Tuesday, March 31, 2009

Monday, March 30, 2009

Random charts...

Above, graph showing the performance of the Dow during four bear markets, from dshort.com via Calculated Risk...

Above, chart showing annual inflation from 1914 through February 2009 (at 0.24%), via dshort.com

Above, a chart comparing "Bush's deficits" to "Obama's deficits" from The Heritage Foundation. President Obama's deficits are as scored/projected by the administration and the Congressional Budget Office. Below is 'Comparison of CBO, Administration, and Blue Chip Medium-Term Projections: Levels of Real GDP, 2005 to 2019', which shows that the administration's projections are more positive than both the Congressional Budget Office and the Blue Chip consensus. Chart via Director's Blog

Theory vs. practice

With the economy suffering its worst downturn in a long while, the heat is on economists and various financial types for (mostly) not seeing the crisis coming. Some are going to extremes and questioning capitalism and the very basis of our society's financial structure. Others are re-examining and questioning various economics tenets (though often only those of opposing schools...)

However, some old and hoary shibboleths are still taken as a given. For example, this blogger has already wondered re the multiple calls to make the shareholders of institutions that get government aid in this downturn "take a haircut" (see for example #1 in the Feb 15th 'Random Thoughts' entry, or the Feb 11th 'Rhetorical Questions...' entry). Well, another such "haircut" argument comes from the link below, and includes a shibboleth, that of the shareholder overseeing the institutions in which they hold shares):

"... First, banks that are de facto insolvent need to be restructured, a word that is preferable to the old-fashioned nationalisation. Existing shareholders will have to face that they have lost their money. Too bad; they should have kept a more vigilant eye on the people running their banks..."

OK, at one point in time, perhaps only the wealthy owned stocks, and part of that involved making sure that the companies in which they had an ownership position were well run, etc. But with the spread of stock ownership to the far reaches of the population, this is one idea way beyond its expiration date. This blogger works at a health care institution. All the employees there have money invested in 403(b)s as part of their retirements (via defined contribution plans). These are invested in diversified plans that no doubt include the main companies in the financial sector.

As such, all these employees have already taken a big hit. However, hopefully, in a few years the market will go back up and their retirement nest eggs will gain back the lost value. But this certainly won't happen if they are given a haircut! And telling the Environmental Services associate buffing the floors, or the staff on the Receiving Dock, etc. that they deserve this because they "should have kept a more vigilant eye on the people running their banks" is the height of stupidity.

Niall Ferguson: The great repression

Thursday, March 26, 2009

Random pics...

Baghdad wall art

Balkan wall art

Assassination of Kamal Medhat in Beirut March 25th...

Photo credit: AFP/Ramzi Haidar

Sunday, March 22, 2009

Wyeth v. Levine

Case Recap:

In April 2000 Diana Levine went to be treated for a migraine. The staff at the Vermont hospital gave her an intramuscular injection of Demerol for her headache and Phenergan for her nausea. Not getting any relief she returned to the clinic and received a second injection of both drugs. The second time a physician-assistant administered the drug IV push (and the drug entered her artery, either because the needle entered the artery, or because it migrated from the tissue to the artery); ... this caused gangrene to set in and her right arm had to be amputated. After settling lawsuits with the clinic/hospital and staff for their error she sued the maker of the drug (Wyeth) claiming that the labeling was inadequate since although it warned against IV administration it did NOT prohibit it and warn doctors and nurses not to give promethazine IV push under any circumstances... Wyeth's defense was that the labeling of the drug conformed to what was approved by the FDA, and that it could not deviate. The judge instructed the jurors that they could consider Wyeth's compliance with FDA rules, but that this did not establish that the warning was adequate. The jury found that Wyeth was negligent, that Phenergan was a defective product due to inadequate warnings, and that the product defect was the direct cause of Levine's injury. They awarded Diana Levine USD 7.4 million. The judge reduced this since she had collected monies from her settlement with the clinician and clinic.

Wyeth appealed to the Vermont Supreme Court in 2006, but the court upheld the ruling of the lower court. In 2007 Wyeth filed a writ for certiorari, requesting that the SCOTUS review the case, and the court granted certiorari on January 18, 2008. The case was argued before the SCOTUS at the beginning of November.

Below is a scan of a promethazine package insert (warnings highlighted)...

March 2009 the SCOTUS decided 6-3 that federal law did not pre-empt Levine's state claims. They dismissed Wyeth's claims that it would not be possible to comply with state laws and federal labeling duties, given that the FDA has a procedure in place (CBE, or "changes being effected" provisions) by which a manufacturer may add or strengthen a drug safety warning. They rejected Wyeth's argument that the Food, Drug, and Cosmetic Act (FDCA) gave the FDA total labeling standards, ruling that a reading of Congressional intent showed that they did not intend the FDCA to pre-empt state laws.

OK, so the SCOTUS may have ruled completely correctly re the law and pre-emption. However, this blogger really can't agree with the initial judgment and finding of fact. He has a number of issues:
  • The physician assistant administered a dose greater than prescribed by the label, administered it improperly, and also continued to inject the drug even though Levine complained of pain. However, the jury rejected Wyeth's argument that these actions relieved it of liability.
  • The initial finding was that the product was defective as a result of inadequate warnings., and that the injury would not have occurred if Phenergan's label had included an adequate warning. However, the package insert already had no fewer than six warnings related to this issue, it's not sure what additional verbiage would have been useful given that all current warnings were ignored.
  • Levine argued that there should be a warning saying "Not for IV Push" The jury and the court did not accept this, thankfully. There are limited cases in which IV push is medically indicated, as in when immediate relief is needed, and we don't want manufacturers to make labels too tight. As it is, Wyeth might add this to the label to protect against further state tort actions, what would this do to the responsibility of medical personnel?
All in all, a dissatisfying set of circumstances. This blogger feels that a FDA-mandated label that pre-empts state law IS the way to go, and that this should be the law (since it is not currently). Otherwise, drug manufacturers are at the mercy of juries in every state!

Final note: Reading the reactions on-line to news accounts, and scanning blogs, it is disheartening that most folks don't seem to want to bother to read up on the facts of the case, but bring their pre-conceived biases to bear.

Preemption and Amputation: Diana fights Wyeth
Amputee awaits high court, wants musical glow back
Drug Label, Maimed Patient and Crucial Test for Justices
Preview: Wyeth v. Levine (recap of the case prior to the SCOTUS)
Wyeth v. Levine (links to all the documents) - SCOTUSWiki
Drug Ruling Puts Devices in Spotlight
Supreme Court Rules in Wyeth v. Levine

Financial crisis and hospitals - III

Previous blog entries have discussed the stresses that hospitals are facing in these tough times (e.g. see links below). How Do Hospitals Get Paid? A Primer explains how hospitals make their money. In brief and simplified: The hospitals' list of prices for their services is call the chargemaster. No one actually pays those rates, everyone pays at some discount to these "list" prices. Hospitals essentially get money either from the government (Medicare and/or Medicaid) or from commercial insurance. Yes there are some other additional income streams from operations (e.g. self pay patients, etc.) but these are often much smaller. Medicare pays flat fees related to "diagnostics related groups, DRGs", Medicaid pays flat fees, per diem payments, or fee for service. Finally, the commercial insures generally pay via per diems or fee for service. The bottom line to remember is that in general commercial insurance "overpays" while the government "underpays" and the hospitals net out (i.e. significant cost-shifting occurs)

So, let's look at our simplified model (numbers in USD millions). Let's make some assumptions - the hospital's commercial insurers are on average paying 80% of list, while the government on average reimburses 40%, and the hospital breaks even at 60% (i.e. as noted above, it is losing money on 'government' business while making "excess profit" on the 'commercial' business to balance this out...) The hospital is in the relatively decent position of a 60% commercial and 40% government payor mix

OK, the hospital bills USD 500 million, gets USD 320 million of revenue and it operates at a healthy six point seven percent margin. Now, given the economic distress that the country is going through many people lose their jobs, and thus their insurance (ignoring COBRA). Assume that they all get on a government program and remain covered, the payor mix changes, as the government portion increases and the commercial portion decreases. Let us model a 44%-56 payor mix. We see that the hospital's margin goes down to (a still reasonable) four percent.

This simple and simplified model is intended to illustrate that all other things being equal, a shift in payor mix from commercial to government will have a significant, negative impact on a hospital's bottom line! The hospital does the exact same amount of work, needs the same number of employees, has to buy the same amount of supplies, pays the same for utilities, etc. etc. Expenses are the same, but due to the way the system works revenue will be decreased, resulting in a lower margin. (Note: we are not discussing re if hospital executives are paid appropriately or are overpaid; if hospitals are as efficient as they may be or are full of duplication and waste; if 'investing' more in primary care will reduce overall healthcare expenditures; if a single-payor model is better or not; etc.) The move from scenario one to scenario two is what is happening in real life right now, and the result is a weakening in the bottom lines of most hospitals - some hospitals which were doing very well are now doing OK, some which were doing OK are closer to break-even, and those that were at break-even now have negative margins. All while the other forces hammering them (see links) are increasing.

Financial crisis and hospitals II - January 27th
Financial crisis and hospitals (updated) - November 14th

Random chart...

Some good news in these times... Most indicators going in the right direction (though some levels are still way too high e.g. percent malnourished, percent with access to clean water, etc. ) Go here, Positive Trends in Economic Development for the original plus commentary.

Random pic... Honest Broker?

Wednesday, March 18, 2009

Thursday, March 12, 2009

Random chart...

Chart comparing economic contraction in the recession thus far, compared to previous recessions and the Great Depression. Go to the Calculated Risk entry, 'What is a depression?' for a larger version of the chart and a nice discussion...

Monday, March 9, 2009

Truth commission?

A segment of the Democratic party wants hearings to be held to examine various aspects and actions of the Bush administration. One suggestion has been to set up a "Truth Commission" to get to the bottom of these issues. This blogger is in favor of this, provided that Senators from both parties are hauled in front of the Commission to recount how they were briefed on the matters in question and chose to do nothing!

On another front, the Obama administration has disappointed a number of supporters by taking similar positions as the Bush administration in a number of areas e.g. use of the 'state secrets privilege', etc. "Justice Department lawyers told the court Friday that despite the changeover from Bush to Obama, there would be no change in the legal position of the government in this case... The position taken by the Obama administration in the Yoo lawsuit is consistent with its efforts in a whole series of court cases involving national security and democratic rights, where the Obama Justice Department has essentially adopted the Bush administration's standpoint as its own. This includes assertion of the "state secrets" privilege to suppress lawsuits against illegal kidnappings by the CIA ("rendition") and illegal surveillance by the National Security Agency."

Not much of a surprise - in the November 8th entry, Post-electoral predictions, this blogger predicted, "Post-inauguration a President Obama will display a new-found respect for the office of the President of the United States, and will not help (and will almost certainly impede (even while trying to keep this "behind the scenes") any attempts to drag former-President Bush, former-vice president Cheney, and some of their senior aides before panels to hold them to account for some of their actions while in power. This will be to the profound dismay of very many of his supporters..."

Facing the Cold, Hard Truth
Obama administration backs immunity for author of Bush torture memos

Libby Zion, RIP

Approximately 25 years ago (March 5th to be precise), 18-year Libby Zion died. Admitted to the hospital the day before with a fever and "strange jerking motions", the residents gave her meperidine to control the movements. Later, still agitated, the resident when called prescribed an antipsychotic and ordered that she be put in restraints. A few hours alter she died of cardiac arrest.

When her father found out that she had been 'treated' by residents, that no attending physician had seen her, that she had been tied down, and that it was usual practice for residents to be on duty for 36-hour shifts, he was outraged. He charged that "They gave her a drug that was destined to kill her, then ignored her except to tie her down like a dog," and campaigned against the physicians, the hospital, and the system. The father also persuaded the Manhattan D.A. to convene a grand jury, and he also later initiated a civil proceeding.

The Ad Hoc Advisory Committee on Emergency Services (more commonly known as the Bell Commission) was set up to look at how residencies were conducted. After hearings, etc., the Commission recommended that residents work a maximum of 80 hours a week, and no more than 24 hours in a row, and that attending physicians be present at all times. In 1989 the state adopted these recommendations, and in 2003 In July 2003 the Accreditation Council for Graduate Medical Education adopted similar regulations for all accredited medical training in the United States. The legacy of Libby Zion.

Libby Zion law - Wikipedia
A Life-Changing Case for Doctors in Training

Random chart

The Financial Crisis and the Policy Responses: An Empirical Analysis of What Went Wrong

Sunday, March 1, 2009

Read the bill!

Transparency is the word/order of the day. Candidate Obama promised it, President Obama is moving towards greater transparency... A new campaign, "Read The Bill", is underway. From their web site: "Too often, controversial bills are voted on hours after coming to the House or Senate floor. There is no time for members of Congress to read the bill, and no chance for interested citizens to weigh in on the legislation. ReadTheBill.org's mission is to strengthen our democracy by making sure elected officials and citizens have the chance to read and understand legislation. A more transparent government begins with providing the people with the opportunity to tell their elected officials what they think of a piece of legislation, before it comes up for a vote. ReadTheBill.org is an effort to gather individuals and groups, luminaries and everyday folks, conservatives, liberals and independents behind the simple concept that all non-emergency legislation should be available online for 72 hours before debate begins."

On the face of it, this sounds like a good idea. However, it will not prove as useful as some might think. This blogger sometimes does read proposed legislation that is on subjects that interest him. From this experience he can say that there is a huge variation in how easy it is to understand - sometimes it is easily understood, sometimes it is well-nigh impossible to understand what is going on...

For example, this blogger read the 528-page ARRA (H.R. 1) when it was originally posted and understood it just fine, certainly well enough for the purpose of providing feedback to his senators and representatives, as well as to blog semi-coherently on the subject (see the January 28th entry 'Some recovery info', and the February 3rd entry, 'Stimulus update II...')

However, a counter-example was during the big debate in 2008 re amendments to FISA. When that legislation was working its way through the Congress, this blogger printed and read it, and could barely make out what was go on... It appeared to be hundreds of pages mostly referencing previous legislation and updating it e.g. striking previous language XXX and replacing it with amended YYY; change subsection b/para 2/line 5 from ‘and’ to ‘but’, etc. It was virtually impossible to understand, see below for a small sample. The legislation's opponents claimed that the bill undercut existing legislation, weakened civil protections, included unconstitutional provisions, etc. Proponents of the legislation claimed that this was nonsensical, that the proposed amendments just ratified the status quo, allowed the law to catch up with technology, etc., etc. Wading through the actual verbiage, of the proposed legislation this blogger had had no real basis for determining who was characterizing the bill more accurately!

The bottom line: instituting the changes called for by the "Read the Bill" crowd is just the very first step of what is needed. In this blogger's opinion much more is needed, for example a “plain English” explanation of intent and what is being included. This is especially necessary if the language includes modifications to existing legislation! Otherwise, forget it, posting proposed legislation even 30 days ahead of time would not really help the public one whit!

b) Use of Information-
(1) IN GENERAL- Section 106(k)(1)(B) of the Foreign Intelligence Surveillance Act of 1978 (50 U.S.C. 1806(k)(1)(B)) is amended by striking ‘sabotage or international terrorism’ and inserting ‘sabotage, international terrorism, or the international proliferation of weapons of mass destruction’.
(2) PHYSICAL SEARCHES- Section 305(k)(1)(B) of such Act (50 U.S.C. 1825(k)(1)(B)) is amended by striking ‘sabotage or international terrorism’ and inserting ‘sabotage, international terrorism, or the international proliferation of weapons of mass destruction’.
(c) Technical and Conforming Amendments- The Foreign Intelligence Surveillance Act of 1978 is further amended–
(1) in paragraph (2) of section 105(d) (50 U.S.C. 1805(d)), as redesignated by section 105(a)(5) of this Act, by striking ‘section 101(a) (5) or (6)’ and inserting ‘paragraph (5), (6), or (7) of section 101(a)’;
(2) in section 301(1) (50 U.S.C. 1821(1)), by inserting ‘weapon of mass destruction,’ after ‘person,’; and
(3) in section 304(d)(2) (50 U.S.C. 1824(d)(2)), by striking ‘section 101(a) (5) or (6)’ and inserting ‘paragraph (5), (6), or (7) of section 101(a)’.

Note: This blogger is a big fan of transparency, having proposed a "Regulation FD" for campaign finance as far back as March 2002... But it needs to be much more than lip service, it needs to be done right!

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