Peter Thiel Makes The Case For Confiscatory Taxation On Billionaires

This broke over at Forbes and is bouncing around the ‘nets today:

Peter Thiel, a PayPal cofounder and one of the earliest backers of Facebook FB +0.49%, has been secretly covering the expenses for Hulk Hogan’s lawsuits against online news organization Gawker Media. According to people familiar with the situation who agreed to speak on condition of anonymity, Thiel, a cofounder and partner at Founders Fund, has played a lead role in bankrolling the cases Terry Bollea, a.k.a. Hogan, brought against New York-based Gawker. Hogan is being represented by Charles Harder, a prominent Los Angeles-based lawyer.

Whatever you think of Gawker, Hulk Hogan, or Thiel himself, this is yet one more way in which extreme income inequality destroys civic life. It’s actually worse than many, given the clandestine way it deepens the corruption of the system that could (in theory) provide a check on the damage that purchased legislative and executive branches can do.


Here’s a take on the poison here revealed from Caterina Fake:

Champerty, as third-party litigation funding used to be called (and should probably be called again!) was formerly a crime, but the commercial litigation finance industry has been growing in recent years.

Fake notes that much of such litigation is actually a form of speculation, in which rich folks gamble on the possibility of significant payout.  One can imagine the “free market” argument that such funding levels the playing field, allows those who’ve suffered real harm to recoup, and thus makes the legal system a more efficient and effective dispute-settling and behavior-changing engine. But Thiel’s pursuit of Gawker illuminates what this leads to in the real world:

Generally, people avoid frivolous lawsuits because it often exposes them to as much scrutiny as those they sue, so what is significant about this case is that by funding Hogan behind the scenes, Thiel could get his revenge, escape exposure, and influence the outcome of the case.

For the very rich, this is a win however it goes, and damn the collateral damage.

Hogan’s lawyers made decisions against Hogan’s best interests, withdrawing a claim that would have required Gawker’s insurance company to pay damages rather than the company itself–a move that made Nick Denton, Gawker Media’s founder and CEO, suspect that a Silicon Valley millionaire was behind the suit.

I leave it to the actual lawyers to weigh in on the ethics (and consequences, if any) for such a litigation approach. For myself, I’ll note that what you have here is an insanely rich guy gaming the legal system to destroy a media outfit that pissed him off.

And with that, one more thought:  Franklin Roosevelt created the social welfare state in the US as an alternative to revolution.  Today’s plutocrats might want to think about that.  In plainer terms: to remain democracies, modern democractic states need to tax polity-buying wealth out of individual hands; income taxes and a levy on inheritances.  A 90% rate that kicks in well below an estate value of a billion bucks seems a good place to start.

A blogger can dream…

Image: Cornelius Bos, Lazarus in Heaven and the Rich Man in Hell, 1547.

Yet another distributional analysis

The Hill has “details” on the latest “plan”-like scribblings of the Republican policy “wonks” on healthcare. There is one thing I want to look at before I start my morning coffee:

The core of the plan is a $2,500 tax credit that any citizen would be eligible for and use to purchase health insurance. The lawmakers say this gives flexibility to people, whether they get employer-based insurance or not, to more directly control their healthcare spending, for example by using a health savings account.

I’m looking at one of the sponsor’s web pages and I get very few more “details”

every American citizen is eligible to claim a $2,500 tax benefit as well as a $1,500 tax benefit per dependent minor. This benefit can be assigned to an employer, transferred to a Roth Health Savings Account, or advanced for annual distribution. With this benefit, individuals and families now have the freedom to use pretax dollars to plan and save for their health care futures.

Let’s look at the distributional consequences of this type of policy.

For people who make under 200% of FPL, pre-tax dollars aren’t too valuable as most of their dollars are minimally taxed.  For people making six figures and only have a kid or two at most, pre-tax dollars are fairly valuable as they are facing a much higher explicit marginal rate.  Worrying about pre-tax dollars is overwhelmingly an upper middle class to affluent problem.

More importantly it is the flat subsidy.

$208 a month is a decent subsidy.  In some regions that will buy the equivalent of a Silver plan with absolutely no out of pocket monthly premium.  That is fine for a healthy and young individual (as underwriting is back with a vengeance).  There are Silver plans for 40 year old non-smokers that cost under $200.  However, that same $200 a month Silver plan with a $3,500 deductible will cost a 63 year old $450 a month.  And odds are that 63 year old will need to use their policy a lot more than the 40 year old.

Furthermore, a flat subsidy is great for people who don’t need help.  I get my insurance through my employer and the visible premium payment is roughly two hours of pay per month for a Platinum like coverage for my family.  I don’t need help.  My family does not need help.  We already have access to good, high actuarial value, affordable coverage.

Families and individuals that are not mid-career professionals and are making under median income will see a far higher percentage of their income go to post-subsidy premiums.  The poorer you are, the higher the premium percentage is for a given level of individual risk.  And that is a major problem as the people who should bear the least risk are the one’s with the fewest available resources to mobilize in an oh-shit scenario.

TLDR: Comfort the comfortable

Relief, of Sorts, For the Middle Class

In reality, it’s just enforcing a bit of fairness:

The Department of Labor on Wednesday will finalize a rule extending overtime protections to 4.2 million more Americans currently not eligible under federal law, boosting wages by $12 billion over the next 10 years, the White House said Tuesday evening.

The updated rule, which takes effect Dec. 1 and doubles the salary threshold below which workers automatically qualify for time-and-a-half wages to $47,476 from $23,660 a year, or from $455 to $913 a week. Hourly workers are generally guaranteed overtime pay regardless of what they make.

“We’re strengthening our overtime pay rules to make sure millions of Americans’ hard work is rewarded,” President Obama said in a statement. “If you work more than 40 hours a week, you should get paid for it or get extra time off to spend with your family and loved ones.”

One of those Americans, Obama said, is Elizabeth Paredes, a single mom from Tucson, Arizona, who works as an assistant manager at a sandwich shop. “Elizabeth sometimes worked as many as 70 hours a week,without a dime of overtime pay,” Obama said. “So Elizabeth wrote to me to say how hard it is to build a bright future for her son. And she’s not alone.”

$12 billion over ten years is real money, and could be a game changer for a lot of people.

Good lord that is a lot of money

Wellmark in Iowa has a great example of the benefit changes of the ACA and their costs:

Wellmark Blue Cross & Blue Shield is sending letters this week telling about 30,000 customers it plans to raise their premiums by 38 percent to 43 percent next year….
She said about 10 percentage points of the increase stem from the costs of a single, extremely complicated patient who is receiving $1 million per month worth of care for a severe genetic disorder.

Pre-PPACA or with current grandfathered/grandmothered plans that are not ACA compliant, Wellspan would have had a pair of outs. The first one would be that they could have underwritten individuals with severe genetic risks out. They might not be able to say that they are writing out based on genetics but they could write them out on the basis of past service history. The second out would be the lifetime limit. Most individual policies would have stopped paying after $1 million or $5 million in claims.

So what would that have meant in a pre-PPACA world for the patient?  Most likely the patient would quickly run through their private insurance.  At that point, s/he would most likely either qualify for Medicaid, put on charity care or left to die.

From a policy perspective, it is completely unreasonable to expect a 30,000 person risk pool to absorb one of the top ten claims in the nation.  I am slightly surprised that Wellmark does not have reinsurance or stop loss policies on their plans unless they figure that they can self-insure because they are big enough as a corporation to eat the loss of one unlucky division.  Risk adjustment does not help as risk adjustment does a decent job of calculating average costs of conditions.  A $12 million dollar a year claim episode is an extreme outlier so a risk adjustment transfer might only move a small fraction of the total claim cost to Wellmark.

National re-insurance could be a viable solution.  We had talked about a life panel approach where Medicare would act as a claims repricer for a certain set of conditions before.

we identified a set of big chronic conditions that are impossible to game or upcode, this could be an interesting proposal that reduces private medical premiums, and total net medical spend.

Let us  take cystic fibrosis and  hemophilia as examples.  These are conditions that can’t be faked on a chart and can be easily verified.  They are also very expensive conditions.  Insurers with small risk pools in a particular region/product can be destroyed by having an unnatural cluster of CF or hemophilia members that they cover.    Each condition can cost $300,000 or more per personper year to treat.  Fifty or more very low utilizers in an exchange or commercial plan are needed to generate sufficient surplus to cover one CF person.

Moving these very high cost individuals to Medicare immediately lowers the medical expenses of the privately insured groups as some of their highest cost members have been removed.  This means lower premiums (and for those who think insurers are inherently evil, lower potential profits as the MLR requirements kick in).  Medicare tends to pay a lower rate for services than commercial and Exchange plans.  The rate for Exchange plans is usually Medicare plus a bit, while large employer groups tend to pay at Medicare plus a lot.

A plan like this could be financed by a covered life set-aside.  Every month, every person covered by a fully insured product would see $5 of their premiums go to the national super catastrophic risk re-pricer pool to cover the people who have $8 million/year claims.  This would create a defacto national super high cost risk pool that is adequately funded while removing some of the expensive cases from insurers’ books by paying those claims at Medicare rates instead of higher Exchange or commercial rates.

And yes, this type of plumbing work-arounds would not be needed in single payer system but we’re not in that world today nor likely to be in it next year.

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Finding woodworkers in Louisiana

Louisiana is expanding Medicaid with the new eligibility date starting on July 1st.  The Times Picayune  reports that Louisiana is using its SNAP (food stamp) database as a means of identifying individuals who are Expansion eligible and then automatically signing them up.

Department of Health and Hospitals officials are “highly confident” they’ll receive federal approval to use data from food stamp applications to qualify people for Medicaid, the first state in the country to use such a method through what’s known as a state plan amendment….

Kennedy said DHH is preparing to send out about 100,000 letters to people that the agency has determined are eligible for Medicaid but aren’t among the state’s 1.4 million enrollees. All the recipients will have to do is respond to the letter, Kennedy said, and they’ll be added to the program….

DHH officials had previously said they would use a “fast track” approach to Medicaid expansion enrollment, but the food stamp enrollment is particularly significant because the federal government had never before approved using food stamp data to qualify Medicaid recipients.

I think this is interesting from a few angles.

First it is an example of a government that wants to do well by maximizing the data that it already holds.  The state of Louisiana in a variety of data sources that it owns already has an excellent idea of who is eligible for Medicaid based on income and who is not.  The challenge has always been integrating those data sources into a coherent information stream.  Using the SNAP database is an excellent starting point.

Secondly, it makes sense that Louisiana is doing this for an expansion roll-out.  All else being equal, an individual who otherwise would not have signed up for Medicaid Expansion without being automatically enrolled will be healthier and less expensive once they are signed up via the letter than people who actively sought out enrollment into Medicaid.  The active seekers are more worried about their health care costs because they know themselves to have a good reason to worry about paying for health care services.  This will lower the average cost on a capitated basis.

The most interesting angle to me is how does this outreach change the Medicaid cost savings for Louisiana.  The woodworkers have a FY2017 62/38 Federal/state split on their costs.  The Expansion eligible individuals have a CY2016 100/0 split on their costs.  A large rush of legacy woodworkers will eat up most of the cost savings gained through lower charity care appropriations, and shifting of voluntary Legacy Medicaid qualified individuals to Expansion eligibility groups.

This is a good problem to have, as more people covered with the Feds picking up most of the tab is a good thing in and of itself.  However the problem is Louisiana has a balanced budget constraint and a large structural deficit.  Medicaid expansion is taking a decent chunk out of the structural deficit caused by Jindal’s decision to destroy Louisiana to boost his Presidential chances but a 100% Medicaid Eligibility uptake rate would take away most of the savings.


Tuesday Evening Open Thread: For Entertainment Purposes Only

Convention-planning update from CNN:

Sen. John McCain told reporters on Capitol Hill on Tuesday he might not go to the Republican National Convention this year because it’s so close to his primary in August. “I have to campaign for reelection,” he said.
This year’s convention might also be something of a spectacle if Donald Trump and Ted Cruz are slogging it out for delegates on the convention floor.

This is the latest in a trend of lawmakers who are up for reelection and are considering skipping, including Mark Kirk of Illinois, Kelly Ayotte of New Hampshire and Richard Burr of North Carolina. Some who don’t like Trump won’t go if he’s the nominee, like Rep. Charlie Dent, a moderate from Pennsylvania…

It would be notable if McCain were to skip, if for no other reason than he’s had a speaking spot at every convention for more than 30 years

Apart from that, Mrs. Lincoln, what’s on the agenda for the evening?

Late Night Oddities Open Thread: Rainbow Bagel and the End of Days

Via commentor NotMax; once he’d violated my eyeballs with the Washington Post link, I had to try and dilute the horror by sharing it with you all. Per Roberto A. Ferdman, “The most controversial bagel in Brooklyn”;

It’s mid-afternoon, but the line still spills out the front door, snaking around the block, eating up the better part of the sidewalk, as it has since early that morning. There are young couples, clinging to each other in the cold. Mothers, standing patiently next to their anxious children. There are teenage girls, chatting in packs. And there are SLR cameras — so many SLR cameras.

“What are you all waiting for?” a passerby who lives in the neighborhood asks as she plucks an earphone out from one of her ears. She is looking at the crowd with amazement. “I see this line every day. It isn’t just for bagels, is it?”

“It’s the line for rainbow bagels!” a little girl yells…

The rainbow bagel, the brainchild of self-proclaimed “world premier bagel artist” Scott Rossillo, who has been making the brightly hued treat for almost two decades, is having a moment that many people in Williamsburg, Brooklyn, could do without.

For years, Williamsburg was the epicenter of cool for a specific kind of person. A thriving artist population, a liberal bend and a general disdain for popular culture birthed a haven for counterculturalism, a capital of hipsterdom that was defined, at least in part, by a high concentration of yoga studios, organic markets, vintage stores and artisanal coffee shops.

But time has transformed the neighborhood from the sort of place coveted by a select few to a destination for just about anyone visiting New York City. And that popularity hasn’t always jibed with local values. The tourism triggered a commercial flood: First came the Dunkin’ Donuts, then the Starbucks. A Whole Foods will be opening this year.

In many ways, the rise of the rainbow bagel perfectly encapsulates this tension, an unlikely but apt example of a proud neighborhood confronting the inevitable: change. The dye-infused treat, whose dough resembles Play-Doh more than it does something edible, is the antithesis of the organic-eating culture that courses through the veins of so many who live in the area.

It’s evidence of a uniquely modern form of gentrification…

It’s a good article, honestly (you should read the whole thing!) but I think it’s “uniquely modern” only insofar as it’s easier to fly in on a jet and snap a selfie than to travel by sail or animal-back to bring long stories home to your less cosmopolitan neighbors. The nuns in our high school taught us that a certain Mary from Magdala was a key figure in the New Testament because Magdala was the period equivalent of Las Vegas, an exciting resort destination for Roman bigwigs stranded in the Middle Eastern backwaters. A woman from Magdala would be used seeing the best entertainers and conjurers, the contemporary equivalent of Siegfried and Roy or David Copperfield; the support of someone so sophisticated was proof that Jesus wasn’t just another street preacher with a gift for sleight-of-hand. A few hundred years from now — assuming our species survives — no doubt there will be tourists at every aquatic gambling hall on Jupiter, sending sensograms back to their neighbors at home on the mundane rocks of the asteroid belt…