Some details on the Greek situation (UPDATE-1)

Spreads for Portugal, Spain and Greece are jumping up relative to a week ago. Except for Greece, the situation is not terrible, but there is growing evidence of the risk of contagion is very real as evidenced by the jump in Portugal and Spain's borrowing rates. The graphs are for today and last week, respectively.
Assumptions:

• Greek GDP was approximately EUR 237B in 2009
• Greek deficit was approximately EUR 32.3B, or 13.6% of GDP
• Debt service costs based on at-issue yields of outstanding government bonds (Bloomberg: Crop GGB Corp) is EUR 11.7B
• Therefore, the debt service is approximately 1/3 of the deficit.
• Public sector spending accounts for 40% of GDP
• Imports are in 2009 were EUR 47B and imports EUR 15.7B (source)

The haircut scenario:

• What is this trying to accomplish?
  Reduce the debt burden on Greece so it can continue to operate.  
• After the haircuts will Greece start reducing net debt outstanding?
  No. Their structural deficit is twice the size of their debt service. Assuming a 50% haircut, Greece would still pay over EUR 5.8B a year in debt service, or 2.4% of GDP.
• OK, So what's the point?
  The idea is to get Greece to the point where it's GDP is growing faster than it's total debt, reducing outstanding debt as a percentage of GDP. Without this, they would just be heading right back in the same direction.

Let's look at some of the problems with this plan. We commonly define GDP as:

GDP = Consumption + Investment + Government Spending + NetExports

• Increasing government spending is out of the question. The government is already running a deficit which they are trying to reduce and the restricted access to capital markets makes going further into debt to stimulate the economy a non-starter. If anything, this number will be shrinking.
• Furloughs, layoffs, wage cuts or benefit cuts would do nothing to increase consumption.
• To increase NetExports you would need to reduce imports, increase exports or both. When a country devalues their currency, imports instantly become more expensive and exports more competitive, therefore instantly goosing this number. Greece, however, doesn't have this option because it is part of the Euro, so the answer is to reduce wages. Judging by the pictures of the protesters I've seen, I would expect significant resistance.
• To increase Investment, businesses would have to start spending to increase in capacity. An increase in capacity spending would need to see increased aggregate demand.

Increasing retirement ages would decrease pension expenditures, but increase labor costs for government employees. With an already elevated unemployment rate (~9.8%), increasing the labor force does nothing except increase idle capacity. Because of the stickiness of wages in a highly-unionized labor force, the added capacity is unlikely to exert enough pressure to significantly reduce wages and increase utilization.

As you can see, without the option of devaluation, stimulating GDP will not be easy. Without significant wage cuts or fiscal stimulus, the economy runs the very real risk of stalling and falling into a deeper recession. The Greeks have a real problem in their hands, and I see no straight-forward solutions. The more I look at the numbers, the more exiting the Euro seems like a good strategy.

A Euro exit
More than debt and associated debt-service, Greece's problem is it's financial obligations. They spend more than they collect and eliminating their debt is not going to change that. If the people refuse to accept cuts in nominal terms, they are going to have to accept cuts in real terms. Default is not going to magically fix this. If anything, the restricted access to capital markets would put even more pressure on the government to balance it's budget as borrowing to cover short-falls ceases being an option. If workers refuse to be flexible, inflating away obligations is the only choice if Greece wishes to get back to growth, and they can't do that without leaving the Euro unless the ECB debases the Euro, which is a topic for another post.

UPDATE-1:  Peter Bookvar over at The Big Picture has this to say:

There is talk that the package for Greece will total 120b euros over 3 years which would be much bigger than initially said a few weeks ago.

EUR 120B is definitely enough money to delay default by 2, maybe 3 years. At 30B a year, it would be enough to cover all funding of the deficit, although there is that small matter of the 17B,still due this year, the 30B due next year and the 31B due in 2012 in combined short and long-term bonds coming due. (Bloomberg: GGB / GTB). The issue, once again, is that you'll just end up with a more highly-leveraged Greece. Without GDP growth or deficit reduction, this is just delaying the problem and making sure the fallout will be greater when it does hit.

A little more on Greece

Last nigh,t I blogged about the inevitability of some kind of bailout and how liabilities don't just vanish, they just move to bigger balance sheets until they can't anymore and they need to be spread amongst a large number of individuals. Today, Peter and Simon over at the Baseline Scenario wrote the following:

To restore confidence in buying Spanish and other major European nation bonds, it would surely help to have clear signals that President Obama himself, and the Federal Reserve, are taking an active stance now on making sure this does not spread to become another threat to global financial stability. A broader wall of preventive financing must now be put in place – after all, this is exactly why (in principle) the IMF was recapitalized this time last year.

ATTENTION SAVERS OF PLANET EARTH: They are going to take your money. Whether it is through taxes, inflation, lost profits or non-performing assets. It sucks and I am completely against it, but, by definition, you can only take something from someone who has it, and you are the only ones with money.

For those of you old people reading about this Greek debt crisis and thinking, "8% isn't that bad, my mortgage used to be 11% in the 80s, why should they get a cheap IMF loan?" Let me just put it this way: The additional yearly debt-service of refinancing the long term debt coming due in the next 8 months and 2011, assuming it is refinanced at a similar maturity, would be an additional 175MM EUR. So, as they are dealing with recession, strikes, and a giant budget gap in a deficit they need to shrink, their debt-service rises 175MM. They are fighting an uphill battle.

For any of you econ geeks, if you haven't already, I suggest you read David Merkel's Of Credit Ratings, Sovereign Risk and Semi-Sovereign Risk as well as The Whole Earth is Owned; Debts Net Out to Zero. My writing could never compare.

All debts must be paid, even Greek ones

So, I'd like to publicly admit here that I was oh-so-wrong about Greece. It looks like they really won't be able to make it through May without a bailout. I really didn't expect this to happen until 2011 or 2012 but, with 10yr rates at over 800bp, fresh downgrades and rumors of restructuring, it doesn't look so good. While many are going to go on about the moral hazard in the bailout and why they should be kicked out of the Euro, I want to focus on something else.

Why would other Euro countries agree to a bailout?
Let's start with what I think is the biggest part, which I will explain with the this quote,

"When you owe someone $1,000 and you can't pay, you have a problem. When you owe someone $100,000,000 and you can't pay, they have a problem."

Banks across Europe hold Greek bonds. The fact that they could be repoed at the ECB for liquidity and they had a higher yield made them attractive. If Greek creditors push Greece too hard, they might just take their proverbial ball and go home. They really could just give up on the Euro and tell their creditors: I'm not paying you. If that happens, a lot of European banks are likely to face substantial losses. I can't tell you how much because there is no reliable source for this data, even what you see in Die Spiegel seems a little iffy. If what we saw during the Panic of '08 is any indication, banks taking the Greek losses would simply end up bailed out by their respective governments anyways. The liabilities won't vanish, they'll just move to a larger balance sheet until they reach the biggest one (governments), at which point they are socialized. It's just the way it works at this present point in time, so deal with it.

Back to defaults: A ruthless external default would do no good for anyone. A disorderly financial meltdown would risk contagion across the rest of the heavily indebted EU nations and emerging markets. Rising spreads could put enough pressure on the likes of Spain, Italy or Portugal that they too decide they can't/don't want to play the EUR game anymore, which brings us back to the whole bank liabilities thing. Someone, somewhere owns all this debt and someone, somewhere is going to have to take a loss if we let this all get out of hand and, if that loss is big enough, then we'll all have to share this loss through inflation, recession, higher taxes, service cuts etc. There is no way around it, the debt must be paid in some form or another by someone. Stoking a disorderly collapse will just ensure we'll be the only ones cleaning up the ensuing mess.

I love recession pr0n just as much as the next blogger (we are a bearish bunch) but these are real lives we are talking about. I am in no means fan of a bailout, but it might be the least-costly way to resolve this. Italy, Ireland, Spain and the UK are all on shaky ground as far as debts go, they don't need their spreads shooting up. A disorderly collapse that leads to bank bailouts, another recessionary dip and more fiscal stimulus sounds really expensive,  politically, socially and financially. Greece might be able to get out of this predicament, or not, but we won't know unless they get a chance. Yes, the proposed rescue package is essentially just kicking the can down the road, but time has a funny way of healing some wounds.

I can't believe you are defending that profligate bunch! Why couldn't be more like industrious Germany with that awesome trade surplus?!
Whatever, seriously. You can't run a surplus without someone running a deficit, it's just the way it works. Savers need borrowers and vice-versa. Not only that, but Greece paid a risk-premium. A risk-premium is extra yield you pay because there is--wait for it--risk! A risk-premium is what you pay for the right to fail. By asking for a risk premium the market is saying, "We'll lend you this money, but at higher rates because we are not sure you'll be able to pay us back." Creditors can demand their money all they want, but you can't take back something that isn't there anymore. They aren't going to get it, so they might as well try to be civil and try to figure out a plan to recoup whatever they can because at this point the debtor holds a lot of cards.

To end, here's some graphs for your viewing pleasure (GREECE SHORT is short T-bills, the rest is bonds):

Greek Debt Due in the Next 5 Years By Month

Greek Debt Due in the Next 30 Years By Year

Germany, Portugal, Greece and Spain Yield Curves

Portugal, Italy, Greece and Spain Yield Curves

Housekeeping: Guest Posts

In the future, you may see some posts from guest authors. The first potential guest author is a very, very close friend of mine. A securities lawyer in Mexico, he has great insight into their banking system and its unique challenges and problems. I won't list his real name because we haven't talked about whether he will write under a nom-de-plume or not. Needless to say, I am very excited about this collaboration and the added breadth it will bring to Morally Bankrupt.

On Health-care Pt. 2.7: Reform is not inherently evil

Health-care reform has been a BigDeal(tm) lately, and I wanted to express some thoughts about it, the way it works and my general gripes about what is decidedly not real progress in my mind. In this series I will explore the benefits and failures of the current path of health-care reform in the United States. I will talk about insurance companies and risk pools; the difference between moral, political and economic decisions; and (in)efficiencies of scale in different levels of the industry.

On the April 17th, 2010 edition of The Economist, packed between an article about how we shouldn't eat our vegetables (seriously) and something about that slowly disintegrating Mediterranean economy, there was an article about dialysis. Most of the content matter was nothing new. Dialysis is expensive, sometimes up to $80,000 per person per year; many people die; the drugs and equipment are expensive. Basically, the same old "is it worth $x to keep this person alive?" question that is guaranteed to get everyone to scream over each other and not much else. But, while cruising through snooze-ville, I came across these little gems:

... running dialysis clinics and administering drugs, which account for 80% of the cost of dialysis. The two biggest operators of dialysis clinics are Fresenius and DaVita ...  Each of them runs almost a third of America’s dialysis clinics.

American dialysis clinics are paid on a “cost-plus” basis for the drugs they use ... American clinics used to favour an injected drug costing $4,100 a year over an identical oral one which was introduced to the market at a cost of $450 a year. After languishing unused, the oral drug now costs more than the injected one.

In case you didn't follow, here's how I understand this: Some pharma company came up with a drug that could be administered orally instead of intravenously and cost 11% of the original drug. Wow, that seems both convenient and economical! The maker couldn't sell this new, cheaper substitute because what clinics are paid is based on the cost of the drugs, therefore cheaper drugs meant less profits. In order to sell their new drug, the drug maker increased the price to a level above the injected substitute and the clinics, lured by higher profits, switched to it too. Clinics were able to do this because they could just bill it to the insurers. Patients didn't care because they were too worried about not dying, and because the insurer is paying anyways. This is big money! The government alone spends "$24 billion a year," and private insurers spend even more, although no exact figure was given. In any case, that's $48+ billion.

That, my (few) readers, is what we call "negative price elasticity of demand," resulting from the presence of a "perverse incentive."

Your friendly neighborhood tea-partier might be pointing to this as proof that the evil socialist health-care reform is going to bankrupt this once-great, once-capitalist nation, but he/she would be wrong:

The reforms will introduce a “bundled price”, whereby clinics receive a set rate for providing treatment. Analysts expect drug costs to fall by at least 10% soon after the change, as clinics use fewer or cheaper drugs.

Take that reactionaries!

On Health-care Pt. 2.6: Risk Pools and Fraud

Health-care reform has been a BigDeal(tm) lately, and I wanted to express some thoughts about it, the way it works and my general gripes about what is decidedly not real progress in my mind. In this series I will explore the benefits and failures of the current path of health-care reform in the United States. I will talk about insurance companies and risk pools; the difference between moral, political and economic decisions; and (in)efficiencies of scale in different levels of the industry.

So, I was taking a look at the Coalition Against Insurance Fraud website, and found a page full of stats (2) for reporters. Two things became instantly apparent: they don't know how to cite their so-called "stats" in any kind of usable manner and they are obviously run by the insurance companies themselves. Despite this, some of their claims are sort of interesting:

The U.S. spends more than $2 trillion on healthcare annually. At least 3 percent of that spending — or $68 billion — is lost to fraud each year. (National Health Care Anti-Fraud Association, 2008)

Medicare and private health insurers pay up to $16 billion a year for needless imaging tests ordered by doctors. (American College of Radiology, 2004)

Fraud accounts for 19 percent of the $600 billion to $800 billion in waste in the U.S. healthcare system annually. Fraud amounts to between $125 billion and $175 billion annually, including everything from bogus Medicare claims to kickbacks for worthless treatments and other services. (Thomson Reuters, 2009)

Medicare and Medicaid lose an estimated $60 billion or more annually to fraud, including $2.5 billion in South Florida. (Miami Herald, August 11, 2008)

First of all, let me say that I have little faith in these so-called statistics. I have little faith in anything that uses as its source The Miami Herald. Not because the Herald isn't a fine newspaper (it isn't) but because it's written by journalists not academic researchers. I'd like to see real research, not some little quotable that's mostly unfounded opinion. In the great words of Wikipedia, "[citation needed.]"

Second, the actual figures don't really matter to me. I'm here to talk about ideas. Let's look at four types of fraud:

• Person without coverage receives care which is billed as if the covered person had received it
• Person with coverage conspires with provider to participate in excess billing in exchange for cash or otherwise
• Doctor orders unnecessary procedures to increase billings when lacking clients
• Person receives medicine paid for by insurance which is improperly used or re-sold. (Where do you think dealers get pills?)

The first one stands out to me, because I see a solution for it. The fraud consists of someone not participating in the insured pool, but then using the coverage of the pool to receive treatment. It is the equivalent of sneaking in a concert. His / her costs are being paid for by the rest of the participants, raising their premiums. The higher the premiums go, the more incentive there is to cheat or forgo insurance in this system. You could detect and stop the fraudsters by investing in additional fraud and abuse detection units and then attempting to prosecute the fraudsters, which costs money. Another possible solution is to make participation in the pool compulsory, and severely limit the possibility of fraud. You still would be open to abuse from people not eligible for the mandated pool (e.g. illegal immigrants), but it would be much more difficult and there would be much less incentive for legal residents to attempt to cheat this system.

Final result? Compulsory participation reduces the amount of care the uninsured fraudulently receive that is paid for by the presently-insured. Depending on the levels of fraud in the system and the cost of compulsory participation, the costs of the presently-insured might even drop.

On Healthcare Pt. 2.5: Demographics of the Uninsured (UPDATE-1)

Health-care reform has been a BigDeal(tm) lately, and I wanted to express some thoughts about it, the way it works and my general gripes about what is decidedly not real progress in my mind. In this series I will explore the benefits and failures of the current path of health-care reform in the United States. I will talk about insurance companies and risk pools; the difference between moral, political and economic decisions; and (in)efficiencies of scale in different levels of the industry.

Last week, I ranted about risk pools. This week I continue, since the rest of my work on the next post is not ready. See, I have this work thing that I have to do if I want to get paid. I was perusing through a report on the uninsured from the CDC and stumbled upon this interesting chart (click for full version). The chart focuses only on people under 65 because anyone older than 65 is covered by Medicare.

This is really interesting! The younger groups are less likely to be covered.  If we make the (admittedly big)  assumption that older people need more treatment, what we are seeing is a rational economic choice by the younger population to stay uninsured. I have no hard statistics on this, but from anecdotal evidence--I am in my mid 20s--younger people often will go without health insurance if they are short on money or in order to free-lance or work part-time; the price elasticity of demand for health insurance in this group is larger. I know many, many young people who go without health insurance, some because they can't afford it, and some because they are taking their chances because of the cost of coverage. Of the group that "can't afford" it, all of them could, they just refuse to reduce their standard of living for it. It makes sense if the healthy younger population gets sick less; they may not need enough coverage to justify the premiums. This means that the younger population is not subsidizing the older population, making the rising costs of insurance a self-fulfilling prophecy (remember the cost of coverage has to be less than or equal to the premiums paid plus the return on float for the system to be sustainable). If you knew the cost of your insurance was priced to subsidize someone else's, you might elect not to buy, and therefore drive the cost up for the remaining participants. By forcing everyone to participate in the risk pool, we are introducing a large set of young people, bringing down the median age of the risk pool, reducing the cost-per-particpant, and hopefully reducing the cost of participation too.

Before anyone thinks I am saying that young people going increasingly uninsured is responsible for a rise in premiums, let me clear it up: I am not. The uninsured as a percentage of the population has largely remained steady over the last couple of 20+ years, as you can see below. What I am saying is that making participation compulsory will create an implicit transfer payment system that will allow us to smooth out the changes in cost of care over the life of the participant. We are paying a little more now so we have to pay less in the future. The young can bitch about this now, but they'll probably have to pay this no matter what. If the old people can't afford health-care, the government will chip in and guess who will end up paying the government? Yup, that's right, the young. If the old can pay, but end up severely draining their wealth reserves, guess who's going to either inherit less or have to help them more? Yup, the young.

Now look at the other half of the graph (full version linked)

What is most obvious here is that blacks and hispanics are disproportionally less insured. Supporting a system where there is such huge disparities by race is definitely not progress. One could argue that this is because black and hispanics are more likely to be poor, but the really poor have Medicaid. It's the  marginally less-poor that are more likely to be uninsured:

Lack of access to health insurance could be holding back this not-so-poor segment of the population. Say it with me: This is not progress.

UPDATE-1: Got another nifty little piece of data, thanks to my sister. According to this report from the census, uninsured individuals by households income level break down like this (click image for full-size):

• < $25,000: 24.5%
• $25,000 - $49,999: 21.4%
• $50,000 - $74,999: 14%
• > $75,000: 8.2%

I am looking for more data as far as value of coverage utilized by age group and premium levels by age group so I can see if my theory checks out. Please shoot me an email if you have access to any of this data or know where I can find it.

On Health-care Pt. 2: Risk Pools

Health-care reform has been a BigDeal(tm) lately, and I wanted to express some thoughts about it, the way it works and my general gripes about what is decidedly not real progress in my mind. In this series I will explore the benefits and failures of the current path of health-care reform in the United States. I will talk about insurance companies and risk pools; the difference between moral, political and economic decisions; and (in)efficiencies of scale in different levels of the industry.

Let's start with the basics.  The reforms so far cover the following problems:

• The exclusion of individuals with "pre-existing conditions"
• Lifetime caps on coverage
• The availability of coverage for those who may not be able to afford it

As The Economist describes it:

Some 32m of the country’s 49m or so uninsured (most of those left out of the new scheme are undocumented aliens) would, starting in 2014, be required to take out insurance. The working poor and uninsured earning up to $88,000 a year get subsidies on a sliding scale so that they can afford to buy coverage; the poorest of all will be added to the rolls of Medicaid.

This effectively means that almost every American will have some sort of coverage, barring those who elect to forgo coverage and instead pay the fine. By my very basic calculations (34 AVG weekly hours x 22.47AVG hourly wage x 52 weeks [BLS]) there is probably a good chunk of the population that will benefit from the subsidy. I will put something more detailed together once I can get better data as to the distributions of these earners (I suspect a both a positive skew and fatter tails) and adjust for employer-provided benefits.

Insurance typically works by having covered individuals pay premiums to the insurance company, who is in charge of disbursing money to care providers for covered procedures and using their size to bargain for better deals. The care providers have an incentive to negotiate with insurers because they benefit from a single counter-party who is, in theory, more creditworthy and easier to deal with than hundreds of thousands of individuals. In addition, there may be economies of scale created by streamlining payments and the associated operational work. The cash held by insurance companies between when premiums are paid and payments for coverage are disbursed is called a "float," and insurance companies typically make money by investing the float in return-generating instruments. If aggregate premiums and the return from their investment exceed the payments made to care providers, there is an accounting profit for the insurer; therefore it is in the best interest of the insurer to make sure their policy holders are healthy, or at least healthier than the mean. This is why you often see things like gym-memberships, smoking cessation and nutritional assessment covered by health insurance. The healthier you are, the less the more profitable they are.

Unfortunately, the quest to have a healthier pool of insured participants often results in discrimination, which is what current legislation hopes to rectify. Insurance companies can be at a comparative advantage to others by improving their policy-holder pools, creating more efficient systems and negotiating harder with care providers. This too, unfortunately sometimes leads to unethical behavior. Insurers can become more profitable by finding ways to avoid disbursing monies for procedures, what is commonly known as the "pre-existing condition" problem.

Now that the risk pool is effectively the entire population, we are looking at a serious problem with this system: If the wealthy are more likely to be healthy, and the poor are more likely to be covered under the government program, private insurers are getting a comparatively better pool of participants, meaning they will inevitably be able to run a lower-cost operation than Medicaid. Not because the private sector is necessarily more efficient, although that may be the case, but because they have a healthier pool of policy-holders. What this system is effectively doing is privatizing gains and socializing losses, also known as the "heads I win, tails you lose," problem. Additionally, this will continue to reinforce the idea that the insurance companies are value creators, even if they may not be. There is no doubt in my mind that this amounts to an unequivocal give-away to the insurers. This is on top of the subsidized premiums from new policy holders that they are receiving.

Of course, this is not the only inequity in the system. Medicaid is backed by the full faith and credit of the US Government, so their cost of capital is the riskless rate. Additionally, they don't need to build a capital base since they can cover their costs from the general fund, where the additional taxes (hopefully) levied to cover these expenses will end up anyway. What this means is that private insurers must collect money ahead of expected payouts, the difference being a profit or loss. The government, on the other hand, is paying for this just-in-time, and letting the gains or losses affect the deficit/surplus. This puts them at an unfair advantage to the private operators in terms of costs of capital, which the insurers will surely whine about in an attempt to extract a tax credit.

For the following part, we will be focusing only on the federally mandated, minimum level of coverage.Of course expensive plans will cover things like private rooms while Medicaid might only covered a shared room, but let's focus on the bare-minimum care that we are all going to get. Just like schools, you always have the option of paying for a private one, but you are always allowed access to at least the same public one your neighbor's kids might go to.

You may be asking yourself, "Why is this all relevant?" The answer to that is that once the risk pool equals the population, the amount of federally-mandated coverage provided should be a constant, excluding the positive or negative effects of incentive programs from private-label insurers. This means that we are going to provide the same amount of coverage and it has to be paid for, no matter what. If the quality of care for the federally-mandated coverage is constant across the Medicaid and private-label risk-pools--which it should be since the providers are independent--the only difference is who pays for what share of the total. In the end it all must be paid for by premiums and subsidies. Following that logic, the minimum that you will pay, either through premiums or taxes, must at least equal the cost of coverage or else the insurers lose money or the government adds to the deficit, which the public taxes will eventually pay for anyway. Notice the "at least," which is important because if insurers lose money, they will simply raise rates or demand subsidies to make up for it, lest they go out of business and we all end up on the government risk pool anyways. However, if the insurers make money, they get to keep it. well, at least until we can negotiate lower premiums, but I wouldn't hold my breath. What this all amounts to is insurers taking a call option on care. If they don't make money, we make up the short-fall one way or another, if they make a profit, it's ka-ching! time for them. If you ask me, this looks less like evil socialism and more like shameless giveaways to big business.

Finally, if you were paying attention, you voiced a loud "ugh!" after reading "If the quality of care for the federally-mandated coverage is constant across the Medicaid and private-label risk-pools." Everyone knows that some coverage is better than others because some providers are better than others. The trend is toward equality, but that doesn't mean we are anywhere near it. If that is the case, it would imply multi-tiered care quality for basic care depending on your insurer. Does that sound progressive to you? Does segregating the poor and rich in the emergency room sound like that evil socialism slowly killing this great capitalist nation to you? The finer points of fairness here fall under economic, moral and ethical view points I don't feel like arguing, but I will say this:


From where I'm looking, this is definitely not progress.

On the next segment, I will cover more of the economic problems, unavoidable inefficiencies, and misalignment of interests in this system, as well elaborate on the argument for why I think is the smallest-government option for universal health-care is actually--spoiler alert!--a single risk-pool system.

On Healthcare Pt. 1: Economic, Ethical and Political Decisions

Health-care reform has been a BigDeal(tm) lately, and I wanted to express some thoughts about it, the way it works and my general gripes about what is decidedly not real progress in my mind. In this series I will explore the benefits and failures of the current path of health-care reform in the United States. I will talk about insurance companies and risk pools; the difference between moral, political and economic decisions; and (in)efficiencies of scale in different levels of the industry.

I'd like to begin this series by explaining that I am decidedly not a fan of large government. I also do not think that health-care is a right. I think that as a wealthy nation, it behooves us to share this cost to improve the life of the collective and improve our collective experience at a small cost to the privilege. If it all works well, we will collectively be more efficient, create more value and ultimately all be better off. To me, denying health-coverage to someone because of a socio-economic disadvantage that they may not be at fault for is tantamount to denying a child a polio vaccine until they can pay for it out of their wages. An investment in health-care is an investment in our labor force and our future, and I like to think it will have a positive return. That being said, that is an economic decision, not an ethical or political one.

My personal ethical inclination toward universal health-care lies in the fact that  we all get sick. Children in Nigeria, children in the United States, children in Sweden and children in China all get sick. The Queen of England gets sick, the Pope gets sick, Socrates got sick, the Dalai Lama got sick and even the seemingly invincible Dr Gregory House gets sick. Getting sick is as much a part of being a human as is being born, getting hungry and dying. Denying someone the right to live because of something they can't control seems a little backwards. We've spent so many thousands of years innovating, working towards advancement and creating this thing we call society. Fighting this just seems like spitting in the face of thousands of years of human ingenuity and progress over, as Frances McDormand once said, "just a little bit of money," which as I will explain later in the series, may not be as much as you think.

Finally, it is important to plainly state that this system implies a redistribution of wealth, which is a political decision I happen to favor, but many are opposed to *ahem*libertarians*ahem*. It is important to understand that the reasons people support, or oppose, universal health-care are varied in many different dimensions. Calling someone names over their ultimate answer is, in my opinion, unwarranted and a sign of ignorance since, ultimately, these decisions are all deeply personal. Right, wrong and truth are all subjective in this context and calling names because someone refuses to accept our truth as their own is not only intolerant, but ultimately totalitarian. This democracy thing we have going, after all, rests in the idea that we all get to have a say so we can influence, not dictate, what happens.