Lifestyles of the Well-Connected

I have to say, I walked away from this Times puff piece about the Obama administration's 20-something staffers feeling annoyed.

I'm reminded of some of the things that I hated most about college, namely the preponderance of self-absorbed, entitled douchebags. Man, I really disliked being in college (thanks for the memories, NYT). And apparently I wouldn't enjoy the O.C. D.C. much, either.

The Basketball of Health Care Reform

With the Cavs set to take on the Celtics in Boston in a little while, I'll pose a question that may be interesting to some of you: what does the NBA have to teach us about the mechanics of the new health care law?

The NBA has a salary cap ($57.7 million for this season) to keep the big market teams from buying up all the talent, a la the Yankees in major league baseball. But the NBA's cap is a soft cap, meaning teams can go over it. But if a team pulls in two big-money stars and their team payroll exceeds the cap by a certain amount, they have to pay the luxury tax (although there are enough exemptions and special cases to make the IRS blush). For this season, the luxury tax kicks in $69.92 million. If your payroll hits that, you have to pay the league a tax on every dollar above the salary cap you've gone. That money then gets distributed to teams whose payrolls come in below the cap. A little bit of redistribution to achieve an extra degree of parity between high-revenue and low-revenue teams.

What does this have to do with health care? The new law institutes the very same principle for health insurance companies. Starting in 2014, insurance companies will be subject to guaranteed issue and community rating rules. This means they can't turn people away (as in, for pre-existing conditions) and, except for certain exceptions, they can't charge people more for things that are out of their control, like gender or medical history. That's all well and good for the consumer but suppose you're an insurance company that by sheer luck of the draw ends up getting a disproportionate share of the less healthy, more expensive customers? You can't turn them away and you generally can't charge them more to make them help cover the added expense of covering them.

Never fear. The new law contains risk adjustment mechanisms, to be implemented by the states. Insurance plans with lower than average actuarial risk--that is, a healthier and cheaper than average pool--have to pay a fee. This then gets distributed to insurance plans that have a higher than average actuarial risk--the disproportionately unhealthy, more expensive pools. So no insurer gets unduly penalized for accepting sicker people into its pool.

If lower than average actuarial risk plans were NBA teams, they'd be the ones that luck out and get multiple superstars on their team, hitting the luxury tax threshold. Of course, in the world of health insurance that translates into fewer sick people drawing benefits. Higher than average actuarial risk plans are those teams whose payrolls check in under the cap, garnering them luxury tax payments.

All right, it's tip-off. Go Cavs.

The Number 23

Perhaps a nice dinner today. And an aged whiskey.

Counting

You may have heard that certain "Tea Party" types--and even a U.S. Congress(wo)man or two--are deathly afraid of the attack on liberty known as the U.S. Census. They're convinced that questions about, say, race are not something the government has any reason to ask and thus it must be unconstitutional (generally defined among that crowd as "something with which I disagree). The question of where in the Constitution it says the government can ask your race in the Census came up today. And, in fairness, it's an interesting question.

But as anyone who's taken some basic U.S. history or government classes knows, the Constitution did explicitly require that race be reported to it. Why? Because we didn't originally count everybody the same way:

Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons. The actual Enumeration shall be made within three Years after the first Meeting of the Congress of the United States, and within every subsequent Term of ten Years, in such Manner as they shall by Law direct.

If the government didn't know your race for the first 70-odd years of its existence, it might've had to round upwards and count people of every race as a whole human being. Clearly that wouldn't do so they had (and were empowered by the Constitution) to include race in the count.

"But," you might protest, "that language was stripped out after the War of Northern Aggression!" Certainly, but the second section of the Fourteen Amendment merely takes away the necessity (for taxation and apportionment purposes) of asking your race. It doesn't now forbid the government from asking. And since the precedent was already set that they can and did ask demographic questions, one would think an amendment taking away that power would have to do so explicitly.

What's the moral? Merely that I suspect many of these Patriots are not nearly as familiar with history or the Constitution as they'd have you believe.

Also, don't forget to return your Census forms.