Every once in a while, something happens at a sporting event that provokes a discussion of much deeper societal values. Such an event happened Saturday, July 9, at Yankee Stadium. Christian Lopez, the fan who caught Derek Jeter’s 3,000^th hit, a home run, made an instant decision to give the ball to Derek Jeter, even though he had an absolute right to keep it, and maximize the economic benefit from securing a ball that is very important in the history of baseball.  To put this into perspective, the value of what the Yankees gave him for the ball was probably worth around $50,000.  The ball could have fetched $400,000 in an auction.

Whether he made a values-based judgment that he had simply received a windfall and did not deserve to profit simply from being in the right place at the right time, or whether he believed that he would receive more long-term economic benefit from giving up the ball does not matter: he did an admirable thing.

Everyone’s behaviors are on a continuum from being totally generous of spirit to others to being totally mercenary and interested only in helping oneself.  To be generous of spirit does not mean that one withdraws from the capitalist system, lives like Mother Teresa or Paul John Paul II, and deny or give away everything material.  A person whom I consider an example of practicing behaviors that are generous of spirit, and whom I have always admired, and got to meet by serving briefly on a board of directors with him, is Neil Armstrong, the astronaut who was the first person to walk on the moon.

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We are at the stage at which a new health plan paradigm needs to be adopted by governments and insurance companies.

The Old Paradigm: Healthy people subsidize those who get sick or injured through no fault of their own.

Throughout the history of U.S. health insurance, the prevailing paradigm was that everyone paid for health insurance, with the healthy people paying higher premiums to subsidize those who became sick through no fault of their own.  State insurance regulators authorized the issuance of health insurance policies with three rating frameworks:

• Community rating: everyone paid the same premiums;
• Adjusted community rating: differences in premiums are allowed, based on population demographic factors like gender, age, and geographic differences in health care delivery costs; and
• Experience rating: those with pre-existing conditions either were denied coverage, paid more, or had coverage exclusions.

All these systems assumed that insured people had no control over their health.  Therefore, adjusting premiums based on individual behavioral risk factors, such as smokers’ penalties, allowed in life insurance policies, or premiums based on taking a drivers’ education course, part of automobile insurance ratings, were not allowed in health insurance policies.

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There is a relatively easy pair of solutions to the unemployment crisis.  The biggest issue for private sector employers which have provided retirement benefits for their employees is the burden of providing for future benefits for current and future retirees. (Government accounting is different. Government employers only have to provide for what they out in the current year.)  What many people do not understand is that when a private employer provides such benefits, it not only covers what it pays in the current year, but a share of what it will pay out in future years.  The exact allocation between current and future year benefit expenses varies from employer to employer, but there is no question that portion of current-year benefit expense allocable to future years is huge and it gets in the way of employers hiring new workers.

So how do we solve this problem?  It’s very simple, but the answer varies between pension and retiree medical expenses.

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I was pleasantly surprised and gratified to see the U.S. Securities and Exchange Commission sue the State of New Jersey for fraudulently misrepresenting its financial health because of its failure to report on the status of its pension funding.  According to the SEC, New Jersey had 79 separate bond offerings between 2001 and 2007, representing over $20 billion in tax-exempt bonds, on which it made false and misleading disclosures to investors and prospective investors.

I would hope this is a first step to getting government finances in order.  Like many people with discretionary assets, my wife and I own tax- exempt bonds.  We are deeply concerned about whether we are getting accurate and complete information about the state of finances in Connecticut, and in the few other states in which we have government bonds.

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As the son of a mother who, mercifully died suddenly as a result of an automobile accident when she was in the early stages of Alzheimer’s disease, and a father who deteriorated over an 15-month period, all of which was spent in a rehabilitation center and a nursing home after he broke his hip at age 82, I have thought a lot about end-of-life issues.

As a result, I was gratified to see an incredibly incisive and thoughtful article on this subject by Dr. Atul Guwande of Harvard Medical School in the August 2, 2010, issue of The New Yorker. The subject of end-of-life care for individuals with terminal illnesses or diseases is not a new one, but Guwande brings new insight to it.

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I have received two comments regarding the recent health care legislation.  The one I just approved, from Congressman Chris Murphy, is obviously thoughtful and took considerable time and effort to draft.  I have some reactions to that comment, as well as the comment received earlier in the week, but I will be deferring response to both comments until this weekend, when I am back home and have an opportunity to look at some research I have accumulated on health care.  I am honored that Congressman Murphy, a thoughtful and dedicated public servant, considered this blog of sufficient value that he would make the effort to comment.  I owe him and all of you reading this blog a better effort than I can make from my hotel room after a lengthy conference.

One of the fundamental issues with health insurance reform, and the reason it has been so difficult to get done is that health insurance differs fundamentally from other risks.  One of the basic principles of insurance is that an insurer creates a mechanism to protect against a defined risk event, with a defined financial payout, by collecting an amount in advance from each policyholder that, along with investment returns, allows for the insurance company to make an adequate profit.

This plays out very well in insurance products like life insurance, auto insurance, and property and casualty insurance.  Life insurance is the simplest because the insurance company determines, for an entire policyholder population, when people are likely to die, and sets premiums to make sure it can pay out when people die.  Auto and property and casualty insurance work similarly, with the defined benefit being either the fair market value of the auto or the legal liability level of the policymaker.  Because the definition and scope of fair market value and the potential risk of legal liability have not changed very much over time, these are relatively stable risks to insure.

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In the September 7, 2009, issue of the New York Times, reporter Michael Lud wrote an article entitled “Out of Work and Too Down to Search On,” which essentially made the point that the economic environment is so bad that many people stop looking for work.

Unemployment is psychologically devastating.  I know: I was unemployed for several months in early 1979, when I left my law firm and was trying to secure another legal position.  I was asked to look for another job because I was told I would not be made a partner.  My stay on the unemployment rolls was brief, but terrifying.  As a result, I empathize with anyone who has lost his or her job.

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At a time when businesses are trying to reduce costs to continue to be profitable when revenues are either declining or flat, it is tempting to reduce spending on government advocacy, especially if a business believes that it is adequately represented by trade associations or coalitions.  Nothing could be riskier.  Let me illustrate my point by discussing the evolution of health care legislation.

Contrary to what is sometimes reported in the popular media, large, self-insured employers want to continue to control and manage their own health plans for their employees, and are unenthusiastic about the “single payer” system, which would take control of health care costs away from them, and place it with a government-owned organization.  While some employers think a single payer plan will reduce their health care cost outlays, this is probably not the case, and, more likely than not, they will pay more, except that it will be in the form of one or more kinds of taxes.  In fact, when I hear the comment that Toyota has an advantage over GM because Toyota does not have to pay health care costs, I am astounded that any intelligent person accepts this argument uncritically.  Someone, whether it is Toyota or another category of Japanese taxpayer, pays for the health care costs of Toyota employees.  While a single payer system spreads the cost over a larger population, the real driver of health care costs is not who pays, but how much is paid, based on usage and cost-per-unit.

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