Presumptive eligibility = liar loans

In my last blog post, I mentioned an organization named Enroll America, which is supporting the Obamacare enrollment push. I happened to visit their website and found there a "best practices" document encouraging the use of "presumptive eligibility" for Medicaid. The document describes presumptive eligibility as follows:

With presumptive eligibility, an individual or family can be temporarily enrolled in Medicaid (or CHIP, if applicable) immediately if it appears they are eligible. They simply need to provide a few pieces of information—name, household size, and estimated monthly income—and a presumptive eligibility determination can be made. ... [Presumptive eligibility] can be used even when IT systems are down, or when an individual can’t get a real-time determination using the new single, streamlined application for coverage.

I like that part about "even when IT systems are down." Obviously, presumptive eligibility was designed with healthcare.gov in mind.

The document has a handy FAQ section:

Do individuals need to verify their income for presumptive eligibility?
No. The determination is made based on the individual’s attestation of their family circumstances.

How do providers get paid for services delivered during the temporary eligibility period?
Providers get paid the regular Medicaid rates for any services provided during the temporary eligibility period, even if the person is eventually found ineligible for Medicaid.

Who can determine someone presumptively eligible?
States that use presumptive eligibility get to choose which entities are allowed to make presumptive eligibility determinations.

So, I can walk into a hospital, fill out a form on which I "attest" to my monthly income, some "entity" can approve it, and I can get Medicaid coverage? And if turns out that I lied and am not eligible, the government will still pay?

Isn't the practice of accepting an attestation of income on an application -- in their case, a loan application -- precisely what banks are being fined billions of dollars for by various government agencies? And yet, here we have a group encouraging the acceptance of unverified information on Medicaid applications as a "best practice."

The big banks are now often condemned for allegedly entrapping unknowing victims into entering unverified, false information on their loan applications. But, just as now advocacy groups encourage the entry of unverified information on Medicaid applications so that poor and minority communities can receive medical benefits, so in the years before 2008 enormous pressure was applied by various advocacy groups like ACORN on banks to accept unverified information on so-called "liar's loan" applications so that those same poor and minority communities could receive bank financing.

For example, Wikipedia describes the Community Reinvestment Act (CRA) as follows:

The Community Reinvestment Act ... is a United States federal law designed to encourage commercial banks and savings associations to help meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods. Congress passed the Act in 1977 to reduce discriminatory credit practices against low-income neighborhoods, a practice known as redlining.

As Edward Pinto reports in the WSJ:

[The housing] bubble was the result of government policies that lowered mortgage-lending standards to increase home ownership. One of the key players was the controversial liberal advocacy group, Acorn (Association of Community Organizations for Reform Now). The watershed moment was the 1992 Federal Housing Enterprises Financial Safety and Soundness Act, also known as the GSE Act. To comply with that law's "affordable housing" requirements, Fannie Mae and Freddie Mac would acquire more than $6 trillion of single-family loans over the next 16 years. Congress's goal was to force these two government-sponsored enterprises (GSEs) to purchase loans that had been originated by banks—loans that were made under the pressure of another federal law, the 1977 Community Reinvestment Act (CRA), to increase lending in low- and moderate-income communities. ... Acorn and the other advocacy groups succeeded at getting Congress to mandate "innovative and flexible" lending practices such as higher debt ratios and creative definitions of income. [emphasis added]

In sum, we have exactly the same pattern repeating itself: a liberal community organizing group leverages the provisions of liberal legislation to encourage various entities to accept unverified income information on applications that will result in the granting of benefits (Medicaid coverage or bank financing). And, this practice is made risk-free for the entities themselves by the guarantee that if it turns out that the information provided is false, the government will make good any losses suffered (by making the Medicaid payments on the one hand or by making good on loan guarantees provided through Fannie Mae and Freddie Mac on the other).

And now we are witnessing the ultimate hypocrisy: after having incentivized the banks for years to engage in this destructive behavior of accepting unverified information, then, when the banks actually behaved that way, the government now drags them into court for having done so. We can be sure that hospitals and other medical providers, after being incentivized to implement presumptive eligibility, will be vilified and accused of fraud in the future for having done so. And groups like Enroll America and ACORN will move on unpunished to the next liberal scam.

The technology-entitlement-surveillance complex

The Los Angeles Times reports:

Enroll America, a nonprofit organization formed in 2010 to support the [Obamacare] enrollment push, is supplementing its field program with a $5-million digital campaign targeting minority women. It will use data analytics, similar to those the Obama reelection campaign used to spectacular effect in 2012, to find women online who are likely to be uninsured and capture their attention through ads on websites they visit.

"Based on the information that we have on users and that we collect as they are searching and going about their day online, we can meet them where they are with our message," said Anne Filipic, a 2008 Obama campaign alum who later worked in the White House as deputy director at the office of public engagement. "And when they come to our website [at Enroll America], we can actually tailor our website so it shares specific content, or even specific pictures, based on the demographic."

This is exactly the dynamic I described in my blog post The blueprint for the ideal enterprise software company in the age of entitlements. More and more the function of Silicon Valley is to streamline and facilitate access to the welfare state. Either that, or to provide government agencies like the NSA with tools to snoop into our lives and analyze our social networks. For, as WSJ reported last June:

Key advances in computing and software in recent years opened the door for the National Security Agency to analyze far larger volumes of phone, Internet and financial data to search for terrorist attacks, paving the way for the programs now generating controversy. ... The NSA's advances have come in the form of programs developed on the West Coast—a central one was known by the quirky name Hadoop—that enable intelligence agencies to cheaply amplify computing power, U.S. and industry officials said. The new capabilities allowed officials to shift from being overwhelmed by data to being able to make sense of large chunks of it to predict events, the officials said.

In a speech delivered in January 1961, outgoing President Dwight Eisenhower warned about the dangers of the military-industrial complex. In our age, the danger arises instead from the technology-entitlement-surveillance complex. Increasingly, the individual stands helpless in the face of an ever more powerful and all-embracing (totalitarian, that is) government enabled by high technology.

President Obama bemoans the inequality gap that is opening ever wider between the haves and the have-nots in our society. And yet, it is Obama's promotion of an ever-expanding government, gushing lucrative contracts, that creates enormous and irresistible opportunities for entrepreneurs to start up software companies. The Silicon Valley billionaires of the future will make their fortunes by enabling all the various activities of Big Brother.

I just didn't realize I would be the one who was going to pay for Obamacare personally

The Democrats say that the reason why individual policies offered under Obamacare are more expensive is because they provide better coverage. This assertion is a bold-faced lie.

Before Obamacare, an individual paid a certain premium for a policy that covered, say, only items 1, 2, and 3. The reason the individual purchased precisely that policy was because it was his considered judgment that he only needed coverage for items 1, 2, 3. And, who could be a better judge of what coverage he needed and how much he was able to pay for it than the individual himself?

After Obamacare, the individual is forced to purchase a policy that covers not only items 1, 2, and 3, but also items 4, 5, and 6 as well, and this for a substantially greater premium than he was paying before Obamacare. Well, harumph the Democrats, the individual should be grateful: he is receiving better coverage, even if he is paying a “little bit more.”

Actuarially speaking, however, the individual is not likely to use the coverage for items 4, 5, and 6. After all, he did not need that coverage before Obamacare, so why should he suddenly need it after Obamacare? That is, within a large pool of policyholders, a significant number of them simply won't use coverage that they did not judge themselves to need and weren't willing to pay for before Obamacare. It's just a fact. But, if they don't use the extra coverage, where do the extra dollars they are paying in premiums go?

In reality, the extra amount the individual is paying in premiums after Obamacare does not go to purchase coverage for items 4, 5, and 6 for himself, but rather to help defray the costs of coverage for items 1-6 for somebody else.

As the now famous Cindy Vinson of San Jose, whose premiums for an individual policy have gone up $1800 a year under Obamacare and who doesn't qualify for premium support, said:

Of course, I want people to have health care. I just didn't realize I would be the one who was going to pay for it personally.

The war between the SIP's and the YAF's is beginning to intensify.

Obama, VC wannabe, has a desk waiting for him at KPCB.

Until recently I thought it was a slam dunk that President Obama would join the venture capital firm Kleiner, Perkins, Caufield, and Byers after he left office.

After all, his Democratic buddy Al Gore is already there. Mr Obama is obviously a VC wannabe. He's always talking about "investment." And there can be no doubt that he is adept at spending enormous sums of money to promote "technology" and "innovation."

As soon as he was elected in 2008, the website of the Office of the President-Elect published Mr Obama's "technology agenda" (apparently, a contractor other than CGI developed this website because you can actually access it). The agenda proclaims Mr Obama's grandiose vision:

Barack Obama and Joe Biden understand the immense transformative power of technology and innovation and how they can improve the lives of Americans. They will ... employ technology to solve our nation's most pressing problems -- including improving clean energy, healthcare costs, and public safety.

But, it's not exactly clear now where KPCB will put Mr Obama.

Obviously, Al Gore is keeping a seat warm for the President on the Greentech Team, but rumor has it that other members of the team are having second thoughts about the President joining them given the spectacular failure of his bets on companies like Solyndra and A123.

The Digital Team also seemed like a good fit for the President, but the monumental catastrophe of the rollout of the healthcare.gov website has made it apparent that the President has little talent for putting together a first rate software venture.

But I jest. A while back I wrote a post that dealt with the question of what the blueprint for the ideal software company in the age of entitlements might be:

As an entrepreneurially inclined software engineer (over the last two decades I have worked for 3 Silicon Valley enterpise software startups that have gone on to successful IPO’s), I have been asking myself lately the following question: What is the blueprint for the ideal enterprise software company in the age of entitlements? In attempting to answer that question, I have assumed that government spending on entitlement programs will only continue to expand (that is, more and more programs will make more and more transfer payments to an ever-increasing army of Julias). So, the problem becomes one of imagining a company that can best profit from the expansion of these entitlement programs.

Is it possible to imagine anyone with more experience in the area of entitlement programs or with a better grasp of how venture capitalists might create companies that can harvest the monies that flow through these programs than Mr Obama?

Yes, there is a corner office awaiting Ex-President Obama on Sand Hill Road. But, his presence at KPCB will just be one more sign that the old, rebellious, counter-culture-based Silicon Valley is dead, and has been reborn as the handmaiden of big government.

Obamacare vaporware will get worse still. Or: How VC-wannabe Obama will learn about the mythical man-month.

Twenty years ago, Frederick Brooks wrote the classic book The Mythical Man-Month to discuss the challenges facing engineers when they develop large software systems. This book is required reading in CS programs around the world and its findings have been confirmed by every software engineer (including myself) who has ever worked on large software projects.

The book addresses the following question: When a large and complex software project is behind schedule, what should you do to speed up its completion? The naive answer is that you should add more software engineers to the project. The basic reasoning behind this answer goes like this: If one software engineer will take one year (twelve man-months) to complete a task, then it should take 12 software engineers one month (again, twelve man-months) to complete the same task. Brooks demonstrates that this reasoning is fallacious. Instead, he posits a thesis that has become known as Brooks Law:

Adding manpower to a late software project only makes it later.

Brooks Law is true for two basic reasons, as summarized by Wikipedia:

1. It takes some time for the people added to a project to become productive. Brooks calls this the "ramp up" time. Software projects are complex engineering endeavors, and new workers on the project must first become educated about the work that has preceded them; this education requires diverting resources already working on the project, temporarily diminishing their productivity while the new workers are not yet contributing meaningfully. Each new worker also needs to integrate with a team composed of multiple engineers who must educate the new worker in their area of expertise in the code base, day by day. In addition to reducing the contribution of experienced workers (because of the need to train), new workers may even have negative contributions – for example, if they introduce bugs that move the project further from completion.
2. Communication overheads increase as the number of people increases. The number of different communication channels increases rapidly with the number of people. Everyone working on the same task needs to keep in sync, so as more people are added they spend more time trying to find out what everyone else is doing.

The Obamacare website and all the back-office enterprise software components that support it obviously qualify as an example of the kind of system that Brooks had in mind. The project is obviously very much behind schedule and very buggy. So, what is President Obama doing? Precisely, what Brooks said he should not do: he is adding manpower to the project. Reports the President:

We've had some of the best IT talent in the entire country join the team. And we're well into a tech surge to fix the problem.

I can just imagine this new "best IT talent surging" onto the project and declaring "We are in charge now." There is no surer way to get the engineers already on the project to say "fuck this" and simply give up. When people already on the project are alienated, they will become uncooperative and stop supplying information about the architecture and implementation of the system.

In addition, Democrats are growing increasingly annoyed with their dysfunctional software system. Mr Obama fumed:

Nobody’s madder than me about the fact that the website isn’t working as well as it should, which means it’s going to get fixed.

Bitched Nancy Pelosi:

I think somebody should fix it. Coming from where I do in California, I have great confidence in technology and its ability to bring fresh eyes to the subject and fix it so that we can go forward. Just fix it, just fix it.”

In spite of the fact that she comes from California, Nancy obviously does not understand very much about the challenges of large software systems. "Just fix it" is the cry of someone who simply doesn't know what to do or even how to get started.

So, where do we stand? We have a software system that is terribly late and horribly buggy, the President is adding manpower to the project, and all the Democrats, increasingly dismayed that the system is not working, are applying enormous pressure to the engineers to "just fix it." Given the way things are working out, the Obamacare fiasco probably calls for a revision of Brooks' Law. It should now read:

Adding manpower to a late software project only makes it later. And having politicians watch over engineers' shoulders and scream at them while they are trying to fix problems, only makes the project even later and more buggy still.

In an earlier blog post in July, I made the following prediction:

The idea that all the computer systems required to implement Obamacare will be up and running smoothly by October is sheer fantasy. The recent announcements of delays in the implementation of Obamacare are just the beginning. Expect a steady drumbeat of additional postponements from the Obama administration as the implementation of Obamacare falls farther and farther behind schedule.

That prediction has come true in spades. Expect the problems with the system not to decrease, but actually to increase. It is a certainty now that the personal mandate will be delayed, just as the Tea Party Republicans insisted it should earlier this month.

Once again, Obama takes the low road

The crisis had passed. It was a moment for the President to reach out, to heal wounds, to build bridges. A confident and magnanimous leader, one with abundant experience as a chief executive officer, would use the moment to try to create an atmosphere of reconciliation and cooperation.

But, not Obama. Once again he could not restrain himself from attacking his opponents. Assuming his most haughty demeanor and punctuating his speech with lengthy pauses intended to convey his utter contempt for those he was speaking about, the President said:

The folks who pushed for the shutdown and threatened default, claimed their actions were needed to get American back on the right track, to make sure we're strong. But, probably nothing has done more damage [hyperbole?] to America's credibility in the world, our standing with other countries, than the spectacle we have seen these past several weeks. It's encouraged our enemies, it's emboldened our competitors, and it's depressed our friends who look to us for steady leadership.

Mr President, what is damaging American credibility in the world and our standing with other countries, what is encouraging our enemies and emboldening our competitors is the fact that Federal spending is completely out of control. Soon America will be buried under a mountain of debt that we will have no hope of repaying and that will cripple our country. And when Tea Party Republicans take a principled stand to oppose this reckless behavior, they are greeted by you with nothing but intransigence and attack. This is hardly the right way to kick off the next round of negotiations.

I have already written (here and here) about how President Obama never seems to be able to deliver a speech without taking the low road and attacking Republicans in the most petty, divisive, and mean-spirited way. Today's press conference was just the latest example.

Kennedy was killed not by communist Oswald, but by climate of hate created by Dallas' sick, right-wing bigots

Now even the Wall Street Journal is repeating the outrageous slander that the city of Dallas was somehow responsible for President Kennedy's assassination. An article, written by Ann Zimmerman and appearing in today's WSJ, states:

After John F. Kennedy was assassinated here on Nov. 22, 1963, it took years for this metropolis to shake its stigma as the "City of Hate," with many people blaming its virulent anti-Kennedy sentiment as the cause. ... Dallas's image had taken a hit even before the killing, according to historians. An ultraconservative strain in the city, led by Edwin Walker, a former Army major general with anticommunist and segregationist views, had criticized the Democrat Kennedy as soft on Communism.

Of course, Ms Zimmerman is forced to acknowledge the inconvenient fact that Lee Harvey Oswald, the person who actually killed Kennedy, was a "left-wing extremist" (actually, a communist; see below):

In the end, the Warren Commission concluded that Kennedy met his fate at the hands of a left-wing extremist, Lee Harvey Oswald. Nonetheless, many blamed Dallas for the combustible climate that led to the assassination.

George Will has already pointed out the sheer stupidity of this departure from fact:

The transformation of a murder by a marginal man into a killing by a sick culture began instantly — before Kennedy was buried. The afternoon of the assassination, Chief Justice Earl Warren ascribed Kennedy’s “martyrdom” to “the hatred and bitterness that has been injected into the life of our nation by bigots.” The next day, James Reston, the New York Times luminary, wrote in a front-page story that Kennedy was a victim of a “streak of violence in the American character,” noting especially “the violence of the extremists on the right.” Never mind that adjacent to Reston’s article was a Times report on Oswald’s Communist convictions and associations.

Wikipedia's biography of Oswald details his well-known communist sympathies and his attempt to renounce his US citizenship and defect to the Soviet Union.

In October 1959, just before turning 20, Oswald traveled to the Soviet Union. ... Almost immediately after arriving, Oswald told his Intourist guide of his desire to become a Soviet citizen. When asked why by the various Soviet officials he encountered—all of whom, by Oswald's account, found his wish incomprehensible—he said that he was a communist. ... According to Oswald, he met with four more Soviet officials ..., who asked if he wanted to return to the United States; he insisted to them that he wanted to live in the Soviet Union as a Soviet national. ... On October 31, Oswald appeared at the United States embassy in Moscow, declaring a desire to renounce his U.S. citizenship. "I have made up my mind," he said; "I'm through." ... The Associated Press story of the defection of a U.S. Marine to the Soviet Union was reported on the front pages of some newspapers in 1959.

The Warren Commission concluded that on April 10, 1963 [after returning from the Soviet Union], Oswald attempted to kill retired U.S. Major General Edwin Walker, firing his rifle at Walker through a window, from less than 100 feet (30 m) away, as Walker sat at a desk in his home; the bullet struck the window-frame and Walker's only injury was bullet fragments to the forearm. General Walker was an outspoken anti-communist, segregationist, and member of the John Birch Society. ...Marina Oswald testified that her husband told her that he traveled by bus to General Walker's house and shot at Walker with his rifle. She said that Oswald considered Walker to be the leader of a "fascist organization."

Yes, this is the same Edwin Walker that Ms Zimmerman suggests was responsible for stirring up the "ultraconservative strain" in Dallas that led to Kennedy's assassination.

So, let's examine Ms Zimmerman's twisted logic. Lee Oswald was a communist attempting to kill anti-communists. John Kennedy can certainly be described in some respects as ardently anti-communist (remember the Cuban missile crisis). These right-wing, anti-communists were responsible for stirring up the climate of hate that led to the assassination of Kennedy. So, President Kennedy, an ardent anti-communist, was responsible for stirring up the climate of hate that resulted in his own assassination. Absurd!

Ms Zimmerman's article is simply the latest example of how the liberal left and the mainstream media always attempt to pin the blame for all acts of violence on the supposedly sick souls of right-wing extremists, clinging to their guns and religion. Up until now, the best example of this genre was Paul Krugman's insane column blaming the shooting of Arizona Congresswoman Gabby Giffords not on the actions of a demented lunatic, but on the climate of political hatred fomented by right-wing extremists. But now, I fear that Ms Zimmerman has surpassed even Mr Krugman's ravings.

Defining profligacy down. Whatever!

The Continuing Appropriations Act, 2014 (CAA) is a defeat not for Tea Party Republicans, but for all Americans, particularly young ones.

The CAA does not raise the debt ceiling by some fixed amount, but simply suspends enforcement of that ceiling altogether until February 8, 2014, at which point the limit will be reinstated at the level of debt that has been incurred by then. This is the budgeting equivalent of throwing up one's hands and sighing "Whatever!" This same procedure of "suspension" was adopted in the No Budget, No Pay Act passed when we ran up against the debt ceiling earlier this year.

(Here's an analogy. Imagine that you have a credit card with a credit limit of $5000 and you have maxed it out. Instead of lifting the credit limit by some fixed amount (say, by $1000 to $6000), your bank waives the credit limit altogether until next February and says that your credit limit at that time will be reinstated at whatever amount you have spent up until then. Gee, do you think that might be an incentive to spend as much as possible between now and next February? I can guarantee you that all over Washington meetings are being held to figure out how to accelerate as much spending as possible into the period before the February deadline.)

These two pieces of legislation taken together represent the abject failure of our government even to try to rein in our profligate deficit spending (as I pointed out in a previous blog post, the federal deficit in FY2013 will be about $1T; that is, our federal government is spending about 1/3 more than it is taking in).

Such utter irresponsibility is given the name of "moderation" and "willingness to compromise" and the Tea Party Republicans who opposed it are labeled "extremists" and terrorists," even by members of their own party. Although we continue to head down the road to a Greece-like catastrophe, the news media celebrate the fact that the "crazies" have been defeated and the government once more can open the spigots of spending for a few more months.

This is how far we have defined profligacy down. How young people are not outraged by this fiscal debauchery (which they will have to pay for) is beyond my ability to understand.

Felix Salmon: The default has already begun

In a piece entitled The Default Has Already Begun, Felix Salmon makes the following comments:

The best way to look at this, I think, is that there's a spectrum of default severities. At one end, you have the outright repudiation of sovereign debt, a la Ecuador in 2008; at the other end, you have the sequester, which involves telling a large number of government employees that the resources which were promised to them will not, in fact, arrive. Both of them involve the government going back on its promises, but some promises are far more binding, and far more important, than others.

Right now, with the shutdown, we've already reached the point at which the government is breaking very important promises indeed: we promised to pay hundreds of thousands of government employees a certain amount on certain dates, in return for their honest work. We have broken that promise. Indeed, by Treasury's own definition, it's reasonable to say that we have already defaulted: surely, by any sensible conception, the salaries of government employees constitute "legal obligations of the US."

I guess I should conclude from Salmon's comments that every time a company lays off some of its employees (and federal employees are experiencing not layoffs, but rather furloughs), then that company is "in default."

The bubble that government employees live in is truly amazing. Awww, the poor federal workers, waaaaah!!! Do they not understand the basic concept of layoffs? Out here in Silicon Valley where I work, layoffs are a fact of life: when your company's expenses are greater than its revenues, it may decide to lay people off. When I was working for Nielsen, I came in one Friday in the darkest days of 2008 and discovered that 2 out of every 3 people in my office had been laid off. My friend Sebastien, a highly qualified senior software engineer, was one of them. Sebastien didn't whine about "resources promised to him not arriving." Instead, he packed up and left. The next week he was out pounding the pavement looking for a new job. Within a couple of weeks, he had found a job that was better than the one he'd had at Nielsen. This is the flexibility, agility, and the resiliency of workers in the high tech sector. Compare this to the ossified, sclerotic, inflexible world of the government worker.

Last week I quoted Treasury Secretary Jack Lew's astonishing statement that "[the payment system of the US government] was not designed to be turned off selectively." Now, Felix Salmon makes the astounding claim that it is "a default" for the government even to furlough workers. The government cannot stop spending or furlough workers when it is spending more money than it is taking in?!? What world do these people live in?

Krugman: Covered California is working fine

Paul Krugman said today:

They messed up the software for the federal version of it. But we have the exchanges working just fine in many states, which means it's fixable, and it will be fixed. California has a perfectly well-functioning exchange, which it's running itself. If you can do it for 30 million people, you can do it for 300 million. So, Obamacare will be working fine.

I just visited Covered California. This is the message I got:

We're sorry for the inconvenience. We are performing a scheduled maintenance of the Covered California website from Saturday night, October 12th, at 8:00 pm until Monday morning at 3:00 am.

Politico reports: Tech experts wary of more Obamacare "glitches"

See here. Among the quotes:

The glitch-plagued Obamacare rollout might be just the beginning: A series of potential technology problems could thwart the Obama administration’s goal of getting 7 million people enrolled in the new exchanges by the end of March. ... Washington and Lee University School of Law professor Tim Jost, a staunch Obamacare backer and a consumer advocate at the National Association of Insurance Commissioners, said the rollout has been “very disappointing.”

But, as I wrote in an earlier post, the "glitches" are the least of Obamacare's worries. If the government can't even get the software for the website running bug-free, then how well can they have designed the overall business logic of the system?

The Obama Administration is quickly going to be forced to acknowledge that the problems with the system are more than mere "glitches." VC Wannabe Barack Obama will be revealed to know as much about software systems as he does about renewable energy (remember Solyndra).

BTW: Within a couple of weeks, as the system quickly grinds to a halt, the proposal to delay/defund Obamacare will make more and more sense and people like Ted Cruz will be seen to have made a prescient and savvy bet against Obamacare.

The war between the SIP's and the YAF's

At the heart of Obamacare is the basic misconception that you can give a significant part of the population a raw deal and they will not do anything about it.

The people with the greatest incentives to enroll in Obamacare are, naturally, those who are sickest and those who are poorest -- let's call them the SIP's. The sick will have an incentive to enroll because they have pre-existing conditions. The poor will have an incentive to enroll because they will receive premium support.

Hence, the mandate. That is, the only way Obamacare can work is if the young and affluent -- let's call them the YAF's -- also are forced to enroll. Since the YAF's by definition have no pre-existing conditions and will not receive premium support, the premiums paid by them under Obamacare will be far in excess of the premiums they would have paid without Obamacare. And the excess paid in by the YAF's, so the argument goes, will cover the costs of the SIP's.

But, how is this a good deal for the YAF's? After all, they are healthy, so their only need is for insurance against catastrophic illness or injury. Well, they are being told, their reward will come decades later in life when they are no longer YAF's, but have themselves become SIP's. The problem is that this reward is being promised to them at a date decades in the future by a government that cannot even meet the liabilities it already has on its books for other social programs, such as Social Security and Medicare. So, how can these YAF's believe that the government will deliver on this additional promise?

When the YAF's realize what a raw deal they are getting, they will put an end to Obamacare.

"Glitches" are least of Obamacare's worries

Ezra Klein has posted to his "Wonkbook" a piece entitled Obamacare's Website is really bad. Klein writes:

[A] few screens after that, the site crashed on me entirely. ... [And yet, t]he fact that the site is buckling under the traffic is not a reason to defund or delay the law. Indeed, it's perverse to use the overwhelming demand as a reason to take the law away from the people who so clearly need it. And even if it takes a few more days or even weeks until the site is working as well as it should be, the open enrollment period still has another five months and 27 days (or so) to run. These are fixable, not fatal, problems.

The fact that Klein thinks the technical problems with the Obamacare web site can be remedied in "a few more days or weeks" (heck, just spin up a few more servers to handle the excess traffic) is an indication that he has no understanding whatsoever of enterprise software development. (BTW, Ezra, just exactly how do you define the SLA "working as well as it should be?")

Even worse, my intuition tells me that the "glitches" (new favorite Democrat buzzword) encountered so far in the website will be the least of Obamacare's worries. What I really worry about is the "business model" the system is based on. How well has this business model been defined? Is it really a model for producing a net benefit for the American people? We are being asked to believe not only that the meaning of the 2000-plus pages of the Affordable Care Act is perspicuous and void of any ambiguity, but also that all these pages have been translated without misinterpretation into specific software business rules that will improve the health care and reduce the health costs of all Americans.

Klein seems to fail to understand the basic fact that, when customers click on buttons in the Obamacare portal, backend business processes will be set in motion. It is one thing for software to capture data in a form, send that data over a wire, and store that data as a transaction in a database. It is quite another thing for the backend business processes to operate in such a way that all the transactions taken together aggregate and add up to a net benefit.

Contrast Obamacare with Amazon, for example. Every quarter, Amazon files financial statements with the SEC. All the various transactions initiated through Amazon's website are rolled up into an income statement, and Amazon's financial status is summarized in a balance sheet. These financial statements are created in accordance with strict accounting rules defined by FASB and under the supervision of an independent accounting firm. Thus, at the end of every quarter, we have a reasonably good idea of whether Amazon made a profit in the preceding quarter and whether its financial health is good. In other words, we know whether Amazon's business processes for that quarter have resulted in a net benefit for Amazon's stockholders.

How will the net benefit (if any) from Obamacare be measured? What accounting methodology is going to be applied to all the transactions under Obamacare to determine if the benefits of the system outweigh the costs and if the system is having a positive impact on America's balance sheet? Will government accounting (contradiction in terms) be employed? Will we encounter the same kind of accounting shenanigans and obfuscations that we grew so accustomed to at Fannie Mae and Freddie Mac? Will the benefits be simply what Mr Obama and other Democratic politicians assert they are (just as Barney Frank asserted to the bitter end that Fannie Mae was solvent)? Or will there be any hard and impartial measurement, any metrics? Furthermore, if there are metrics and these metrics show that the system is operating "at a loss," will the Democrats have the political courage and integrity to acknowledge the system's shortcomings and fix them? Or will a malfunctioning health care system become simply another example of a government program run amok, rolling up huge costs, further inflating American debt, but preserved for the benefit of various politicians and special interest groups?

Given the "glitches" we have seen in the rollout of the various exchanges, I am not confident that the underlying business processes have been given anywhere near the amount of thought that they should have been given. My experience as a software engineer tells me that it's fairly easy to create a UI for a web app that gives the illusion that something beneficial is happening in the backend. Yes, the system can display a message that says: "Congratulations! You have successfully enrolled in Obamacare!" But, what should really concern us is whether all the various clicks and user actions, once the exceptions and error messages begin to die down, will prove to add up to a real, objectively measurable net benefit for the American people.

Lew: Government spending cannot be turned off

As reported by McClatchy:

Testifying before the Senate Finance Committee during an unusual 8 a.m. hearing, Treasury Secretary Jacob Lew all but ruled out the chances that the Obama administration would try to prioritize who gets paid in the event that next week's debt ceiling deadline passes. ... Asked about prioritizing payments due so that bondholders get paid, and so do Social Security recipients, military families and so on, Lew suggested it couldn't be done. "This system was not designed to be turned off selectively," he said.

This system is not designed to be turned off selectively??? What the hell does that mean? Can we never stop the outflow of money from the federal government if we choose to?

Once again it needs to be pointed out that families and businesses "selectively" stop spending money if they don't have it. The assertion that the federal government cannot stop spending is simply preposterous on its face. If the federal government's payment systems are so inflexible, then they have been designed about as effectively as the Obamacare exchanges.

McClatchy goes on:

Lew repeatedly warned that it's not just a matter of paying interest to bondholders to prevent a default on U.S. government bonds, but rather the hundreds of millions of dollars of bonds that roll over in coming weeks. These bonds are used as collateral in all sorts of financial transactions and if financial markets decide they won't trade then until the government is funded it could cause financial markets to seize up.

This is "Chicken Little" fear mongering of the worst kind. The idea that the market in U.S. government bonds, the deepest, most liquid market in the world, will freeze up is also completely preposterous.

Facts about the debt limit

Contrary to all the lies coming out of the White House and the liberal mainstream media, a refusal by House Republicans to raise the debt limit is not the same thing as forcing the United States to default on its debt. As reported in the Washington Post, Moody's Investors Service has published a memo stating:

We believe the government would continue to pay interest and principal on its debt even in the event that the debt limit is not raised, leaving its creditworthiness intact. The debt limit restricts government expenditures to the amount of its incoming revenues; it does not prohibit the government from servicing its debt. There is no direct connection between the debt limit (actually the exhaustion of the Treasury’s extraordinary measures to raise funds) and a default. [emphasis added]

The federal government reports the national budget figures as follows (see here and here):

1. In FY2013, the federal government will receive revenues of approximately $2.7T.
2. In FY2013, the federal government will have expenditures of approximately $3.7T.
3. IN FY2013, the federal government will have interest expense of approximately $416M.

Thus, although items 1 and 2 taken together reveal that the federal government will run a deficit of approximately $1T in FY2013, nevertheless, items 1 and 3 taken together demonstrate clearly that the government has approximately 9x the revenue coming in as is required to pay interest on our debt. So, there is, as Moody's correctly points out, absolutely no need to default. The only thing that can possibly cause a default is if President Obama makes a deliberate and premeditated decision not to service the debt, but opts instead to continue spending incoming revenues on bloated government programs.

It is all so simple. There is no need for the government to stop making payments on its debt (which, yes, would have catastrophic consequences for global financial markets). Rather, the government simply needs to figure out how to stop spending the extra $1T a year more than it is taking in so that it does not need to borrow any more. Families and businesses in the private sector face this challenge every day. If more money is going out than is coming in, then it's time to prioritize, tighten the belt, and figure out how to trim the spending.

Furthermore, Barack Obama himself, when he was a senator, opposed raising the debt limit. Said Senator Obama:

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the US Government cannot pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. ...Increasing America’s debt weakens us domestically and internationally. Leadership means that 'the buck stops here'. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.

At the time, Senator Obama was urging Congress not to tolerate an increase that would bring the debt ceiling to $9 trillion. The current debt ceiling, which President Obama wants raised, now stands at $16.7 trillion, or 85% higher than it was when Senator Obama said that raising it would represent a failure of leadership.

So, the facts may be summarized as follows:

1. not raising the debt ceiling does not entail a default on our debt,
2. we are running a deficit of $1T a year,
3. Obama himself opposed raising the debt ceiling 7 years ago,
4. the debt ceiling is now 85% higher than when Senator Obama opposed it.

Given these facts, it would be unconscionable for the House Republicans to do anything else than to stick to their guns and demand that the President avoid a debt crisis by cutting back on bloated Federal spending.

Elizabeth's story

I just read Elizabeth Smart's book My Story in a single sitting. Hers is a tale of how faith and the cherished love of family can preserve the soul untouched even when the devil incarnate (Immanuel, indeed; may he find the lowest ring in hell) is defiling the body and doing his utmost to undermine the spirit. Elizabeth writes:

The main reason I was able to survive is because of my God, my family, and my community.

Although I am an atheist, I have the deepest appreciation and admiration for sincere religious sentiment. And I have rarely encountered such a pure and confident expression of faith, untainted by doubt, as one finds in this book. Elizabeth and her family represent the best that Mormon faith and family have to offer.

Read the book; then, just ask yourself: Who would you rather have as a role model for our young women, Elizabeth or a twerking Miley Cyrus?

McAfee: Obamacare = a hacker's wet dream

John McAfee, founder of software security company McAfee Inc. calls Obamacare "a hacker's wet dream."