Mar 31, 2009
Follow the world of infectious disease in real time
New Rules for Medicare Advantage Plans next year
- "CMS will prohibit a practice by Medicare prescription drug plans that charges both a higher copayment for brand-name medication and the difference between the cost of the brand-name drug and a generic version. Higher copays still will be permitted, but the extra cost for the difference between the drugs will no longer be charged to beneficiaries (Alonso-Zaldivar, AP/Boston Globe, 3/30)."
The current practice by some plans may be tantamount to double charging, but I'd rather see CMS require the plan to reimburse the consumer for his or her share of the generic drug (using whatever co-pay pertains to generics), and then make the consumer bear the full extra cost of the branded drug. (An appeals process could handle the few instances where the patient can't tolerate the generic drug.)
If we want a dynamic and innovative drug industry, but one that doesn't put us into the poor house (any faster than we're already going there), we should give new drugs a lot of pricing freedom when they are new and under patent, but cut 'em off at the knees once those rights expire with a policy that agressively promotes generic competition. That's why it's important to limit the games that drug companies play to extend their period of market exclusivity. There's some activity in Congress right now to try to close the latest loophole the drug companies are using -- where they pay a generic company a "Go-away" fee not to compete. (See the report on what's happening this week in the KFF newsletter.) Drug companies protect billions of dollars of revenue by fending off generic copies this way. Fixing the loophole is one of those little things that Congress could do to help keep health care costs under control, but I'm afraid the pharmaceutical lobby will be able to kill it unless we citizens let Congress know it's important.
We should send little email notes to our esteemed congressional legislators saying, "I support legislation to stop drug companies from keeping generics off the market by paying them to "Go-Away. I hope you won't let this issue die, because our health care costs depend on it." -- something like that. Here's how to contact your members of Congress:
- Senators: US Senate, and search in the upper right corner
- Congressman: Write your Congressman
Mar 30, 2009
Health reform needed to boost productivity.
Obama's people talk about the need for health care reform as a budget and cost issue. That may or may not be true, depending on the details of the reform itself. One thing they should be emphasizing, though, is that universal health care coverage, if it was no longer dependent on employer sponsored plans, would provide a tremendous boost to our national productivity. And, productivity increases are what we need if we are ever to work our way out of our deficit problems.
I bet that you know someone -- maybe yourself --who has been trapped in a job out of fear of losing health insurance. That "job-lock" is a major deterrent to new business starts. And, jumping ship from a large bureaucracy-bound corporation to a small business is often hard because many small businesses don't provide adequate health insurance. When workers' employment choices are so biased, they exact a cost in lost productivity (the difference in the value of what they could be producing if they weren't constrained and the value of what they actually are producing in their less-than-optimal job). The current employment-based system also is biased in favor of big companies and against small companies. (That's why many small businesses don't offer health insurance.) Big companies have the scale and resources to pool risks across a wide range of enrollees and drive a hard bargain with prospective health insurers for low premiums. And, they generally pay 35% marginal tax compared with, say, 28%, for small proprietors, so they get a bigger tax break from deducting health care premiums. So, it's less costly, per enrollee, for large companies to provide health coverage than for small ones. As a consequence, large companies can offer lower total compensation (wages + benefits) than small companies can for the same skill level.
So, the current system biases employees against smaller, more entrepreneurial ventures, and rewards larger firms at the expense of smaller ones. Both of those biases waste resources and lower our overall productivity as a country.
Bottom line: we need universal access to health care, unrelated to employment, as a boost to our economic productivity. To go deeper into this subject, see a very good summary by Elizabeth Jacobs, a Congressional Fellow.
Next post on this subject: what should the reform look like?
Mar 29, 2009
Standardized tests, technology and teaching
Thanks to our journaling teacher...we'll call her Ynonymous, for letting us peek into the craziness of her world.
Mar 26, 2009
To win, you needed an RSS Feed!
First prize went to Ben, in Texas of all places. I've never met Ben, but I do know his father, who must have sent him a blog post early on. Ben is very tech saavy, having started more companies in his first thirty years than I will ever do in my lifetime. Right now, he's head of XOXCO.com, a "Clickable Research and Development Company." Their site is geared for people with web sites and blogs, I think, so I should like it, if I ever get up to speed. Getting back to Ben, he did ask me if the the "fun prize" was getting to punch Larry Summers. The answer is ONLY in a virtual sense! That is, Ben could develop a little "clickable" application for me that would allow anyone reading one of my Summers posts to click on the "Give a sock to Larry" button as a way of expressing our disdain. On the other hand, I wouldn't pay him to do this, so my sense of outrage at Larry S's failure to apologize for his role in creating our current debacle is obviously limited by my own pecuniary concerns.
Second prize ($10 Amazon gift card) followed a few hours later, with a response from Julie O, from Minnesota (no, not Rochester!). Now, Julie is someone I know, who is doing important work on our country's behalf (that's all I'll say about that!), so I'm happy she won. Not sure how she did it, but I assure you I gave her no hints! And, she's not a relative.
There were a number of other entries in the 24 hours following the post, more than 5 but less than ten (that's all I'll say about that!). I feel bad about not having enough money to give everyone who answered a prize, but them's the rules. So, I'll save my pennies and run another contest in about 6 months.
Giving Summers enough rope...
- "The “dirty little secret,” Obama told Leno on Thursday, is that “most of the stuff that got us into trouble was perfectly legal.” An even dirtier secret is that a prime mover in keeping that stuff legal was Summers, who helped torpedo the regulation of derivatives while in the Clinton administration. His mentor Robert Rubin, no less, wrote in his 2003 memoir that Summers underestimated how the risk of derivatives might multiply “under extraordinary circumstances.”
Given that Summers worked for a secretive hedge fund, D. E. Shaw, after he was pushed out of Harvard’s presidency at the bubble’s height, you have to wonder how he can now sell the administration’s plan for buying up toxic assets with the help of hedge funds."
I would forgive old Larry and not mention him again in this blog or in any side emails.
Mar 24, 2009
Fun Prize for first two respondents to this post.
Mar 20, 2009
Who should have a retrospective 90% windfall tax?
BUT, the CONGRESS! It is what it says it isn't! What it isn't is the representative of the people's interest. What it is is an institution rife with craven, cowardly, corrupt and even lazy thespians, who created the very institutional framework that has brought us down. Imagine an institution that votes on December 15, at the very end of a President's term (2000), on a bill to prohibit all regulation of CDS's (credit default swaps) or CDOs (collateralized debt obligations), which has neither been reported out of a committee or subjected to ANY debate on the floor -- throws that bill into a 12th hour appropriations bill to keep the government running -- and approves it overwhelmingly (292 to 60 in the House--see how your congressman voted) and by "unanimous consent" in the Senate. (See the awful story in Wikipedia.)
If those yea'ers and consenters and no-show-ers argue that they didn't know because the bill was slipped into a vote at the last minute, couldn't shut down government by denying appropriations, or depended on their leadership to have done the homework, we should figuratively string 'em up by turning them out of office. But, if even one were to issue the following statement:
"I want to apologise to my consitutiuents; I let this happen because I was ignorant, [acceptable alternatives: asleep at the wheel, overly dependent on hedge fund PACs for campaign contributions, completely uncurious about how the financial system works, happy that I could get my own bills slipped into law in the dead of pre-Christmas recess night, unwilling to challenge a system that works so well for my own longevity in Congress, thought that the pros in the Clinton Admin (Rubin/Summers) were taking care of things]. All I really cared about at the time was staying in office and getting home early for Christmas. I let you, my constituents down, and to make up for it I will work diligently to force my party and institution to change its rules regarding last minute piggy-backing of bills onto appropriations bills. I will never again vote for an appropriations bill that contains anything but appropriations. I will also introduce legislation to impose a retrospective 90% windfall tax on my salary of 2000-2008 to pay back the taxpayer for my misdeeds."
I would stand up and vote for such a congressman. (And maybe even send him/her $10 donation!)
Mar 15, 2009
"Satyam is Sanskrit for Enron"
The gospel according to Paretta: "The spreadsheet shows an important accounting indicator -- the QofE (quality-of-earnings) ratio. It's the ratio of cash flow from operations to net income. Because net income includes non-cash expenses, cash flow from opns (CFO) should typically be higher than net income because to arrive at CFO you add back large expenses like depreciation and accrued expenses or expenses you did not pay for yet (Accts payable) and subtract smaller revenues that did not produce cash, like increases in Accts receivables. When CFO/NI is not greater than 1, it brings into question whether net income includes revenues that are being recorded before the're actually earned. (or even fictitious revenues!) So when QofE is less than one for even one period, it's a red flag and when it remains so over nearly a 5 year period, as in the case of Satyam, it is a big red flag! If you fictictiously inflate revenue then you also have to inflate accounts receivable; otherwise the accounts don't balance. Satyam's receivables rose steadily over the five year period and also as a percentage of net income. That relationship can jump around for a period or two (also a red flag) but when it grows steadily then you have to ask, why are they increasingly not collecting the revenues they are recording in A/R (big red flag). If you're a Satyam kind of company, if you want CFO to rise so that it exceeds or approaches net income you have to either stop paying your A/P or you have to make up fictitious A/P, because A/P reduces net income but does not affect CFO. Notice how on the second page of the spreadsheet A/R and A/P and related accruals are increasing and are an increasing percentage of net income? Again if it happens just one period, it is a blip on the radar...a pink flag. If it keeps happening, it is another big red flag. It means you are increasingly not collecting your A/R and you are not paying your debts. The conclusion is you are either a crook or you don't know how to run your business. So three big red flags and it is time to sell, call the cash flow police, or both. The mystifying thing is that Raju admits that 94%, or $1 billion, of the company's cash balance was fictitious. That should have been caught by the auditors (PwC) unless the banking system in India is so corrupt that banks sent PwC false confirmations. In any case Raju could not have done this alone. There had to be collusion on a massive scale to the extent we have never seen before. The international fallout from this is going to be huge. Stay tuned."
Yes we Can! (stay tuned, that is.)
Thanks again, Doctor Bob.