According to a recent article in the newspaper the Florida legislature is considering lowering property insurance bills by switching long term risks to the taxpayers. By what authority they propose to burden the taxpayers of the state with the burden of assuming the risks that homeowners pay insurance companies for is unclear. Apparently they view the public fisc as a cornucopia of money which they can apply to any purpose, regardless of lack of constitutional or legal authority.
Gov. Charles Crist has said it is right to “raise concerns” about the state taking on “long term risks” but the insurance crises has to be considered too. While it is very generous of the Governor to want to bail out this rogue industry which has for years ripped off their policy holders by its failure to provide adequate reserves while rewarding executives and stockholders with undeserved financial largesse, he is dead wrong if he thinks that the taxpayers should pick up the bill without qualifications, without requiring the industry to pay for its own mess without robbing the state coffers to cover their mismanagement.
What is being overlooked is the fact that despite the near universality of homeowners insurance it is a private endeavor not a governmental matter and government should not become the final underwriter of this enterprise. What might be more appropriate would be a government backed loan similar to the bailout of the Chrysler Motor Company some years back. The Federal Government went on the hook to guarantee a loan but Chrysler paid it back.
Somehow conservative institutions are always eager to individuate profits and socialize losses, but the cost of insuring ones home should not be borne by the taxpayers.
The current proposal puts the government of Florida in the position of a reinsurer, but at the expense of all of the taxpayers, not the insurance companies and policy holders who would benefit. Government should not become a “hedge fund” covering private risks at public expense. A large part of the current problem is insurance companies are undertaking to assume more risks than their own reserves can cover, given the poor way that reserves are calculated, so the method to carry more risk is covered by the neat mechanism of “reinsurance,” which of course means that they are increasing the cost of their operation and passing that cost on to the policy holders.
Much like a bookie who has taken on too much exposure in his betting, they are “laying off” a portion of that exposure to a “hedge fund” type entity, a reinsurer. In the bookies’ case however, it does not add to the cost or odds of the bettor, just how much the bookie may not win. In the insurance scenario, however, the cost of “laying off” the risk is the premium or cost of reinsurance, which is added to the premium paid by the original insured, the homeowner. Meanwhile dividends and big salary goes on as usual.
Perhaps a few bankruptcies among the major carriers would be a good thing to flush out the waste in the industry and make it self-sustaining, requiring larger reserves and smaller dividends, until such time as the industry does not have to put it’s hand in the governnent’s pocket. If the government is to take on risks to save the insurance industry it should only do so on a basis of underwriting a loan to the industry, not assuming their liability for the sake of a segment of the society. If this is done the ultimate beneficiaries will be the insurance companies, now making big bucks, with business as usual at taxpayers expense.
Tuesday, January 16, 2007
Privatizing- the Corporate Takeover
When the concept of privatizing first surfaced on the political landscape it seemed like a good idea whose time had come. Clearly, to save extensive taxpayers funds in the performance of a governmental function seemed like a good idea. Where was the down side ?
Unfortunately the down side is now screamingly apparent and is in the process of taking huge, destructive bites out of good government. It has become a solution in search of a problem, where in pursuit of profit, inattentive or lazy politicians are persuaded to sell a portion of their sovereign responsibility to the smiling face of some generous campaign contributor. The benefits to the politician are several. Firstly, the constituents are persuaded that privatizing will save tax dollars and that their elected officials who favor such moves are looking out for the public. By contracting out the politicians are relieved of further responsibility in the privatizing function, now the responsibility of the contractor whose obligations are supposedly set forth with great specificity in the terms of the contract. Although this is the rubric, it is seldom the actual case. Contracts, framed in vague, rosy, descriptive language setting out ill-defined objectives give the contractor vast cover, manuevering room to weasel and crawfish, to advance varying interpretations as changes in circumstances or expectations may require. Rarely, if ever, is there any consideration for providing a valid mechanism to determine if real savings have been achieved nor any continuing examination or oversight to determine whether the public interest is being better served since this would require a continuing question as to whether the original decision to privatize was a correct one. What, a continuing responsibility for a political decision ? What a frightening, radical idea that is. Hold politicians responsible for their decisions ?
What is actually happening is that at all levels of government America is for sale, discreet pieces of government on the block, for sale to the highest t bidder. Counties have sold the responsibility to operate its jails to large corporations, Correction Corporation of America, and Wackenhut among others. The contention that this will save tax dollars is pure smoke and mirrors. We now have large executive salaries, as well as profit for the stockholders added to the actual cost of running a jail. Hiring less qualified personnel at lower salaries, creating some risks is part of the formula. Putting the conduct of management beyond the reach of the elected officials and the public is part of the price. Another part of the price is that in the event something goes wrong, County is not off the hook, not relieved of legal responsibility for the operation of the facility despite all of the laudatory language, all the reassurances inserted into the contract documents by the high powered attorneys representing the contractors. Indeed since their clients have secured the management of a large number of jails, they have developed a level of expertise far greater than the legal representative of government, especially when the elected politicians are pushing their staffs to make the deal rather than carefully examine the proposals for the pitfalls, the downside less they call their bosses judgment into question. The State of Florida’s budget in 2003 appropriated 132 million for privatizing contracts.
A careful look at privatizing leads to the conclusion that what we are seeing in the out sourcing of critical governmental functions. On occasion, the actual transfer of governmental function is presented as a mere contract for services, rather than an outright transfer of responsibility.
The recent problems which have surfaced with respect to the acquisition of “new genration” voting machines is a good example where the process of recording and compiling the voting records is claimed to be a “proprietary secret” a black box concept depriving the voters of the ability to audit and verify the correctness of reported results and without any paper trail in effect lets the contractor control the outcome of an election. What greater danger for potential abuse can be imagined yet “lazy” election officials, content to contract out their basic responsibility to the charms of technology have put our very election process in jeopardy.
Privatization has become an aggressive industry. No longer content to be a dormant availability to assist government, Dick Army, a former Republican workhorse in the House, presents it as part of a conservative battle between “Free Market” vs. the corrupt, ever expanding big government. Using seductive terms such as “streamlining ”well funded foundations such as the Reason Foundation have sprung up to promote the new enlightenment, let corporations, not elected government run the country.
Not to be outdone the publishers of legal books have hit the market with a number of “How to” books, targeting both attorneys who work for governments as well as clients who are potential contractors. An interesting document created at taxpayer expense is a GAO report to the “House Republican Task Force on Privatization. “ This tome is essentially a “how to “ outline, to assist the Republican task force in finding lucrative opportunities for their corporate campaign contributors. In the field of education privatizing is achieved, by vouchering, a backdoor way to dismantle public education and funnel money to religious institutions at the same time.
Probably one of the quietest, and most insidious examples of runaway privatization was the virtual gutting of the U. S. Army’s Quartermaster Corps. Although that entity still exists on paper, an examination of the incredible number of contractors in Iraq performing their function staggers the imagination, particularly as to have costs and questional procurement methods. Not adverse to helping a political friend, the current administration has let multibillion dollar contracts to such entities as , Halliburton, without the benefit of obtaining competative bids, nor with any great specificity as to mission. Here is a bucket of money, do good. Of course Halliburton, after slicing a huge cut for their own coffers, turns around and sub contracts most of the work out, some to subsidiary companies, totally owned and controlled by themselves but provide a “cut out” so they can take an additional slice for profit. They operate the food services, cafeteria style, transportation, logistics, communications, protection contractors, all receiving huge salaries for performing services formerly performed by the military. Taxpayer savings? It is to laugh.
Vice President Cheney was Secretary of Defense during Ronald Reagan’s administration, when privatizing became all the rage. After leaving DOD he joined Halliburton as CEO, thereby enabling him to catch his own pass. Whether his blind trust hidden behind a “Chinese wall” contains stock options and residual interest in Halliburton is not known. His going away package was 35 million.
One has only to recall the recent attempt to contract our port security concerns to a foreign corporation owned by a foreign muslim government to demonstrate how deep this rot has gotten nor how dangerous to U.S. interests it has become.
The best, only answer is to elect officials who are willing to perform a difficult job and not “contract out” for a quick fix. Like the man says, “eternal vigilance is the price of liberty”.
Unfortunately the down side is now screamingly apparent and is in the process of taking huge, destructive bites out of good government. It has become a solution in search of a problem, where in pursuit of profit, inattentive or lazy politicians are persuaded to sell a portion of their sovereign responsibility to the smiling face of some generous campaign contributor. The benefits to the politician are several. Firstly, the constituents are persuaded that privatizing will save tax dollars and that their elected officials who favor such moves are looking out for the public. By contracting out the politicians are relieved of further responsibility in the privatizing function, now the responsibility of the contractor whose obligations are supposedly set forth with great specificity in the terms of the contract. Although this is the rubric, it is seldom the actual case. Contracts, framed in vague, rosy, descriptive language setting out ill-defined objectives give the contractor vast cover, manuevering room to weasel and crawfish, to advance varying interpretations as changes in circumstances or expectations may require. Rarely, if ever, is there any consideration for providing a valid mechanism to determine if real savings have been achieved nor any continuing examination or oversight to determine whether the public interest is being better served since this would require a continuing question as to whether the original decision to privatize was a correct one. What, a continuing responsibility for a political decision ? What a frightening, radical idea that is. Hold politicians responsible for their decisions ?
What is actually happening is that at all levels of government America is for sale, discreet pieces of government on the block, for sale to the highest t bidder. Counties have sold the responsibility to operate its jails to large corporations, Correction Corporation of America, and Wackenhut among others. The contention that this will save tax dollars is pure smoke and mirrors. We now have large executive salaries, as well as profit for the stockholders added to the actual cost of running a jail. Hiring less qualified personnel at lower salaries, creating some risks is part of the formula. Putting the conduct of management beyond the reach of the elected officials and the public is part of the price. Another part of the price is that in the event something goes wrong, County is not off the hook, not relieved of legal responsibility for the operation of the facility despite all of the laudatory language, all the reassurances inserted into the contract documents by the high powered attorneys representing the contractors. Indeed since their clients have secured the management of a large number of jails, they have developed a level of expertise far greater than the legal representative of government, especially when the elected politicians are pushing their staffs to make the deal rather than carefully examine the proposals for the pitfalls, the downside less they call their bosses judgment into question. The State of Florida’s budget in 2003 appropriated 132 million for privatizing contracts.
A careful look at privatizing leads to the conclusion that what we are seeing in the out sourcing of critical governmental functions. On occasion, the actual transfer of governmental function is presented as a mere contract for services, rather than an outright transfer of responsibility.
The recent problems which have surfaced with respect to the acquisition of “new genration” voting machines is a good example where the process of recording and compiling the voting records is claimed to be a “proprietary secret” a black box concept depriving the voters of the ability to audit and verify the correctness of reported results and without any paper trail in effect lets the contractor control the outcome of an election. What greater danger for potential abuse can be imagined yet “lazy” election officials, content to contract out their basic responsibility to the charms of technology have put our very election process in jeopardy.
Privatization has become an aggressive industry. No longer content to be a dormant availability to assist government, Dick Army, a former Republican workhorse in the House, presents it as part of a conservative battle between “Free Market” vs. the corrupt, ever expanding big government. Using seductive terms such as “streamlining ”well funded foundations such as the Reason Foundation have sprung up to promote the new enlightenment, let corporations, not elected government run the country.
Not to be outdone the publishers of legal books have hit the market with a number of “How to” books, targeting both attorneys who work for governments as well as clients who are potential contractors. An interesting document created at taxpayer expense is a GAO report to the “House Republican Task Force on Privatization. “ This tome is essentially a “how to “ outline, to assist the Republican task force in finding lucrative opportunities for their corporate campaign contributors. In the field of education privatizing is achieved, by vouchering, a backdoor way to dismantle public education and funnel money to religious institutions at the same time.
Probably one of the quietest, and most insidious examples of runaway privatization was the virtual gutting of the U. S. Army’s Quartermaster Corps. Although that entity still exists on paper, an examination of the incredible number of contractors in Iraq performing their function staggers the imagination, particularly as to have costs and questional procurement methods. Not adverse to helping a political friend, the current administration has let multibillion dollar contracts to such entities as , Halliburton, without the benefit of obtaining competative bids, nor with any great specificity as to mission. Here is a bucket of money, do good. Of course Halliburton, after slicing a huge cut for their own coffers, turns around and sub contracts most of the work out, some to subsidiary companies, totally owned and controlled by themselves but provide a “cut out” so they can take an additional slice for profit. They operate the food services, cafeteria style, transportation, logistics, communications, protection contractors, all receiving huge salaries for performing services formerly performed by the military. Taxpayer savings? It is to laugh.
Vice President Cheney was Secretary of Defense during Ronald Reagan’s administration, when privatizing became all the rage. After leaving DOD he joined Halliburton as CEO, thereby enabling him to catch his own pass. Whether his blind trust hidden behind a “Chinese wall” contains stock options and residual interest in Halliburton is not known. His going away package was 35 million.
One has only to recall the recent attempt to contract our port security concerns to a foreign corporation owned by a foreign muslim government to demonstrate how deep this rot has gotten nor how dangerous to U.S. interests it has become.
The best, only answer is to elect officials who are willing to perform a difficult job and not “contract out” for a quick fix. Like the man says, “eternal vigilance is the price of liberty”.
FLORIDA STATE GOVERNMENT, YOUR FRIENDLY HEDGE FUND REINSURER
According to a recent article in the newspaper the Florida legislature is considering lowering property insurance bills by switching long term risks to the taxpayers. By what authority they propose to burden the taxpayers of the state with the burden of assuming the risks that homeowners pay insurance companies for is unclear. Apparently they view the public fisc as a cornucopia of money which they can apply to any purpose, regardless of lack of constitutional or legal authority.
Gov. Charles Crist has said it is right to “raise concerns” about the state taking on “long term risks” but the insurance crises has to be considered too. While it is very generous of the Governor to want to bail out this rogue industry which has for years ripped off their policy holders by its failure to provide adequate reserves while rewarding executives and stockholders with undeserved financial largesse, he is dead wrong if he thinks that the taxpayers should pick up the bill without qualifications, without requiring the industry to pay for its own mess without robbing the state coffers to cover their mismanagement.
What is being overlooked is the fact that despite the near universality of homeowners insurance it is a private endeavor not a governmental matter and government should not become the final underwriter of this enterprise. What might be more appropriate would be a government backed loan similar to the bailout of the Chrysler Motor Company some years back. The Federal Government went on the hook to guarantee a loan but Chrysler paid it back.
Somehow conservative institutions are always eager to individuate profits and socialize losses, but the cost of insuring ones home should not be borne by the taxpayers.
The current proposal puts the government of Florida in the position of a reinsurer, but at the expense of all of the taxpayers, not the insurance companies and policy holders who would benefit. Government should not become a “hedge fund” covering private risks at public expense. A large part of the current problem is insurance companies are undertaking to assume more risks than their own reserves can cover, given the poor way that reserves are calculated, so the method to carry more risk is covered by the neat mechanism of “reinsurance,” which of course means that they are increasing the cost of their operation and passing that cost on to the policy holders.
Much like a bookie who has taken on too much exposure in his betting, they are “laying off” a portion of that exposure to a “hedge fund” type entity, a reinsurer. In the bookies’ case however, it does not add to the cost or odds of the bettor, just how much the bookie may not win. In the insurance scenario, however, the cost of “laying off” the risk is the premium or cost of reinsurance, which is added to the premium paid by the original insured, the homeowner. Meanwhile dividends and big salary goes on as usual.
Perhaps a few bankruptcies among the major carriers would be a good thing to flush out the waste in the industry and make it self-sustaining, requiring larger reserves and smaller dividends, until such time as the industry does not have to put it’s hand in the governnent’s pocket. If the government is to take on risks to save the insurance industry it should only do so on a basis of underwriting a loan to the industry, not assuming their liability for the sake of a segment of the society. If this is done the ultimate beneficiaries will be the insurance companies, now making big bucks, with business as usual at taxpayers expense.
Gov. Charles Crist has said it is right to “raise concerns” about the state taking on “long term risks” but the insurance crises has to be considered too. While it is very generous of the Governor to want to bail out this rogue industry which has for years ripped off their policy holders by its failure to provide adequate reserves while rewarding executives and stockholders with undeserved financial largesse, he is dead wrong if he thinks that the taxpayers should pick up the bill without qualifications, without requiring the industry to pay for its own mess without robbing the state coffers to cover their mismanagement.
What is being overlooked is the fact that despite the near universality of homeowners insurance it is a private endeavor not a governmental matter and government should not become the final underwriter of this enterprise. What might be more appropriate would be a government backed loan similar to the bailout of the Chrysler Motor Company some years back. The Federal Government went on the hook to guarantee a loan but Chrysler paid it back.
Somehow conservative institutions are always eager to individuate profits and socialize losses, but the cost of insuring ones home should not be borne by the taxpayers.
The current proposal puts the government of Florida in the position of a reinsurer, but at the expense of all of the taxpayers, not the insurance companies and policy holders who would benefit. Government should not become a “hedge fund” covering private risks at public expense. A large part of the current problem is insurance companies are undertaking to assume more risks than their own reserves can cover, given the poor way that reserves are calculated, so the method to carry more risk is covered by the neat mechanism of “reinsurance,” which of course means that they are increasing the cost of their operation and passing that cost on to the policy holders.
Much like a bookie who has taken on too much exposure in his betting, they are “laying off” a portion of that exposure to a “hedge fund” type entity, a reinsurer. In the bookies’ case however, it does not add to the cost or odds of the bettor, just how much the bookie may not win. In the insurance scenario, however, the cost of “laying off” the risk is the premium or cost of reinsurance, which is added to the premium paid by the original insured, the homeowner. Meanwhile dividends and big salary goes on as usual.
Perhaps a few bankruptcies among the major carriers would be a good thing to flush out the waste in the industry and make it self-sustaining, requiring larger reserves and smaller dividends, until such time as the industry does not have to put it’s hand in the governnent’s pocket. If the government is to take on risks to save the insurance industry it should only do so on a basis of underwriting a loan to the industry, not assuming their liability for the sake of a segment of the society. If this is done the ultimate beneficiaries will be the insurance companies, now making big bucks, with business as usual at taxpayers expense.
PENANCE
After listening to the President’s speech on Iraq, I was surprised that the President finally admitted that he had made mistakes in connection with his decisions concerning the invasion of Iraq and the subsequent conduct of the war. In accepting responsibility for his mistakes it occurred to me that there should be consequences for this, not merely consequences for the country but consequences for the President personally.
Being a history buff my mind turned to the controversy between Thomas a’ Becket and King Henry II of England in 1174 and how King Henry was required to show his penance for his complicity in the murder of Becket. The King was required to walk barefoot to Westminister Cathedral while being scourged.
Accordingly, I think it would be most appropriate for President Bush to walk barefoot from the White house to the Capitol as a penance to show an act of contrition. Sourging would not be necessary, the act of contrition being demonstrated by his barefoot state would be enough. After years of arrogant and inaccurate decisions, it would be more correct on his part than to once more present the American people with yet another arrogant and questionable decision.
In the nature of pulling out all the stops to support his position is the suggestion that we owe it to the soldiers who were killed for his folly to keep going in Iraq to demonstrate that they did not die in vain. In other words we should be willing to have more of our kids killed in defense of his flawed policies as a tribute, to honor those who have already died needlessly. What a foul card to play to suggest to those who have already lost a loved one that to admit our mistakes would denigrate the quality of their sacrifice.
Now, rather than recognize that the bulk of the fighting is in the nature of a civil war between Sunni and Shiite, he characterizes all of the combatants as belligerents, as if in suggest that all of this chaos is part of the insurgency fomented by Al Qeda to overthrow the government. More troops will turn it around, bring us to victory. It is painfully reminiscent of the man who keeps repeating the same act yet expects a different result. No reference is made to the fact that we have a vast number of U.S. troops already in Baghdad and the fact that this number has had little effect in quelling the violence. No, 20,000 more and a few concessions by the Iraqis will win the day.
Senator Joe Biden suggest dividing the country into three sections, for Kurds, Sunni and Shiites, giving each section a large degree of autonomy but providing for a federal type central government. I looked into the history of Iraq and to my amazement that is precisely what the Ottoman Empire did in 1534, when they provided for three administrative provinces located at Mosul, in the north for the Kurds, Baghdad in the center of the area for the Sunni, and Basra in the south for the Shia. Although some home rule was permitted by Istanbul this administrative division was kept in force by the Ottoman until 1918 when W.W.I ended, a period of almost 500 years.The British occupation and their establishing a monarchy ultimately led us to the mess with which we are confronted today, but separating the contesting factions pretty well kept the peace for 500 years.
The mistake it would seem is viewing Iraq as a long standing sovereign political entity when in fact it is a recent creation, a product of British Colonialism and the mandate system established at the end of W.W.I .
The Iraqis love to point to the ancient cities of Mesopotamia, and then claim “we gave the world civilization.” Perhaps they should have kept some of this “civilization” for themselves. The reality is that the area now occupied by Iraq is where the Mesopotamia existed but beyond the geographic locale there is little justification for the current Iraqis to take credit for the creation of civilization. Perhaps they should study their own violent recent history and seek a solution without reliance on America to solve their problems.
Meanwhile President Bush would do well to examine Joe Biden’s proposal and stop worrying about his place in history as a brilliant military strategist.
Being a history buff my mind turned to the controversy between Thomas a’ Becket and King Henry II of England in 1174 and how King Henry was required to show his penance for his complicity in the murder of Becket. The King was required to walk barefoot to Westminister Cathedral while being scourged.
Accordingly, I think it would be most appropriate for President Bush to walk barefoot from the White house to the Capitol as a penance to show an act of contrition. Sourging would not be necessary, the act of contrition being demonstrated by his barefoot state would be enough. After years of arrogant and inaccurate decisions, it would be more correct on his part than to once more present the American people with yet another arrogant and questionable decision.
In the nature of pulling out all the stops to support his position is the suggestion that we owe it to the soldiers who were killed for his folly to keep going in Iraq to demonstrate that they did not die in vain. In other words we should be willing to have more of our kids killed in defense of his flawed policies as a tribute, to honor those who have already died needlessly. What a foul card to play to suggest to those who have already lost a loved one that to admit our mistakes would denigrate the quality of their sacrifice.
Now, rather than recognize that the bulk of the fighting is in the nature of a civil war between Sunni and Shiite, he characterizes all of the combatants as belligerents, as if in suggest that all of this chaos is part of the insurgency fomented by Al Qeda to overthrow the government. More troops will turn it around, bring us to victory. It is painfully reminiscent of the man who keeps repeating the same act yet expects a different result. No reference is made to the fact that we have a vast number of U.S. troops already in Baghdad and the fact that this number has had little effect in quelling the violence. No, 20,000 more and a few concessions by the Iraqis will win the day.
Senator Joe Biden suggest dividing the country into three sections, for Kurds, Sunni and Shiites, giving each section a large degree of autonomy but providing for a federal type central government. I looked into the history of Iraq and to my amazement that is precisely what the Ottoman Empire did in 1534, when they provided for three administrative provinces located at Mosul, in the north for the Kurds, Baghdad in the center of the area for the Sunni, and Basra in the south for the Shia. Although some home rule was permitted by Istanbul this administrative division was kept in force by the Ottoman until 1918 when W.W.I ended, a period of almost 500 years.The British occupation and their establishing a monarchy ultimately led us to the mess with which we are confronted today, but separating the contesting factions pretty well kept the peace for 500 years.
The mistake it would seem is viewing Iraq as a long standing sovereign political entity when in fact it is a recent creation, a product of British Colonialism and the mandate system established at the end of W.W.I .
The Iraqis love to point to the ancient cities of Mesopotamia, and then claim “we gave the world civilization.” Perhaps they should have kept some of this “civilization” for themselves. The reality is that the area now occupied by Iraq is where the Mesopotamia existed but beyond the geographic locale there is little justification for the current Iraqis to take credit for the creation of civilization. Perhaps they should study their own violent recent history and seek a solution without reliance on America to solve their problems.
Meanwhile President Bush would do well to examine Joe Biden’s proposal and stop worrying about his place in history as a brilliant military strategist.
Bush’s “new” tactic- the “Surge”
Newly emerging in the world of spin and double think is President Bush’s supposed new strategy called the Surge is vaguely reminiscent of the defensive “strategy” or tactic employed by the Japanese Army in Guadacanal in their desperate hours. It was called the “Banzai Charge”. When all else had failed they would remind their troops of the necessity of winning at all costs for the Emperor and then when their enthusiasm had been whipped up, unloose them to attack the Marine positions where, met with discipline, withering fire, they died by the thousands. Men like Al Scmidt, and John Basalone, both winners of the Medal of Honor, met the enthusiastic waves of Japanese infantry with courage and intrepidity, coupled with USMC dedication to accuracy of fire and won the day.
Let us proceed with some care and trepidation and not be overconfident that greater numbers, without more, will necessarily carry the day.
Let us proceed with some care and trepidation and not be overconfident that greater numbers, without more, will necessarily carry the day.
Thinking Outside the Box
One of the most useful metaphors to come down the pike in recent years is the one that suggest that problem solvers should “think outside the box”, i.e. to ignore the usual parameters of an issue or problem and look for possibilities beyond the areas usually considered in evaluating problems. Two current concerns leap to mind as the type of problem which cries out for “out side the box” examination for possible solutions.
The first is the current Florida Hurricane insurance fiasco where insurance companies, having grown fat for years on big premiums and small claims, now find themselves having large liability claims from past hurricanes and prospectively more exposure in future hurricane disasters. Pointing to the extensive liabilities, the companies whine that they just must greatly increase premiums or selectively drop coverage's if they are to survive.
The root cause of this dilemma is of course, the failure of the carriers to establish generously funded reserves during those years when collections were high, and claims few. Instead of prudently socking away great gobs of cash to cover the eventual claims (what insurance's is all about), that would spread the cost temporally as well as across the current policy holders. Instead the accountants and actuaries indulged in all manner of arithmetic fictions and skewed projections in order to minimize the projected risks, thereby reducing the perceived need of reserves against contingencies and freeing up buckets of cash to pay big dividends to the stockholders as well as fat salaries and bonuses to management.
A short digression to Chapter 41 of the book of Genesis, where Joseph, in interpreting the dreams of the Pharaoh, warns him of the necessity of storing up food during the seven years of plenty so that there will be food for Egypt during the seven years of famine which will follow. Now if two old primitive guys like Pharaoh and Joseph could reason that it was necessary to put up stores to cover the lean years coming, it is puzzling that our sundry insurance geniuses could not apply the same reasoning to the need to keep large reserve on hand for the years when large claims could be expected. Instead with adroit manipulation, they were able to spend most of the money as quickly as it came in, only setting aside a measly amount for reserve.
Now that the big claim years are upon them the plan is to pay off the claims with current premium collections, now at vastly increased levels due to the continuing necessity of establishing some reserves and continuing to pay staff and management big salary and bonuses. They are, in effect, paying off old claims out of current income and again failing to establish adequate reserves for the future.
One would have expected the Mutual companies to have fared better, but they distributed excess funds to the policy holders in the Mutual arrangement as well as treating the management with largess and not adequately attending to the need for larger reserves. They too will now “front end load” the premiums to cover the shortfall and their excessively optimistic planning.
In passing, one should note that the entire concept of insurance is predicated on the proposition of sharing losses and creating reserves to cover claims, rather than indulge in rosy optimizing as a rubric for giving away the store. To expect to always pay claims out of current income (premiums) completely ignores the foreseeable necessity of establishing reserves.
The second area of crisis where outside the box thinking would be of use in is the health care industry. We should be looking for a larger statistical universe as a way to bring health care cost under control, not by adding more bells and whistles to an already failing system.
Currently we are faced with the fallacy that private insurance entities,are the appropriate vehicles by which health care costs should be administered. This ignores the fact that the stock insurance companies are profit oriented agencies and therefore add to the actual cost of health care, with dividends for stockholders, big excessive salaries and perks for top management as well as large administrative costs necessitated by billing and records keeping practices, to say nothing of the immense costs involved in interfacing with the Federal Medicare and Medicaid systems to coordinate and determine who pays what. Added to this is a pile of regulations dealing with deductions, annual and otherwise as well as co-pays, all of which are adroit devices to throw major portions of the cost of care back on the insured. Clearly a single pay system would eliminate vast areas of paper shuffling at a significant savings.
Similarly, the health care providers must develop a symbiosis with the carrier for billing and collection purposes, all of which adds a further increased burden on the dollars that should be spent on care. The doctors and hospitals and other providers, anticipating that fractional amounts of their charges may not be honored, (whether based on disagreement as to the necessity of the service rendered or viewing the charges as excessive,) all try to bill at the highest amount they can get away with in order to counteract the anticipated disallowance's. Further, after working discount arrangements with insurance companies and other discount devises we wind up with different prices for the same service or procedure, depending on the nature of the patient’s insurance arrangement or lack thereof. Paradoxically, those with no insurance are usually presented with the highest bill.
If it aint broke, don’t fix it but the mid boggles if anyone can contend this system isn’t broke.
Of course a single pay system bristling with the promise of efficiency and cost reduction is unacceptable because if smacks of “socialized Medicine,” a scare word left over from the fifties. If we recognize that most doctors and hospitals are already receiving their major payment from Government financial plans then the socialized medicine taint is smoke and mirrors, doctrinaire nonsense designed to block a simplified, if less profitable system.
Of course the insurance lobby will fight single pay solutions because it will push them away from the trough and eliminate a vast amount of wasteful expense engendered by the health Insurance “crisis.” If we could but uncouple the term “insurance” from our thinking and solutions we could deliver universal health care at a reasonable cost to all citizens and let the armies of clerk, cost accounts, actuaries, billing review clerks and the like, go on to find more productive employment.
A further consideration is that our current system shackles health care to employee benefits which has a great negative effect on our workplace economy and places the excessive cost of this broken system upon the wage market, depressing wages and adversely effecting America’s ability to be competitive in the world markets. By placing an efficient streamlined system with the responsibility of government rather than the employers would greatly benefit both business and labor.
The first is the current Florida Hurricane insurance fiasco where insurance companies, having grown fat for years on big premiums and small claims, now find themselves having large liability claims from past hurricanes and prospectively more exposure in future hurricane disasters. Pointing to the extensive liabilities, the companies whine that they just must greatly increase premiums or selectively drop coverage's if they are to survive.
The root cause of this dilemma is of course, the failure of the carriers to establish generously funded reserves during those years when collections were high, and claims few. Instead of prudently socking away great gobs of cash to cover the eventual claims (what insurance's is all about), that would spread the cost temporally as well as across the current policy holders. Instead the accountants and actuaries indulged in all manner of arithmetic fictions and skewed projections in order to minimize the projected risks, thereby reducing the perceived need of reserves against contingencies and freeing up buckets of cash to pay big dividends to the stockholders as well as fat salaries and bonuses to management.
A short digression to Chapter 41 of the book of Genesis, where Joseph, in interpreting the dreams of the Pharaoh, warns him of the necessity of storing up food during the seven years of plenty so that there will be food for Egypt during the seven years of famine which will follow. Now if two old primitive guys like Pharaoh and Joseph could reason that it was necessary to put up stores to cover the lean years coming, it is puzzling that our sundry insurance geniuses could not apply the same reasoning to the need to keep large reserve on hand for the years when large claims could be expected. Instead with adroit manipulation, they were able to spend most of the money as quickly as it came in, only setting aside a measly amount for reserve.
Now that the big claim years are upon them the plan is to pay off the claims with current premium collections, now at vastly increased levels due to the continuing necessity of establishing some reserves and continuing to pay staff and management big salary and bonuses. They are, in effect, paying off old claims out of current income and again failing to establish adequate reserves for the future.
One would have expected the Mutual companies to have fared better, but they distributed excess funds to the policy holders in the Mutual arrangement as well as treating the management with largess and not adequately attending to the need for larger reserves. They too will now “front end load” the premiums to cover the shortfall and their excessively optimistic planning.
In passing, one should note that the entire concept of insurance is predicated on the proposition of sharing losses and creating reserves to cover claims, rather than indulge in rosy optimizing as a rubric for giving away the store. To expect to always pay claims out of current income (premiums) completely ignores the foreseeable necessity of establishing reserves.
The second area of crisis where outside the box thinking would be of use in is the health care industry. We should be looking for a larger statistical universe as a way to bring health care cost under control, not by adding more bells and whistles to an already failing system.
Currently we are faced with the fallacy that private insurance entities,are the appropriate vehicles by which health care costs should be administered. This ignores the fact that the stock insurance companies are profit oriented agencies and therefore add to the actual cost of health care, with dividends for stockholders, big excessive salaries and perks for top management as well as large administrative costs necessitated by billing and records keeping practices, to say nothing of the immense costs involved in interfacing with the Federal Medicare and Medicaid systems to coordinate and determine who pays what. Added to this is a pile of regulations dealing with deductions, annual and otherwise as well as co-pays, all of which are adroit devices to throw major portions of the cost of care back on the insured. Clearly a single pay system would eliminate vast areas of paper shuffling at a significant savings.
Similarly, the health care providers must develop a symbiosis with the carrier for billing and collection purposes, all of which adds a further increased burden on the dollars that should be spent on care. The doctors and hospitals and other providers, anticipating that fractional amounts of their charges may not be honored, (whether based on disagreement as to the necessity of the service rendered or viewing the charges as excessive,) all try to bill at the highest amount they can get away with in order to counteract the anticipated disallowance's. Further, after working discount arrangements with insurance companies and other discount devises we wind up with different prices for the same service or procedure, depending on the nature of the patient’s insurance arrangement or lack thereof. Paradoxically, those with no insurance are usually presented with the highest bill.
If it aint broke, don’t fix it but the mid boggles if anyone can contend this system isn’t broke.
Of course a single pay system bristling with the promise of efficiency and cost reduction is unacceptable because if smacks of “socialized Medicine,” a scare word left over from the fifties. If we recognize that most doctors and hospitals are already receiving their major payment from Government financial plans then the socialized medicine taint is smoke and mirrors, doctrinaire nonsense designed to block a simplified, if less profitable system.
Of course the insurance lobby will fight single pay solutions because it will push them away from the trough and eliminate a vast amount of wasteful expense engendered by the health Insurance “crisis.” If we could but uncouple the term “insurance” from our thinking and solutions we could deliver universal health care at a reasonable cost to all citizens and let the armies of clerk, cost accounts, actuaries, billing review clerks and the like, go on to find more productive employment.
A further consideration is that our current system shackles health care to employee benefits which has a great negative effect on our workplace economy and places the excessive cost of this broken system upon the wage market, depressing wages and adversely effecting America’s ability to be competitive in the world markets. By placing an efficient streamlined system with the responsibility of government rather than the employers would greatly benefit both business and labor.
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