And the flashdrive is the new paperclip...

Total systemwide savings rising to $400 billion in 2019--and we will need those savings and more to pay for the government health programs as they are currently constituted. Melinda Beeuwkes Buntin and David M. Cutler: >The Two Trillion Dollar Solution: Saving Money by Modernizing the Health Care System: The fundamental challenge in health reform is to reduce the growth rate of health care costs.... If we cannot “bend the curve” of increasing health care costs, then we will not be able to afford our current commitments to Medicare, Medicaid, and the State Children’s Health Insurance Program, let alone the cost of covering the 45 million uninsured Americans.... >[W]idely accepted solutions include bringing health care into the information age, reforming health insurance markets, and learning what works and which health care providers are better at what they do. Reform will also require reorienting payments away from fee-for-service... toward value-based systems that pay for entire episodes of care, stressing prevention and not just acute treatment.... >[O]ur best guess is that fundamental health system reform involving just three of these strategies will lead to federal savings of about $550 billion over the next decade... [First,] health information technology... direct federal savings of $196 billion between 2010 and 2019... administrative simplification... more productive use of time by physicians and nurses. Second... insurance “exchanges”... $64 billion over the next 10 years. Finally, payment system reforms... could save the federal government $299 billion... by reducing the frequency and intensity of hospitalizations. >These three sets of policies together would yield overall [additional] system savings of $1.5 trillion over the coming decade [in reduced private and state costs].... >We first lay out the two potential means for achieving savings—by cutting waste and inefficiency out of the “base” of current health care spending and by aligning incentives to encourage the growth of only effective health care services. We then discuss how other industries have achieved efficiency gains and the specific policies that experts agree can bring cost savings. In the second half of the paper, we present evidence about the quantitative impact of these types of policies taken together. We sum up each section with a discussion of [additional] related strategies that [also] have promise... > >

Payment Reform to Improve Health Care: Ways to Move Forward, by Ellen-Marie Whelan and Judy Feder

Wolf: >FT.com / Columnists / Martin Wolf - Reform of regulation has to start by altering incentives: At the heart of the financial industry are highly leveraged businesses. Their central activity is creating and trading assets of uncertain value, while their liabilities are, as we have been reminded, guaranteed by the state. This is a licence to gamble with taxpayers’ money. The mystery is that crises erupt so rarely.... >[B]anks are special sorts of businesses: for them, debt is more than a means of doing business; it is their business. Thus limited liability is likely to have an exceptionally big impact on their behaviour.... In a highly leveraged limited liability business, shareholders will rationally take excessive risks, since they enjoy all the upside but their downside is capped: they cannot lose more than their equity stake, however much the bank loses. In contemporary banks, leverage of 30 to one is normal.... >A solution seems evident: let creditors lose. Rational creditors would then charge a premium for lending to higher-risk operations, leading to lower levels of leverage. One objection is that creditors may be ill-informed about the risks being run by banks they are lending to. But there is a more forceful objection: many creditors are protected by insurance backed by governments. Such insurance is motivated by the importance of financial institutions as sources of credit, on the asset side, and suppliers of money, on the liability side. As a result, creditors have little interest in the quality of a bank’s assets or in its strategy. They appear to have lent to a bank. In reality, they have lent to the state.... [C]reditors are most at risk in a systemic crisis. But a systemic crisis is precisely when governments feel compelled to come to the rescue, as they did at the end of last year.... >The well-known solution is to regulate such insured institutions very tightly. But an enormous part of what banks did in the early part of this decade – the off-balance-sheet vehicles, the derivatives and the “shadow banking system” itself – was to find a way round regulation.... >Such a crisis is not only the result of a rational response to incentives. Folly and ignorance play a part. Nor do I believe that bubbles and crises can be eliminated from capitalism. Yet it is hard to believe that the risks being run by huge institutions had nothing to do with incentives.... Regulatory reform cannot end with incentives. But it has to start from incentives... There are three players relevant here: shareholders of banks, lenders to banks, and managers and traders of banks. Shareholders are already on the hook to some extent: they can lose their investment. Nevertheless, there is space for reform. The natural reform I would like to try--to see what happens--would be to make financial-institution stock into par-value stock. It would work like this: If you hold a share of a regulated bank, then in a crisis the bank can call on you for an additional capital investment of up to $X. As a condition of their licenses to do business, financial institutions would be required to have outstanding equity on such terms and conditions that they can always call for half their book net worth from their shareholders. Lenders are now largely off the hook in the event of a systemic crisis. (They are on the hook for a one-off collapse.) I think lenders need to stay off the hook in a systemic crisis--what you gain in ex ante caution you more than lose in the additional likelihood of bank runs. Managers and traders are, however, where I would focus most of my attention. I believe we need compensation reform: compensation schemes that make it a complete personal catastrophe for the CEO and all other employees if their bank fails. If managers and traders are, personally, wiped out--reduced in assets to their last two cars and their last four-bedroom house--if any financial institution they worked for goes bankrupt anytime in the next two years, then we have a chance of creating sufficient caution. Otherwise, I don't see how we do it.

Paul Krugman Sends Us to Ali Frick Who Reportrs on Barney Frank: >Think Progress: Barney Frank: GOP Thinks $2 Billion F-22 Project Is Funded By Monopoly Money: On a press call hosted by the Center for American Progress Action Fund this afternoon, Frank pointed out Republicans’ hypocrisy in railing against the deficit while simultaneously funding a $2 billion air force jet that has never once flown a mission in Afghanistan or Iraq. Frank said so-called deficit hawks act as though the Pentagon is funded with “Monopoly money”: >>I am of course struck that so many of my colleagues who are so worried about the deficit apparently think the Pentagon is funded with Monopoly money that somehow doesn’t count... >Frank also dismissed concerns that eliminating the F-22 will cost jobs: >>These arguments will come from the very people who denied that the economic recovery plan created any jobs. We have a very odd economic philosophy in Washington: It’s called weaponized Keynesianism. It is the view that the government does not create jobs when it funds the building of bridges or important research or retrains workers, but when it builds airplanes that are never going to be used in combat, that is of course economic salvation... >Indeed, conservatives declare that canceling the F-22 would result in thousands of lost jobs. However, as Center for American Progress Senior Fellow Lawrence Korb pointed out on the call, the administration has also ramped up production of the F-35, which is produced at many of the same facilities — and by the same workers — as the F-22. >Frank called the F-22 fight an important “test” for the Obama administration’s efforts to cut wasteful military spending. “If we cannot hold the line on this, then it’s very bad news for trying to hold down any kind of excesses in military spending,” he said.

• Chris Lehmann: Rich People Things: Steve Forbes Misunderstands Augustus, Caesar and Hannibal | The Awl
• Tyler Cowen: Kindle and DRM and Netflix too
• FT.com | The Economists' Forum | Reform of regulation has to start by altering incentives
• Economist's View: FRBSF: Fighting Downturns with Fiscal Policy
• Poet's Choice By Katha Pollitt
• Matthew Rognlie: What's wrong with low real interest rates?
• Andrew Gelman: Is it "schlocky" to compare life expectancies between countries?
• Paul Krugman: Two reactions to Ezra Klein
• Nouriel Roubini: The risks of a double-dip, W-shaped recession may be growing
• Matthew Yglesias: All Nonwhite Converging on Hypernegative View of GOP
• Iran's Election and the Rift Inside the New America Foundation
• How Low Can They Go? - The Plank

Tyler Cowen says that he is "pro-copyright... but... the default settings make it too hard for successful negotiations to occur..." I wonder: doesn't that also mean that he is "anti-copyright, but the default settings don't provide enough rewards to creative authorship..."? How would one tell the difference between the qualified pro-copyright and the qualified anti-copyright positions? >Marginal Revolution: Kindle and DRM and Netflix too: As a reader, I find it good policy to keep the number of books on my Kindle to below twenty.  That forces me to read the ones I order and it also protects me from "stranded" consumer durables.  Uncertainty and confusion about my rights only strengthens my desire to keep that policy.  >As a writer, I expect the Kindle is temporarily in my financial self-interest, as it gets more "influentials" reading my work and perhaps talking it up.  In the longer run I suspect it means a lower equilibrium price for books.  One question is whether publishers use "sticky" or inconvenient DRM practices as an implicit collusive method for limiting the spread of Kindle. >Today I was struck by this passage about the origins of Netflix: >>Netflix's selection of more than 100,000 DVD rental titles is made possible by the "first-sale doctrine" of U.S. copyright law, which permits buyers of DVDs to lend them out without studios' consent. >>In Netflix's early days, its buying team would sometimes purchase DVDs at local Wal-Marts or Best Buys if it couldn't get copies through studios, says Ted Sarandos, Netflix's chief content officer. >>In contrast, to deliver movies and television shows over the Internet, Netflix has to license them from studios. So far, it has gotten only about 12,000 titles, a hodgepodge of older films such as "Diehard," episodes of popular TV shows including "30 Rock" and a smattering of new releases. >That's right, we had more innovation because some of the usual copyright strictures about negotiating rights did not apply.  I am pro-copyright, but once again the default settings make it too hard for successful negotiations to occur. Me? I'm putting my trust in Google as semi-benevolent *kami*. Google Books is rolling forward. Google Movies and Google Music are YouTube in disguise. When the titanic battle between them and iTunes takes place, it will shake the universe.

Back in the old days, when Tom Ricks worked for the *Washington Post,* you never knew what he thought or how to read his stories: Did he really think Danielle Pletka had a point of view worth taking seriously? You could not tell until three years later, when his book would come out. (Answer: no.) That is not a problem any more: >Wise words on Iran from Karim Sadjadpour: If you are as weary as I am of knee-jerk nonsense from pundits and pols who would rather tear down their president than really aid the Iranian people, then you might enjoy this commentary by Karim Sadjadpour. And unlike many in Washington, he actually knows what he is talking about. An expert on the Iranian opposition, he offers these wise words of advice: >>This is extremely delicate and the situation is so dynamic. We clearly have to be on the right side of history here, but I think if we try to insert ourselves into the momentous internal Iranian drama that's unfolding we may unwittingly undermine those whom we're trying to strengthen. Historically that's often been the case in Iran.    >>It goes without saying that the Obama administration should clearly not acknowledge the results of these contested elections. This would demoralize people. We should also be pushing all of our allies not to acknowledge the results of these elections until justice prevails in Tehran. I was disappointed that Turkey's Abdullah Gul and Afghanistan's Hamid Karzai did not hesitate to congratulate Ahmadinejad.  >>But again, I think if we overtly take sides the regime could well react with a massive and bloody crackdown on the demonstrators using the pretext that they are acting against an American-led coup." >(HT to old Steve Coll) >Of course, if the crackdown does grow bloody, then the United States government can step up the rhetoric-but then it will be doing so alongside its allies, instead of having other countries wary of joining us. But for the moment, as my friend (and counterinsurgency expert) Terry Daly observes, the question for President Obama is, "Does he have the intestinal fortitude to continue to do the difficult right thing and keep hands off the events in Iran, or will he fold under intense domestic pressure and loudly support Moussavi and the demonstrators?" >Meanwhile, this analysis points out that in two provinces, the recorded turnout exceeded 100 percent! Also check out this nice essay by proven provider Robin Wright about the role of Ayatollah Montazeri, who has issued a fatwah dismissing the election results. >---- >CORRECTION: The other day this blog referred to right-wingers recklessly calling Obama weak for his careful handling of the Iranian crisis as "clowns." In fact, they should have been called "dangerous clowns." Best Defense regrets the error.

Shame on ABC News and *Fortune*. This isn't even "opinions on shape of earth differ" journamalism. This is "the earth is f;at" journamalism. Shame on John Boehner and Lindsey Graham. We could have fruitful and productive normal politics right now--if we had a better class of Republicans, and a better class of journalists. Igor Volsky: >Wonk Room » The Public Insurance Plan Is Not Responsible For High CBO Scores: Since the Congressional Budget Office (CBO) issued very preliminary cost estimates of the Health, Education, Labor and Pensions (HELP) committee’s health bill and the Senate Finance Committee’s draft legislation, Republicans and some in the media have argued that the somewhat higher-than expected price tags undermine the President’s contention that a new public heath insurance plan would lower health care spending: >>Rep. John Boehner (R-OH): The Congressional Budget Office came out with a score on Senator Kennedy’s bill, just part of the score — of the — of his bill, that says that the public option would cost over $1 trillion, and would cause 23 million Americans to lose their private health care coverage, and only 16 million of which would — would be covered under the — the government plan. [CNN, 6/16/2009] >>ABC News: The President’s chances for an optional health care plan that would be run by the government may be fading after a Congressional Budget Office report found a Democratic plan in the Senate would cost at least a trillion dollars over the ten years and cover just 1/3 of the uninsured. [ABC News, 6/16/2009] >>Sen. Lindsey Graham (R-SC): The CBO estimates were a death blow to a government run health care plan. The finance committee has abandoned that. [This Week, 6/21/2009] >>Fortune Magazine’s Nina Easton: And I think the, the big speed bump this week, of course, was that CBO, Congressional Budget Office study that said that the costs of a public plan are going to be well beyond what they expected. [MTP, 6/21/2009] >But both estimates never scored the public option. The HELP Committee’s bill omitted any language about the public plan and, according to reporting by the Health Beat’s Maggie Mahar, the CBO couldn’t “mark up the Senate Finance Committee plan because the Senate Finance Committee plan doesn’t yet exist.” “Yesterday, I spoke to Peter Orszag’s Office of Management and Budget and they confirmed that there are many blank lines in the draft CBO is looking at. What was missing included a public-sector insurance option,” Mahar wrote. >In fact, rather than add to the costs of reform, a robust public option could produce savings that could actually be scored and identified by the CBO as a money-saver. As the New York Times editorialized on Sunday, “A public plan would have lower administrative expenses than private plans, no need to generate big profits, and stronger bargaining power to obtain discounts from providers. That should enable it to charge lower premiums than many private plans.” “It would also shave hundreds of billions of dollars from the amount needed to cover the uninsured — a crucial advantage as Congress scrambles to finance the reform effort,” the NYT concluded. Why oh why can't we have a better press corps?

Maureendowdsfriendwhodoesntwantanycredit@gmail.com emails me: >12% of the country still thinks Obama is a Muslim. 8% thinks he faked his birth certificate. The new Washpost/ABC poll says that 22% of the electorate id's itself as GOP. Thus it is a fair inference that roughly half of declared Republicans are fringe lunatics--which explains why "respectable" conservative media outlets like *National Review* publish the Andy McCarthys and the Victor David Hansons, and why GOP politicians like Michelle Bachman and Steve King are now "mainstream" for the GOP.