Topic: General

Help Wanted: New Medicare Administrator

Dr. Mark McClellan recently announced his intention to resign from the position of administrator of the Center for Medicare and Medicaid Services (CMS). 

Finding a replacement shouldn’t be hard.  The job description is simple.  The next Medicare administrator must run a sprawling program that buys health care for approximately 42 million Americans in every state of the union, and he must simultaneously:

  1. Spend less money on health care (to keep Congress and the Administration from calling for your head);
  2. Spend more money on health care (for example by averting the 5 percent cut in physician payments scheduled to take effect next year) to keep providers from calling from your head - and seniors from doing so once they can’t find a doctor to treat them;
  3. Using modest carrots and no sticks, dramatically improve the mediocre quality of care currently being delivered to Medicare beneficiaries - but don’t interfere with the way in which providers deliver health care, particularly if a low-quality provider has the ear of a congressman or employs lots of people in a swing district;
  4. Buy lots of pharmaceuticals for seniors - but don’t pay too much (because Congress and the Administration will have your head) or too little (or the pharmaceutical companies will stop developing innovative products);
  5. Using inadequate and outdated information, set the price that Medicare will pay for every single good and service that beneficiaries need in every county in the United States;
  6. Assure Congress that you are protecting the program from fraud and abuse, even though your own fraud control personnel have doubts about whether they have the tools to do so, and the program is routinely labeled as being at “high risk” for fraud;    
  7. Prepare Medicare for the impending tidal wave of baby boomers, who will stop paying into the system and will start expecting benefits in 2011; 
  8. Keep a straight face while you explain that Medicare will be there for future generations, even though your trustees have determined that putting just one part of the program in actuarial balance for the next 75 years will require an “immediate 121% increase in the tax rate or an immediate 51%reduction in expenditures;”
  9. Surrender your every waking hour to the thankless task of bailing out a sinking ship while being forced to cheer on the efforts of your bosses (in the Administration and Congress) to drill more and bigger holes in the bottom; and finally 
  10. Walk on water in your (non-existent) free time. 

The last item on the list is obviously a stretch, but the next administrator of CMS will face all of the other challenges. 

How did the Medicare program – born of such high hopes and good intentions – end up in this mess?  What can we do to address these problems? 

For some answers to these questions, along with a satirical perspective on the Medicare program, attend the book forum for Medicare Meets Mephistopheles at the Cato Institute on September 21, 2006.  Sign up here.

Islam and Enlightenment

Let me start by saying that I was not and am not a supporter of the Iraq war, and personally I’m an old-fashioned skeptic about religion. But I was appalled to hear Seyyed Hossein Nasr, a leading Islamic scholar, declare on an NPR interview show on Tuesday that the Pope’s statements “themselves are acts of violence.”

Interviewer Diane Rehm wanted to make sure what she’d heard. She asked him, “You’re saying that the language itself is an act of violence?” “Of course it is,” Nasr replied. Discussing the violent reaction to the Pope’s quotation, he declared, “He who uses the sword shall perish by the sword.”

Later in the show, Rehm read a quotation from a column by Anne Applebaum, who wrote that westerners of all political stripes “can all unite in our support for freedom of speech - surely the Pope is allowed to quote from medieval texts - and of the press. And we can also unite, loudly, in our condemnation of violent, unprovoked attacks on churches, embassies and elderly nuns.”

Asked for his reaction, Nasr said that such violence was “not unprovoked–it is provoked.” “Because words are violence?” asked Rehm. “Of course,” replied Nasr, “of course.”

I want to be careful not to pick out obscure members or adherents of any philosophy and draw large conclusions from them. But Nasr is not so obscure. He’s a distinguished professor at a leading American university. He holds a Ph.D. in the history of science and philosophy from Harvard and is the author of more than 20 books, from publishers including Oxford University Press. His university held a conference honoring him, titled Beacon of Knowledge. The website of the Seyyed Hossein Nasr Foundation declares him “one of the most important and foremost scholars of Islamic, religious and comparative studies in the world today.” So it seems fair to say that Nasr is not an oddity; he’s a recognized Islamic scholar.

And that’s why it’s so shocking to hear the claim that words “are acts of violence” from such a distinguished scholar. A scholar, we might note, who teaches at George Washington University, named in honor of the great Enlightenment statesman. I don’t want to believe that we are faced with a clash of civilizations, much less World War III. But if Islamic scholars who teach at great American universities believe that violent attacks “on churches, embassies and elderly nuns” are “provoked” by the words of a religious leader in a university speech a thousand miles away, then we certainly have a clash of world views.

The west went through the wars of religion and emerged with a modern understanding of toleration. We have learned through bitter experience that we can worship God without forcing everyone else to worship in the same way. We allow our neighbors to practice their religion, we practice our own or none at all, we criticize views we deem unsound, and we accept that our own views and faith will also be subject to criticism.

What we forswear is violence in response to words. In the present crisis we should seek peaceful dialogue between Muslims and Christians, not to mention Jews and freethinkers and all the others who share our world. But we who live in Enlightenment societies should not apologize for the fact that freedom of thought and freedom of speech sometimes lead to hurtful words.

Instead, we should reaffirm our own commitment to free speech - “hate speech” laws, anyone? - and urge Muslims to appreciate the benefits of liberal values, such as liberty and prosperity and social harmony. And we should hold Muslim leaders to the same standards we expect of western leaders, both civil and religious: we expect them to condemn, yes, “unprovoked” violence.

Cross-posted from Comment is free.

The United States of Agriculture?

Every year, Congress spends nearly $20 billion and maintains steep trade barriers to benefit a small group of farmers growing one of about half a dozen “program crops.” A hearing on U.S. farm policy before the full House Agricultural Committee today illustrates the problem beautifully.

All farmers together make up less than 2 percent of the U.S. population, and those receiving federal production subsidies or trade protection are less than 1 percent of the population. Yet our farm programs are designed not to serve the interests of the 99+ percent of us who pay the taxes and consume the food, but the small fraction who grow certain favored crops. In fact, U.S. farm programs benefit a small number of producers at the expense the majority and the nation as a whole.

[In a major Cato study last year, we documented six ways that current U.S. farm programs hurt the average American—through higher food prices, lost jobs, more government spending, environmental damage, stifling of rural development, and the undermining of America’s image abroad. We also hosted a policy forum last month featuring the pro-reform Secretary of Agriculture Michael Johanns.]

So why do these programs persist despite their cost to the general public? Classic interest group politics. Agricultural producers, although small in number, are concentrated, well organized, and highly motivated to save programs that can mean big bucks to their bottom line. Meanwhile the mass of consumers and taxpayers, although an overwhelming majority, are diffused, disorganized and mostly unaware of the cost they pay as individuals for those same programs.

Which brings us to today’s hearing in the House. Who do you think Congress will be hearing from as it begins to rewrite the farm bill? Of the 17 witnesses, not a single one will represent taxpayers, consumers, or non-farm businesses that use those commodities to make their final products. Every witness represents a sector of farm producers. No wonder Congress routinely ignores the interest of the vast majority of its constituents when it writes farm legislation.

Here is the witness list:

Bob Stallman - president, American Farm Bureau Federation

Tom Buis - president, National Farmers Union

Allen B. Helms Jr. - chairman, National Cotton Council, Clarkedale, Ark.

Paul T. Combs - chairman, USA Rice Producers’ Group, Kennett, Mo.

Dale Schuler - president, National Association of Wheat Growers, Carter, Mont.

Gerald Tumbleson - president, National Corn Growers Association, Sherburn, Minn.

John R. Hoffman - first vice president, American Soybean Association, Waterloo, Iowa, also representing National Sunflower Association and U.S. Canola Association

Greg Shelo - president, National Grain Sorghum Producers Association, Minneola, Kan.

Jim Wysocki - president, National Potato Council, Bandcroft, Wis., representing Specialty Crop Farm Bill Alliance and National Potato Council

Jack Roney - director of economics and policy analysis, American Sugar Alliance

Mark Kaiser - board member, Alabama Peanut Producers Association, Seminole, Ala., representing Alabama Peanut Producers Association, Florida Peanut Producers Association, Georgia Peanut Commission and Mississippi Peanut Growers Association

Richard Groven - vice president, National Barley Growers Association, Northwood, N.D.

Jim Evans - chairman, USA Dry Pea and Lentil Council Inc., Genesee, Idaho

Mike John - president, National Cattlemen’s Beef Association, Huntsville, Mo.

Joy Philippi - president, National Pork Producers Council, Bruning, Neb.

Ron Truex - president and general manager, Creighton Brothers, Atwood, Ind., representing United Egg Producers

Paul R. Frischknecht - president, American Sheep Industry, Manti, Utah.

Klein on Medicare Meets Mephistopheles

No one is going to accuse the American Prospect’s Ezra Klein of being a libertarian.  (Oh, wait.  I think I did once.) 

Which makes it all the more impressive that he was able to say such kind things about the Cato Institute’s latest health policy book, Medicare Meets Mephistopheles:

[T]he book is actually quite good. I’d happily recommend it to anyone with a basic grasp on health care and a desire to learn a bit more about Medicare. Hyman is a felicitous and fun writer, and he conveys an impressive amount of history and data in as accessible and absorbable a manner as one could hope. I know how tricky it is to make health care a quick and gripping read, and I tip my hat to anyone who is capable of enriching the debate and educating readers by doing so.

Full disclosure: Klein was less enamored with Hyman’s analysis and recommendations.  (Readers can find those comments in Klein’s post over at Tapped.)  Hopefully, Klein will raise his concerns at the Medicare Meets Mephistopheles book forum this Thursday.

Speak with Forked Tongue; Carry Large 2x4

The next time you meet a Canadian at a cocktail party and consider invoking fuzzy feelings of fraternity by toasting our countries’ recent softwood lumber accord, better to just smile, nod your head, and stare intently at your shoes.  Calling the U.S.-Canada Softwood Lumber Agreement (2006) an “agreement” mocks the fact that the Canadians had no viable alternative but to sign on the dotted line.

One option was to endure the cost and uncertainty of continuous litigation, continued restrictions on their lumber exports, and the specter of never again seeing the $5.3 billion in duties collected illegally by U.S. Customs on previous exports.  The other option was for Canadians to agree to impose export restraints (in the form of export taxes or quotas) on their lumber and see the return of about 80 percent of that $5.3 billion.

The U.S.-Canada softwood lumber dispute dates back many decades, but the most recent spate of protection, rulings, and edicts relates to litigation that began in the early 1980s, evolved into the Softwood Lumber Agreement of 1996, and then produced new trade remedy cases and a string of litigation beginning in 2001, when SLA 1996 expired.  (This paper attempts to present a chronology of events—but the most recent events are not documented therein.)

Make no mistake: the United States is the villain in the lumber dispute. 

Its agencies administered the trade remedy laws illegally and when they were required to make amends, pursuant to the terms of the North American Free Trade Agreement, they refused.

In short, antidumping duties can be imposed if the petitioning industry is materially injured by reason of dumped imports; countervailing duties can be imposed if the petitioning industry is materially injured by reason of subsidized imports.  In 2002, the United States imposed both antidumping and countervailing duties on Canadian softwood, which prompted Canada to challenge those findings under NAFTA’s dispute settlement procedures.  The NAFTA panel found that the U.S. International Trade Commission failed to meet the legal threshold for finding injury, and that the Commerce Department failed to find, legally, dumping or countervailable subsidization.

Second, third, and fourth attempts by those agencies to render affirmative findings within the law were also found wanting by the NAFTA panel, which eventually ordered the agencies to revoke the measures.  The United States refused, and instead insisted that an agreement to limit Canadian lumber sales was the only way to resolve the issue.  By that point, U.S. Customs had collected about $5 billion on softwood imported from Canada pursuant to those illegal antidumping and countervailing duty measures.  The U.S. industry was insistent that those monies be distributed to them, as beneficiaries of the now-repealed Byrd Amendment.  The importers (and the Canadian producers to whom many were related) demanded that those duties be refunded promptly.

Well, an ugly compromise was struck in the form of the Softwood Lumber Agreement (2006).  Under its terms, the importers/producers will be refunded about 80 percent of their rightful $5.3 billion, and despite the illegality of the measures and the fact that the United States completely disregarded its NAFTA obligations, the domestic petitioners will keep about $500 million and the U.S. government (actually, the Bush administration—these funds will be outside the domain of congressional appropriators) will keep about $450 million to be used for “meritorious initiatives.”  Such initiatives will include low-income housing projects, disaster relief, and various other vote-purchasing endeavors.

Meanwhile, the days when you could just pick up the phone, dial your favorite Canadian lumber producer, and place an order for 100 pallets of 2x4s at $344 per thousand board feet are over.  No longer will the purchasing agents at Home Depot, True Value Hardware, Ryan Homes, and elsewhere be able to negotiate lumber volumes and prices based on quaint considerations like supply and demand.  Canadian lumber will be required to sell for a minimum of $345 per thousand board feet.  If prices dip below that level, Canadian exports will be subject to a combination of export taxes (ranging from 5 to 15 percent) and volume restrictions.  So yes, the agreement does allow freedom of lumber trade to reign, as long as the prices are high enough.  Once the benefits of trade go too far and actually provide cost savings for consumers, freedom will be reined in.

On so many different levels, U.S. actions and attitudes in the lumber dispute–and the interventionist outcome it produced–betray an administration that is only rhetorically commited to free trade.  And that can’t possibly ignite the embers of global trade liberalization.

ACLU Sues to Limit Educational Liberty in AZ

Arizona passed a series of new school choice bills this June, and the ACLU has now filed suit to stop one of them from being implemented. For more than six years, individual Arizonan taxpayers have been able to claim a dollar-for-dollar tax credit on donations they make to private Scholarship Granting Organizations (SGOs). The SGOs, in turn, help families to pay tuition at the independent school of their choice. The recent bill that the ACLU is challenging extends that donation tax credit to businesses as well as individuals.

On what grounds does the ACLU claim to oppose this policy, you ask? They assert that “it violates state constitutional provisions prohibiting public funding for religious schools and mandating that the state provide a general and uniform public school system.”

The first objection is not likely to hold water, given that the AZ Supreme Court already ruled, in Kotterman v. Killian, that tax credits do not constitute public funding.

The second challenge is more interesting, having been inspired by the astonishingly inventive Florida Supreme Court ruling that struck down that state’s A+ voucher program early this year. Will foes of educational freedom find this argument a winner in AZ? Not knowing much about the AZ Justices, it’s hard to say. The argument certainly did not work with Wisconsin’s Supreme Court when it was used against Milwaukee’s voucher program during the 1990s.

What’s most interesting about all this is, however, is not the details of the legal arguments but the fact that opponents have been reduced to arguing about such minutia. In states where school choice programs are established and running, they tend to be very popular with the families who are able to participate. Hence, opponents find it hard to convince people that choice is bad – they have to try to show that some legal “i” has gone undotted to have any hope of herding the public back into state monopoly schools. In the Florida case, the plaintiffs openly acknowledged that the success of the voucher program was utterly immaterial to their argument.

Opponents of school choice don’t care whether or not educational liberty helps families. They are ideologically wedded to the status quo monopoly and will seek to preserve it by any means necessary.

How this benefits the American people, or advances “civil liberties,” I really can’t imagine.

Putting an End to “The War on Terror”

Our responses to the threat of terrorism are all too often described as “the war against terrorism.”  But this makes no linguistic sense; terrorism is one of many dangerous phenomena, not an enemy.  We do not describe our responses to the threat of hurricanes, for example, as a war against hurricanes.  More important, the war metaphor has severely biased both the nature and extent of our responses to the threat of terrorism.

First, the war metaphor implies that the primary response to the threat of terrorism should be a military response.  Terrorism, however, is the tactic of those who are motivated to seek political change by violence but are militarily weak.  The most important and too often neglected first question to address is whether some change in policy – such as the foreign basing of U.S. military forces – would reduce the motive for a terrorist threat against Americans at a lower cost than any other potential response.  Maybe not.  In that case, the most effective responses to the residual threat of terrorism are improvements in intelligence, intelligence sharing, and the capability of local police forces – with several special operations forces the only important military response.  The very expensive new weapons systems in the U.S. defense budget, in contrast, contribute nothing to increasing our security against the threat of terrorism.

Second, the war metaphor leads to an overreaction to the the threat of terrorism by inviting misleading comparisons of current conditions with those during prior conditions properly described as wars.  Those who defend an aggressive response to the threat of terrorism are quick to point out that the current losses of liberty and property to counter this threat have been small relative to those during wars.  But the threat of terrorism is very different than the threats during a war in three dimensions: Terrorism presents the small probability of a small loss (unless terrorists acquire a nuclear weapon) but one that may be extended indefinitely.  A war presents a larger probability of a large loss but one that is likely to be limited to a few years.  Most of us are prepared to sacrifice some liberty and property when there is an increased threat to our lives, but the difference in conditions presented by the threat of terrorism and wars strongly affects how much that we are prepared to sacrifice.  In general, people should be expected to be willing to pay a lower current price for security when the expected loss is lower and the period of potential loss is longer; for both of these reasons, how much liberty and property we should be expected to sacrifice in response to the threat of terrorism is far less than during a war.

This perspective leads me to conclude that the U.S. Government should substantially reduce the several dimensions of the current cost of responding to the threat of terrorism to a level sufficient to support only the most effective of these responses for a duration that may be indefinitely long.  Americans may have a lot to learn by a better understanding how Britain, Spain, and some other countries have responded to a threat of terrorism for decades with little sacrifice of liberty or property.

We may still need to replace the war metaphor with some metaphor that better reflects an effective, sustainable response to the threat of terrorism, but I will leave that to someone who is a better wordsmith.