Op-Ed Columnist

Obamacare: The Rest of the Story

By BILL KELLER

Published: October 13, 2013 

Unless you’ve been bamboozled by the frantic fictions of the right wing, you know that the Affordable Care Act, familiarly known as Obamacare, has begun to accomplish its first goal: enrolling millions of uninsured Americans, many of whom have been living one medical emergency away from the poorhouse. You realize those computer failures that have hampered sign-ups in the early days — to the smug delight of the critics — confirm that there is enormous popular demand. You have probably figured out that the real mission of the Republican extortionists and their big-money backers was to scuttle the law before most Americans recognized it as a godsend and rendered it politically untouchable. 

 

Tony Cenicola/The New York Times

Bill Keller

What you may not know is that the Affordable Care Act is also beginning, with little fanfare, to accomplish its second great goal: to promote reforms to our overpriced, underperforming health care system. Irony of ironies, the people who ought to be most vigorously applauding this success story are Republicans, because it is being done not by government decree but almost entirely with market incentives. 

Using mainly the marketplace clout of Medicare and some seed money, the new law has spurred innovation and efficiency. And while those new insurance exchanges that are now lurching into business will touch roughly 1 in 10 Americans (the rest of us are already covered by private employer plans or by government programs like Medicare), these systemic reforms potentially touch every patient, every taxpayer. 

“This is the 90 percent of the story that doesn’t make the headlines,” said Sam Glick, who follows health care reform for the Oliver Wyman consulting firm. 

Since the Affordable Care Act was signed three years ago, more than 370 innovative medical practices, called accountable care organizations, have sprung up across the country, with 150 more in the works. At these centers, Medicare or private insurers reward doctors financially when their patients require fewer hospital stays, emergency room visits and surgeries — exactly the opposite of what doctors have traditionally been paid to do. The more money the organization saves, the more money its participating providers share. And the best way to save costs (which is, happily, also the best way to keep patients alive) is to catch problems before they explode into emergencies. 

Thus the accountable care organizations have become the Silicon Valley of preventive care, laboratories of invention driven by the entrepreneurial energy of start-ups. 

These organizations have invested heavily in information technology so they can crunch patient records to identify those most at risk, those who are overdue for checkups, those who have not been filling their prescriptions and presumably have not been taking their meds. They then deploy new medical SWAT teams — including not just doctors but health coaches, care coordinators, nurse practitioners — to intervene and encourage patients to live healthier lives. 

Advocates of these reforms like to say that they are transforming medicine from the treatment of disease to the treatment of patients — and ultimately the treatment of populations. 

At Cornerstone Health Care, a 250-doctor organization in North Carolina, patients with a history of congestive heart failure get a daily phone call from a nurse asking them to step on a scale and report their weight, the best early indicator of an impending emergency. The next stage, Grace Terrell, the president of Cornerstone, told me, will be to give these patients scales that automatically transmit their weight directly to the nurse. (“If the N.S.A. is Big Brother, we’re Big Mother,” Terrell says of the weight surveillance program.) Diabetes patients are invited in for low-cost pedicures. Why? Because diabetics are notoriously vulnerable to infections that lead to amputation, and a common cause of those infections is ingrown toenails. (Both of these practices were pioneered by CareMore, a California-based company that runs clinics for Medicare patients and that has become a major role model since Obamacare.) 

The Heritage Provider Network, a huge accountable care organization in California, offers Medicare patients free dance lessons, healthy cooking classes and casino excursions that feature “brain power” activities on the bus. The Greater Buffalo United Accountable Healthcare Network, a new, seven-doctor practice in upstate New York, is building a gym and a teaching kitchen for its patients, who are mostly inner-city minorities. 

“Most doctors were on treadmills,” plodding through their routines, said Raul Vazquez, the chief executive of the Buffalo venture. Now they’re reinventing health care for the inner city with an invigorated sense of mission. 

This is not the heroic medicine that turns surgeons into gods and emergency rooms into Hollywood material. Don’t expect to see a toenail-clipping episode on “Grey’s Anatomy.” But these services address the embarrassing fact, reiterated in study after study after study, that Americans pay much more for medical care than other developed countries, with no better results. 

Obamacare addresses this problem by going, as Willie Sutton famously advised, where the money is. It concentrates resources on the unhealthiest. According to Kaiser Health News, the sickest 1 percent of patients account for 21 percent of health care costs; 5 percent account for half of the total costs. 

“There are organizations that are bringing emergency room visits down by 15 to 20 percent,” Glick said. “Hospital admissions, you see numbers like 20 and 30 percent. That can make a huge difference not only in the cost of care but also in the quality of care.” 

The best sign that these innovations are beginning to go viral is that they have caught the attention of some giant businesses. Drugstore chains like Walgreens and CVS are now partnering with hospitals or accountable care organizations to give patients convenient points of access and to coordinate treatment. Companies that spend heavily on employee health care plans are learning the best lessons of the Obamacare laboratory. Walmart, the country’s biggest private employer, will fly workers who need transplants or heart or spinal surgery to premier facilities like the Mayo or Cleveland Clinics to assure that their problems get fixed right the first time, avoiding costly readmissions. 

Obamacare has also had some important indirect consequences. According to Catherine Dower of the Center for the Health Professions at the University of California at San Francisco, since the Affordable Care Act states have become more aggressive about challenging some of the protectionist laws that prevent well-qualified medical professionals — pharmacists, nurse practitioners, physician assistants, emergency medical technicians — from offering some kinds of primary care. California just passed a law that will allow pharmacists to check your blood pressure and cholesterol level and to dispense prescription birth control and antismoking drugs. Letting pharmacists perform services that don’t require seven years of medical training makes those services cheaper and more convenient, increasing the chances consumers will take better care of themselves. 

Dower said that while the formal doctor lobby continues to resist this as a threat to the M.D. cartel, many physicians have embraced it, recognizing that outsourcing some of these services leaves them more time to do what only doctors can do. And with an estimated 29 million new clients expected to join the ranks of the insured, there is a lot of work to share. 

The emerging system is far from perfect. As Elisabeth Rosenthal reported in The Times on Sunday, Congress buckled to drug company lobbying and refused to let Medicare use its purchasing power to bring down obscenely inflated drug prices. And like any upheaval, the reform of health care will produce some losers. Not all of the new organizations will make a go of it. Since hospitals account for about a third of our health care bill, they are a particular target of cost-cutters; some will fail to adapt and will go out of business. Taking costs out of the system means taking money out of somebody’s pockets. This is what the business world calls “creative destruction.” 

Grace Terrell of Cornerstone said that of its 250 doctors, “20 percent are still, ‘Down with Obamacare,’ though even they like the private-enterprise approach; 30 percent really get it; and the others are moving faster than the market. We may ultimately fail, but we’re pretty far ahead of the curve.” 

One reason you may not have heard much about this part of the Obamacare story is that it is numbingly complicated. (Stephen M. Davidson of Boston University has written a concise and accessible guide to the law and its consequences.) But I suspect another reason is partisan spite. The Democrats were passionately in favor of enrolling the uninsured, but many would have preferred a government-run program, or at least a public option. What Obamacare has wrought is the kind of market-driven reformation that Republicans pretend to believe in. Which makes you wonder how much of their opposition rests on the merits, and how much is just a loathing for anything associated with Barack Obama.

How to Make the Debt Ceiling Obsolete

How to Make the Debt Ceiling Obsolete

October 8, 2013 | 

Posted in Public Presentations | 

By Marco Vangelisti

Money creation is a government function. Reversing the privatization of money creation will render the debt ceiling and government borrowing obsolete. 


As I write, the US Congress is locked into a stalemate over the issue of raising the debt ceiling of the US Government. The issue of an ever increasing government debt forces us to lurch from one political crisis to the next. The current government shutdown and the looming default on US government debt are the handiwork of an irresponsible minority of ideologues in the House of Representatives using Congress’ power of the purse to subvert the democratic legislative process. They are undermining the very foundation of our democracy and endangering our economy. But, even in the absence of saboteurs in the very halls of Congress, the problem of an increasing level of government debt combined with a weak economy presents a very hard problem to solve, at least within the confines of conventional thinking.

First let’s look at the problem and then at the solution made available by some thinking outside the box.

Let accept for the time being the conventional wisdom that we need the economy to grow again (in a later blog post I will explore why economic growth is not the way to address the economic needs of the vast majority of the population). We measure growth in the economy by looking at the growth in GDP (Gross Domestic Product). If GDP contracts for two consecutive quarters we are officially in a recession. So let’s look at the components of GDP and figure out why growth in GDP has been anemic since the economy resumed growing in the middle of 2009.


GDP = C + B + G + (X-I)

C             stands for consumption, the amounts of goods and services purchased by individuals

B             stands for investments made by the business sector

G             stands for government investments and spending

(X – I)    stands for the difference between our exports to other countries minus what we import from the rest of the world


Our economy is heavily dependent on consumer spending, in fact C has historically accounted for roughly 65% of economic activity. Business investments are a function of the business cycle. In good times businesses are more optimistic about their ability to find buyers for additional products and services and invest to increase their capacity to produce. B has been fluctuating over the last couple of decades around 15% of GDP. Government investments and spending has hovered at around 20% of GDP.  The difference between exports and imports has not been a significant component of the GDP in the last few decades.

Consumer spending fueled most of US economic growth since the end of World War II and was made possible by raising real wages in every decade until the 1980s.





Since then real wages have been flat, in other words the purchasing power of Americans who worked for a living has stagnated. The growth in consumption and hence most of the growth in GDP since the early 1980s was made possible by two strategies the US middles class adopted to keep up the illusion of the American dream – an ever increasing standard of living. The first strategy required more members of the family joining the labor force – mostly stay-at-home moms gaining employment outside the home.

The second strategy was to borrow first to buy homes, then by using credit cards, by taking out larger and larger student loans and finally by borrowing against the value of the equity in ones’ homes. Those strategies are now exhausted. Real wages continue to decline and the few jobs that are being created of late for the most part pay less and are less stable than those lost during the recession of 2007-2009.  In other words, for the foreseeable future we cannot count on the middle class to drive economic growth through consumption. C is dead in the water. What about B? Businesses in the US are currently sitting on about $1,700 B in cash unwilling to invest it in the US for the very obvious reason that they do not see sufficient aggregate demand, in other words buyers, for the additional products and services those investments would create.

In other worlds, as long as C is dead in the water, B is dead in the water. What are we left with? Government spending is the only component of GDP that can support economic growth at this point and reverse the downward spiral of our economy. The economist John Maynard Keynes recognized this problem in the middle of the Depression of the 1930s and showed how government spending is necessary during recessions even if it results in higher levels of government debt. Yet government spending would at this point require either higher taxation or additional government borrowing. Higher taxation in the current US political reality would fall primarily onto the poor and middle class as opposed to the very rich or wealthy corporations that could well afford it since the latter finance our political process. Such regressive taxation will exacerbate the problem of stagnating consumption. Higher government borrowing is opposed by a political class that seems to be oblivious to basic economics and apparently incapable of simple observation – any attempt made by governments in recent history to reduce their debt during a recession has led to an even greater contraction of economic activity hence exacerbating the country debt to GDP ratio.

So, if Government spending is the only way out of our economic crisis and additional taxation or Government borrowing is out of the question how do we get out of this pickle? As Dwight Eisenhower suggested – if a problem cannot be solved, enlarge it.

To solve the problem we need to think outside the box and enlarge the scope of the problem to include the design of the money and banking system.
Most lay people if asked “who creates the money used by the nation?” may respond “the Government”. Some might think that the Central Bank (the Federal Reserve in US) creates money and that the Central Bank is part of the government. Very few pause to reflect on the fact that if the government creates the money we all use either directly or through its central bank then there would be no need for the government to borrow money.  It turns out that the subject of money creation has become a taboo in our society. The main reason for this taboo is the spectacular injustice of a fundamental government function – money creation, being almost completely privatized considering that such privatization represents the largest transfer of economic wealth and power in the history of human kind from the public at large to a private elite.

To gain a basic understanding of the current design of the money and banking system please check out this link. The key point to understand is that more than 95% of our money supply is electronic money created by the private banking sector when it lends it into existence. There are a couple of ways to look at this process. One way is to say that the private banking sector monetizes borrowers’ promises to repay – in other words, it turns borrowers IOUs into spendable bank IOUs. Another is to say that the private banking sector created upward of $9 Trillion dollars of electronic money (demand deposits and time deposits in the picture below) with which it purchased its income generating assets in the form of commercial and individual loans, real estate loans, treasury bonds, MBSs, CDOs and other investment assets.





All the money we use, physical currency and electronic money created by the private banking sector is backed by the full faith and credit of the US and is accepted in payment of taxes by the US Government. The Government is also periodically called to guarantee a portion of the electronic money created by the banks (those representing FDIC insured deposits each $250,000 or less) or to rescue the too-big-to-fail banks when their reckless lending threatens the entire national system of payments. So while the US Government, through its full faith and credit and taxing power, therefore all of us collectively, guarantees and bears the risk of the money creation process of the private banking sector, it has to borrow that same money from those that either have the privilege to created it – the private banks, or from those that have accumulated substantial wealth in their hand- rich individuals, wealthy corporations and central banks around the world.

The solution to our economic conundrum is therefore very simple. The Government needs to reclaim the quintessential government function of money creation. During the Civil War the US Government issued through the US Treasury debt-free money in the form of paper currency known as Greenbacks with which if financed the war with the South. It is time the US Treasury resumes the issuance of debt-free money as long as inflation is low and stable.
The new money could be used to launch a massive government employment program similar to the WPA to rebuild the 70,000 structurally deficient bridges in this country, to rebuild the crumbling national infrastructure, to hire a new generation of young farmers that will transform the wasteful and destructive industrial agriculture into sustainable small scale organic agriculture, to invest in education and health care (as opposed to the sick care) of the US population, to support the basic human needs of the most vulnerable in our society. Another idea, which will soon be put up for a vote by the Swiss government, is to provide a national dividend to all adults in the country.

Once the economy is stabilized with the debt-free government spending outlined above, we can start using additional debt-free money creation to gradually retire some of the government debt. Regardless of the use of such debt-free money, reclaiming for the Government money creation, which is a fundamental government function and privilege, will be the best way to finally address the needs of regular people in this country while at the same time removing the weapon of the debt ceiling from an irresponsible minority in Congress bent on sabotaging our democracy and the rule of law.

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Marco Vangelisti

Marco came to the US as a Fulbright scholar in mathematics and economics at the University of California in Berkeley. After a stint in the financial industry, Marco worked as visual artist on a full-time basis for 5 years and obtained a MFA focusing on the intersection between public art and ecology. He later worked for 6 years for Grantham, Mayo, Van Otterloo & Co. LLC (“GMO”), managing investment equity portfolios primarily on behalf of large foundations and endowments. In April 2009 Marco left the finance industry and has since been instrumental in the formation and development of the Slow Money Northern California chapter where he currently leads the investor working group. Marco also serves on the Slow Money national steering committee and represents Northern CA in the national Slow Money Chapter Council. In the second half of 2012 Marco led the design and launch of the Soil Trust, a Slow Money philanthropic revolving fund investing in small food and farming enterprises around the county. Marco is currently developing an Economics for Transition curriculum for engaged citizens and activists.