Dr. No

Fascinating look at the expansion of Medicaid as states have taken advantage of this uncapped entitlement for decades to provide health care to constituencies well beyond the original mandate of the program. This is a crystal ball for both California and the nation as a whole as politicians fantasize about national healthcare without considering the fiscal implications and marketplace impact that socialized healthcare induces. Simply put, we’ll never have healthcare reform until the cost side of the equation is dealt with.

In a Wall Street Journal op-ed of uncommon chutzpah, Arizona governor Janet Napolitano attributes her state’s travails to Washington’s alleged failure to “pay its bills.” Characterizing supposed cuts in federal transfer programs–including contemplated and rejected cuts–as federal “debts” to the states, she maintains that “Arizona would not be in deficit this year” if Washington paid up on only a few of its obligations.[2] The governor could not be more wrong. Arizona’s fiscal crisis is due chiefly to the state’s expansion of its Medicaid programs. That decision, in turn, is largely attributable to the perverse incentives created by Medicaid’s inordinately generous transfers to the states. To oversimplify slightly, states get into fiscal trouble not because the feds shirk their obligations, but because they have made promises to pay in the first place. While Arizona’s problems are exacerbated by a dysfunctional political system, the state’s predicament illustrates a pervasive structural crisis.

Which brings me to Dr. No, otherwise known as Sen. Tom Coburn (R-OK) who is the emerging as one of the more interesting members in Congress. His stance on fiscal issues should be singled out and held high as a standard other members of Congress should aspire to. In a sentence, Coburn demands that new spending bills be paid for by eliminating redundant Federal programs or other cost savings, and that programs have performance measures mandated as part of the authorizing legislation. Sounds obvious right? But for the last 30 years Congress (under either party) has behaved in an entirely different fashion.

Reid cobbled together the 35 bills — each of which had passed the House by large margins — into one legislative package in an attempt to overcome all of Coburn’s parliamentary obstacles at once. Coburn is opposed to creating federal programs unless other programs he considers duplicative are eliminated or reduced in scope, and he demands that new programs also contain measures of their effectiveness.

[From Sen. Reid Thwarted On Bundle Of Bills – washingtonpost.com]

Bust a Deal, Face the Wheel

Sprint lost a pretty significant case involving the early termination fees (ETFs) here in California. A contract is a contract and I’m not inclined to cheer the court action nullifying a valid contract between two parties, however it’s also clear that cell phone companies have profitably abused ETFs (e.g. attaching an ETF to a renewal contract even when the consumer didn’t get a new handset) and something needs to be done.

Verizon has a proposal to the FCC that is pretty reasonable. Basically what they are calling for is a national policy on ETFs that allows an opt-out period (similar to a cooling off clause), pro-rated ETFs, and lastly, no ETFs for contract renewals unless the consumer receives a new handset.

While I think this is an issue that needs to be dealt with at a regulatory level, I am not inclined to support judicially inspired chaos that will result from each state regulating the issue independently. What will be a natural consequence of such a market would be handsets that are rendered inoperable on carriers other than the one originally sold on and that can’t be a good thing.

Bonus link, the NY Times has a good piece on ETFs.

200807291129.jpg Sprint Nextel Corp. (S) was dealt a major blow in its early-termination-fee case when a California judge ruled it would have to pay $ 73 million.

[From Sprint Loses Early Termination Fee Case, May Pay $73 Million]

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