Saturday, February 28, 2009

Recession Special Series God-Not-Again Post-Finale: Three That Aren't Really Free (Part 7 of 6)

NEW YORK, New York-- Okay, okay, the "three-fer" series was supposed to be dead. But then I discovered three medium-cost policies that were overlooked but fit in with the recession-friendly series of ways to make America more like Duffland for all of us without spending too much.


1. Pay for performance in healthcare. You've probably been hit with this feeling before. Maybe while reading the Sunday paper over breakfast. Or while watching the news at night. You've probably thought to yourself at various points in the last month, "It sure is nice to have a president with a brain in his head." And it is nice. The economy's handbasket may already be burning in hell, but President Obama's budget speech was a breath of optimism in its focus on energy, healthcare and education as opposed to, say, going to war with Syria.

Despite the fact the president seems involved in working to improve it, though, healthcare is a mess. Medicare costs are set to bankrupt the government and perhaps private sector as well by mid-century if current rates of cost inflation continue. And for all the money we spend on healthcare, we're neither healthy enough nor are enough of us insured.

If, as Obama plans, state-supported health plans are to be expanded, they need to lead the way toward a pay-for-performance system for payment of treatments. This is a big issue that can, and does, fill books. (I can recommend Obama adviser David Cutler's "Your Money or Your Life," and I've been meaning to read Ezekiel Emanuel's "Healthcare Guaranteed.") But the short of it is that health plans currently pay doctors based on how much money they spend on treatments. The upshot is that health professionals are incentivized to order many tests, and expensive ones at that. This may be great for pushing up costs, but it doesn't make people any healthier. And while doctors get green for ordering you a battery of tests, they aren't incentivized to follow up with patients when they're ill or check in when they're healthy. In short, the system isn't set up to keep people healthy; it's set up to create ever-more costly procedures.

One of the ideas getting tossed about is a "pay-for-performance" model whereby doctors are incentivized to keep people healthy. This could entail payments for check-in calls between physical exams to see how people are doing, or follow-ups to make sure a patient is taking his pills. The focus would be on making sure doctors are making people healthy, and positive health outcomes would be incentivized rather than expensive procedures.

IBM has recently prevailed upon the payor it uses to insure its employees in Arizona to adopt a pay-for-performance model. It will be watched closely by many who hope it will rein in costs and improve the health of plan subscribers. If it works, the government will be smart to move Medicare toward this model.
Cost to federal gov't: Too difficult to say given that we want to go to bed tonight!

2. Implement carbon quotas. It's unclear whether a cap-and-trade system, which is not working particularly spectacularly in Europe, or a flat-out emissions tax without capping carbon, is preferable. But something needs to be done to slow global warming. A few common concerns are that government will make things like turning on the lights more expensive. Well, duh, that's kind of the point -- to encourage energy efficiency. But if the Obama administration is counting on pulling in tens of billions every year in carbon taxes, it may make sense to have a payroll-tax decrease accompany any carbon tax so that modern conveniences aren't prohibitively expensive, as some suggest.

Also important, though controversial, would be to levy a carbon tax on imported goods from countries that do not have equally stringent carbon legislation. Without this, there would certainly be an exodus of manufacturing from US shores; and, from the other side, the US would be cleaning itself at poorer countries' expense. Net gain for the global climate: nil. Cost to the federal gov't: Right, uh... I guess nobody knows this...

3. Begin a foreign business intership program for college grads: This is the only suggestion in this post that borders on original, and it's the least likely be seriously considered by Congress. The idea would be to initiate a program that would allow high-achieving college graduates to intern as business attaches in the US's foreign embassies for one- or two-year stints. Graduates would work for the Commerce Department or US Chamber of Commerce, if it's too far beyond the purview of the Commerce Dept, to research foreign companies and markets and act as liaisons between US businessmen and potential overseas partners.

The motivation behind this idea comes from a global business trend that the US has appeared to be left out of in recent years. Non-First World countries including Russia, China, the Middle East and myriad other Asian, European and African nations arrange many foreign business deals for both private and state companies on official trips. The prime minister of, say, Bulgaria will bring along business leaders when he goes on a state visit to Turkey. There will be a raft of deals, all pre-arranged with the two governments' blessings, that the businessmen will sign while the prime ministers look on approvingly. The US seems largely not to take part in this (admittedly sketchy) way of doing things.

Personally, I'm fine if Obama doesn't have CEOs trailing him every time he goes on a state visit, but at the same time you don't want to lose out on real opportunities for fear of playing this sketchy, state-capitalist game. An internship program like the one proposed could be a step toward compromising those two positions.

Sending high-achieving graduates to foreign countries could be potentially beneficial by:

-Providing future business leaders with firsthand knowledge of foreign cultures, languges and markets;
-Providing graduates with solid business experience;
-Spreading international best practices in products and services to the US -- think of it as a cross-pollination that would make US businesses more innovative at home and more competitive abroad. If a returning intern comes back with his head full of interesting cell-phone payment systems he saw in Finland, he could start a business that could offer attractive services or rates to US cell-phone subscribers;
-Having "boots on the ground" to build personal relationships with companies in foreign countries for the benefit of US firms;
-Offering a ready-made body of information and intelligence on local markets for US firms interested in expanding operations into them either via acquisitions or organically but not knowing what local firms are out there, how trustworthy they are, or how sophisticated their business models are;
-Generating opportunities for small and medium-sized US firms to tap into resources they may not be able to afford in order to identify and secure new export markets at a time when rebuilding exports is increasingly important to ensuring long-term economic growth;
-Providing those small firms with some follow-up after deals are signed to let them know how their products are received, potentially help with marketing, and generally make places like Tajikistan more receptive to US business by having a token smiling, friendly American around to allay Tajik businessmen's fears of those devious Americans

Fortune 500 firms wouldn't really need this sort of thing. But for small and medium-size companies with little international experience, it could present myriad new opportunities.

The flip side to this program would be expanding grants to bring foreign students to the US. I can't say anything bad about that idea -- programs like the Fulbright Scholarship are a long-term good way to build up good will, international relationships and cultural understanding, and an expansion of them is always going to offer good ROI. Cost to the federal gov't: Maybe $25M per year for 500 interns at estimated $50K of expenses per year.

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