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“House Republicans Unveil Plan to Replace Health Law” (nytimes) describes a plan for a redesigned river of tax dollars directed at America’s health care industry. Let’s call the new plan “RepubliCare”.

Is there any way to look at this other than as a proposal to subsidize an industry that is demonstrably one of America’s least efficient and least competitive?

First, let’s look at whether it is fair to characterize America’s health care system as the equivalent of a 1930s steel mill.

A local family with some European connections has a relative who needed some stent work. With no insurance, the relative was quoted $125,000 for this project here in Boston, $40,000 in Switzerland, and $10,000 in Ukraine. “It was the exact same state-of-the-art Dutch stent for all of these,” explained my source. (The procedure was ultimately done in Ukraine by a top cardiologist there.)

Based on the higher cost to get the exact same thing done, I conclude that this is not one of our competitive industries and that, in a free market, it would mostly not exist (e.g., absent a health insurer willing to pay an insane local price, a typical American who needed work quoted at $125,000 would get it done by traveling to another state or another country).

Second, what about the specifics of this plan? It seems that health care for lower-income Americans would continue to be handled by 51 separate state bureaucracies:

Medicaid recipients’ open-ended entitlement to health care would be replaced by a per-person allotment to the states.

Ordinarily letting the states, some of which are much larger than the typical country, run stuff seems like a good idea. But here, a state government would have an incentive to favor local businesses even if health care could be provided with lower cost and higher quality in a neighboring state.

The health care industry, in addition to all of their profits from monopolization and collusion (helped by barriers to entry set up by state licensing boards and insurance commissions), will get direct federal tax subsidies in the form of tax credits:

Under the House Republican plan, the income-based tax credits provided under the Affordable Care Act would be replaced with credits that would rise with age as older people generally require more health care. In a late change, the plan reduces the tax credits for individuals with annual incomes over $75,000 and married couples with incomes over $150,000.

Why not just lower taxes on people who earn less than $75,000 per year and let the health care industry compete on a level laying field for their new higher purchasing power? (If the answer is that you don’t want people running up a $1 million bill from a catastrophic problem and ultimately sticking the rest of society with the invoices, roll an automatic catastrophic insurance policy (maybe with treatment done by the lowest high-quality bidder within 500 miles) into Medicaid/Medicare.)

Readers: Is there any reason for people interested in a market economy to be excited about this proposal? To my casual eye it looks like a slightly tweaked version of the same general idea: more favoritism through tax subsidies for an industry that has gotten fat off these since World War II.

Perhaps the strong resemblance between the hated old and the celebrated new is an illustration of what Tyler Cowen is saying in The Complacent Class: The Self-Defeating Quest for the American Dream:

an ever-increasing percentage of the federal budget is on autopilot, with only about 20 percent available to be freely allocated, and that number is slated to fall to 10 percent by 2022. In 1962, about two-thirds of the federal budget had not been locked in and could be allocated freely. Today, however, it is harder to have a meaningful debate about how the money should be spent because most of the money is already spoken for, and that is a big reason why problems of polarization—which have always been present—have become harder to solve.5 This change in the nature of the federal budget, and this quest for ever more guarantees, is one of many ways in which America’s pioneer spirit has been replaced by a kind of passivity. In the meantime, politics becomes shrill and symbolic rather than about solving problems or making decisions.

For the most part, American politics does not change and most voters have to be content—or not—with the delivery of symbolic goods rather than actual useful outcomes

So there will be a debate about transgender bathroom policy, but there won’t be any about the nearly 20 percent of GDP that is flushed down the health care toilet.

Related:

• my own health care reform plan from 2009 (universal coverage, but pre-budgeted, unlike Medicare and Medicaid)
• how some Americans will get a share of these new health care dollars even if they’re only slightly/briefly acquainted with the health care industry

 

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Atlantic Magazine (“Have Americans Given Up?”) has convinced me that the next book should be The Complacent Class: The Self-Defeating Quest for the American Dream by Tyler Cowen.

Readers: Maybe you all can order a copy too and then we can have a virtual book group discussion? We don’t want to be like those Middlebury students or New York Times journalists and complain about a book that we haven’t actually read!

Lending some support to the Atlantic summary of Cowen’s thesis, here are a couple of new products, one from a U.S.-founded company and one from a Korean company (exercise for the reader: guess the current gender identifications of the household members who purchased the respective items).

Related:

• Don’t invite these economists to your New Year’s party
• Another economic sourpuss

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My Facebook friends attribute Donald Trump’s victory in 2016 to a relatively sudden outbreak of stupidity, racism, and sexism among American voters.

We Believe the Children: A Moral Panic in the 1980s (won both “A Wall Street Journal Best Book of 2015” and “A Boston Globe Best Book of 2015”) suggests that, if we are in fact The Stupid Country (TM), this is not new.

Starting in the 1970s, for example, we convinced ourselves that multiple personalities could dwell within one physical human.

In 1973 the results of one of these experiments were published under the title Sybil: The True and Extraordinary Story of a Woman Possessed by Sixteen Separate Personalities. Written by a magazine journalist named Flora Rheta Schreiber, the book purported to tell the story of Sybil Dorsett, a shy and lonely woman who, in 1953, had “embarked on one of the most complex and most bizarre cases in the history of psychiatry.” The book reconstructed the therapeutic encounters between Sybil and her heroic, Upper East Side psychoanalyst, and it laid out the awful discoveries brought to light during Sybil’s time on the couch. “Sybil Dorsett’s” real name was Shirley Mason, and her psychoanalyst was Cornelia Wilbur. The two first encountered one another in 1945, when Mason, then a college student, went into psychotherapy with Dr. Wilbur.

Shirley Mason grew up in a Minnesota farm town where her Seventh-Day Adventist parents prohibited novel reading, story writing, and making drawings with weird colors in them—all activities that Shirley loved. Pretending was also expressly forbidden, but Shirley had imaginary friends named Vicky and Sam, though the rigid, self-lacerating piety of the church sometimes made their company difficult to enjoy. She had an intimate and confusing relationship with her mother, who sometimes alternated between bouts of nervous energy and long episodes of impenetrable depression.

When Wilbur had early success in the treatment of hysterics, she believed she had found a line of work to which she was exceptionally—even uniquely—well suited. Years later she would describe her clinical abilities as those of a “genius” and “a magician.” She also referred to herself as a maverick. In the years preceding her move into psychoanalytic practice, Wilbur consistently found herself working, sometimes recklessly, at the experimental frontiers of clinical psychiatry. She conducted a number of experiments with barbiturates, administering large doses of these powerful drugs to psychotic patients and noting the results. Wilbur was interested in shock therapy, and she also assisted on some of the first couple of hundred lobotomies performed in the United States.

Then, as now, we thought that it would be a great idea to give psychologically-troubled patients a whole cabinet full of drugs:

By this point Wilbur had also given Mason prescriptions for Demerol, Edrisal, Daprisal, and Seconal, the last of which is a highly addictive barbiturate. A week and a half later, Mason arrived at Wilbur’s office for a weekday appointment, and there seemed to be something different about her. “I’m fine,” Mason said, “but Shirley isn’t. She was so sick she couldn’t come. So I came instead.” “Tell me about yourself,” Wilbur said, and Mason replied, “I’m Peggy!” That Mason should have turned out to have Multiple Personality Disorder, of all things, was very exciting on its own—the condition was vanishingly rare in the 1950s. But within two sessions Mason had displayed four separate personalities. Wilbur had never heard of a documented case of four separate personalities. She decided to psychoanalyze all of them.

When it was finally published in 1973, Sybil included a list of the sixteen personalities that Wilbur eventually found inside Mason, complete with birth dates and personality characteristics. Victoria Antoinette Scharleau, born in 1926, was a “sophisticated, attractive blonde.” Peggy Lou Baldwin, born the same year, was an “angry pixie with a pug nose.” Mason had male personalities as well: Sid Dorsett was a carpenter and a handyman. Sybil describes Wilbur teasing out these personalities, one by one, gaining their trust, playing them off one another in search of information. It is a long and arduous process. Some of Mason’s personalities are so wary of Dr. Wilbur that she doesn’t even learn of their existence for months. The personalities know all about one another, however, and unbeknownst to the host personality—that’s Shirley—they argue and exchange information as part of a big, collaborative effort to help Mason survive the trauma that brought them into being in the first place.

Think that your fellow citizens are stupid because they were credulous enough to believe Donald Trump’s statements that regulations and high tax rates are retarding economic growth? Here’s some stuff from Sybil that Americans had no trouble believing…

At home Mason’s conservative, fundamentalist parents would bring their young daughter into the bedroom at night and force her to watch as they had sex. In the woods Hattie [the patient’s mom] would gather up neighborhood children and take them to a secluded place. “‘Now lean over and run like a horse,’ [Hattie said]. As the children squealed with delight at the prospect, Hattie would motion them to begin. Then, while the little girls, simulating the gait of horses, leaned over as they had been instructed, Hattie from her perch on the floor, revealed the real purpose of the ‘game.’ Into their vaginas went her fingers as she intoned, ‘Giddyap, giddyap.’” In 1962 Cornelia Wilbur would serve as one of the editors of an influential study of homosexuality identifying the phenomenon as an “illness,” one most frequently caused by improper mothering, and this belief is reflected in Sybil’s descriptions of Hattie’s abuse. Hattie orchestrated lesbian orgies in the forest. Hattie separated Mason’s legs with a wooden spoon, suspended the small girl from the ceiling, upside down, and then administered enemas. “‘I did it,’ Hattie would scream triumphantly when her mission was accomplished. ‘I did it.’ The scream was followed by laughter, which went on and on.” Sybil described Hattie’s motivation for these abuses as her pathological hatred of men. “‘You might as well get used to it,’ her mother, inserting one of these foreign bodies, explained to her daughter at six months or at six years. ‘That’s what men will do to you when you grow up. . . . They hurt you, and you can’t stop them.’” Wilbur obtained these stories by slowly and methodically turning Shirley Mason, who never displayed her “alter” personalities to anyone other than her analyst and her roommate, into a drug addict. When Mason had a particularly bad day, Wilbur would regularly give her up to five times the prescribed dose of Daprisal, Amytal, Demerol, or any number of other medications, and as therapy progressed, Wilbur added a powerful antipsychotic called Thorazine. At the center of this pharmaceutical regimen was Sodium Pentothal, a barbiturate so renowned for its ability to lower patients’ inhibitions that it was colloquially, though inaccurately, known as “truth serum.” Wilbur administered Pentothal injections with such frequency and in such large doses that Mason would often come out of a therapy session unable to remember anything she had said. “Under Pentothal,” she once confessed in a letter to Wilbur, “I am much more original.” As Mason’s personalities multiplied, and as the stories those personalities provided became more horrifying and more lurid, Wilbur decided a book had to be written about the case. To ensure Mason’s cooperation, Wilbur said she would cover Mason’s living expenses in exchange for her full-time devotion to therapy. Mason agreed. She spent at least fifteen hours a week in Dr. Wilbur’s office, and as a consequence of the drugs she consumed, she slept for roughly the same amount each night. As [Debbie] Nathan put it in Sybil Exposed, “she was a professional multiple personality patient.” Mason would stay on the job for more than a decade.

Did we have any incentive to be this dumb?

One explanation for Sybil’s runaway popularity is that it provided an elegant companion narrative to the growing consensus that child abusers committed their crimes not because of social conditions but because they were mentally ill. The tendency to see abusers as pathological aberrations from a healthy norm made them more interesting and less frightening: they could either be treated and then returned to nonabusive normalcy or, in cases that resisted treatment, they could be cordoned off from society for the rest of their lives without any misgivings. In any case, one would not have to get involved in a tricky conversation about what many people regarded as parents’ right to subject their children to disciplinary violence if they wanted to. By giving the victims of abuse a mental illness of their own, Sybil accomplished much the same thing, pushing attention away from the circumstances that cause abuse to happen in the first place and toward the elaborate treatments that might be administered after the fact.

The author’s explanation: As American society fell apart starting in the 1960s and none of the expensive anti-poverty programs were working, Americans wanted to believe that poverty (“social conditions”) was not an important driving factor.

It turns out that Americans who are making money by believing in something are unlikely to abandon that belief. “Sybil” actually wrote a letter to her now-famous therapist admitting that it was all made up:

By the time Shirley wrote the letter, she had no life outside of therapy, her friendship with Dr. Wilbur, meandering walks through New York, and a lesbian roommate who sometimes tried to get into bed with her. The letter was written as a four-page entry in a therapy diary that Mason maintained and allowed Dr. Wilbur to read. It began with a kind of forensic analysis of the doctor-patient relationship in which Mason found herself: At various times over the years you have told me you thought I was more than average in intelligence, or that I was clever, or that I was sensitive, imaginative, creative, original, etc. Well, I am. And, you see, I am also egotistical. . . . But I have played on it long enough now. It isn’t getting me anywhere, so this time I will be honest. . . . I have tried to tell you this before, but I couldn’t hold out very long when you showed doubts. . . . A person likes to be admired, and so I let it slide rather than to disappoint you or risk your anger if you should become convinced. I felt I couldn’t lose you again. After three paragraphs building up in this way, Mason came out with it, writing, “I do not have any multiple personalities. I don’t even have a ‘double’ to help me out. I am all of them. I have been essentially lying in my pretense of them, I know. I had not meant to lie in the beginning. I sort of fell into a pattern, found it worked, and continued to build on it.” While Mason thought it possible that there were real cases of Multiple Personality out there, she suspected that others diagnosed with the disorder could be cases “just like mine, hysterics with nothing better to do than ‘act a part’ and put off onto ‘another personality’ the things they cannot quite dare to pretend themselves, and then act as if they had forgotten in order to avoid punishment or feeling some sort of guilt or shame for the lie.”

As for the elaborate stories of abuse, Mason couldn’t say exactly where they had come from. They “just sort of rolled out from somewhere, and once I had started and found you were interested, I continued.” She said she made up all the stories about fugue states and Philadelphia, and she asked that Dr. Wilbur stop demonizing her mother, Hattie. She may have been anxious and controlling, but she hadn’t been a sadist, and she hadn’t raped Shirley with a flashlight. Though the letter had obviously been difficult for Shirley to write—she had no idea what Dr. Wilbur would make of it—the result was

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Charles Murray is a racist for citing research on the link between genetics and IQ. But when the New York Times suggests a genetic basis for creativity, that is definitely not racism! In “What Biracial People Know” we learn that “multiracial people are more open-minded and creative.”

By “race” it turns out that the New York Times mostly means “skin color.” But genetics nerds don’t divide up the world by skin tone. To the extent that they recognize “race” they look at DNA. And it turns out that “Europeans Less Genetically Diverse Than Africans”. The Telegraph summary of this research:

People of African descent are more genetically diverse than Middle Easterners, who are more diverse than Asians and Europeans.

So basically Africa should be where most of the important creative stuff happens, followed by Saudi Arabia and neighbors, with Europe, white Americans, China, and Japan in last place among significant-sized populations. Africans should also be the most “open-minded” so we would expect to see the fewest wars among ethnic or tribal groups on that continent.

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In response to a post on Facebook about getting a Lyme disease diagnosis for a not-quite-well child after a few trips to the doctor and being “one seriously pushy mother with the doctor’s office,” there were nearly 100 congratulatory comments. Here’s a sampling:

• Great catch, mom!
• Good job mom!!
• Way to follow your gut!
• Great Mom! Persistence works!
• Excellent job Dr. Mom!
• Great catch and very lucky the test cooperated.
• Thank God for Mommy’s gut feeling
• great mom intuition!
• Smart mommy!
• Poor little guy, but so lucky to have YOU for his Mama Bear!!
• Moms know best!
• Way to go mommy!
• Good instincts momma. Lyme is so scary for how sneaky it is
• Good instincts mom!
• Mother’s intuition is always the best.
• The mom instinct is strong!!!
• Yay momma!
• A mother knows!
• A great reminder to never doubt our instincts…thank goodness!
• Mama knows best.
• Sorry about that ;(. Mom instinct is no joke! Great mom!

More signs of the Zeitgeist:

• Sending healing vibes his way
• I started using Tumeric recently. Read up on the benefits. For everyone, the benefits are incredible. (link to Turmeric for Health)

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I’m wondering if “Protesters Disrupt Speech by ‘Bell Curve’ Author at Vermont College” (nytimes) inadvertently proves Charles Murray correct. Here’s the summary of The Bell Curve from the best minds of American journalism circa 2017:

Hundreds of students at Middlebury College in Vermont shouted down a controversial speaker on Thursday night, disrupting a program and confronting the speaker in an encounter that turned violent and left a faculty member injured.

Laurie L. Patton, the president of the college, issued an apology on Friday to all who attended the event and to the speaker, Charles Murray, 74, whose book “The Bell Curve,” published in 1994, was an explosive treatise arguing that blacks were intellectually inferior to whites because of their genetic makeup.

I listened to an abridged version of the book about 13 years ago and noted in a posting that the book was not in fact about race. The Wikipedia page on the Charles Murray contains the following summary:

The Bell Curve: Intelligence and Class Structure in American Life (1994) is a controversial bestseller that Charles Murray wrote with the Harvard professor Richard J. Herrnstein. Its central point is that intelligence is a better predictor of many factors including financial income, job performance, unwed pregnancy, and crime than one’s parents’ socio-economic status or education level. Also, the book argued that those with high intelligence (the “cognitive elite”) are becoming separated from the general population of those with average and below-average intelligence, and that this was a dangerous social trend. Murray expanded on this theme in his 2012 book Coming Apart.

…

Much of the controversy erupted from Chapters 13 and 14, where the authors write about the enduring differences in race and intelligence and discuss implications of that difference. While the authors were reported throughout the popular press as arguing that these IQ differences are genetic, they write in the introduction to Chapter 13 that “The debate about whether and how much genes and environment have to do with ethnic differences remains unresolved,” and “It seems highly likely to us that both genes and the environment have something to do with racial differences.”

In other words, you have to get through 12 chapters of a 22-chapter book before coming to the two chapters that the New York Times says the book is about! (And, in any case, the Bell Curve authors were mostly citing research on the Heritability of IQ, not conducting it.) Certainly the New York Times focus on “blacks were intellectually inferior to whites” says more about the New York Times than about Charles Murray. The chapters in question could just as easily have been summarized with “whites were intellectually inferior to Asians.” Somehow the paper that styles itself the Great Friend of the Colored Races can’t resist running story after story about how Americans with darker skin do poorly in school (see New York Times to employers: Toss resumes from applicants who went to school in poor neighborhoods).

What the book is actually about seems consistent with our Age of Rage (concerning inequality). As Wikipedia notes:

those with high intelligence (the “cognitive elite”) are becoming separated from the general population of those with average and below-average intelligence, and that this was a dangerous social trend.

If you like to fret about inequality, the sidelining of less-than-brilliant workers in favor of robots, etc., why wouldn’t you love Charles Murray? I’m wondering if the incident at Middlebury College shows that America’s brightest millennials are unable to read a book before showing up to protest. Then of course we have the fact that their counterparts in Asia spent those hours studying. In my own 2004 posting I said that the silver lining of the otherwise depressing book was that old people like me might still be able to find work because “if the book is right most [future young Americans] will be dumb as bricks.”

Related:

• Book Review: The Redistribution Recession (using tax dollars to encourage low-skill/low-education Americans to work fewer hours and have more kids)
• The Son Also Rises: economics history with everyday applications (potential genetic factors behind “success” (not just IQ))
• “Child Support Litigation without a Marriage” (the U.S. system, built starting in 1990, of using court orders for private cashflow to encourage Americans to have kids for profit; see this chapter for the aggregate effect on our economy)
• unemployed = 21st century draft horse?

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Back in December I wrote a post about some economists who remind Americans that, after adjusting for population growth, our economy is not in fact growing and that our expenses for healthcare, housing, and education are “soaring”.

A friend recently shared Scott Alexander’s “Considerations on Cost Disease,” which is along similar lines.

On our public schools:

Costs really did more-or-less double without any concomitant increase in measurable quality.

So, imagine you’re a poor person. White, minority, whatever. Which would you prefer? Sending your child to a 2016 school? Or sending your child to a 1975 school, and getting a check for $5,000 every year?

On universities:

Inflation-adjusted cost of a university education was something like $2000/year in 1980. Now it’s closer to $20,000/year. No, it’s not because of decreased government funding, and there are similar trajectories for public and private schools.

I don’t know if there’s an equivalent of “test scores” measuring how well colleges perform, so just use your best judgment. Do you think that modern colleges provide $18,000/year greater value than colleges did in your parents’ day? Would you rather graduate from a modern college, or graduate from a college more like the one your parents went to, plus get a check for $72,000?

(or, more realistically, have $72,000 less in student loans to pay off)

My uncle paid for his tuition at a really good college just by working a pretty easy summer job – not so hard when college cost a tenth of what it did now.

On health care:

The average 1960 worker spent ten days’ worth of their yearly paycheck on health insurance; the average modern worker spends sixty days’ worth of it, a sixth of their entire earnings.

Countries like South Korea and Israel have about the same life expectancy as the US but pay about 25% of what we do.

On building a subway system:

[the original cost of building New York City subway lines] looks like it’s about the inflation-adjusted equivalent of $100 million/kilometer today, though I’m very uncertain about that estimate. In contrast, Vox notes that a new New York subway line being opened this year costs about $2.2 billion per kilometer, suggesting a cost increase of twenty times – although I’m very uncertain about this estimate.

Maybe this is all fine because we’re paying ourselves more?

health care and education aren’t paying their workers more; in fact, quite the opposite.

Conclusion:

If some government program found a way to give poor people good health insurance for a few hundred dollars a year, college tuition for about a thousand, and housing for only two-thirds what it costs now, that would be the greatest anti-poverty advance in history. That program is called “having things be as efficient as they were a few decades ago”.

Right now the standard of living isn’t just stagnant, it’s at risk of declining, and a lot of that is student loans and health insurance costs and so on.

Readers: What do you think of Scott Alexander’s analysis? He admits that he has no solutions to offer (though perhaps returning education and health care to the market economy would be a start?).

Related:

• my health care reform article from 2009 where I asked “Who Voted to Spend All of Our Money on Health Care?”

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Continuing my report on Eccentric Orbits: The Iridium Story, one of the Wall Street Journal “20 books that defined our year” for 2016.

The central figure in the book is Dan Colussy, a former Coast Guard officer who ran Pan Am for 10 years and then did a rollup of government contractors called United Nuclear Corporation, sold to GE in 1997.

The central villain is Motorola. They had insurance against their satellites falling out of the sky and hitting people but it wasn’t of unlimited duration. When Iridium went bankrupt, after paying out most of the funds raised to Motorola itself, the Motorola executives desperately wanted to de-orbit the $6 billion worth of satellites, thereby insuring that their investors and partners (the gateway owners, the handset manufacturer Kyocera, et al.) would be left with nothing.

Who was partying with the bondholders’ cash during the Chapter 11 proceedings that started in August 1999?

The legal profession was very happy to assist in the demise, restructuring, and rebirth of Iridium, and by one estimate the lawyers were burning through $4 million a month in fees approved by the bankruptcy court. You had lawyers for Iridium, lawyers for the creditors, lawyers for Motorola, lawyers for Boeing, and lawyers for every gateway. You had lawyers on staff and outside lawyers for specialized matters like licensing and insurance. The White House counsel was involved, as were the employees of the biggest lawyer of them all, Attorney General Janet Reno. There were lawyers from the Departments of Commerce, Defense, State, and Treasury, including one—David Cohen—whose title was Senior Counsel to General Counsel in the Office of the General Counsel. Colussy hired lawyers to deal with the FCC, the various aviation insurance companies in Paris and London, and the International Telecommunication Union in Geneva.

What was the risk? The good news for fans of climate change fans is that the “science was settled.” After all, the formulae for orbital mechanics go back to Isaac Newton, 1684-7. Estimate #1:

[NASA] said the chances of being hit by falling debris would be 249 to 1, with the chance of an actual death at 40,000 to 1. The NASA analyst believed that, in addition to the titanium fuel tank, five other parts would survive reentry: the battery, three structural brackets, and the electronic control panel.

Estimate #2:

Risk assessments carried out by aviation insurance experts hired by Boeing estimated the probability of personal injury from de-orbiting the Iridium satellite system at 1 in 1.063 trillion.

Nobody ever figured out how to reconcile these apparently conflicting results.

No technology is so beautiful that it couldn’t be ruined by software developers:

Each country billed its Iridium phone service in local currency, and each customer had a choice of four different service plans. That meant that a call could originate in a country licensed to use Zambian kwachas, go through a gateway priced in Brazilian reals, and terminate over landlines priced in Peruvian nuevo soles. If the phone had been purchased in, say, Oslo, then all of this would have to be fed into the Reston computers, where it was converted into South African rands for the originating gateway and Saudi riyals for the gateway owners, translated into American dollars for Iridium, and summarized in a monthly bill denominated in Norwegian kroner. The diciest part of the whole system was the terminating leg of the call—the part that continued on land after the satellites passed it down. These “tail charges” could be as low as 4 cents a minute or as high as $2.50 a minute, depending on where the call ended up, and that was on top of the already exorbitant Iridium per-minute charges—anywhere from $3 to $7. Iridium had hired Andersen Consulting to program ten million lines of computer code for the billing system, but the system was unstable, functioning so erratically that Leo Mondale eventually developed an in-house Excel system that worked just as well. Naturally the customers were annoyed by the unpredictability of it all, and one of the first decisions Colussy made was to change all billing to one price and one plan. Iridium would get 80 American cents per minute, period. Service providers could charge whatever they wanted—most charged around $1.50—but the wholesale price was 80 cents. (Ten years later, that was still the Iridium price.)

The U.S. government was an important future customer, but because hadn’t yet invaded Afghanistan or Iraq, people in Washington and at the Pentagon didn’t feel a huge urgency. The U.S. government was also critical for dealing with Motorola, which insisted on a total release of liability above and beyond what any commercial insurance policy might cover.

The Washington bureaucracy fully deserved its reputation, and any agency with the word “license” or “permit” in its charter was bound to be staffed by an army of people whose deliberately measured passive-aggressive voices threatened to put you to sleep at any moment. The goal of the process seemed to be the collection of bulky brown folders full of data.

Colussy hires the right lobbyists, though

… senior partner at the vast Sidley Austin firm, to carry his case before the FCC, the insurance companies, and any other regulatory agencies that cropped up and to ensure that all the licenses were transferred. In the rarefied world of “regulatory enforcement law,” Carter Phillips was king, having been an Assistant Solicitor General before going into private practice, and currently holding second place on the all-time list of cases argued before the Supreme Court (in excess of fifty)—cases touching such obscure and complex parts of the federal bureaucracy that, if placed end to end in a bound volume, would render the most dedicated law student comatose.

Eventually he gets to the right person in the Pentagon:

In many ways a meeting with the Deputy Secretary had an air of seriousness that meetings with the SecDef lacked, mainly because you knew that, at the end of the meeting, the decision was likely to be made one way or the other. The SecDef was the person you talked to at the beginning of a process. The DepSec was the last person you talked to.

“I have a message for your CEO,” said [Rudy] deLeon. “Tell Mr. Galvin that if I hear one more fucking threat to bring these satellites down, then his corporation is going to have a really hard time doing business with the Pentagon in the future.” The room went still. “I will give him that message,” said Schaffner. “All right,” said deLeon, “we should all now work together to get the constellation indemnified so that we can move forward without destroying it.”

More than a year after the bankruptcy filing, the Pentagon wakes up a bit:

in October [2000], USS Cole, a guided-missile destroyer out of Norfolk, Virginia, was going through a routine refueling stop at the port of Aden, in Yemen, after coming through the Suez Canal. It had pulled up next to a “dolphin” platform—the equivalent of an offshore gas station—… Forty-eight minutes after refueling began, an inflatable small craft manned by Ibrahim al-Thawr and Abdullah al-Misawa was seen pulling alongside the Cole by the duty officer. Al-Thawr and al-Misawa both stood at military attention and saluted as they approached. What was impossible to see from the deck was that the two men were standing on top of 250 kilograms of composition C-4 plastic explosives, and once they pulled alongside, they used a detonator to blow a sixteen-hundred-square-foot gash in the side of the Cole, directly opposite the mess hall, while most of the crew was at lunch. The two al-Qaeda bombers died instantly, and the Navy casualty toll would end up being seventeen dead and thirty-nine injured. … But the communications center aboard the ship had been disabled by the explosion, so his only contact with the Cole was through a single phone, borrowed from the U.S. embassy—an Iridium phone.

Colussy was trying to get a contract from the Feds for $72 million for 20,000 phones, to be used worldwide, and unlimited minutes over a two-year period. (That’s $150 per month per user.) The military’s proposed alternative was going to cost at least $10 billion to construct. The repair of the Cole alone cost $250 million (source). Despite the comparatively miniscule cost of the Iridium contract, it seemed that the government had endless file cabinets full of bureaucrats who needed to look at it. This gave competitors time to poke around and lobby as well (it seems that senators were cheaper to buy than satellites):

Unfortunately, Senator Ted Stevens and Representative Jerry Lewis were not going away. Keith Bane, newly energized by the prospect of McCaw owning Iridium, had Motorola lobbyists in Washington working on Stevens, and even volunteered to make a call to the senator himself. The grassroots efforts in Stevens’ home state were starting to work as well. Sam Romey, a rough-and-tumble mountain man and service provider in northern Alaska, was so infuriated by the Stevens-Lewis letter that he had rounded up a contingent of Alaska State Troopers to talk to Stevens. But Bernie Schwartz wasn’t defeated so easily. One of the most powerful Democrats in the Senate—Ted Kennedy of Massachusetts—was now lobbying for Globalstar, calling the Pentagon to ask questions, but even that was not as surprising as the fact that one of the most powerful Republicans in the Senate had jumped onto the Schwartz bandwagon as well—Trent Lott of Mississippi.

Back in Washington, Dave Oliver called Colussy to say, “I have neutralized the Democratic side in Congress”—but now Globalstar had a new ally in the form of the Office of Management and Budget (OMB). For weeks Oliver and deLeon had been coordinating all the approvals Iridium would need through a group of twelve agencies and departments, and there had been dozens of e-mails, memos, and PowerPoint presentations as they got ready for the showdown meeting in the Situation Room. (Dannie Stamp called it “organizing the circle jerk.”) But that debate had occurred without involving OMB. Now OMB had announced its intention to oppose the Iridium deal. Bringing OMB up to speed was like starting the whole process all over again, with every policy wonk in the city now alerted to a unique situation that read like a case study at the Kennedy School.

And then, as if the story couldn’t get any stranger, word came from Isaac Neuberger that weekend that President Clinton and [Motorola CEO] Chris Galvin were playing golf together in Vietnam. What he didn’t say was that on the golf course earlier that day, Galvin had spent most of the round telling Clinton that it was better to let the satellites be destroyed, because they had a life span of only five years anyway and some of them had already been flying for three years, so it was silly to go through all these machinations in Washington just to keep a constellation alive that couldn’t be replaced as satellites went out of commission. After all, who was going to throw another $6 billion after the $6 billion that had already been spent? Clinton was “spooked” by the remarks, according to Neuberger, and passed them along to Sperling.

Sperling was still jet-lagged from his 3:00 a.m. touchdown from Vietnam when he arrived at the West Wing to chair the Situation Room meeting on November 20. Keith Bane’s de-orbit deadline was two days away, and the battle lines had been clearly drawn. There were twenty-eight people present from nine departments and agencies, but only two mattered. The Office of Management and Budget was determined to change this deal or get rid of it entirely, and the Pentagon was determined to make it happen.

All of the alternatives to Iridium were technically inferior or still on the drawing board, so no matter how many politicians they bought the competitors couldn’t quite kill Iridium, e.g., Ted Stevens had to back off when Alaska State Troopers and natives told him that Iridium

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My black diamond-capable host in Beaver Creek broke his rib falling face-down on a cat track about two weeks before I arrived. Conversation one morning:

• “I rolled over in bed and heard a crack. I think I broke my rib again.”
• “That’s terrible. I’m sorry to hear it. What can do you to help it heal?”
• “There are really no medicines. You just have to give the bones time to knit together. What I need is something to keep me from rolling over in bed.”
• “You could take a Viagra every night at bedtime.”

[Some credit due to Kevin Fitzgerald, the world’s funniest veterinarian.]

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My cold wasn’t getting any better after two weeks so I went to the doctor. The receptionist asked for my insurance card. This is a “silver” Obamacare policy that costs $8,460 per year. I noticed that the co-pays are now higher than what the corresponding services typically cost not that long ago (and therefore higher than the market price today in a lot of rich countries). A generic prescription is $20; branded drugs will be $60 or $90 if they are covered at all. An office visit is $30 or $50. A few stitches at the “ER”? $700 co-pay.

My appointment was right after the lunch break so I was seen almost as fast as a dog would be seen at a vet. A sinus infection was diagnosed. “I used to prescribe Erythromycin for this,” the doctor said, “and it was a couple of pennies a pill. Now it is $200 for a course so I’m going to give you a Z-pack.” How was it possible for a generic to cost $200? “I think the generic manufacturer was acquired.” (Medscape says that “For example, erythromycin in 500-mg tablets had three increases of more than 100%. Its price increased from 24 cents per tablet in 2010 to $8.96 per tablet in 2015.” while Wikipedia gives the wholesale price at 3-6 cents in countries not subject to U.S. government regulation.)

[Separately, I posted this story on Facebook and a passionate Hillary Clinton supporter living in the Bay Area responded with

I know it’s crazy. Just this week I slightly scratched my back bumper on my car, but because my car insurance has a $500 deductible, I had to pay the whole thing myself. And to think I pay $1700/year in car insurance for me and my wife… clearly I’m losing money on this deal!

(or, you know, that’s how insurance works.)

Is the analogy apt? I haven’t had any health problems in the last two years nor changed my plan or vendor yet the cost of insurance has doubled while the emergency room deductible went from $100 to $700. I haven’t seen car, home, or aircraft insurance rates rise. In fact, my Obamacare policy now costs about the same as what a private owner would pay for insurance on a $2 million turbine-powered aircraft in which as many as 11 people might be killed if the single non-professional pilot should make a mistake. Thus it now costs as much to insure someone against the hazard of falling into the hands of the world’s least efficient medical system as it does to insure 11 people against the hazard of flying through the air at 300+ mph.]

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