Frances Townsend Lands Intelligence Association Board Chair

Baker Botts L.L.P. Partner Frances Fragos Townsend has been named chairman of the Board of Directors of the Intelligence and National Security Alliance. INSA is a nonprofit, non-ideological, professional association created to improve our nation's security.

One might expect a professional association to appoint a professional as their Board Chair. Frances Townsend omitted any mention of the hospital with the highest death toll from the Bush White House Lessons Learned report on Hurricane Katrina.

James A. Baker, III is one connection between Fran's employment and her hapless investigation. Baker has long time ties to The Carlyle Group, a politically connected private equity underwriter. Carlyle owned LifeCare Hospitals, which lost 24 patients in Katrina.

Mr. Baker surely knew of this omission when he created a consulting division for Fran in his law firm. James has a similar reputation in performing investigations. He conducted one Texas City BP explosion study, which killed 15 workers. His report went soft on CEO Lord John Browne. Shortly after the report's release, the good Lord landed a job with Carlyle's energy joint venture, Riverstone Holdings.

How much intelligence does it take to note something stinky? In addition to Fran's omission, Carlye and Riverstone paid the New York Attorney General a combined $50 million to make a pay for play investigation go away. Can you bribe your way out of a bribery investigation? That's something worth investigating, but INSA won't do it, not under Mrs. Townsend's Chairwomanship. That pattern is clear.

Carlyle Group's Short Term Management & Political Favors

The Carlyle Group purchased LifeCare Hospitals in August 2005 and Synagro Technologies in April 2007. The private equity underwriter (PEU) promotes its operational expertise in managing affiliates for maximum sale value. It charges affiliates 2% per year for management services.

Synagro Technologies bribed Monica Conyers, the wife of Rep. John Conyers, in November 2007. Monica plead guilty to receiving two payments from Synagro in return for her vote on their sewage sludge and incinerator contract. Synagro or their representatives are yet to be charged.

The Carlyle Group and its joint venture energy investment, Riverstone Holdings, paid a combined $50 million to the New York Attorney General. The money settled their legal "pay to play" liability regarding New York pension fund investment placements. The bribes, or what look like bribes, seem to multiply.

LifeCare Hospitals lost 24 patients in the aftermath of Hurricane Katrina. While HCA helicoptered patients from their dead New Orleans facilities, Tenet and LifeCare let patients and staff swelter in toxic gumbo for five hellish days. Carlyle's innovative defense in wrongful death law suits involves blaming the feds. They suggest patients became wards of the government as soon as FEMA evacuation teams set up in New Orleans. How are people miles away from an acute care hospital clinically responsible for patients?

None of the above facts made the White House Lessons Learned report on Hurricane Katrina. No Carlyle Group's LifeCare and their 24 deaths, no Tenet's 10 patient deaths in Memorial Medical Center, no mention of the hospital facility with the highest death toll. Thirty four patients died in Memorial. The political connections are disturbing.

During the Bush years, the Carlyle Group was portrayed as a key part of the Bush cabal. It turns out they're a bipartisan PEU.

Congress Fails Miserably in Representing the People

What happens when 70% of Americans favor something, but Congress ignores their will? Consider the following examples:

1. Over 70% favor a government run, public health insurance option. Congress and the White House scramble to offer a not for profit insurance co-op in place of a government plan.

2. Over 70% of federal employees, under pay for performance plans, find the system unfair. A mere 26% find the rating and pay process equitable.

Senators Max Baucus and Kent Conrad are behind #1. Both get major donations from for-profit health care corporations, many with no facilities in their states of Montana and North Dakota.

Senator Evan Bayh wants pay for performance to solve the ills of education, while President Obama thinks P4P will rescue health care. The ignorance is palpable.

Citizens should be concerned that corporate sponsors outweigh the public will.

PEU's & Systemic Risk

Private equity underwriters claim they pose no systemic risk to the economy. They suggest a long term investment horizon makes up for their past sins of excess leverage and greed based income model. The WSJ reported on PEU's:

Filings unsealed by federal regulators allege Danny Pang walked away with at least $83 million before the seizure of his investment firm, Private Equity Management Group. Additionally, estimates of potential losses by Pang’s investors have escalated to as much as $654 million - or nearly 80% of the $823 million investors are still owed.

No risk? Hardly. Add risky financial bets to the equation and the mendacity grows exponentially. This is the group President Obama caters to with his infrastructure bank, financial public-private partnerships, and FDIC sales of bad banks.

The Carlyle Group is a virtual one stop PEU shop for Uncle Sam. They bought BankUnited with a $4.9 billion government subsidy, free of TARP restrictions. Carlyle has an infrastructure fund ready to invest in public works projects. From Booz, Allen, Hamilton to ARINC, Carlyle affiliates garner huge chunks of government business.

Swine Flu in U.S. Hits 1 Million

The Centers for Disease Control estimates 1,000,000 Americans have the H1N1 swine flu. It took five weeks for the number to reach 100,000, then another five weeks to his the million mark. What happens in the next five to ten weeks?

Imploded Wall Street Goes Lobbying

The greed and leverage boys funnel money to elected officials in Washington, D.C. Bloomberg reported:

Wall Street’s largest trade group has started a campaign to counter the “populist” backlash against bankers, enlisting two former aides to Treasury Secretary Henry Paulson to spearhead the effort.

How much did consultants charge for "populist backlash"? Why aren't citizen's concerns reasoned? Is it populist to expect a financial firm to package quality products and stand behind them? Do citizens grab rakes and march over 30 to 1 or 40 to 1 debt to equity? I've never seen anyone protest excessive leverage.

Wall Street likely killed investing for a generation or more, but that's not their concern. Are people demanding salmonella contaminated peanut butter from PCA? Who wants Chinese tainted heparin before their next heart operation? Of course not. That's why they're reframing dissatisfied customers as "populists":

The outside consultants join SIFMA staff for a daily 10:00 a.m. conference call, “given the importance, complexity and real-time nature of the campaign style-implementation,” according to one of the memos.

Who's advising SIFMA?

To advise on the strategy, the trade group turned to a bipartisan roster of consultants. Such advice doesn’t come cheap and SIFMA is discussing dipping into its reserves to cover some of the costs, according to one memo.

Michele Davis, Paulson’s former spokeswoman, and Jim Wilkinson, his former chief of staff, are among those leading the effort. SIFMA is paying their firm, Brunswick Group LLC, a monthly retainer of $70,000, the documents show. Both Davis and Wilkinson declined to comment. Paulson left office in January.

Assisting them is a Democratic polling company, Brilliant Corners Research and Strategies, which is paid $5,000 a month. It is run by pollster Cornell Belcher, who worked on President Barack Obama’s campaign. BKSH & Associates Worldwide, a lobbying firm chaired by Republican strategist Charlie Black, signed on for $10,000.

Is there any link to Business Forward, the blue version of K Street? Brunswick Group lobbyists are behind Business Forward, a club for the big money boys to garner insider access to the White House.

Beware the next campaign. The last one produced soaring rhetoric, followed by Bush like implementation. Corporafornication lives, sponsored by the blue and red teams.

The greed and leverage boys will win. The current system of purchased politicians and campaign style implementation assures it. A pox on the red and blue political houses.

Southern Governors Go South to Buenos Aires

South Carolina Governor Mark Sanford and former Arkansas Governor Bill Clinton recently visited Buenos Aires, Argentina. Clinton raised money for his Global Initiative, with varying reports of his dalliances. Sanford supposedly hiked the Appalachian Trail, which runs from North Georgia to Maine. He confessed to wanting something "more exotic."

What caused Sanford's detour and surprise absence? Maybe Mark heard about Andrea Rincón, a shocking “morocha” (brunette) who's well-endowed and a former participant in the popular TV reality show “Big Brother”? Did all the stimulus talk inspire either Governor to pursue a lap dance?

(Note: the Governor's press conference revealed an extra-marital affair. Mark Sanford said he spent five days weeping in Argentina. Don't cry for Governor Sanford, Argentina! However, South Carolina taxpayers may gnash their teeth over footing his travel bills to Argentina.)

Lucky Max Baucus Represents Virtual Montanans

Senate Finance Chair Max Baucus plays a key role in health care reform. The NYT reported:

“I think I’m the luckiest guy in the world,” he said in an interview in his office. “Here I am representing Montana in the United States Senate. I am at the point to be able to do something really significant, really meaningful, and it must be done.”

Representing Montana? Really? Senator Baucus took campaign donations from eight for-profit health care companies with no, as in zero, facilities in his state.

Between Dirty Max, the Obama team's Chamber of Commerce reform lingo, Obama's appointment of a for-profit insider Health Czar, and a mostly purchased Congress, signs point to health care deform.

Obama-Led Democrats Plan to Cave

In his press conference, President Obama called for a "public option that's not profit driven."

Linda Douglas, Communications Director for the Office of Health Care Reform spoke on MSNBC. Linda said "if you have a not for-profit alternative."

A non-profit co-op faces significant start up costs and will be at an early competitive disadvantage. Current nonprofit co-ops have not solved the health insurance ills in various regions of the country.

Dirty Democrats plan to pander to their for-profit health care sponsors. Obama appointed a for-profit insider, Nancy-Ann DeParle as his health care czar. Why is the White House hiding Health Reform Czar Nancy-Ann DeParle? She is absent from the airwaves and Capital reform public testimonial sessions, but her handiwork made the news. Greed is as greed does. Co-op means co-opted.

Deform is coming.

(In the picture above, President Obama is surrounded by politicians with huge for-profit healthcare sponsorship. Many donations come from firms with no facilities in the Senator's state)

Obama on Iran

The United States has a long history of tampering in politics of foreign countries. President Obama increased the military's black ops budget. How do those two facts intertwine in Iran? What is the CIA's role in the current protest scene? President Obama won't speak to this likely reality.

He does talk about the right of peaceful protest. Consider his track record in this area:

Police believed that protesters would run through downtown. More than 100 people were arrested in a clash with police that began after officers entered the park and confronted demonstrators.

That wasn't Tehran, but Denver, Colorado, the site of the Democratic National Convention.

A federal judge has upheld Denver’s plans to control protesters during the Democratic National Convention in August. Local and federal officials are setting up a so-called public demonstration zone they plan to fence off with chicken wire or chain link. Demonstrators had sought closer access to the convention site for demonstrations and parades. But the court said the plans don’t violate their First Amendment rights.

On this issue, candidate Obama remained silent. It extended to heavy handed police efforts:

Police say they began arresting people after demonstrators rushed them; the protesters say they were attacked.

A video shows her asking a question about the arrest of another man when the officer knocks her to the ground and says "Back it up, b----."

Citizens have the right for their vote to count. U.S. and Iranian leaders offer incapable systems. Iran has ballot stuffing, the U.S. voter caging and the "man in the middle" computer system. Each should hang their head.

People have the right to protest, to be heard. U.S. and Iranian leaders use force to constrain this right.

President Obama might have more credibility if he spoke up on America's failures.

DeParle's Excellent Adventure

White House Health Czar heard the cash register's ka-ching in her short time in public service. Nancy-Ann DeParle's health care stock holdings soared since her appointment.

Cerner Corporation

March 2-$35.25
June 23-$58.28

Her stock soared from $950,000 to almost $1.6 million

Boston Scientific

March 2-$6.66
June 23-$9.76

Her BSX holdings grew from $400,000 to $585,000

DaVita

March 2-$46.04
June 23-$47.75

Nancy-Ann's Davita shares grew slightly from $1.8 million to $1.86 million

Overall, Ms. DeParle's health care holdings rose from $3.1 million to $4 million, a 28% return in just over three months. Sweet!

Her financial disclosure form indicates all "conflicting assets" have been disposed of. It doesn't say how. When a PEU is the White House Health reformer, words have no meaning anymore. Deform applies to more than language.

(Note: The White House Health Reform Communications Director spoke on MSNBC today. She called Obama's public plan "a nonprofit insurance option." That's quite a redefinition. As an aside, Nancy-Ann DeParle's public time is severely restricted. She won't testify before any Congressional Committees charged with reform. Her media time is carefully choreographed. So far, no reporters have grilled her about her PEU background or any financial conflicts of interest.)

Big, Interconnected, & Risky

Larry Summers, President Obama's Chief Economic Adviser, said the following to the Council on Foreign Relations:

"Any financial institution that is big enough, interconnected enough or risky enough that its distress necessitates government writing substantial checks, is big enough, risky enough or interconnected enough that it should be some part of the government's responsibility to supervise it on a comprehensive basis."

Supervision? Recall this is the same private sector Larry Summers who suggested sovereign wealth funds should be regulated. That's nowhere to be seen, now that Larry is serving the public again.

Private equity underwriters look to get a free pass, like their foreign government funded siblings. Yet, PEU affiliates repeatedly show up for federal capital. The Carlyle Group's David Marchick testified before a Senate Committee on the need to shore up manufacturing firms, even those owned by cash heavy PEU's.

The FDIC is changing rules to allow private equity to invest hundreds of billions in failing financial institutions. Rather than PPIP for toxic assets, Obama/Geithner/Bair plan to sell bad banks. Purchase accounting and billions in FDIC subsidy should wash bad financial products through quite profitably.

If it's like BankUnited, the FDIC will wipe out shareholders in favor of the PEU boys. Carlyle and company got $4.9 billion in subsidy from the FDIC, with no executive compensation restrictions. As a nonpublic company, the new BankUnited will focus on commercial accounts. How many Carlyle affiliates switched banking institutions?

Is there a game between the feds and PEU's? You fund my bank, I'll help your affiliate. The NYT reported:

Rental car companies were pushing the Fed to finance their fleets. Hertz, which is owned by two private equity firms — the Carlyle Group and Clayton, Dubilier & Rice — hired Mr. Eizenstat to make its case.

In trying to persuade the Fed to relax its loan terms, Mr. Eizenstat led delegations of Hertz officials to both the Treasury and the Fed. They reached out to Ron Bloom, the co-chairman of the Treasury Department’s auto task force, as well as to top aides to Mr. Geithner. They also made detailed financial presentations to Fed officials in Washington and New York.

While the Fed so far has denied Hertz’s requests to relax loan terms, some of the lobbying appears to have worked. In March, the Fed announced that it would purchase loans used to buy light trucks and recreational vehicles. It also said that it would finance equipment leasing deals, rental car fleets and “floor plan” loans, which car and R.V. dealers use to finance showroom vehicles.

Larry Summers also said to CFR:

"If you give people enough leverage, they can lose an unbelievably large amount of their own money and that of their clients."

The Carlyle Group lost Carlyle Capital Corporation, Blue Wave Partners, SemGroup, Hawaiian Telecom, and Edscha. It's on the verge of losing IMO Carwash. Private equity is not risk free.

The quickest way to lose client money is derivatives, many of which are risky credit bets. They aren't going away anytime soon. Neither is opaque trading of energy futures. Betting and speculation remain on the table, open to manipulation from the big money boys.

The new rule is the same as the old. He who funds those in power makes and enforces the rules. Bush looked out for his friends time after time, at the expense of taxpayers and citizens. Obama seems to have a similar taint. Under either administration, Goldman Sachs and the PEU's win.

The Obama team restarted securitization with taxpayer money. It won't rein in naked credit default swaps. It's fine with speculation on energy, which turns gasoline into a dollar hedge instead of a driving fuel. And it flat out loves private equity, the solution for banking, infrastructure, education and health care.

The PEU boys are plenty big enough, interconnected enough and risky enough. The government writes plenty of checks to PEU affiliates. Every now and then PEU's return the favor.

Obama Sharpens Knife on Safety Net Hospitals & Dual Eligibles

President Obama looks more like his predecessor with each policy announcement. When George Bush enacted Medicare Part D Prescription Drug program, people covered by Medicare & Medicaid took a major hit. These are poor people, the elderly and disabled. Dual eligibles, averaging over 5 prescription drugs, faced prescription montly co-pays of $15 to $60. A new $720 annual bill is significant for the struggling. In 2007, I wrote:

In 2006 President Bush said in Dublin, Ohio, "And you probably read about kind of the dual- eligible problem. I don't know if you've had that problem here in Ohio, Governor. We're dealing with it. Our job is to solve problems when they arise." So what did George do? Not much. The problem lay in the pharmaceutical benefit design.

He did shaft those same dual eligibles by not informing them of their ability to be reimbursed for past medication expenses. Recall, these are the poor, frail disabled and elderly. Hundreds of million in federal funds intended to help dual eligibles likely ended up in the coffers of insurance companies.

Now the Obama team wants to go afte the same low hanging fruit. The AP reported:

For instance, it said, drug reimbursements might be reduced for people who receive both Medicare and Medicaid.

As for safety net hospitals that Bush loved to stress, Obama has plans.

The newly proposed $313 billion in savings, he said, "will come from commonsense changes."

He would cut $106 billion from payments that help hospitals treat uninsured people because his plan would cover nearly every American.

Horse hockey! Between undocumented residents and the chronically noncompliant, I expect well over 20 million uninsureds. Add a long term phase in and the numbers come down slower. Safety net providers will still be needed.

President Obama's commonsense changes include unenacted funding plans and tapping a struggling safety net system for money to cover the uninsured. That doesn't sound like common sense, unless your goal is for nonprofits to fail and be acquired by their for-profit brethren.

Now Change Means No Change From W.

More Political Theater

The WSJ reported:

In recent days, President Barack Obama has come out strongly in favor of a government-run health plan to compete with private insurers in the new exchange Congress is working to create. But his spokesman did not rule out the possibility that he would sign a bill without such a provision.

“I don’t think, at this point, we would draw quite that strong a red line,” said White House Press Secretary Robert Gibbs.

Enjoy the show folks. The U.S. Chamber of Commerce has it scripted. Watch your wallet, as business won't pay more and the government is tapped out. That leaves the individual.

Max & Kent's Cool Bait & Switch Co-op

Senators Max Baucus and Kent Conrad offered an insurance co-op in place of a government provided health plan. The co-ops would be created in markets to compete with private health insurance plans. Co-ops would be owned by members.

New co-ops would have significant start up costs, including capital reserves. Would new members get assigned a start up fee? This question is relevant as reform has been charged with paying for itself.

I thought government provided important services the private sector couldn't. Why the shift to nonprofit insurers? Private health insurance includes nonprofit variations like Kaiser Permanente and some Blue Cross/Blue Shield plans. They failed to cover an estimated 50 million people. Why will they do better now?

Is Max trying to make room for WellPoint, a for-profit, publicly traded company to get in the back door through its licensed Blue Cross/Blue Shield plans. Their annual report stated:

We are the largest health benefits company in terms of medical membership in the United States, serving 35.0 million medical members as of December 31, 2008. We are an independent licensee of the Blue Cross and Blue Shield Association, or BCBSA, an association of independent health benefit plans. We serve our members as the Blue Cross licensee for California and as the Blue Cross and Blue Shield, or BCBS, licensee for: Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri (excluding 30 counties in the Kansas City area), Nevada, New Hampshire, New York (as BCBS in 10 New York city metropolitan and surrounding counties, and as Blue Cross or BCBS in selected upstate counties only), Ohio, Virginia (excluding the Northern Virginia suburbs of Washington, D.C.), and Wisconsin. In a majority of these service areas we do business as Anthem Blue Cross, Anthem Blue Cross Blue Shield or Empire Blue Cross Blue Shield (in our New York service areas). We also serve our members throughout the country as UniCare. We are licensed to conduct insurance operations in all 50 states through our subsidiaries.

Funny, Senator Evan Bayh's wife Susan is on the Board of WellPoint. So is President Bush's Uncle, William H.T. "Bucky" Bush. That sounds like bipartisanship in our corporate sponsored Congress.

Could the co-op could be a for-profit health insurance company which licenses a name? If not, the "solution" is new co-ops saddled with high start up costs. They'll need to hire a third party administrator, often a for-profit health insurance company. What are the odds a co-op will get a fair TPA bid from their competitor?

Vote out every incumbent in 2010, but especially Max Baucus, Kent Conrad and Evan Bayh.

Oil & Gas: Investment or Commodity

Gasoline sales dropped 33.8% from May 2008 to May 2009. Yet, they increased 3.6% from last month. How much was due to price differences vs. volume changes? It is important to know.

Last spring and summer gas prices soared while demand cratered. The U.S. Department of Transportation is yet to release data showing an increase in monthly miles driven. The downtrend is well over a year old, running from January 2008 through March 2009, the last data available.

Gas prices whipsawed during the fifteen month period of reduced driving. Prices have no relation to automobile use. What's driving the wild swings? Faith in the dollar and opaque energy futures trading platforms. It seems change is yet to arrive.

Congressional Investigation on Merrill Lynch Purchase but Not LifeCare Deaths?

Why does Congress investigate one situation and not another? When do they subpoena e-mails and other documents and when do they let putrid things lie? The answer might be politics.

Take the investigation of government leaders and regulators on the purchase of Merrill Lynch. Treasury Chief Hank Paulson may have overstepped his bounds, but which Bush minion didn't? The Obama team expressly avoids any torture investigation, wanting to move forward. Funny, Bank of America CEO Ken Lewis feels likewise on his firm's purchase of Merrill. He wants to move forward.

So why the pressure? Paulson is already a private citizen. Lewis needs to stay on the good side of government and the regulators to keep his job. That leaves Fed Chief Ben Bernanke. Someone wants his backside. Is it Larry Summers, the quirky, oddball academic? Rumors have Larry wanting the Fed Chief role. Is this political theater crafted to open the door for a Summers term at the Fed?

Who could deliver this juicy story? Wasn't Tim Geithner head of the New York Fed? Wouldn't the BOA/Merrill Lynch deal flow through Tim's hands? Did Tim take his insider knowledge of excess strong arming and offer it to Rahm Emanuel, Obama's political architect? Did Rahm offer the goody to a Congressional committee, one badly needing to look competent and heroic?

I surmise the wrong people are on the stand. Geithner should testify under oath first. His testimony will show who should be called next.

I'm glad Congress recalled how to subpoena e-mails and documents after their Hurricane Katrina abdication. The people's legislature allowed the Bush administration to submit a pitiful Katrina Lessons Learned report. Who omits the hospital with the highest patient death toll? Bush and report author Frances Townsend did. Their political friends benefited.

Clue that Health Insurance Tax to Be Paid by Employee

While taxing health insurance remains on the table, no politician has stated who would pay the tax, the employer or the employee. A clue pointing to the worker came in a New York Times article:

"... proposals being discussed by the Senate Finance Committee and others in which small companies would have to pay some portion of their payroll toward health benefits but would also receive some form of tax credits to defray the expense."

It wouldn't make sense to tax small employers while simultaneously offering tax credits. Signs point to workers paying taxes on their employer provided health benefits. Is it an intermediate step to corporations dumping the health insurance benefit? Time and a detailed conference committee bill will show.

Obama Team Blazes Bizarre Trails

The Unitary Executive is alive and well. Yet, it looks like a punch drunk fighter as it swings wildly at executive incentive pay. Corporate boards set pay for executives. Shareholders infrequently get a vote on establishing a stock incentive program for directors/executives.

Today President Obama appointed a Pay Czar. The NYT reported:

The Obama administration on Wednesday appointed a compensation czar who will have broad discretion to set the pay for 175 top executives at seven of the nation’s largest companies, which received hundreds of billions of dollars in federal assistance to survive.

The Obama team had options in impacting pay. First, it can appoint Board members that would then vote on pay packages. Or it could impose pay requirements as a condition of government investment, at the time of the deal.

It didn't. Pay restrictions came long after equity injections. In this regard, Tim Geithner (NY Fed President & Treasury Secretary) looks arbitrary. The Obama administration looks schizophrenic as it reins in executive pay while proposing "pay for performance" as the solution for health care and education ills.

In another odd move, Treasury Chief Tim Geithner offered the Obama solution for dealing with executive pay outside government supported institutions. Reuters reported:

Treasury will ask Congress to pass two pieces of legislation giving the SEC authority to force companies to give shareholders a non-binding vote on pay packages for top executives and to make internal pay committees that set pay levels and perks more independent from management.

A non-binding vote on pay packages? President Obama limited this to publicly traded firms. Private firms, like private equity underwriters, continue their free pass. The Obama plan provides a subtle incentive for public firms to go private to avoid executive pay scrutiny. Another gift for the PEU boys?

Tim Geithner just criticized shareholders for not reigning in executive pay:

Boards of directors and shareholders “did not do a good job” overseeing pay policies, the Treasury secretary said.

Once I learned the severe limits of extrinsic motivators and their ability to suboptimize organizations, I voted against every proxy proposal on incentive pay.

I'm afraid Boards are part of the excess compensation problem. Between their huge pay and stock awards, I don't see compensation committees as independent. Virtually every proxy statement shows a pay methodology (a comparison group, a complex pay formula) and a belief in pay for performance. Both do harm.

Theory is needed. Dr. W. Edwards Deming and Alfie Kohn have much to teach our suboptimal leaders. Congress and the Unitary Executive look foolish as they pursue "practical change." Will they ever learn?

Did Obama Read the Piece?

In the New Yorker Dr. Atul Gawande wrote "The Cost Conundrum," a piece on variation in health care costs and quality in South Texas. He interviewed physicians and administrators in South Texas, trying to find reasons for high medical usage under the Medicare program.

The piece made clear, Medicare utilization and quality data isn't on provider radar. Why not? Did Medicare share the data? Did it gather teams of providers to work on improvement?

The article showed how little attention doctors and health executives pay to quality measures, of the specific kind. They focus on revenues, billing and take home pay. So how will layering pay for performance change anything? The focus will still be on what the doctor or hospital has to do to maximize the money. There is another way. The piece stated:

…decades ago Mayo recognized that the first thing it needed to do was eliminate the financial barriers. It pooled all the money the doctors and the hospital system received and began paying everyone a salary, so that the doctors’ goal in patient care couldn’t be increasing their income.

This is clearly not the Obama plan. Gawande continued the Mayo way:

No one there actually intends to do fewer expensive scans and procedures than is done elsewhere in the country. The aim is to raise quality and to help doctors and other staff members work as a team. But, almost by happenstance, the result has been lower costs.

It’s not happenstance, according to Dr. W. Edwards Deming, once the world’s foremost quality guru. Higher quality means lower costs. Dr. Deming would excoriate the Obama plan, rankings, pay for performance, etc.

Dr. Atul Gawande should study Dr. Deming’s work. There is a multi-decade track record and many books chronicling his accomplishments. Profound knowledge is sorely needed and President Obama hasn’t a clue.

“We took a wrong turn when doctors stopped being doctors and became businessmen,” he said.

Texas has no Certificate of Need. That means anyone can build and operate any health care facility anywhere, anytime. If it’s someone with the power of the ordering pen, watch out.

Mayo isn't alone in delivering high quality, lower utilization Medicare services:

All of them function on similar principles. All are not-for-profit institutions. And all have produced enviably higher quality and lower costs than the average American town enjoys.

The Obama health reform team is led by a for-profit insider. White House Health Czar Nancy-Ann DeParle has a very profitable history with for-profit hospital companies. Beware, foxes are in the hen house.

President Obama was so taken by the article he gathered advisers and key legislators. Did they miss the solutions embedded in the low utilization institutions? The piece refutes key elements of Obama's reform plan.

Update 9-11-19:  Executives focus on revenues and billing, which turned UVA Health System into a nightmare for thousands of patients.  Earlier in her career CEO Pamela Sutton-Wallace said "I am creating systems where I am having an impact on the communities that I serve."  She was the top leader during four of the six years UVA Health System sued former patients more than 36,000 times for over $106 million. She is now headed to New York's Presbyterian Hospital. 

Rep. Neugebauer's Campaign Yacht Funding Beats Dumping

While financially stressed boat owners abandoned their boats in record numbers, Representative Randy Neugebauer worked to finance his yacht in innovative ways. Randy applied to the Federal Elections Commission for permission to use campaign funds to rent his family's "recreational boat." The FEC issued a favorable draft opinion.

How many ways can elected officials wash campaign cash into their personal coffers? Did he threaten the FEC like he did FASB? Both groups caved to his demands.

Obama's Pay Go Means Citizens Pay for Health Care Reform?

President Obama proposed binding "pay as you go" rules for Congress. No new spending can occur without new revenue or expense cuts to offset the expenditure. The timing of his proposal impacts health care reform.

Despite a recent Christina Romer "schlocky" assertion, the Obama clearly wants health care reform to save U.S. employers on health insurance costs. President Obama, Larry Summers, David Axelrod and Rahm Emanuel stated the burden of employer sponsored health insurance harmed companies in the global economy. Who should we believe, the President and his top advisers or one member of his economic squad?

Any increased coverage under PAYGO must be funded, or savings generated within the existing system to pay for insurance for millions of Americans. Here are the tea leaves:

1. Roughly one third of the uninsured can afford coverage, but cannot or don't buy it. Many want coverage but can't get it due to pre-existing conditions.

2. Roughly one fifth won't qualify for coverage as they are undocumented immigrants. These patients will remain a burden on safety net facilities

3. That leaves almost half of the uninsured as candidates for coverage. Some 15 million Americans don't file taxes, despite a legal requirement. To the extent, the uninsured and the non-filing overlap, a significant number of citizens will be non-compliant with any legal requirement to have coverage, even with penalties.

4. Expect the Obama plan to subsidize insurance for 10-15 million, out of a projected 50 million uninsured. The plan will be implemented over time, a period of years.

5. Businesses clearly want to shed responsibility for that pesky health insurance benefit. Up to 25% plan to shift more costs to employees, some plan to eliminate the benefit entirely.

It will be interesting to see the rate of employer shedding during the reform phase in period. What new revenue sources are on the table?

a. Taxing employer health insurance benefits-no one has said who pays this tax, the employee or the employer. Also, the individual tax treatment of health insurance has huge policy implications. If the employer loses the deduction, but the worker retains it, expect businesses to dump the benefit cost onto the employee.

b. Taxing nonprofit community hospitals. Recall that the uninsured are not going away, not even by half. Safety net facilities are already stressed. Removing disproportionate share funding and adding a tax burden will bankrupt many nonprofit community hospitals. They will be available for sale to their for-profit brethren.

c. Adding a value added tax, roughly a national sales tax.

Assume some new revenue, but not enough to cover costs for covering 10-15 million. That means cuts to existing programs, Medicare, Medicaid, & CHIP. Medicare could be means tested, i.e. wealthy pay for their Medicare coverage. Pete Peterson and Denny Shelton sit in this corner. Blackstone Group co-founder Pete Peterson doesn't have Medicare. He buys health insurance from his billions. Legacy Health Partners CEO Denny Shelton is willing to pay for his Medicare coverage. That $42 million from the sale of Triad Hospitals means Denny has the skins to pay. Obama's White House Health Czar made $1.4 million from Triad's sale.

President Obama's proposal of PAYGO is promoted as deference to Blue Dog Democrats, but it's really a shout out to Pete Peterson and his fellow big money boys. Mr. Peterson donated $1 billion of his private equity underwriting (PEU) proceeds to a foundation bearing his name. It wants the U.S. to cut entitlement spending and not raise taxes for the wealthy. Mr. Peterson appointed Tim Geithner to head the New York Federal Reserve Bank. At a gathering of the financial elite, Geithner remarked that due to Mr. Peterson, there are no fiscal doves left.

President Obama's hawkishness is his latest pander to the PEU boys. Did Rahm Emanuel preview this line of thought to Carlyle Group co-founder David Rubenstein over dinner at the Blue Duck Tavern? If only it was named the Blue Dog Trough!

Watch the details of health care reform. Foxes are in the hen house.

Trust the Good King Covering for his Bad Predecessor

President George Bush decreed torture of people in U.S. custody. President Barack Obama issued another decree banning such behavior. This leaves citizens subject to the goodness of the unitary executive.

Independent investigation are not under way. The only court cases are from concerned citizen groups seeking access to information and a handful of detainees. WaPo reported on CIA Chief Leon Panetta's position:

Panetta argued that none of the 65 CIA documents immediately at issue, which the ACLU has sought for several years in a Freedom of Information Act lawsuit, should be released. He asked U.S. District Judge Alvin K. Hellerstein to draw a legal distinction between the administration's release in April of Justice Department memos authorizing the harsh interrogations and the CIA's desire to keep classified its own documents detailing the specific handling of detainees at its secret facilities overseas.

The unitary executive is firmly entrenched. Court cases are needed to break it up. A spineless Congress has zero chance of performing oversight. It's clear the Obama team won't part with power voluntarily, much less return justice to its proper place.

Barack "the Hack" Obama Appoints "Covergirl" Fran Townsend to HSAC

America's Homeland Security Advisory Board has a familiar face, Frances Fragos Townsend, President Bush's Homeland Security Adviser. Fran was on vacation as Hurricane Katrina boiled in the Gulf of Mexico in August 2005. She rushed back to help overwhelmed Joe Nagin, managing to answer a call from Governor Blanco of Louisiana. Fran traded e-mails with Bush Chief of Staff Andy Card, but those remain secret, even from a Congressional investigation.

As the last hospital patients were plucked from dead facilities, Fran jumped on a plane to Saudi Arabia to deliver a letter on Katrina and show America's support for the fight on terrorism. Upon her return Ms. Townsend wrote an investigative report. Here's the executive summary:

"The fact is it didn't measure up," former Bush homeland security advisor Frances Fragos Townsend said in a Feb. 2006 review of the Katrina response.

That applies to her report as well. Who omits the hospital with the highest patient death toll, 34 patients. She left out their corporate owners. The connections are simply amazing in light of President Obama's love for private equity underwriters (PEU's).

The appointment of Frances Townsend is prima facia evidence that competence does not matter. Politics is about politics, pure and simple. Influence peddlers remain in control of our nation's capital. It continues to disturb.

In Search of Explanation & Complexity on Health Care Reform

President Obama spoke on health care reform in his weekly address. He stated:

“That means if you like the plan you have, you can keep it,” the president said. “If you like the doctor you have, you can keep your doctor, too. The only change you’ll see are falling costs as our reforms take hold.”

Health care reform is nuanced and complex. The President believes the American people appreciate such talk.

"But one of the things I’ve actually been encouraged by—and I learned during the campaign—was the American people, I think, not only have a toleration but also a hunger for explanation and complexity, and a willingness to acknowledge hard problems. I think one of the biggest mistakes that is made in Washington is this notion you have to dumb things down for the public."

President Barack Obama in a Newsweek interview May 11, 2009.

So why didn't President Obama deliver? Falling costs as far as the eye can see? Hardly. Costs go up 4.5% a year under the President's plan. That's not falling.

Obama didn't speak to the significant number of employers who plan to pass higher premium costs to workers. Many businesses decrease benefits by raising deductibles and co-pays. The insured picks up those additional costs, which clearly are not falling. Those who can't shoulder the additional burden join the ranks of the uninsured.

What happens if employer health insurance is taxed to pay for covering many of the uninsured? Who pays that rising cost, the employer or the worker? What happens if nonprofit community hospitals lose their tax exempt status? Those costs will be passed on to patients. The only change you'll see are falling costs is patently false.

You can keep your doctor too. The Chief Executive doesn't decide which insurance plans your doctor accepts. He has no control over the bulge of physicians over age 55 and when they pare down their practice or retire. In West Texas many limit their practice, not accepting Medicaid or taking new Medicare patients.

Health care reform will impact doctors, who will respond accordingly. President Obama's promise is political blather, intended to counteract Rick Scott's Conservatives for Patients Rights campaign. Attorneys Scott & Obama, lie, distort, misrepresent. Behind their surface battle, the pair has much in common in management practice.

Obama's reform talk is not explanatory, nor does it address complexity. Only President Obama can say if he is dumbing things down for the public.

Obama's Obession with Extrinsic Motivators

President Barack Obama offers pay for performance as the solution to most of America's ills. From health care to education, incentives are needed. Will extrinsic motivators help? Doubtful, they can make matters worse. The President wants incentives for people to live healthier, for students to learn. He also believes in giving doctors and teachers pay incentives for quality work. America's obsession with incentive pay misses the most powerful motivators, those that come from within. Tapping intrinsic motivation is critical. Extrinsic motivators take people's attention away from the real work, focusing it on award attainment. America has a clear record in this regard:

1. Some 30% of executive stock option awards were backdated, an unethical to illegal practice that maximized executive compensation over a decade long period. 

2. Financial firms produced trillions in junk products, generating millions in incentive compensation for Wall Street executives. 

3. A former chief executive of Lehman Brothers in the 1970s has slammed the bonus culture at the bank for breeding “spoiled and ungrateful schmucks.”

Yet, pay for performance is offered at nearly every turn as a solution to leadership challenges. As Dr. Deming said, "Substitute leadership!" It is sorely lacking in the Capital, White House and corporate board rooms across America. Under extrinsic motivators, expect more cheating.

Update 12-24-21:  Committing fraud to garner performance bonuses resulted in U.S. military families getting substandard housing service from contractor Balfour Beatty.  The fraud ran from "around 2013 to around 2019."

“Instead of promptly repairing housing for U.S. servicemembers as required, BBC lied about the repairs to pocket millions of dollars in performance bonuses."

Update 5-30-23:  HuffPo's "The Golden Age of White Collar Crime" stated:

32 percent of American managers said they were comfortable behaving unethically to meet financial targets.

Congress to Abdicate Leadership for Health Care?

Congress has the power of the purse. One member proposed giving a chunk of that power to an independent contractor. The West Virginia Gazette reported:

Sen. Jay Rockefeller, D-W.Va., has introduced legislation to move decisions about Medicare benefits away from Congress by making MedPAC (Medicare Payment Advisory Commission) into an independent executive agency.

Rockefeller hopes to expand MedPAC's power to determine and implement policies about payments under the Medicare program.

"It's time to move MedPAC into the executive branch and away from the influence of special interests," said Rockefeller, who chairs the Senate Finance Subcommittee on Health Care.

"Congress has proven itself to be inefficient and inconsistent in making decisions about provider reimbursement under Medicare.

"If we want serious improvements in our health-care delivery system, then we need to reform MedPAC's current authority to include fully establishing and implementing Medicare reimbursement rules. Congress should leave the reimbursement rules to independent health care experts."

A MedPAC federal health board would be like the Federal Reserve Bank. The reality is Congress is abdicating leadership, giving away power to a private organization. The people will lose representation on health care issues, plain and simple. America has a chicken shit Congress, one scrambling to contract out its dirty work.

The Obama team supports the move, even though it already has the Centers for Medicare/Medicaid, which promulgates rules and regulations. How will another unaccountable layer fix the problem? Our leadership nightmare continues.

(Senator Rockerfeller is able to stand in the above picture due to high tech, back bracing technology, developed especially for America's spineless Congress. The Senate allowed candidate Obama to keep his brace, although a new Presidential model with special lie technology is now under construction)

Obama Slips into Ehud Barak's meeting with General James Jones

President Obama joined Israeli Defense Minister Ehud Barak in his meeting with White House National Security Adviser General James L. Jones. Jerusalem Post reported:

Obama's visit was seen as particularly meaningful, as it came just a few hours before he was to set off for Saudi Arabia and then Egypt, and following several statements criticizing Israel for its settlement policy.

It was seen as an effort to show a balanced approach and give Israel a boost amid the US administration's outreach to the Muslim world, which will include a visit to Riyadh on Wednesday and a major speech in Cairo on Thursday.

Is that Rahm Emanuel or David Axelrod orchestrated spin? History shows Senator Obama supporting Israel's pummeling of Lebanon, its democratic neighbor to the north in 2006. President Elect Obama endorsed Israel's razing of Gaza, approved by General James L. Jones and Hillary Clinton (the words of Tony Blair). President Obama had this to say in support of Israel:

"There's no doubt that the United States has a special relationship with Israel. There are a lot of Israelis who used to be Americans. There [are] huge cross-cultural ties between the two countries. I think that as a vibrant democracy that shares many of our values, obviously we're deeply sympathetic to Israel."

And, he added, "I would also say that given past statements surrounding Israel; the notion that they should be driven into the sea, that they should be annihilated, that they should be obliterated - the armed aggression that's been directed toward them in the past - you can understand why not only Israelis would feel concerned, but the United States would feel it was important to back this stalwart ally."

Vibrant democracy? I thought democracies didn't attack other democracies.

DeParle's New Jersey Deal Points to Health Care Deform

In 2007 Pascack Valley Hospital in Westwood, New Jersey filed for bankruptcy. It cratered from a heavy debt burden taken on in a building expansion. In 2008 Hackensack University Medical Center, a large nonprofit teaching hospital, asked state health officials for permission to reopen Pascack as a joint venture, for-profit facility. The plan calls for renovating the old building. Huh? Hadn't Pascack taken on big debt from facility updates? Maybe their MRI and CT scanners got repossessed. The new capital source for the project, Plano, Texas-based Legacy Health Partners.

In August 2008 Nancy-Ann DeParle was not President Obama's Health Care Czar. Ms. DeParle was a private equity underwriter (PEU) for CCMP Capital Partners. She sat on the board of Legacy Health Partners, an affiliate of CCMP. Between her two roles, Nancy effectively called the shots for LHP. Legacy's August 2008 press release on the Pascack project stated:

At a time when so many New Jersey hospitals are in danger of failing, thus raising the need for government financial subsidies, this project comprises an innovative three-party alliance that addresses the needs of the local community, but requires no public financial assistance.

Guess who wants to tax financially stressed, nonprofit community hospitals? Senator Chuck Grassley and Gail Wilensky. How might a big property tax bill affect a struggling facility? How many will shutter their doors? And how long will it be before Legacy Health Partners tries to open the former safety net hospital as a for-profit facility.

This story will get no press, just like Nancy-Ann's significant stock holdings in for-profit health care companies. Her over $530,000 in 2008 board pay is never mentioned. Nor is her $1.4 million proceeds from the sale of Triad Hospitals, where she previously held a board position. Denny Shelton, the ex-Triad CEO, heads up Legacy Health Partners.

But when Ms. DeParle picks up the phone to scold a for-profit health insurance executive, that story is told. Others are not. This story was spun by a progressive blogger as "why cutting health costs is hard." I hate to tell Matt, but this is the underlying health care deform plan. A cost that can go up without concern is leveraged buyout interest expense. Triad's sale translated to an increase of $4.1 million in interest expense per hospital. HCA's went up nearly $10 million per facility. Pay no attention to the man behind the curtain!

For-profiteers are in charge of change and are fully capable of twisting it in their favor. The blue team is just as tainted as the reds in this regard. For every Chuck Grassley, there is a Max Baucus. PEU's sit in more than one sweet spot, e.g., health care, banking , public infrastructure....

(HT-Yglesias)

Update 7-1-11:  Hackensack University Medical Center's board of directors is found to have widespread self dealing.  That's the language of PEU's.

Obama Plan Makes GM's Secured Lenders Whole

While lenders in Chrysler's bankruptcy received 29 cents on the dollar, GM's secured lenders will take home a whole buck, according to sources familiar with the government's plan. The WSJ reported GM's $6 billion in loans will be repaid in full.

GM's largest lenders include banks like J.P. Morgan Chase & Co. and Citigroup Inc. and Credit Suisse.

The government funneled tens of billions in taxpayer money through AIG to some of the same and similar firms. It drew the line at Chrysler calling hedge fund investors "speculators." Now, it's back to shoveling billions to favored institutions via GM.