« April 2008 |
Main
| June 2008 »
May 2008 archives
In my creed, waste of public money is like the sin against the Holy Ghost. - John, Viscount Morley of Blackburn, Recollections (1917)
A recent Congressional hearing on spending in Iraq put things in a whole new light. And a better light it is.
At a hearing with the catchy title of "Accountability Lapses in Multiple Funds" before the U.S. House Committee on Oversight and Government Reform all sorts of interesting examples were offered by the representative from the Department of Defense Inspector General's office that made earlier disclosures as to misspent funds in Iraq seem benign.
"Accountability" refers to the fact that the U.S. government spent an estimated $8.2 billion on Iraqi affairs and either forgot to get receipts or, when it got receipts, forgot put detailed descriptions of how the money was spent on those receipts. The reference to "multiple funds" means that it wasn't only U.S. taxpayer dollars that were the victims of "accountability lapses." Monies belonging to the Iraqi government known as "Seized and Vested Assets" were also subject to these lapses. The audit found that $1.8 billion in Iraqi assets over which the United States had authority was paid out in cash with no record of who got the money.
DOD Deputy Inspector General for Auditing Mary L. Ugone (that is her last name - it is not a government pseudonym given someone looking for missing funds) explained the audit was started when the DOD's Criminal Investigative Service found that there were inadequate controls over disbursement of U.S. taxpayer dollars. Funds belonging to Iraq that were disbursed by U.S. authorities, disbursals the U.S. was able to make because of the very close relationship the U.S. enjoys with Iraq's money (and leaders) were also not adequately monitored.
Ms. Ugone told the committee that the Defense Department had appropriated $492 billion to support Operation Iraqi Freedom and that $2.8 billion of seized and vested Assets were to be returned to Iraq to "help rebuild its infrastructure and economy." Ms. Ugone said that $1.4 billion in contract and vendor payments and $6.3 billion in commercial payments lacked minimum supporting documentation and information for proper payment.
Ms. Ugone's testimony was 29 pages in length. At page 16 she describes the payment of $320 million in cash "to an Iraqi representative for Iraqi salary payments" that carried no indication of to whom the funds were provided or how many people were to receive salary payments. It seems appropriate that Iraqi funds be used to pay Iraqi salaries. It would probably have been helpful to indicate who got the salaries.
An exhibit attached to the hearing showed that David Dial, of Irmo, S.C. (home of the Okra Strut food festival) received a U.S Treasury check for an entity called IAP for $11,122,582.80 with no indication what it was for other than "Public Voucher for Purchases and Services Other Than Personal." SFC Alderson Williams certified that the "voucher is correct and proper for payment," according to documents accompanying Ugone's testimony. Another exhibit: A U.S. Treasury check for $5,674,075 went to Al Kasid Specialized Vehicles Trading Company c/o Federal Reserve Bank in Baghdad without a description of what it was for. Anyone wanting more examples can go to the Washington Post or the New York Times.
The difference between disclosures at the May hearing and earlier disclosures is that there was less embarrassment associated with the earlier disclosures.
We know from earlier reports that Parsons, a Texas construction company had a $243 million contract to build 150 health clinics in Iraq, paid itself $60 million of that amount for administration and management and, using the remainder, completed 20 of the 150 clinics. We know Parsons had a contract for $99.1 million to build the Khan Bani Saad Correctional Facility North of Baghdad that was to be completed by June 2006. When that date rolled around, Parsons said it could not complete it before September 2008 and it would cost an addition $13.5 million to complete. Pocketing what it had been paid Parsons went off to look in the classified ads or the White House for other work. The contract was cancelled.
KBR overcharged for meals served troops in Iraq and delivered unsafe drinking water to those troops. (It has just entered into a new contract enabling it to share in a $150 billion contract to provide services to American soldiers in Iraq.)
The earlier reports were uplifting since they showed that a fiscally responsible Bush administration knew exactly to whom and for what monies were disbursed. Its only failure was insuring that the work for which payment was made was completed. By not tracking the purposes of the disbursements there is no risk of embarrassing anyone because of the failure of the recipient to complete the work for which it was paid.
As any teenager would say, if asked, "That is SO Iraq."
Be not afraid of greatness; some are born great, some achieve greatness, and some have greatness thrust upon them. - Shakespeare, words spoken by Malvolio in Twelfth- Night
There is more than one way for a university to receive national recognition. One is to employ a faculty member who receives a Nobel Prize for his discovery. The other is to be governed by a chancellor who proposes a folly. The University of Colorado, has done both. It makes a citizen proud.
Thomas R. Cech was a professor at the University of Colorado in 1989. That was the year that the Nobel Prize in Chemistry was awarded to him and Sidney Altman for their discovery, as the Royal Swedish Academy of Science said, "that RNA (ribonucleic acid) in living cells is not only a molecule of heredity but also can function as a biocatalyst." Dr. Cech's receipt of the prize was accompanied by the usual favorable publicity and redounded to the credit of the University of Colorado where he had been a distinguished member of the faculty since 1978.
Dr. Cech left the university in 2000 in order to become the president of the Howard Hughes Medical Institute in Chevy Chase, Md., a post he recently announced he was leaving in order to return to the University of Colorado. Stories of his receipt of the Nobel Prize were published, as one would expect in all the major newspapers in the world including the Wall Street Journal. But, now, thanks to the discovery of a solution to a problem that does not exist by G.P. "Bud" Peterson, its chancellor, the University of Colorado has returned to the pages of the Wall Street Journal.
In mid-May it was reported that the chancellor had concluded that what the University of Colorado needed was an endowed university chair for a Professor of Conservative Thought and Policy, "conservative thought" he apparently believes, being somewhat different from normal thought, a belief in which he may actually be correct. Hoping to bring the university accolades similar to those brought by Thomas Cech when he received the Nobel Prize, Chancellor Peterson announced that he was hoping to raise $9 million to fund such a position. His proposal did not go unnoticed. It appeared on the front page of the Wall Street Journal and was accompanied by an actual photograph of the chancellor on the second page of that paper, a sign of greatness bestowed on but a distinguished few.
Rep. Tom Tancredo, one of the more amusing examples of the sort of mindless wonders that inhabit the halls of Congress and, briefly, a candidate for the president of the United States, dislikes things intellectual as much as the next man. In a letter to the university he offered to become the first occupier of this chair if it is funded. He was, of course, only joking. In that same letter he suggested that a 20-foot high fence be built around the university, similar to the fence he has longed to see built on the border between the United States and Mexico. That, too, was a joke.
On a more serious note, other conservative commentators have criticized the idea. David Horowitz, who lives in mortal fear of liberal professors and has identified the 101 most dangerous academics in the country, is quoted in the Journal's article as saying that creation of one token chair will brand the individual like "an animal in the zoo."
One name that has surfaced as a candidate to fill the chair is columnist George Will. Upon learning of the new position he said: "Like Margaret Mead among the Samoans, they're planning to study conservatives. That's hilarious. I don't think it would be a good fit."
The University of Colorado is 49th in the country in terms of per-student state funding which accounts for less than 10 percent of the university's total budget. Some may wonder whether a better use could be found for $9 million than the creation of a chair that is described as the first of its kind in the nation and the topic of which could easily be covered within the existing course curriculum at the university. The answer is not hard to find. It could. The discovery of more useful ways to spend $9 million - perhaps on students - would further remove from the conversation the mockery to which the chancellor and his proposal have been subject.
Bud Peterson did not intentionally play the fool and probably doesn't think any of this is hilarious. He was just looking for a way to leave his mark. Perhaps some of his advisors will suggest that there are many other ways to do so.
But all is not despair in the academy. Tom Cech is returning to the university and his return will bring good cheer to its denizens. Sadly, the consequences of the chancellor's folly will have many returns, all of them less felicitous.
The desire to take medicine is perhaps the greatest feature, which distinguishes man from animals. - Harvey Cushing, Life of Sir William Osler
Health insurance companies are constantly looking for new ways to make money. Two of the major impediments to their quest are sick people and the drugs they need. Clever, as a good corporation should be, they have figured out how to overcome the second of these obstacles. Two techniques are employed. The first is practicing medicine just the way doctors do even though few, if any, insurance companies have attended medical school.
When a doctor prescribes a specific drug for a patient, the insurance company may decide that the generic equivalent of that drug is just as good for the patient (whom it has never met) as the one that the physician prescribed and refuse to pay for the prescribed drug. In that event, if the patient wants to use the prescribed drug the patient must pay for the drug out of his or her own pocket. There is, however, a built in appeals process that patient and doctor can go through if they would like to prove that the trained doctor's decision is more medically accurate than the corporation's but it is a somewhat cumbersome process. Why the company insists on substituting its judgment for the doctor's judgment is best known to the insurance company. And as creative as this is on the part of the insurance company, it is not the most dramatic example of saving money through creative insuring.
A recent report in The New York Times discloses that some insurance companies have realized increased profits by reducing the amount of money they are willing to pay for certain prescription drugs taken by their insureds. It seems like such an obvious thing to do that the only remarkable thing is that the insurance companies have not thought of it before now.
Before the companies became creative in reimbursing for drug costs, the insured was required to pay a fixed amout (known as a co-payment) for a prescribed drug that that went anywhere from approximately $5.00 to $50. The amount of the co-pay was determined by the company which also classified medications as being a Tier 1, 2 or 3 drug. The insurance company paid the difference between the drug's co-pay and its actual cost to the insurance company. Then, a funny thing happened on the way to the pharmacy. The insurance companies created a Tier 4 into which they placed REALLY expensive drugs.
People taking Tier 4 are the beneficiaries of the new policy. Here is how three randomly selected insurers have made themselves its beneficiaries.
The insurance program run by the American Association of Retired Persons (AARP) requires patients taking Tier 4 drugs to pay 30 percent of the cost of the drugs with no limit on how much the insured ultimately has to pay. Among them, Sprycel, a Tier 4 drug that blocks the growth of cancer cells and eliminates the need for chemical infusions. It costs $13,500 for a 90-day supply. AARP requires the insured to pay $4,500 for each 90-day prescription and AARP pays the balance. First Health Life & Health also charges a flat 30 per cent for Tier 4 drugs without any limit on what the insured pays. Kaiser Permanente, by contrast, tempers profitability with mercy. It requires its insureds to pay only 25 percent of the cost of Tier 4 drugs and places a $325 limit on how much the insured has to pay for each prescription.
Increasing insurance companies' profitability is not the only benefit of the new program. For Medicare beneficiaries who have to pay 5 percent of their drug costs after they've spent their way through what's known as the doughnut hole - a period of spending on medication without reimbursement - this new structure gets them through that period more expeditiously. Of course, not all Medicare beneficiaries will see the benefit.
But another benefit that will, however, be obvious to its beneficiary: is the cost savings to employers who furnish health insurance to employees.
Karen Ignagni is president of America's Health Insurance Plans, an organization that represents most of the health insurance industry. She pointed out in the New York Times story that lower outlay for prescription drugs means the insurance companies can charge employers lower premiums, thus providing a cost benefit to employers. Adding those benefits to those enjoyed by the insurers makes it obvious that the new policy is a win-win except, of course, for those who can no longer afford to take drugs.
In George Bush's United States 47 million people have no health insurance. In George Bush's United States 9 million children have no health insurance. Thanks to the creation of Tier 4, we will soon have a new class of citizen. It will comprise people who have insurance but are unable to pay for the drugs needed to keep them in or restore them to, good health. In a few years we will know how many people are members of their class. They will join the uninsureds as statistics.
My civil neighbor, the tax-gatherer, is the very man I have to deal with, for it is, after all, with men and not with parchment that I quarrel,-and he has voluntarily chosen to be an agent of the government.
— Henry David Thoreau, Civil Disobedience
It was impossible to know how it would turn out. Of course, there were a few hints. But they were so subtle that only someone with a bit of brain would have picked up on the clues.
Turning delinquent taxpayers over to private collection firms that make contributions to politicians instead of letting the Internal Revenue Service attend to that mundane task seemed like a great idea. So great, in fact, that no one in the Bush Administration foresaw the disastrous outcome.
The idea got its start as a result of the American Jobs Creation Act of 2004. The purpose of the act was not simply to create jobs. It was to transfer to the private sector a number of jobs that had been performed by the public sector - an almost certain guarantee of success since conventional Republican wisdom is that whatever the public sector can do, the private sector can do even better. (That approach reached its zenith in Iraq where President Bush turned over lots of the work formerly done by U.S. troops to private contractors who, it was believed, could do it more efficiently and cheaply than U.S. government personnel.)
In 2005 the IRS began farming out delinquent tax collections to private collection agencies. Three debt collection agencies were initially used and two of them had special qualifications for the work. They had made significant financial contributions to politicians. Pioneer Credit Recovery came from the district of Rep. Thomas M. Reynolds of New York and one of the things that qualified it to be a debt collector for the federal government was that it had given congressional candidates and political action committees $117,450 since 1995. Mr. Reynolds received $16,250.
Linebarger Goggan Blair & Sampson of Austin, Texas and its employees and spouses gave political candidates and PACs of both parties more than $400,000 between 1995 and the time the program was started. After 2007 the firm was fired although the government isn’t saying why that is. It might have to do with the fact that the firm made a $2000 donation to the mayor of Mansfield, Texas a month after he was elected or it may have had to do with the vacation it paid for a contract officer in Chicago that got the firm fired from doing work for that city.
Mark Everson who was the commissioner of the IRS at the time outsourcing tax collection was put in place admitted that outsourcing tax collection is more expensive than keeping it in-house. He nonetheless supported the privatization of collection efforts claiming he could not get sufficient funding to permit him to hire more public sector tax collectors. Following that ill-fated decision Mr. Everson left the IRS to head up the Red Cross where he served only long enough to begin an affair with the member of his staff that resulted in his loss of the job.
According to a report in the Washington Post the private collections program has been a disappointment. The goal of the program was to collect $1 billion from deadbeats owing $25,000 or less. Instead, most of those folks have gotten a tax holiday. Instead of collecting $1 billion, the private debt collectors only collected $49 million. The cost of the program was $98 million suggesting, to the mathematically swift, that it produced a net loss of $49 million.
Commenting on the program in a statement on the floor of the Senate(pdf), Sen. Ben Cardin of Maryland observed that the IRS was losing at least $81 million a year by using private debt collection companies. That's according to Nina Olson, the National Taxpayer Advocate who told Congress that if the $7.65 million spent by the IRS to operate the program were spent instead on its automated collection system it would generate $153 million in revenue. Not everyone would agree with her.
Rep. Jim Ramstad is the ranking Republican on the Ways and Means Oversight Committee. He is unimpressed by the statistics furnished by Ms. Olson. He said the “real choice is whether we use private collection agencies or let these tax debts go uncollected. I hope we don’t take an enormous step backward in our efforts to close the tax gap by eliminating a program that’s working.” He didn’t say what part of the program is working. He’ll probably want to explain to Ms. Olson and Senator Cardin (and Sen. Byron Dorgan of North Dakota, another critic) the part that is working since they are apparently unaware of its successes. He may also want to explain it to his constituents.
