End the hoaxes, part 1: Health care costs cause bankruptcies

August 17, 2009

Health care costs, especially coupled with lack of adequate insurance even for insured people, drove our nation to the brink of economic collapse.

We need health care reform now, to help get our economy back on its feet.

“Unless you’re a Warren Buffett or Bill Gates, you’re one illness away from financial ruin in this country,” says lead author Steffie Woolhandler, M.D., of the Harvard Medical School, in Cambridge, Mass. “If an illness is long enough and expensive enough, private insurance offers very little protection against medical bankruptcy, and that’s the major finding in our study.”

Woolhandler and her colleagues surveyed a random sample of 2,314 people who filed for bankruptcy in early 2007, looked at their court records, and then interviewed more than 1,000 of them. Health.com: Expert advice on getting health insurance and affordable care for chronic pain.

They concluded that 62.1 percent of the bankruptcies were medically related because the individuals either had more than $5,000 (or 10 percent of their pretax income) in medical bills, mortgaged their home to pay for medical bills, or lost significant income due to an illness. On average, medically bankrupt families had $17,943 in out-of-pocket expenses, including $26,971 for those who lacked insurance and $17,749 who had insurance at some point.

Overall, three-quarters of the people with a medically-related bankruptcy had health insurance, they say.

“That was actually the predominant problem in patients in our study — 78 percent of them had health insurance, but many of them were bankrupted anyway because there were gaps in their coverage like co-payments and deductibles and uncovered services,” says Woolhandler. “Other people had private insurance but got so sick that they lost their job and lost their insurance.” Health.com: Where the money goes — A breast cancer donation guide.

Personal bankruptcies played a large role in the banking crisis of late last year and early 2009.  Personal bankruptcies played a huge role in the collapse of mortgage securities markets, which prompted the banking crises.

If anything, current proposals do not go far enough in reforming insurance.

“To ignore the fact that medical costs are an underlying problem of the economic meltdown we’ve experienced would be to turn a blind eye to a significant problem that we can solve,” she said [Elizabeth Edwards, senior fellow at the Center for American Progress].

Edwards was joined by Steffie Woolhandler, a co-author of the Harvard study [discussed above] who sharply criticized current reform efforts.

“Private insurance is a defective product that leaves millions of middle-class families vulnerable to financial ruin. Unfortunately, the health reform plan now under consideration in the House would do little to address this grave problem,” Woolhandler said.

Without new legislation along the lines of the Democratic proposals in Congress, our nation faces economic doom.

Phony assertions of “death panels,” phony assertions of “creeping socialism,” phony claims about bad care in England, Canada and France, are all tools that help push our nation to economic failure.

Please do not be hoaxed.

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52 Comments | Economics, Government, Health care, Hoaxes, medicine, U.S. House of Representatives, U.S. Senate | Tagged: , , , , , , , , , | Permalink
Posted by Ed Darrell

Obama didn’t start the sub-prime mortgage crisis

October 12, 2008

The intensity of the rabid attacks on Barack Obama is troubling. The issues grow more bizarre, the links to Obama grow more tenuous, and the shouts more shrill.

And that’s from the reasonable opponents of Obama.

For example, over at the oddly-named IUSB Vision Weblog (Indiana University – South Bend), there is much yammering about how Barack Obama personally is responsible for the sub-prime mortgage industry collapse, because he represented an ACORN client in a redlining case and won the decision from the judge.

From there, the story trails off into a rabbit warren of wild conspiracy theories and the granting of supernatural powers to Obama (though the authors wouldn’t admit it’s supernatural). For example, there is this post about a letter Sen. McCain signed urging some action on oversight of federal mortgage refinancers.

The authors stoutly defend their bizarre claim that Congress is the agency responsible for the regulation of Fannie Mae and Freddie Mac through the OFHEO, Office of Federal Housing Enterprise Oversight. Congress maintains its usual oversight over the executive branch agency, but it is, after all, an executive branch agency. Think about your high school civics classes: Separation of Powers, Checks and Balances.

Congress is not the superintendent of OFHEO

Here is OFHEO’s mission statement — notice no reference to being in Congress’s chain of command:

OFHEO’s mission is to promote housing and a strong national housing finance system by ensuring the safety and soundness of Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation). OFHEO works to ensure the capital adequacy and financial safety and soundness of two housing government-sponsored enterprises (GSEs) — Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac are the nation’s largest housing finance institutions. They buy mortgages from commercial banks, thrift institutions, mortgage banks, and other primary lenders, and either hold these mortgages in their own portfolios or package them into mortgage-backed securities for resale to investors. These secondary mortgage market operations play a major role in creating a ready supply of mortgage funds for American homebuyers. Combined assets and off-balance sheet obligations of Fannie Mae and Freddie Mac were $4.2 trillion at year-end 2005.

Fannie Mae and Freddie Mac are Congressionally-chartered, publicly-owned corporations whose shares are listed on the New York Stock Exchange. Under terms of their GSE charters, they are exempt from state and local taxation and from registration requirements of the Securities and Exchange Commission. Each firm has a back-up credit line with the U.S. Treasury.

OFHEO’s oversight responsibilities include:

Conducting broad based examinations of Fannie Mae and Freddie Mac; Developing a risk-based capital standard, using a “stress test” that simulates stressful interest rate and credit risk scenarios; Making quarterly findings of capital adequacy based on minimum capital standards and a risk-based standard; Prohibiting excessive executive compensation; Issuing regulations concerning capital and enforcement standards; and Taking necessary enforcement actions.

OFHEO is funded through assessments of Fannie Mae and Freddie Mac. OFHEO’s operations represent no direct cost to the taxpayer. In its safety and soundness mission, OFHEO has regulatory authority similar to such other federal financial regulators as the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Board of Governors of the Federal Reserve System.

The legislation that established OFHEO also requires Fannie Mae and Freddie Mac to meet certain affordable housing goals set annually by the Secretary of Housing and Urban Development. These goals specify the share of mortgages that the two GSEs are required to purchase annually from low-income, moderate-income and central-city homebuyers.

And, explaining its role in mortgage refinance regulation:

OFHEO was established as an independent entity within the Department of Housing and Urban Development by the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (Title 13 of P.L. 102-550). The agency is headed by a Director appointed by the President for a five-year term.

OFHEO’s primary mission is ensuring the capital adequacy and financial safety and soundness of two government-sponsored enterprises, the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). Fannie Mae and Freddie Mac are congressionally-chartered, publicly-owned corporations whose shares are listed on the New York Stock Exchange.

Fannie Mae and Freddie Mac are the nation’s largest housing finance institutions. They buy mortgages from commercial banks, thrift institutions, mortgage banks, and other primary lenders, and either hold these mortgages in their own portfolios or package them into mortgage-backed securities for resale to investors. These secondary mortgage market operations play a major role in creating a ready supply of mortgage funds for American homebuyers. Combined assets and off-balance sheet obligations of Fannie Mae and Freddie Mac were more than $4.2 trillion at year-end 2005, which represents over 40 percent of mortgages outstanding.

In fulfilling its role in the secondary mortgage market, OFHEO promotes housing and a strong national housing finance system.

OFHEO’s oversight responsibilities include the following:
– Conducting broad-based and targeted examinations of Fannie Mae and Freddie Mac
– Making quarterly findings of capital adequacy based on a minimum capital standard and a risk-based capital standard
– Administering a risk-based capital standard, using a “stress test” that simulates interest rate and credit risk scenarios
– Prohibiting excessive executive compensation
– Issuing regulations concerning capital and enforcement standards
– Taking necessary enforcement actions
– Issuing an annual Report to Congress on the financial and operational condition of the Enterprises

OFHEO is funded through assessments on Fannie Mae and Freddie Mac. OFHEO’s operations represent no direct cost to the taxpayer.

The website for the agency is clear that it resides in the Department of Housing and Urban Development (HUD), though it is an independent agency whose director is appointed by the president for a five-year term. When I posted this information at IUSB Vision, however, it was censored. Instead, I got this charming response from the immoderator:

Ed – Stop lying,

You did not read the links. You need to start reading at OFHEO.gov and go and read the links I provided. OFHEO reports to Congress, not the administration. It is a fact. Deal with it. All you have to do is go read on their site THEY will tell you.

Charming fellow. He has censored all of my comments since then. At one point he was lecturing me that I didn’t know the organization. I pointed out to him that the Constitution makes clear the lines of organization in this case: OFHEO is an independent agency within the executive branch. It works closely with the Secretary of HUD. The organization charts show it is not a Congressional agency.

Similarly, this fellow is convinced that Obama, as a lawyer, made the federal courts dance to his tune. He appears to have no understanding for how federal courts work, nor for how a federal judge would regard any attorney acting as arrogantly as they claim Obama did.

Object lesson: You cannot reason a person out of a position he did not get to by reason in the first place.

Election, come soon!

Resources:

8 Comments | Barack Obama, Campaigns, Economics, Government, History, Obama 2008, Politics, Rampant stupidity | Tagged: , , , , , , | Permalink
Posted by Ed Darrell