Archive for October 7th, 2009

Count employer paid health insurance premiums as income … Why not?

October 7, 2009

TakeAway: Seems obvious to me that health insurance premiums paid by employers should be counted as W-2 income, with income tax deductiblility (or credits) of, say, $5,000 per person with a max of $15,000 per family.  Helps out the folks who don’t have access to company paid premiums and stops the gold-plated programs from bloating healthcare spending.

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From DC Examiner: Democrats Win Lobbyists but Lose Basic Reforms, October 1, 2009

The Democrats are having trouble passing convoluted and plainly imperfect health care bills. Maybe they would be better off going back to basics.

All of the current healthcare proposals build a makeshift addition to the health insurance system that grew out of a tax law decision made during World War II.

That decision was to give a preference to employer-provided health insurance: The cost of insurance would be deductible for employers and would not be counted as income for employees.

The system insulates health care consumers from costs, with the result that insurance costs have recently crowded out wage increases.

The tax preference is steeply regressive. High-earning employees with gold-plated, employer-provided health insurance get deductions that are worth many thousands of dollars.

Those without employer-provided health insurance, or low-earners who are among the 40 percent of earners who do not pay income tax, get exactly zero. If a Republican Congress had designed such a system, it would be attacked as a favor to the rich, and rightly so.

During the 2008 campaign, Barack Obama attacked John McCain’s proposal for equalizing the tax treatment of employer-provided and non-employer-provided health insurance, and so it would be embarrassing for him to advocate such a change.

More determining, labor unions, a strong Democratic constituency, want to maintain the current system because they have obtained very expensive policies for their members. But with only 8 percent of private-sector workers in unions, it seems clear that basic reforms would do more for low-earners and ordinary Americans than the Democrats’ current plans.

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Full article:
http://www.realclearpolitics.com/articles/2009/10/01/democrats_win_lobbyists_but_lose_basic_reforms_98526.html

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Posted in Health Care / Medical Insurance | Leave a Comment »

“Synchronous Lateral Excitation” … risky, but not what you’re thinking.

October 7, 2009

TakeAway: In finance, actions can be both individually prudent and collectively disastrous. It’s called “synchronous lateral excitation”, and it explains the credit crunch of 2008 – 2009.

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Excerpted from New Yorker: Rational Irrationality – The real reason that capitalism is so crash-prone, John Cassidy, October 5, 2009

On June 10, 2000, Queen Elizabeth II opened the high-tech Millennium Bridge, which traverses the River Thames from the Tate Modern to St. Paul’s Cathedral.

Thousands of people lined up to walk across the new structure, which consisted of a narrow aluminum footbridge surrounded by steel balustrades projecting out at obtuse angles. Within minutes of the official opening, the footway started to tilt and sway alarmingly, forcing some of the pedestrians to cling to the side rails. Some reported feeling seasick.

The authorities shut the bridge, claiming that too many people were using it. The next day, the bridge reopened with strict limits on the number of pedestrians, but it began to shake again. Two days after it had opened, with the source of the wobble still a mystery, the bridge was closed for an indefinite period.

Some commentators suspected the bridge’s foundations, others an unusual air pattern.

The real problem was that the designers of the bridge, who included the architect Sir Norman Foster and the engineering firm Ove Arup, had not taken into account how the footway would react to all the pedestrians walking on it. When a person walks, lifting and dropping each foot in turn, he or she produces a slight sideways force.

If hundreds of people are walking in a confined space, and some happen to walk in step, they can generate enough lateral momentum to move a footbridge—just a little. Once the footway starts swaying, however subtly, more and more pedestrians adjust their gait to get comfortable, stepping to and fro in synch. As a positive-feedback loop develops between the bridge’s swing and the pedestrians’ stride, the sideways forces can increase dramatically and the bridge can lurch violently.

The investigating engineers termed this process “synchronous lateral excitation,” and came up with a mathematical formula to describe it.

What does all this have to do with financial markets? Quite a lot.

Most of the time, financial markets are pretty calm, trading is orderly, and participants can buy and sell in large quantities.

Whenever a crisis hits, however, the biggest players—banks, investment banks, hedge funds—rush to reduce their exposure, buyers disappear, and liquidity dries up.

Where previously there were diverse views, now there is unanimity: everybody’s moving in lockstep.

“The pedestrians on the bridge are like banks adjusting their stance and the movements of the bridge itself are like price changes,” Shin wrote. And the process is self-reinforcing: once liquidity falls below a certain threshold, “all the elements that formed a virtuous circle to promote stability now will conspire to undermine it.” The financial markets can become highly unstable.

This is essentially what happened in the lead-up to the Great Crunch of 2008.

http://www.newyorker.com/reporting/2009/10/05/091005fa_fact_cassidy?printable=true

Posted in Economics, Financial Crisis | 2 Comments »

Factoids: How Medicare Works …

October 7, 2009

Ken’s Take:  It’s still not obvious to me how putting the screws to doctors will “fix” the healthcare situation …

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Medicare’s price controls already pay only 83 cents on the private dollar.

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Congress decides each year how much it wants to spend on doctors, period.

If one area of medicine receives a larger slice of this pie, another must accept a smaller one.

The portion sizes are determined using a formula known as Relative Value Units, or RVUs. Medicare assigns an RVU to each of 7,500 billable services—in 2008, a colonoscopy earned 5.64 of these units, a hip replacement 37.66.

Then it multiplies a doctor’s total RVUs by some dollar factor, currently about $36, and cuts a check.

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Source: WSJ, The War on Specialists Oct. 6, 2009
http://online.wsj.com/article/SB10001424052748704471504574443472658898710.html?mod=djemEditorialPage#printMode

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Posted in Health Care / Medical Insurance | Leave a Comment »

The “Wal-Mart of the web” … Amazon’s KSFs.

October 7, 2009

KSF= Key Success Factors

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From BrandChannel, Nimble Amazon Thrives In Recession, September 22, 2009

Having conquered the online book market, reports the New York Times, “Amazon is set to cross a significant threshold” to become the Wal-Mart of the web.

By the end of 2009, Amazon’s worldwide sales of general merchandise will exceed the books, music and movies Amazon is known for.

“Amazon’s expansion strategy has allowed it, almost alone among retailers, to thrive during the recession, even while its own media business has stagnated*”

While Amazon’s marketing has helped transition customers into seeing it as more than a bookstore, back-end innovation is the real engine of the company’s successful expansion.

In Amazon’s huge merchandise warehouses, “every product, shelving unit, forklift, roller cart and employee badge … has a bar code.” The company has an “almost magical business model in terms of inventory management”

Amazon builds engagement with purchase recommendations, wish lists, customer reviews and free shipping.

According to Interbrand — a brand consultancy , the company’s success shows “why you are best off not owning a retail footprint in a recession“: its flexibility lifted it past struggling and fallen competitors like Borders and Circuit City.

Full article:
http://www.brandchannel.com/home/post/2009/09/22/Nimble-Amazon-Thrives-In-Recession.aspx

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Posted in Internet Marketing - eCommerce -, Retailing | Leave a Comment »