Medicare and Hospital Payments – In a previous post, I described how Medicare came to adopt price schedules for hospitals and physicians that are now derided as Soviet in origin. Actually, as I noted, this was a home-grown American idea that Presidents Ronald Reagan and George H.W. Bush embraced and introduced to Medicare. In this and the next post I would like to describe how this system works, starting with inpatient hospital services. I will draw on the excellent literature provided by Medpac, the independent Medicare Payment Advisory Commission established in 1997 by Congress to advise it on issues affecting the Medicare program.
Reports that bailout will attract 6.7% rate rejected – The interest rate for a nine-year EU/IMF loan would be lower than the 6.7 per cent being quoted in some reports today, a source involved in the talks has indicated. The source said the interest rate was still under negotiation but would not be that high. The loan of €85 billion would come from a number of different funds, some controlled by European Union institutions, others by the IMF. It is understood that the interest rate for the IMF portion of the loan will be in the region of 4.5 per cent, while the interest charged by EU bodies will be considerably higher. The source accepted that the average interest rate was likely to be higher than the 5.2 per cent charged to Greece when it was bailed out earlier this year. But it was pointed out that the Greek loan was for a period of only three years.
Europe Strives to Calm Nerves as Borrowing Costs Rise – Officials across Europe scrambled on Friday to speed measures aimed at easing the fears of investors even as borrowing costs flirted with new highs in the euro zone’s frailer countries. In Portugal, lawmakers approved a tough 2011 budget to help the country meet a pledge to cut the deficit to 4.6 percent of gross domestic product next year, from 9.3 percent in 2009. In Spain, the central bank demanded greater disclosure from banks. And it announced plans for new stress tests to show investors that financial institutions, particularly weaker savings banks, could absorb a “problematic exposure” of 180 billion euros ($238 billion) to the country’s collapsed construction and real estate sectors. Meanwhile, a team of European Union and International Monetary Fund specialists in Ireland was racing to complete terms of its financing package before markets reopened on Monday.
"Tell the EU and IMF to Shove It!" Irish Prime Minister Brian Cowen is Mahmoud Abbas. He’s caved in to the demands of foreign capital and transferred control over the nation’s budget to the EU and the IMF. This is a black day for Ireland. The Irish people will now face a decade or more of grinding poverty and depression thanks to their venal leaders. As soon as the ink dries on the IMF loans, the second occupation of Ireland will begin, only this time there won’t be armored cars and Paramilitaries in fatigues, but nerdy-looking bureaucrats trained in the art of spreading misery. In fact, the loans haven’t even been signed yet, and already IMF officials are urging the government to cut jobless benefits and the minimum wage. They’re literally champing at the bit. They just can’t wait to get their hands on the budget and start slashing away. And don’t believe the hype about European unity or saving Ireland. My ass. This is about bailing out the banks. The bondholders get a free ride while workers get kicked to the curb. Here’s a clip from the Financial Times that spells it out in black and white: "According to data compiled by the Bank of International Settlements, the three largest creditors to the Irish economy at the end of June…were Germany to the tune of €109bn, the UK at €100bn and France at €40bn. These sums amount to 2 per cent of France’s gross domestic product, 4.5 per cent of Germany’s GDP, and 7 per cent of British GDP."
Borrowing Rates from The EFSF – Today I re-read this piece that Wolfgang Munchau published in the FT on September 28th. Titled “The Truth Behind the EFSF” at Eurointelligence and “Could Any Country Risk a Eurozone Bail-Out?” at the FT, it concludes that countries that tap the facility will have to pay interest rates of about 8 percent. If this were true, then countries like Ireland could face very substantial financing costs even after seeking help from this fund, which would make successful stabilisation all the harder. Looking into this issue, it seems to me that Munchau’s assertions about borrowing rates from the EFSF are not correct. By my calculations (see below) the EFSF borrowing rate would be a bit below 6 percent. Now this is still very high but given the large sums that would be involved if the facility swings into action (financing budget deficits and bond redemptions for three years) this difference is likely represent a significant amount of money.
There is No Food Inflation; the BLS Made Sure of That – It went unnoticed how the Bureau of Labor Statistics (BLS) relieved the volatile food and energy prices of volatility. The BLS also relieved the CPI of “extreme values and/or sharp movements [of prices] which might distort the seasonal pattern [which] are estimated and [are] removed from the data.” So out went milk, cheese, oil, and cars from the CPI, if they did not meet the BLS volatility criteria. (The excisions also include non-edibles and non-combustibles, including cards, trucks and textbooks.) Below are some monthly lists of items removed from the monthly Consumer Price Index Summary calculation and the excuses for doing so. (The lists were cut-and-pasted from the BLS website at the time. It looks as though the BLS only posts tables (no words) from the monthly CPI releases prior to May 2007.) There is nothing particular to the months shown. The reader may note the lists stop in 2006. This is because the BLS stopped releasing the list of items after December, 2006; possibly because the deception was so clear as to show the entire CPI calculation is a fraud. This is suggested without much conviction since there weren’t ten people outside of the BLS or Federal Reserve who knew it existed, possibly because critics of BLS methods had so many other fish to fry: hedonic adjustments, geometric averaging, substitution bias, owners’ equivalent rent, and on and on it goes. This prescribed method of stupefying the public successfully deterred me from attempting to understand the changes to food and energy prices. And, as mentioned above, there are so many other distortions to the CPI that one is better off to assume the consumer price index is rising 5% to 10% a year and to adjust one’s life (and investments) accordingly. John Williams, author of the Shadow Government Statistics website, calculates that if the BLS used the same methodologies for compiling the CPI today that it employed in 1990, the government’s number would be 4.5%. If the BLS used the same methodologies as in 1980, the official CPI would be 8.5%.