.  There are some non-subsidized buyers on the Exchanges.  A common case will be people with variable incomes who are not sure if they are subsidy eligible.  They may overestimate their income so they don’t have to pay the APTC back but if they have a bad year, they can collect the Premium Tax Credit the following year when they file for their tax refund.  People who know that they can not qualify for the Exchange have no reason to shop on Exchange.  Indeed, they have a mild incentive to look off-Exchange.

Policies that are sold on Exchange must be offered off-Exchange.  However carriers can offer policy and plan designs off-Exchange that they do not offer on Exchange.  Mayhew Insurance did that in 2014 with an experimental product as we needed data to see if our hunch was right (we weren’t).  Carriers can decide to only participate off-Exchange if they wish to do so.  The advantage of selling off-Exchange is that the population is a bit higher income and that tends to correlate with two things; better health and more stability in paying bills.  Even though policies are offered off Exchange, the on and off-Exchange policies in a single metal band in a state are in a common risk pool for risk adjustment purposes.

Off Exchange has a typical policy buying decision maker earning over 400% Federal Poverty Level (FPL).  On Exchange, subsidized buyers have a median policy decision maker earning around 200% FPL.  These are very different market segments.  And those differences can feed some insight into why a carrier that has the ability to capture the #1 and #2 Silver positions would engage in either a Silver Spamming or Silver Gapping strategy.

Read more