Regulation Theater

Bruce Schneier introduced, to me, the concept of security theater.  The idea that much of what we see in terms of ‘security’ – TSA, Homeland Security, etc – gives us the illusion that something is ‘being done’ to make us more secure, but in reality does nothing – or at worst – makes us less secure.

I have grown to understand that regulation does much the same thing.  And this has nothing to do with “government bad, markets good.”  This is true because written rules are brittle, vague and unable to adapt to fluid situations.

I work for an organization that is bound by PCI guidelines – a private consortium of credit card providers that create security rules for companies that accept credit cards.  (I told you that this wasn’t an anti-government screed.)

The concept behind the guidelines are well intentioned.  Credit card companies are liable for losses due to the theft of credit card companies.  Unfortunately, they don’t have control over the entire transaction.  Retailers accept and store credit card numbers and have been one of the primary source for theft over the years.

But I can tell you with absolute certainty that these rules are not making retailers more secure.  We spend a lot of time and money so that we can pass the audits.  But little of this activity is actually making it less likely that credit cards can be stolen.

This isn’t to say that none of their rules should be followed – quite the contrary – most of them are simply common sense.  But, some of them are:

a) Simply not applicable in our environment – but the rules do not distinguish between risk and no risk, they say that you must do X

b) Less risky than other holes in the environment.  Every company has limited funds that they can spend on security (security is always a trade off between costs and benefits) and if we have a hole Y that has a 10% chance of loss and one Z that has a 1% chance of loss we will ignore Y in favor of Z if PCI hasn’t addressed Y.

The PCI – or any regulator for that matter – simply cannot know the details of every environment.  We have a pretty good idea what our risks are, but we can’t address them because we are too busy engaging in the theater of making PCI think its all OK.

If the card issuers really want the retailers to take the risks seriously they need to create the incentives for us to really care.  Make a retailers partially responsible for a breach.  Let us decide where the risks and rewards are – if we have skin in the game we are going to be much more successful than you trying to guess what is likely going to be a problem.

This is true for other areas as well – don’t create rigid rules like SOX & HIPAA with rules that don’t actually address the problem you trying to solve.  Make the failures expensive and the perpetrators culpable.  The results will be far more successful.

Technorati Tags: regulation,economics

POSTSCRIPT: Even knowing how many holes there are in most companies I fell safe using a credit card at almost any company.  The breaches require several steps of compromise and are unlikely more often than not.  Not impossible – but improbable.

Is This Called Reverse Rescission?

My father-in-law passed away early this spring after a very long, very painful battle with cancer.  The last 6 months or so of his life was spent in a cancer clinic receiving chemo treatments 2 or 3 times per week.

I can say pretty definitely that medicine prolonged his life, I have a really hard time deciding whether it was worth it – but those aren’t really conversations you can have with anyone can you?

After he passed away his wife spent months going through all of the medical bills trying to make sense of them.  He typically took care of these things, but those last two years were really tough and I think that he was getting a bit addled.

It took her awhile – maybe three months – to organize all of the bills and get them filed for payment.  But she finally completed that herculean task.  And then the worst happened.  The claims came back one by one with DENIED written across the top.

Not only had my mother-in-law lost her husband of almost forty years but the insurance that they had been counting on to cover hundreds-of-thousands of dollars was being denied to her.  Needless to say she was more than a little distressed.

To many of you this comes as no surprise – in fact you were probably expecting this outcome as soon as you started reading.  To the family, this was completely unexpected.

So she called the insurance company to find out why all of the claims were being denied.  It turns out that my father-in-law had changed his coverage about two years ago.  He changed that coverage to the most basic coverage that Illinois law allows.

Needless to say that the minimum coverage doesn’t cover extensive chemotherapy, frequent doctor visits, huge regimes of drugs and specialists that were used very liberally to keep the man alive.

I doubt that this is what he had intended to do.  Like I said, he was very sick – and very proud.  Too proud to turn the increasingly burdensome task of handling medical bills to his wife or anyone else in the family.  His wife felt the same way.

So she called the insurance company and pled her case.  Needless to say they were sympathetic to her story.  They had signed documents, the law and a case history of at least two years on their side.  My father-in-law did not have – nor did he pay for – insurance coverage that would pay for this massive set of bills.

But she never gave up.  She kept calling different departments at different levels of responsibility until someone finally relented.  Whether it was to get her to leave them alone or because they were persuaded that it was simply illogical that a very sick man would voluntarily cancel insurance that were paying for services that he was already using I don’t know.

But in the end they agreed to cover over $200K of bills – minus the missed premium payments.

Keep this in mind the next time you hear that all insurance companies simply drop coverage as soon as their customers get expensive.  I’m claiming that this practice is wide spread.  After all companies don’t stay in business if they simply give money away to everyone that asks for it.  But they aren’t necessarily the cold-hearted, money-grabbing bastards that they are often portrayed to be.

Technorati Tags: healthcare

How Free-Marketers Can Win the Healthcare Debate

It’s simple – make the following proposal:

1. Eliminate tax preferences for employer-provided healthcare.
2. Allow individuals to purchase health insurance under a federal charter bypassing state laws limiting competition and choice.
3. Expand the role that nurse practitioners have in providing care.

If that bill does not result in lower health care spending and a reduction of the number of uninsured (controlled for people eligible for welfare but don’t sign up and illegal immigrants) then they would pass some pre-determined single payer plan.

Heck, the plan could be written directly into the bill with a sunset clause.  Its time politicians put their money where their mouth is – make a bet on which system will work and end the stupid debate.

Technorati Tags: healthcare,politics,free market

Propaganda Anyone?

Go read this and come back – I’ll wait.

You didn’t follow the link – try again.  My comment isn’t going to make any sense until you read it.

You didn’t listen, whatever.

Wait a minute - things got SO bad that he had to quit his practice and at no time prior to that point he thought maybe a blood test would tell him what was wrong?  A blood test that would potential mean that he wouldn’t lose everything?

Or that selling his Porsche might pay for the blood test before things got so bad he was destitute?

How does this story even pass the smell test?  Oh wait, anecdotal terror stories are what amounts to honest discussion these days.

Technorati Tags: healthcare,stupidity

Profit Opportunity

Fiscally conservative/socially liberal folks seem to be disenchanted with Obama.

President Obama is exceeding all their fears on fiscal and economic issues. After promising a “net spending cut” during the campaign and denouncing “the most fiscally irresponsible administration in history,” he has sent federal spending and the deficit soaring into the stratosphere.

Meanwhile, he’s not delivering what some of his voters hoped for on social issues. No gay marriage, even as Bill Clinton, Dick Cheney, conservative superlawyer Ted Olson, and the legislature of crusty New Hampshire sign on.

No end to the drug war, even though he’s the third president in a row to have acknowledged using drugs. He even mocked a question about drug legalization at his online town hall. (“Dude, we elected that guy, what’s up with that?” is Reason editor Matt Welch’s summary of the blogosphere’s reaction.) No pullout from Iraq.
So once again fiscally conservative, socially liberal voters are starting to wonder if they made a bad bargain.

Independents who turned against the Republicans are likely to become equally disillusioned with Obama, and there’s already some evidence of that in the polls. Support for “smaller government with fewer services” has risen in the ABC News/Washington Post poll, and independents prefer it by 61 to 35 percent, a margin three times as large as a year ago. The number of people who see Obama as an “old-style tax and spend Democrat” has risen by 11 percentage points.

In a USA Today poll, a majority oppose Obama’s health care efforts and 59 percent say he’s spending too much. In another ABC/Washington Post poll, only 25 percent “strongly approve” of his health care plans, and 33 percent strongly disapprove. His honeymoon may turn out to be as passionate, yet brief, as Britney Spears’ Las Vegas marriage.

It’s hard out here for a fiscally conservative, socially liberal voter. But at least there’s always the other party to try again.

“Well, duh” is the best response that I can think of.  Of course the Democrats aren’t going to give this electorate what they want.  Neither are the Republicans.  There is a true opportunity for a third way to take advantage of the situation – who is going to step up?  I don’t think it’s the LP.

HatTip: Below the Beltway

Technorati Tags: libertarian,politics

Libertarian Prospects for Office

Underneath the Beltway has an interesting post on the impact of the Barr Presidential run on long term Libertarian Party prospects for relevance.

with the selection of Bob Barr as it’s nominee, the Libertarian Party received more mainstream media news coverage than at any other point in it’s history. And it was specifically because of who the candidate was. Not only was it due to the fact that there was no small degree of media fascination with the idea of a former Republican Congressman (and not just any Congressman, but one who had led the Clinton Impeachment drive) was running as a third-party candidate, it was also due to the fact that Ron Paul’s candidacy had brought attention to libertarian ideas, and the LP had selected a candidate that was both media- and politically savvy. It was, as many observed at the time, a smart choice for the LP

As long as the LP keeps embracing an all-or-nothing approach to policy they will continue to be marginal fringe has-beens.

Too many people see too many libertarian ideas as wacky, especially from a policy standpoint.

The only way that a libertarian-like party can ever gain any relevance is to approach marginal changes to mainstream views.

Run on a platform that takes the best of the right and the best of the left, perhaps throw in something that is new. But adopt something too radical and no one will take them seriously.

What they really need to do is adopt a populist rhetoric around libertarian ideals. Denounce corporate welfare. Frame regulation as monopoly enhancing. Create villains that can be rallied around. But that isn't every going to happen because most LPers are nutjobs.

Saving Money on Obamacare is a Pipe Dream

If you want to know why Obamacare will never reduce spending on healthcare you don’t have to look any farther than California.

Medi-Cal doctors, meanwhile, this year have managed to roll back a $1.1-billion cut in their reimbursements. A federal appeals court declared illegal a 10% cut in what physicians are paid by Medi-Cal, the government healthcare program for the poor, that was implemented in July 2008. The court ruled the cut would drive doctors out of the program, endangering the ability of patients to get care and thereby violating minimum federal standards for the program.

Once the government gets involved decisions aren’t made on the basis of common sense, logic or even what is best for Everyone (whoever that person is).

Decisions are based on politics and the temperament of the bureaucrat or judge that is sitting on the other side of the bench (or 40 page form or the impersonal telephone line).

I can’t wait.

Technorati Tags: politics,California,healthcare

Missing the Point

I think that Ezra is missing the point.

The likelier outcome, I think, is that Congress will dismantle the filibuster when it realizes that the filibuster is making it less relevant. If you look back at the financial crisis, the lead response came from the Federal Reserve, because everyone understood that Congress couldn’t move quickly enough. If you look at global warming, there’s considerable pessimism that the Senate will be able to pass cap-and-trade, and many expect the Environmental Protection Agency to simply embark on its own campaign to regulate carbon emissions. If you look at health care, ideas like the Federal Health Board or the Independent Medicare Advisory Committee are an explicit effort to entrust the continual process of health-care reform to a more agile body than the Congress.

The Senate loves the filibuster because it absolves them from actually doing anything.  When nothing gets done they are allowed to demonize the ‘evil opposition’ with the understanding that they have delegated the actual responsibility for policy making to the administration anyway.

Technorati Tags: politics,congress

Benefits of National Healthcare

I’m beginning to think that it may be better to just take the plunge and commit to a single payer plan.

The alternative seems to be to slowly chip away at anything resembling a market and with that quality slowly declines, prices slowly rise and people slowly become less satisfied.

While single payer won’t make everything go to shit overnight it will certainly happen faster than the slow erosion that we are currently experiencing.

Bite the bullet, jump off the cliff, make it worse so that it can get better.

If nothing else, at least I’ll know wtf is going to happen – the suspense is killing me.

Technorati Tags: healthcare

Opportunity of a Lifetime

You would think that this would be good news for someone.

Since Obama was inaugurated, not much has changed in the political party landscape at the state level — the Democratic Party continues to hold a solid advantage in party identification in most states and in the nation as a whole. While the size of the Democratic advantage at the national level shrunk in recent months, this has been due to an increase in independent identification rather than an increase in Republican support.

Most of the Big-L Libertarians are nutjobs - but isn't this a prime opportunity for some third party or independent?

I've never understood why someone hasn't been able to cash in on the "all politicians are the same" sentiment.  Maybe I’ll start the None-Of-The-Above Party.

Technorati Tags: libertarian,politics