DY2VTSS?

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CBS News headline, October 31.

Unlike HealthCare.gov, Washington state’s health insurance exchange appears to be working well

Seattle Times headline, October 25.

Thousands get wrong subsidies data from state health exchange

Why would some of the state sites, such was Washington state, be working more smoothly than healthcare.gov? Perhaps they do not rely as much on national government databases to verify identity. It seems that the Washington state site asks for motor vehicle information, suggesting that they use their motor vehicle database as a way to check identity.

Healthcare.gov’s Fail: A Diagnosis

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Today’s WaPo story seems to vindicate my instinct to blame the project organization, not the technical people.

Recall what I wrote in my letter to the editor.

I doubt that presidential anger can do much to cure the dysfunctional organizational dynamics that I suspect are at the heart of the Web site problems.

Today’s story is about those dysfunctional organizational dynamics. Most devastating is a 3-year-old memo from health economist David Cutler. He barely even touches on the technical issues of implementation. He sees the Administration dropping the ball on preparing the health industry and the public for the new system.

Running exchanges is a collaborative process. As just one example, the person who ran the Commonwealth Connector in Massachusetts estimates that he had 500 town meetings to discuss reform, the equivalent of 17,000 meetings nationally – and this was in a state where two-thirds of people, along with insurance companies, supported reform. The person newly appointed to head the insurance oversight office has a reputation as an insurance bulldog, not a skilled facilitator. Remember that most people will get their information about reform from their doctor and their insurance agent. If you cannot find a way to work with hesitant states and insurers, reform will blow up.

An important implication is that even if the Web site were working perfectly, we would have plenty of implementation problems. Has there been enough consumer education to enable people to understand which plan to choose? Have doctors been coached about how to help with the process? etc.

Later, he writes,

Above the operational level, the process is also broken. The overall head of implementation inside HHS, Jeanne Lambrew, is known for her knowledge of Congress, her commitment to the poor, and her mistrust of insurance companies. She is not known for operational ability, knowledge of delivery systems, or facilitating widespread change. Thus, it is not surprising that delivery system reform, provider outreach, and exchange administration are receiving little attention. Further, the fact that Jeanne and people like her cannot get along with other people in the Administration means that the opportunities for collaborative engagement are limited, areas of great importance are not addressed, and valuable problem solving time is wasted on internal fights

The WaPo story makes it seem as if no one was really in charge.

The Medicaid center’s chief operating officer, a longtime career staffer named Michelle Snyder, nominally oversaw the various pieces, but, as one former administration official put it: “Implementing the exchange was one of 39 things she did. There wasn’t a person who said, ‘My job is the seamless implementation of the Affordable Care Act.’ ”

That last sentence gets to the heart of the matter. As I wrote here,

I suspect that the technical problems are mere symptoms. Probably what is fundamentally messed up in this health insurance brokerage business is the org chart.

Cutler’s memo includes a recommendation for a functional org chart. I think that anyone with business experience or common sense would think along similar lines. President Obama’s supporters can spin like Dervishes, and yet it will be difficult to escape the inevitable inference that the White House clique lacks business experience and common sense.

The Great Bubble-ation?

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Alex Pollock writes,

Inevitably following each of the great bubbles was a price shrivel. Then many commentators talked about how people “lost their wealth,” with statements like “in the housing crisis households lost $7 trillion in wealth.” But since the $7 trillion was never really there in the first place, it wasn’t really lost.

He has a chart that shows that the biggest financial bubbles of the past 60 years occurred during the period we call the Great Moderation. Thus, during a period of macroeconomic stability, we had financial instability. Hyman Minsky would not have been surprised.

The Clunkers Program

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Mark Thoma points to an analysis by Ted Gayer and Emily Parker.

The $2.85 billion program provided a short-term boost in vehicle sales, but the small increase in employment came at a far higher implied cost per job created ($1.4 million) than other fiscal stimulus programs, such as increasing unemployment aid, reducing employers’ and employees’ payroll taxes, or allowing the expensing of investment costs.

Pointer from Mark Thoma.

Although this analysis supports a view that this program was not a very effective stimulus, I think this sort of analysis has to be somewhat tenuous. Any government spending involves a diversion of funds from some other use. Any government spending redistributes income. As far as I can tell, Gayer and Parker assume that the subsidies accrued to car buyers. But maybe the subsidies accrued to auto companies or auto workers, in which case the multiplier effects would show up rather indirectly. The concept of what is seen and what is not seen casts suspicion on any calculations of the sort attempted here.

I am not trying to defend the Cash for Clunkers program, of course. I am just trying to point out how difficult it is to draw firm conclusions about the effect of macroeconomic policy.

A Software Executive Gives Input

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He emails me (but not for attribution)

The key to the whole thing is the back-end. The big problem here is likely having to query various legacy DBs in real time (e.g., have the website fire a query to see if your name and SSN match). This was a home-run approach by the original technical team, and in my view a huge blunder (though hindsight is 20/20, and I’ve made some very dumb technical decisions in my life). They already have an Oracle (basically, a modern relational database) instance up and running. The crucial change would be to grab a batch transfer from the legacy systems as of say October 25th and move ALL of it into the Oracle instance. You could then have every query fire against the Oracle database. This would radically simplify every technical problem, as you would now have end-to-end control over the DB – logic – website. You could structure highly simplified queries, and build the whole data model around exactly one job: make this one website work. You could then periodically batch update from those source legacy systems, say daily or weekly once you were in production.

This occurred to me also. You create extracts of the data on legacy systems, and then you run the web site against the extracts. Some issues.

1. You have to hope that the existing system has a clean separation of business logic from physical location of the data. That way, you just change the statements that access data to find it in the extract rather than in the legacy system. If there is business logic mixed in with the data-access statements, then there is more to re-code and test.

2. The job of building the data model for the extract database is not trivial.

3. The job of tuning the database to obtain good response times is not trivial.

4. In some sense, you have two databases. You have a “read-only” database of extracts from other systems. You also have a database that is written to as the user goes through the process. Tuning the performance of that latter database is a nontrivial problem–although they should already be working on it.

5. We start with a deficit in terms of testing, and that deficit gets much larger if we redo the data interchange process.

6. This creates new security problems, and it may create new logistical problems for the people managing the legacy databases. Not that those issues will be given priority at this point.

The 1950s and the Tea Party

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Cass Sunstein writes,

We can’t easily understand those accusations, contemporary conservative thought or the influence of the Tea Party without appreciating the enduring impact of the Hiss case.

I think that David Halberstam’s analysis of the conflict within the Republican Party between the urban establishment and small-town populists better captures the origins of the Tea Party. In his highly perceptive 1993 volume, The Fifties, Halberstam writes (p.4-5),

On one side were the lawyers and bankers of Wall Street and State Street, their colleagues through the great Eastern industrial cities, and those in the powerful national media, based in New York. They were internationalist by tradition and by instinct: They had fought against the New Deal in states where the power of labor was considerable but had eventually come to accept certain premises of the New Deal. By contrast, the Republicans of the heartland…were anxious to go back to the simple, comfortable world of the twenties…They had always controlled their political and economic destinies locally…Now they looked at Washington and saw the enemy…they seemed to have lost control of their own party…they were at war with the Eastern Republicans, who in their eyes, were traitors, tainted by cooperation with the New Deal.

The Tea Party of the 1950s spurned Nelson Rockefeller and nominated Barry Goldwater, with disastrous electoral results.

I would reiterate that midcentury politics revolves around socialism, Communism, and anti-Communism. Both sides have history that they would rather forget. The left would rather forget that many of its leading intellectuals saw Communism as equivalent to, or even superior to, capitalism. The right would rather forget its hostility to Civil Rights (the urban Republicans were crucial to passing Civil Rights legislation, overcoming Southern Democrats and heartland Republicans.)

Extortion vs. Trade

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Apropos Halloween, George Paci writes,

Thursday, American children will be going door-to-door making notional
threats in exchange for sugary foodstuffs. (This may or may not be a
good analogy for a particular popular political stance.)

Friday, American children will be making piles out of their loot:
stuff they want to keep, and stuff they want to swap for treats they
actually like. They will then commence creating and participating in
a market, trading things they don’t want for things they want, negotiating
exchange rates between various bite-size currencies, and sometimes
trading things they do want for things they want more, or for more of
something else they want.

They do this entirely out of self-interest: because it will increase
their happiness. No adult needs to coerce them into trading, or
even suggest or facilitate it.

There is no better day to teach kids about the benefits of trade (and
about subjective value), so I propose we promote November 1 as
Benefits from Trade Day.

Sentences to Ponder

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From Robert Wright.

Self-doubt can be the first step to moral improvement. But our biases are so subtle, alluring, and persistent that converting a wave of doubt into enduring wisdom takes work. The most-impressive cases of bias neutralization I’m aware of involve people who have spent ungodly amounts of time—several hours a day for many years—in meditative practices that make them more aware of the workings of their minds. These people seem much less emotion-driven, much less wrapped up in themselves, and much less judgmental than, say, I am. (And brain scans of these highly adept meditators have found low levels of activity in brain networks associated with self-regarding thought.)

Read the whole thing. I think he is saying that utilitarianism is insufficient as a moral framework, because utilitarians with too much hubris can be morally dangerous. Maybe you will read him differently.

When Will the ACA Exchanges Be Working?

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Tyler Cowen writes,

The exchanges will be mostly working by March 2014, but by then the risk pool will be dysfunctional. In the meantime, real net prices will creep up, if only through implicit rationing and restrictions on provider networks. The Obama administration will attempt to address this problem — unsuccessfully — through additional regulation.

I disagree with the March 2014 date. My opinion of the distribution of likely outcomes is that it is bimodal. There is a high probability that the exchanges will be working at the end of November. I think that there is an even higher probability that they will be working never.

Why the end of November is plausible:

1. We may be hearing overly dire descriptions of the state of the system. Anyone from the outside who looks at a system will think it cannot possibly work. I once worked with a CIO who said that one of his iron laws was that anyone new on a systems project would say, “The person who originally designed this system was an idiot.”

2. Jeff Zients, the new manager, put a stake in the ground for late November. If he thinks that it is unlikely, he is, if nothing else, taking big personal risk to his own reputation.

3. CMS, the agency that was in charge, is actually a pretty effective group. They also pulled off something similar in implementing the Medicare prescription drug plan. It is plausible that they anticipated the major problems, and only minor fixes are now needed.

Why “never” is even more plausible:

1. The fundamental challenges may be very great. In the worst case, suppose that some of the legacy systems that the ACA web site has to access were built around 1975. Back then, in order to pull data out of such a system, you wrote a SAS program, put it into the queue of an IBM-370, waited for an operator to mount a data tape, and if all went well (no JCL errors, no logic errors in your SAS code), after a couple of hours you had a nice fat printout. Now, we want to be able to query those systems in real time, with perhaps hundreds of queries arriving at once…..Hmmm, maybe not even hotshot web programmers wielding the latest methodological buzzwords can pull that off so easily

2. While the Suits talk about bugs or glitches, it looks to geeks as though the problem is design flaws. Those are very hard to fix, particularly in a system that is so large already. Everything about the existing design is there for a reason. It may not be a good reason, but if you “fix it” without understanding the reason, you could be in for a nasty surprise. I just don’t see how you fix design flaws in four weeks.

3. Everyone says that there was not sufficient time to test the system before putting it into operation. Between now and the end of November, it does not seem as though there is sufficient time to test any major changes to the system. If you redesign parts of the system, then you have to write a test plan that is appropriate for the new design. Four weeks may not even be enough time to write a good test plan, much less carry it out.

4. If it is still broken at the end of November, the chances increase that starting over is the fastest path to a working system. But starting over requires a stronger political consensus in favor of the policy that the system is supposed to implement. And we do not have that.

Megan McArdle has more comments, focusing on the disconnect between thinkers and doers in the Obama Administration.

Macroeconomics Without P

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Scott Sumner writes,

I frequently argue that inflation is a highly misleading variable, and should be dropped from macroeconomic analysis. To replace it, we’d be better off looking at variables such as NGDP growth and nominal hourly wage rates.

If we cannot measure P tolerably well, then it sort of spoils the fun about talking about the real wage, the real money supply, or real GDP. I think that the consequence is that we shift all of the focus to:

— the average nominal wage rate, W
–total employment (or hours worked), N

The product of the two, WN, becomes aggregate demand (with NGDP an approximate indicator).

Aggregate supply determines the division between the two. For example suppose we have sticky nominal wages, with W depending on W* (what workers expected W to be, based on recent trends in nominal wages) and N (as employment gets closer to full employment, workers start to expect higher wages). We could have N affect the shape as well as the level of supply curve. That is, the effect of a change in N on wages could be low in a recession and higher near full employment.

From the Fred database, I have downloaded total compensation from the national income accounts (WN, in effect). And I downloaded total payroll employment from the establishment survey (N, in effect). The ratio of the two gives W. Some recent data on the percent change of these numbers.

Year WN percent change W percent change
2008 2.3 2.9
2009 -3.6 0.8
2010 2.3 3.1
2011 3.9 2.7
2012 4.0 2.3

Over the last five years, the median value for the percent change in nominal compensation has been only 2.3 percent. during the entire Great Moderation (1986-2007), there was only one year where nominal compensation grew by less than 2.3 percent (it was 1.6 percent in 2002). The median during the Great Moderation was 5.2 percent. Using this as a measure of aggregate demand shows weakness. Of course, any product involving N would show weakness, so don’t get too excited, folks.

The Phillips-Curve half of the story does not go as smoothly. Perhaps the 2009-2010 pattern is a fluke, and you should just average those two numbers? In any event, we had higher wage growth throughout most of the Great Moderation, but not all of it. From 1993-1996, annual wage growth was 2.1 percent, 1.8 percent, 2.1 percent, and 3.1 percent, respectively. What caused that episode of sluggish wage growth? In that case, it was not weak aggregate demand.