Hospitals and the Real Costs of Protection

The August 28, 2008 WSJ (front page, "Nonprofit Hospitals Flex Pricing Power") had a well-researched article on hospitals. Most people don't realize hospitals and even insurance companies are usually nonprofit corporations. What's worse is that many hospitals and insurance companies are nonprofit subsidiaries of larger partnerships or for-profit corporations, making it hard to ascertain the true owners. When lawyers sue hospitals, it usually takes forever to figure out the proper entity to sue. Many times, you have to trace the corporation or non-profit back to a Limited Partnership (L.P.), even though the direct employer is a nonprofit hospital corporation. Corporations, nonprofits, and hospitals have created byzantine empires to shield themselves from liability, which makes it very difficult to point fingers when things go wrong.

For example, you think Stanford University is called "Stanford University"? Nope. That would be too easy. Stanford is broken up into three separate entities: one, the LUCILE SALTER PACKARD CHILDREN’S HOSPITAL AT STANFORD; two, STANFORD HOSPITAL AND CLINICS; and three, The Board of Trustees of The Leland Stanford Junior University. Yes, it's a scary world when you realize how hard it is to point blame in an ever-expanding universe where lawyers spend all day trying to shield their clients from liability.

I'm not saying Stanford is doing anything unwise--they should be trying to ensure that a medical malpractice judgment against a hospital doesn't cost their University students anything, but at some point, Enron and its fake, fraud-masking subsidiaries come to mind (remember, Enron claimed major profits partly because it kept offloading its debt through a complicated set of fake subsidiaries that took on Enron debt for stock). We forget there's a moral cost to this kind of paper legal protection. The more fragmented a place or entity, the harder it is for people to take responsibility or to find out where the buck stops. Corporate fragmentation disincentivizes entities and their agents to act responsibly, because the money and assets can be shifted or protected through more and more complex special purpose paper vehicles.

Pretty soon, it won't be enough to sue, get to trial, win the trial, and then deal with the appeal after multiple years have passed--when you do win and finally get a judgment, maybe the entity you sued doesn't have assets to claim, or you can't pierce the corporate veil. Corporate America, One. Consumer/Employee, Zero.

Is College Still Worth It?

Meg, a blogger, has a great post on market inefficiencies and colleges:

http://wealthisgood.blogspot.com/2008/08/government-subsidies-enable-colleges-to.html

Her post is related to this CNNMoney article:

http://money.cnn.com/2008/08/20/pf/college/college_price.moneymag/index.htm

I like her dad already.

WSJ's Neal Templin Supports Young Adults

All college-educated young adults who live at home with their parents should read Neal Templin's "Learning Life's Lessons On a Shoestring Budget," WSJ, August 28, 2008; Page D2. For now, the article is posted at the link below, but no permalink exists. If the link below does not go to the article, try googling "Learning Life's Lessons On a Shoestring Budget."

http://online.wsj.com/article/cheapskate.html

It wasn't always a given that kids would move out when they reached adulthood. Children used to live at home until they married, and it's still that way in many other countries.

This arrangement also allows parents to have more sway over who their daughter or son marries, thereby providing more leverage for their expectation of grandchildren. For more on this subject, 60 Minutes did an entertaining report on Italy's men this year, called "Mammoni."

http://60minutes.yahoo.com/segment/170/mammoni

Movie Reviews from Erik Lundegaard

I'm a big fan of The Wire and Tyler Perry. I just found two interesting articles on both subjects from Erik Lundegaard and had to share:

The Wire:
http://www.huffingtonpost.com/erik-lundegaard/the-wire-vs-the-sopranos_b_92120.html

Tyler Perry:
http://www.msnbc.msn.com/id/23635092/

Erik Lundegaard's blog, with movie reviews, can be found here:

http://www.eriklundegaard.com/moviereviews.php

A friend of mine, Jim Quillinan, also has a movie review website worth checking out: http://qsreviews.wordpress.com/ 

David Boaz, Libertarian

David Boaz, Executive VP of the Cato Institute, spoke at the Commonwealth Club recently. His speech was reproduced in The Commonwealth Magazine, September 2008 edition. I haven't been able to find a free online link, but it's a wonderful speech, and you should make the effort to find the speech. Here is an audio file of the speech:

http://search.everyzing.com/viewMedia.jsp?res=0&dedupe=1&index=117&col=en-all-public-ep&sort=rel&e=20501629&channelTitle=Ron+Paul&num=16&start=112&ci=43&expand=true&match=none&channel=236&bc=90&filter=1

Boaz's best line is about Everything I Need to Know I Learned in Kindergarten and how libertarianism has the same simple rules:

Don't hit other people, don't take their stuff, and keep your promises...if you apply those rules, you get civilization and freedom.

Here's another great line:

Always love your country, but never trust your government.

Boaz makes the great point that while we may feel less free today because of excessive government intervention and power, we are certainly more free when compared to a distant past involving slavery, 70 percent income tax rates (1977), fascism, feudalism, and communism. Boaz reminds us, "We had a monopoly phone company, strict regulations on interest and investing, sodomy laws in most states, and, at least briefly, generalized wage and price controls."

Boaz also takes on the question of how to define liberty and arrives at three factors: one, widespread wealth; two, an open society (less racism, no signs stating "No Blacks Need Apply"); and three, actual political and economic liberty (no more military conscription, no Jim Crow laws). He boldly states, "On balance, Americans today are more free than any people in history." He also says we should still be wary of those who seek to curtail our freedoms, suggesting,

Just speak up when somebody says there ought to be a law. There's no magic bullet. There's never been a golden age of liberty and there never will be.

Wise words from a man who strikes the perfect balance between optimism and fear. For more from David Boaz, check out the following link:

http://www.libertarianism.org/reader.html

X-Men

The X-Men movies are some of the best films ever made. So many philosophical questions are covered in the series. For example, what laws, if any, should be passed for people considered superior to others? Should people who are different be controlled in any way? If so, how? To what extent do others without unique characteristics have to bend to accommodate a minority with special traits? I could continue ad infinitum. 

Here's one of my favorite scenes, from X-Men 2:

Storm: Sometimes anger can help you survive. Nightcrawler: So can faith. 

 For whatever reason, this exchange is electrifying in the film.

Yeats and the Stock Market

It's not too often I see someone adeptly combine my two loves--the stock market and poetry--so I had to share James Surowiecki's article with you:

http://www.newyorker.com/talk/financial/2008/09/01/080901ta_talk_surowiecki

Mr. Surowiecki's topic is the market's recent volatility: "[I]n the long run volatility is a very bad thing, because it makes ordinary investors less inclined to trust markets." His best line, about investor uncertainty, is at the very end:

[F]or now we’re stuck in a Yeatsian market: the best lack all conviction, while the worst are full of passionate intensity. Let’s hope the center can hold.

If you're still not agog at Mr. Surowiecki's reference, the first part of Yeats' Second Coming is below:

TURNING and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

Yeats and the stock market--a herd of passionate intensity. That about sums it up, doesn't it?