MyGovCost News & Blog

A Manson Meditation

Tuesday November 21st, 2017   •   Posted by K. Lloyd Billingsley at 11:00am PST   •  

Charles Manson has died of natural causes at the age of 83, and those unfamiliar with the fellow should read Helter Skelter: The True Story of the Manson Murders, by Vincent Bugliosi.

In Los Angeles in 1969, Manson plotted a series of savage killings that were not entirely random. By having his followers scrawl “Pigs” on the wall, Manson hoped to throw the blame on militant blacks. As he believed, this would launch a race war in which the blacks would emerge victorious and seek out Manson for guidance on how to rule. If history was going to advance, innocent people would have to die, an idea Manson shared with Stalin, Pol Pot and others. And in a real sense, Manson got away with his deadly crimes.

He was convicted and sentenced to death, but in 1972 the California Supreme Court invalidated the state’s death penalty statute. This commuted the executions of Manson and his accomplices, who got life sentences with eligibility for parole.

Friends and loved ones of the murder victims, who included actress Sharon Tate, can be forgiven for believing that Manson and his gang should have been grandfathered in. Besides injustice, the convicted murderer confirms another reality.

During his long stretch in prison, Manson was hospitalized several times. Unlike injured veterans returning from conflicts abroad, he never had to wait for medical treatment, which was never denied for any reason. Unlike those insured through Covered California, the state’s wholly owned subsidiary of Obamacare, Charles Manson was never dropped from his plan and never saw his premiums skyrocket.

As Manson confirms, with the possible exception of politicians and government employees, convicted murderers get the best health care in the state. That’s not right, but Covered California, a kind of misery index, won’t fix the problem. It would be better to let law-abiding individuals purchase the health care they believe best suits their needs.

That would require a free market in health care, but in Sacramento and Washington that’s not what politicians have in mind.

The Cost of Congress’ Cover Up Culture

Tuesday November 21st, 2017   •   Posted by Craig Eyermann at 5:49am PST   •  

43695779 - image of businesswoman showing silence in glasses on white background Since 1995, the U.S. Congress has given the most badly behaving of its members and its employees an unusual, secret taxpayer-funded perk. Writing at The Hill, Jennie Beth Martin explains how a law, the Congressional Accountability Act (CAA), that was meant to compel members of the U.S. Congress to live under the terms of the same laws they impose upon regular Americans into something quite different, especially where the issue of workplace harassment, including sexual harassment, is concerned.

The CAA sought to make changes in how Congress dealt with charges of sexual harassment against its members and staff, too. Prior to enactment of the law, a victim of sexual harassment by a member of Congress had virtually no legal recourse at all. With whom would such a victim lodge a complaint or seek redress?

So the CAA created the “Office of Compliance” to deal with such issues. Complainants begin the dispute resolution process with a mandatory (yes, really) course of counseling that can last up to 30 days. Only after completing the compulsory counseling may a complainant pursue mediation. That, too, can last up to 30 days. If mediation fails to resolve the issue to the complainant’s satisfaction, she or he can then go to an administrative hearing, or file a federal lawsuit.

Here’s the kicker: If the dispute is resolved in favor of the complainant (read: victim), funds for the settlement don’t come out of the offender’s personal bank account, or his or her campaign account. Instead, they come out of a secret account maintained by the Office of Compliance. It is so secret, in fact, that taxpayers don’t even know they are funding it.

The Hill‘s Reid Wilson uncovered how much U.S. taxpayers have been charged to pay for those secret settlements, which we should note cover all cases of workplace harassment that reached that outcome – not just cases involving sexual harassment. The following chart tallies up the cumulative cost for the years for the fiscal years from 1997 through 2017.

In all, over $17.2 million have been paid out over 20 years for some 264 cases, where the average cost of a case for a Congressional bureaucrat behaving badly runs about $65,300.

That $65,300 of shush money for their victims is quite a tax-free perk for those elected members of Congress and other legislative branch bureaucrats confirmed to be behaving badly.

Venezuela Defaults on Its National Debt

Thursday November 16th, 2017   •   Posted by Craig Eyermann at 6:25am PST   •  

Two days ago, the news recently broke that the nation of Venezuela officially defaulted on its debt. Writing at Forbes, Frances Coppola reports on the straw that broke the camel’s back for what had been one of the richest nations in South America.

Venezuela has defaulted on two of its US dollar-denominated sovereign bond issues. Downgrading Venezuela’s sovereign rating to SD (“selective default”), the ratings agency Standard & Poors said that Venezuela had “failed to make $200 million in coupon payments for its global bonds due 2019 and 2024 within the 30-calendar-day grace period.”

That’s just the tip of the iceberg, as the country is very likely to continue failing to make scheduled payments on its debt when they come due, even with the deal it struck to restructure its debts with Russia and China yesterday.

Coppola reflects on what its default means for Venezuela now.

For long-term Venezuela watchers like me, this default comes as something of a relief. Venezuela’s determination to maintain debt payments despite the horrendous humanitarian cost to its population has been an international scandal. And even more scandalous has been the determination by some investors to profit from Venezuela’s mismanagement of its finances. Because of their very high yields, Venezuela’s “hunger bonds” have been popular with Wall Street giants like JP Morgan. The angry part of me wants all those investors who have profited from Venezuela’s distress to lose their shirts, big time. But the more cynical part of me says the real villain is Maduro, who has sacrificed his people to maintain Venezuela’s international standing....

But there is a much, much bigger problem looming. Figures from the latest IMF World Economic Outlook database reveal that Venezuela is entering hyperinflation. The IMF forecasts that inflation will rise to 2,350% in 2018 and reach an astonishing 4,685% by 2022.

If this is not stopped – and short of regime change, it is hard to see how it can be stopped, since the IMF was shut out over a decade ago and the Venezuelan government does not welcome external interference – then sovereign debt restructuring will be entirely pointless. As Venezuela’s currency collapses, foreign currencies will become infinitely valuable, and therefore unaffordable. Venezuela’s oil production has already fallen so much that it is no longer earning enough US dollars to meet its debt obligations, and with a worthless currency it will be unable to obtain dollars on the open market. Default is therefore inevitable, with or without restructuring.

Venezuela is entering into the final phases of the national debt death spiral. Things are going to get much worse before any real hope of recovery arrives. And that’s saying something for a country where “extreme food rationing” has already become the norm thanks to its failed socialist economics.

U.S. Postal Service Extends Losing Streak to Eleven Years

Wednesday November 15th, 2017   •   Posted by K. Lloyd Billingsley at 12:46pm PST   •  

The United States Postal Service is reporting losses of $2.7 billion for the past fiscal year, USA Today reports, less than the $5.6 billion from the previous year but still the eleventh straight year the USPS has been a loser for taxpayers. Increases in package delivery failed to offset the drop in regular mail, which fell by, count ‘em, some five billion pieces since more people now use email to pay their bills. The response to losses has been to jack up the price of stamps and seek relief from Congress. As we noted, during years with some of the worst losses, USPS bosses bagged big raises. The massive losses are hardly the only problem for the USPS.

As we noted, the USPS is dropping post offices in retail outlets such as Staples. Consumers found those convenient, but the USPS government employee union doesn’t like them. This forces consumers to use regular post offices, which are like stepping into the eighteenth century. Congress and USPS management have also been unable to implement a simple cost-cutting measure such as ending Saturday mail delivery. So the USPS continues to be a loser for taxpayers.

President Donald Trump says he doesn’t like losers, so he might team with Congress to lift the USPS monopoly on first-class mail and let the USPS compete in that field, as it now does in packages. In the digital age or at any time, stopping the mail monopoly is the only way to end the USPS losing streak and rack up a win for taxpayers.

Government Abuse Not Always Sexy

Tuesday November 14th, 2017   •   Posted by K. Lloyd Billingsley at 3:18am PST   •  

California government in general, and the state Board of Equalization in particular, are hives of nepotism. That ought not to be the case, particularly in a state with a voter-approved law, Proposition 209, against preferences in state employment, education and contracting. Nobody does anything about favoritism and lately lawmakers have been taking it to a lower level. One woman is charging that state senator Tony Mendoza, Artesia Democrat, made a session at his home a requirement for a job in his office. Senate boss Kevin de Leon says he knew nothing about that, and other accusations against his colleague. Now it turns out that de Leon and Mendoza have been living in the same house in the Natomas area of Sacramento. As it happens, on de Leon’s watch, senate Democrats dished out abuse much worse than any of the charges against Mendoza.

Before he became a California senator, New Left patriarch Tom Hayden championed the Stalinist Vietnamese regime that drove many to flee, including Janet Nguyen, born in Ho Chi Minh City in 1976. She came to the United States legally, even though governor Jerry Brown tried to block the refugees from coming to California. Nguyen duly gained election as a state senator from Orange County. Hayden died in October of 2016 and the senate held a memorial for him in February. De Leon’s chief of staff told Nguyen not to say anything during the proceedings. She spoke up anyway, first in Vietnamese then English. The Democrats cut off her microphone, told her to sit down and be quiet, and when Nguyen refused they had her carted off the senate floor. Senate bosses also cut off the feed from the California Channel, so viewers statewide would not hear an immigrant woman, born in a totalitarian state, speak the truth to power.

De Leon feigned outrage and said he would look into it, but nothing came of it and no senator was punished in any way. Nobody in Sacramento could recall a smackdown and cover-up quite like that. Whatever happened with Tony Mendoza, the worst government abuse takes place right out in the open.

President Trump’s Tax Cuts and the National Debt

Monday November 13th, 2017   •   Posted by Craig Eyermann at 6:37am PST   •  

Last week, the Congressional Budget Office issued its first estimate of how the U.S. national debt would change over the next 10 years as a result of the tax cut legislation now making its way through Congress.

That estimate came in the form of a November 8, 2017 letter from CBO Director Keith Hall to Rep. Richard Neal (D-MA), ranking member of the House Ways and Means Committee, in which Hall indicated that the CBO anticipated the publicly held portion of the national debt in the year 2027 would increase from 91.2% of GDP to 97.1% of GDP in that year if the House of Representatives bill H.R. 1, the Tax Cuts and Jobs Act, in its current form were to become law.

However, the publicly held portion of the national debt is just a fraction of the U.S. government’s total public debt outstanding, so those percentages don’t provide the full picture of how the U.S. national debt would change under H.R. 1.

To find out what the impact might be to the full national debt, we took the CBO’s baseline projections of the gross national debt for the years 2017 through 2027 as a percentage of GDP and added in the additional portion that the CBO’s director indicated the national debt would grow over that time. The following chart shows those results, along with historical data going back to 1967, where we’ve indicated the level of the national debt as a percentage of GDP at the beginning of each elected U.S. President’s term in office to provide some historical context.

U.S. Government Total Public Debt Outstanding, 1967-2016, with Projections from 2017 to 2027

Because the effect of the tax cuts wouldn’t show up until the U.S. government’s 2018 fiscal year, there would be no change in the CBO’s projections through 2017. Beginning in 2018 however, there is a gap that grows from year to year for the CBO’s different projections for the national debt.

Without any tax cuts, the U.S. national debt was projected to grow from 109.2% of GDP in 2017 up to 116.7% of GDP in 2027. Under the House’s version of the tax cut bill, the national debt would be projected to grow up to 122.6% under the CBO’s assumptions. This result also assumes that the proposed tax cuts would have no impact on the growth of GDP during the next decade.

At this writing, the CBO has not yet evaluated the Senate’s version of the tax cut bill.

Coincidentally, the CBO projects that the rate of growth of the total national debt from 2017 through 2027 with the tax cuts outlined in H.R. 1 would be about the same as was realized during President Obama’s second term in office.

How Medicare Could Save $3.4 Billion a Year

Friday November 10th, 2017   •   Posted by Craig Eyermann at 5:06am PST   •  

It’s no surprise that the U.S. federal government does lots of stupid things. Sometimes, those things are meant to save money but, surprise surprise, those things really do the opposite and drive up costs instead.

A good example of this unintended effect can be found in Medicare’s Direct and Indirect Remuneration (DIR) fees on medications sold through pharmacies. Blair Thielemier of Pharmacy Times reports on what those fees are and how they affect Pharmacy Benefit Mangers (PBM):

The Centers for Medicare and Medicaid Services (CMS) created DIR fees as a way to track the annual amount of drug manufacturer rebates and other price adjustments applied to prescription drug plans impacting the total cost of Medicare Part D medications. The savings from rebates received by the PBM are passed on to the payer, which in this case is CMS.

DIR fees morphed from the original definition of DIR to a myriad of meanings, including the cost a pharmacy pays to participate in a PBM/plan’s network, the adjustment of the maximum allowable cost (MAC) and the contracted rate the plan reimburses the pharmacy for a medication, and the reimbursement or fee to a pharmacy for meeting or failing to meet certain quality measures.

It appears the original intention of DIR fees was to pass rebate savings from a PBM to Medicare; however, DIR fees are also fees a pharmacy pays a PBM for a network application or for filling a prescription. Although these fees have a place, the terms of DIR fees between pharmacies and PBMs are often cloaked in vague references. It can be difficult for the pharmacy to know how much the PBM/plan will reimburse the pharmacy for a prescription when the pharmacy enters into a contract, when the claim is processed, and when the contract ends.

That vagueness has proven to be costly, because in the interest of saving money, Medicare will claw back those fees from pharmacists months after the original point-of-sale transactions have occurred, where to compensate for the uncertainty for how much will be clawed back and the timing of when it will be clawed back, many pharmacists who operate their businesses on low margins are forced to raise the prices of prescription medication to Medicare consumers.

Writing at RealClearHealth, B. Douglas Hoey, the CEO of the National Community Pharmacists Association, describes the costly impact.

Retroactive DIR fees hurt our nation’s 22,000 independent pharmacies – small businesses that operate on razor-thin margins – by unexpectedly clawing back a portion of the price of a drug often months after a transaction, sometimes leaving the pharmacy upside down on the transaction. That’s no way to operate a business, and it hurts community pharmacies every day.

But pharmacies aren’t the only ones hurt. Our patients suffer too, and so does the Medicare program – and the American taxpayer. These after-the-fact fees lead directly to inflated prescription costs and higher cost-sharing for our Medicare patients because the higher costs drive many patients into the Medicare coverage gap faster. That’s what the Wakely research shows, as well as a January 2017 analysis by the Centers for Medicare & Medicaid Services that said DIR fees on pharmacies do not reduce the cost of drugs for beneficiaries at the point of sale and in fact push seniors into the “donut hole” coverage gap and, subsequently, the catastrophic phase of the Part D benefit faster.

There is legislation pending before the U.S. Congress that could repair the wasteful damage that Medicare is doing in its pursuit of cost savings through its clawback program. Hoey describes the findings of research that his organization funded to determine what benefits might be realized by the passage of the Improving Transparency and Accuracy in Medicare Part D Drug Spending Act (S. 413 / H.R. 1038) bill now pending in the U.S. Congress.

We have new research—commissioned by the National Community Pharmacists Association (NCPA) and prepared by Wakely Consulting Group, one of the top actuarial firms in the country—that establishes a private score for this legislation, estimating how much it will cost or save the federal government. Obviously, knowing that score is often essential to whether a piece of legislation will advance in Congress. Bills with significant price tags almost always have a tougher go of it.

But for the pharmacy DIR bill, the news is a real game-changer. The Wakely research shows that eliminating retroactive pharmacy payment reductions—or post point-of-sale pharmacy “DIR fees”—in Medicare Part D would save the federal government $3.4 billion over 10 years.

No, that’s not a typo. It really is billion with a “B.” Even when it comes to government spending, that’s a lot of money. Perhaps more importantly, the Wakely study shows that DIR legislation will result in extraordinary taxpayer savings without subtracting any benefits seniors currently receive. And for community pharmacies, banning these after-the-fact fees is the fair way to achieve predictability in reimbursements for the medications pharmacists buy and dispense.

Hoey’s organization obviously has an interest in the passage of the legislation, where what we’d really like to see is an independent confirmation of the actuarial research findings to confirm the potential benefit.

If those findings hold, the legislation should be a no-brainer for passage, where the reform it promises can reduce health care costs for consumers while also eliminating uncertainty for pharmacies, where everybody wins because the government stops doing stupid things.

Covered California Still Spreading Misery

Tuesday November 7th, 2017   •   Posted by K. Lloyd Billingsley at 3:45am PST   •  

During the heyday of the Affordable Care Act, also known as Obamacare, Emily Bazar of the Center for Health Reporting kept track of how Covered California, the ACA’s wholly owned subsidiary, actually performed. As she noted, Covered California wasted millions on promotion, handed out lucrative deals to cronies, and its $454 million computer system was dysfunctional. Last year Bazar showed how, despite skyrocketing premiums, Covered California dropped 2,000 pregnant women from coverage, causing them to lose their doctors and miss key prenatal appointments.

Earlier this year, Bazar reported that the state’s vaunted health exchange sent incorrect tax information to the health plans, which led to “higher premiums than consumers initially anticipated,” and people also “owed more out of pocket than they originally thought.” Bazar had already charted how Obamacare hiked premiums 13.2 percent, and canceled policies when people reported changes in income. As a result, many Californians did not get the tax credits they they sought. Covered California may have helped “multitudes” apply for health insurance, Bazar wrote, but “it also is responsible for countless glitches and widespread consumer misery.” So how is it performing now?

Emily Bazar, now with Kaiser Health News, warns that Anthem Blue Cross is pulling out of a large swath of California’s individual market, “forcing hundreds of thousands of consumers to find new plans.” Rate hikes average 12.3 percent and “silver-level” plans “will bear an additional 12.4 percent average surcharge.” Doctor’s networks are smaller and smaller all the time, and “if you are in the middle of treatment for a complex medical condition and lose your insurer, you may have options.” But then, you might not have options. So for all its lofty promises, Covered California still works best as a misery index.

The ACA was essentially a statist coup camouflaged in a white coat. In this plan, you get only the health care the government wants you to have. The same is true for the so-called “single player” scheme, better known as government monopoly health care.

No-Bid Contracts Driving Up Government Waste

Monday November 6th, 2017   •   Posted by Craig Eyermann at 5:53am PST   •  

If someone wanted to stop the U.S. government from wasting so much money, a very good place to begin would be to end the power that bureaucrats have to award multi-million dollar contracts without seeking any form of competition among the businesses they will rely upon to deliver results for U.S. taxpayers.

Writing in The Hill, David Williams of the Taxpayers Protection Alliance describes how the system is supposed to work, and what bureaucrats are doing to subvert practices that promote transparency for their own convenience.

Federal law requires “full and open competition” for most government procurements. Here’s how the bidding process traditionally works. The government publicly announces its need for a specific product or service—such as a year’s worth of public-school lunches or a new naval vessel. Companies submit sealed proposals, and the government chooses the lowest-cost, highest-quality bidder.

Naturally, there are exceptions to the open-bidding process. If there is only one company (a “sole source”) capable of providing a particular product or service, an agency can contract with that firm directly. Agencies can also forego open bidding if they deem it “necessary in the public interest.”

But at many agencies, no-bid contracts have become the rule, not the exception. The share of Pentagon contract spending awarded competitively has fallen almost every year since 2008. In fiscal year 2016, more than half of Defense Department procurement spending—totaling more than $100 billion—was on noncompetitive contracts.

The widespread adoption of no-bid contracting practices at multiple government agencies is a bureaucratic recipe for both bureaucratic corruption and failure.

So it is perhaps no surprise to find that such an arrangement has come to light in the U.S. territory of Puerto Rico, where it is contributing to keeping the lights off across the hurricane-wrecked island’s electrical infrastructure. Robert Walton of the utility industry trade publication UtilityDive provides a brief that the Puerto Rico government-owned utility company PREPA sought to avoid federal government oversight in placing a no-bid contract with a tiny Montana-based utility company.

Dive Brief:

  • As Puerto Rico struggles to restore power to its citizens, a leaked recovery contract awarded to Montana’s Whitefish Energy appears to reveal one-sided commitments and stipulations that government agencies cannot review the project’s finances.
  • Whitefish’s contract has been under increasing scrutiny. In the days after Hurricane Maria struck the island, the Puerto Rico Electric Power Authority (PREPA) declined mutual aid offers from other utilities, opting for a $300 million contract with the little-known Montana firm for power restoration.
  • And with most of Puerto Rico still without power, Rhodium Group has run the numbers and determined that Hurricane Maria’s hit on the island has caused the largest blackout in the United States’ history. The storm has so-far disrupted 1.25 billion hours of electricity supply for American citizens, and three quarters of the island still has no power. To date, that’s about twice the length of outages caused by Hurricane Katrina in 2005.

The Federal Emergency Management Agency (FEMA) has specifically disavowed having any role in the no-bid contract between PREPA and Whitefish. On October 30, 2017, the Puerto Rico government-owned utility cancelled the contract, just ahead of the announcement that the Federal Bureau of Investigation (FBI) was launching a criminal probe into the arrangement.

In Puerto Rico’s case, one could make the argument that the need to establish a no-bid contract to restore electrical power to the territory is “necessary in the public interest”, if only the firm being contracted to do the recovery work were capable from Day 1 of rapidly executing its role. But these kinds of contracts are also being made for non-emergency situations by federal government agencies. John Crudele of the New York Post has been following the money for no-bid contracts placed by the U.S. Census Bureau.

Government investigators found problems with 90 percent of the no-bid contracts awarded by the Census Bureau.

That finding, after combing through just 28 deals, determined that Census probably overpaid contractors by about $9 million.

The U.S. Census Bureau does a lot of valuable work, but none of it can be considered to be any form of emergency response requiring rapid action that can only be arranged through no-bid contracts with outside entities. And yet, it is spending millions of dollars without providing any evidence that it is delivering the best value for U.S. taxpayers.

Crudele does offer a solution:

Here’s what I think—put a couple of government officials in prison for fraud and the nonsense will end. Up until now, all the government does is criticize unethical practices and allow the offenders to slink away quietly into retirement.

It’s time for the Justice Department to investigate the sort of thing the IG—and I—found and treat it as the crime that it is.

You and I wouldn’t get away with this sort of fraud and public servants shouldn’t either.

No they shouldn’t.

Bureaucrats on a Sinking Ship

Thursday November 2nd, 2017   •   Posted by Craig Eyermann at 6:30am PST   •  

48995027 - trouble in paradise concept as five hysterical tourists wearing life rings scream and wave in the ocean for help and rescue after an accident sinks their boat Have you ever wondered what it is like to work for a failing enterprise, when that enterprise is a government?

Diana Sroka Rickert recently had that experience after she accepted a high-level position with Illinois’ state governor’s office. She would go on to leave that job after just a matter of weeks of growing frustration, describing what that state government’s highly dysfunctional environment was like:

Throughout all levels of state government, what permeated the most was an overall attitude of defeat. There was no sense of purpose. No hunger to do more, push further or to succeed.

No acknowledgment that this is a state government that is ranked last by almost every objective and measurable standard. A state government that fails every single one of its residents, day after day—and has failed its residents for decades. A state government that demands more and more money each year, to deliver increasingly less value to Illinoisans. A state government that cannot pay its bills, cannot make good on its promises, cannot help people in need.

The games that were played in the office, the problems that would be easily resolved if anyone cared, the inability to get an initiative off the ground ... it was almost like a running joke, or some sick rite of passage. It was as if the culture said, “You’re not a real state employee until you’re bolting out the door after 7.5 hours with nothing to show for it.”

It was appalling to see how self-absorbed so many staffers and former staffers were. Here they are in a state government that is crumbling—heck, in a building that is literally falling apart—yet at the end of the day what they care about the most is themselves....

I experienced this in a very personal way when these exact people characterized my resignation as a termination—even though the governor’s own statement said I resigned. This type of behavior was not surprising to me because these are people who believe they raise themselves up by pushing someone else down, and who do not care about what is best for Illinois. I consider it a badge of honor that they felt the need to attack me on my way out because it was made very clear: I am not one of them.

It’s no fun to work with nasty people who use the power they have to put their own interests ahead of those they claim to serve, to the point where they create a hostile work environment for their peers. Unsurprisingly, in the context of a state government, not much in the way of needed reform on behalf of the public interest can get done, so it goes undone.

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