Wednesday, June 24, 2009

Computer Billing in Health Care

First published on

The Obama Administration is described as computer savvy. They apparently made excellent use of computer technology during the election campaign and continue to apply computer technologies in their White House duties. They have suggested over hauling America’s health care records system by computerizing records and billing, and reducing or eliminating paper billing and records. America’s health care system has lots of paper to save, but there is reason to worry about jobs.

Monthly employment in health care establishments averaged 14.6 million jobs in 2008 for health care sectors in ambulatory care, hospital care, nursing and residential care. The jobs in these sectors can be divided among three groups of occupations. The first is health care practitioners who are mostly doctor, dentist, pharmacist, nurse, therapy and technology jobs. Health care practitioners actually deliver health care to patients and the jobs tend to have college and professional degree requirements. Few can be performed without a license.

Health care practitioners are the biggest segment of health care with 5.7 million jobs, 2.2 million of them nurses. Next are health care support occupations. All of them have aide, assistant or attendant in their job title: nurses aide, therapy assistant and so on. Jobs in support occupations are 3.1 million of the 14.6 million of the health care total. The third segment might be called administration and overhead, which are jobs in managing, record keeping and billing. These are 5.8 million jobs.

In other sectors of the economy, bills tend to be a two party transaction between a customer and a vender, but seldom so in health care. One illness or injury starts a billing shuffle through separate bureaucracies at hospitals, laboratories, clinics, HMO’s, PPO’s, IPO’s, but also private insurance companies, independent billing agencies and bureaucracies at Medicare, Medicaid, Social Security, workmen’s compensation or the Veterans Administration. Medicare, Medicaid and workmen’s compensation are federal programs with federal bureaucracy, but also administered by the states through 50 separate bureaucracies.

More health care in a paper world brings growth to jobs as financial clerks and information and records clerks, which are bill and account collectors, billing and posting clerks, bookkeepers, office clerks, receptionists, and secretaries. Those jobs exceed 2.6 million for those who work within the health care industry sending out the bills. It doesn’t count the insurance company or government bureaucracy jobs for the people who take them in.

Computerized billing would lead to standardization and cost saving efficiency and better and more detailed records. It should be done, but like many good things it will have noticeable side effects. At the Obama administration jobs will be a bigger problem than they may realize.

Tuesday, June 16, 2009

Parkinson's Law

Parkinson’s Law and America’s Labor Markets

"Work expands so as to fill the time available for its completion."
-C. Northcote Parkinson

Back in the 1950’s Mr. Parkinson published a book that started with Parkinson’s Law cited above. It was a thin book with big fonts and bigger margins. He had some stories with anecdotal material to support the law. I cannot remember a single one of the stories but they were unnecessary. No one contradicted Parkinson’s Law.

Notice if you reverse the first two words Parkinson’s Law becomes a policy. Expand work so as to fill the time available for its completion. Now we have a directive not a prediction. A slight variation might be, expand expenditures so as to fill your whole life with work.

Writing Parkinson’s Law as Parkinson’s Policy is important because a law usually feels like something natural and inevitable and not a decision. Policy is a decision and people make decisions. The federal government is in the best position to expand work so as to fill the time available for completion because it can tax and spend, and controls money and credit, both of which allow increasing the country’s total spending as necessary to create jobs.

Back on August 11, 2005 the Associated Press reported President Bush’s comments on a transportation-spending bill. “President Bush calls the massive $286.4 billion transportation spending bill he signed into law Wednesday a job creator.” The article goes on to describe the bill that pays for 6,000 favored projects in the districts of nearly every member of Congress. Even though the legislation is $30 billion more than the President recommended he is quoted as “proud to sign it.”

Imagine my surprise at the candor of Mr. Bush with his reputation as a devotee of free enterprise. Free enterprisers expect jobs to be part of free markets where supply and demand determine output, prices and wages as if guided by an “invisible hand” and with the Adam Smith condition that society’s bread will not be due to the benevolence of the baker, but to his self-interest.

It is easier for those outside elected office to favor free markets and its policy of waiting since they do not have to take responsibility for the unemployed. It is different for politicians like Mr. Bush who apparently understand that a job in America is a requirement.

Over the last twenty years America’s total spending and Gross Domestic Product(GDP) are up, which helps meet that job requirement, and helps counter the mordant, mournful decline of 4.3 million manufacturing jobs since 1990.

The economist's way of looking at this reality is to say "Wow, this is terrific because the economy has growth with more goods and less hours of work and now 4.3 million people can be released to produce more products and services in other industries." Economists like to talk about alternative uses and labor released for alternative employment can help raise economic growth.

Economists see a natural flow of reallocation as inevitable, but the Obama administration is not prepared to wait for the economist’s reallocation. They have adopted the Parkinson policy of filling the time available for work.

The new stimulus package is loaded up with job creating building projects: roads, rail, solar panels, windmills and plenty more. Adopting building projects as a Parkinson Policy will create jobs, as it did for Mr. Bush, and it has the advantage that Americans will have something to use when the projects are finished.

When Mr. Parkinson published his book he was more concerned about the growth of rigmarole in bureaucracies, especially government. He saw bureaucracies growing with the growth in transactions, which are recorded, counted, and taxed through many bureaucracies.

America administers dedicated taxes and charges through multiple bureaucracies for federal, state and local taxes on income, sales, property, utilities, alcohol, tobacco and charges for workmen’s compensation, unemployment insurance, social security, Medicare and a few more. Every new job in America brings action at tax bureaucracies of work and jobs in recording, filing, collecting and dispersing. There is no natural law that requires each little tax to go with each little service, but it sure is good for jobs.

Filling bureaucracies with Parkinson’s policy helps moderate the relentless tide of jobs lost to labor saving technologies and computer use in the economist’s reallocation. Ominous trends for jobs in information services, especially publishing and telecommunications, finance, even retail and wholesale trade add trouble to the jobs disappearing in manufacturing, natural resources, and agriculture.

From 2000 through 2008 publishing jobs dropped over 150 thousand while broadcasting jobs went down 27 thousand. Telecommunications jobs are off 375 thousand where jobs lost in landline service are not replaced by the trickle of new jobs in cell phones. In today’s digital world landline, cell, and cable companies offer phone services as well as Internet and cable TV services using the same or similar technologies. Their low cost to the incremental customer and the ability of individual companies to offer multiple services through one network pressures firms to consolidate, cut costs, and eliminate jobs.

It is much the same story in finance where jobs have dropped back to 2000 totals. Bank mergers and consolidations typically go with layoffs, but money and finance are nothing but computer code, which can be managed by ever fewer people. On-line banking wipes out jobs even though not everybody likes the efficient digital world. Some still want to drive to the bank and exchange paper with a teller. America now employs 600 thousand tellers. If Americans decide to go digital, America will have fewer tellers, a lot fewer.

Retail jobs are down 633 thousand for the twelve months ending April 2009, but retail job growth has been sluggish for years. Computers raise productivity especially with barcodes and inventory management, raising sales volumes per employee and reducing employment opportunities. Growth in on-line sales will reduce jobs further.

Economists continue to tell anyone who listens that jobs lost to reallocation will be replaced as more Americans resolve to “get some training” for the new high tech jobs of their future. The Bureau of Labor Statistics publishes industry and occupational data that tell a different story. Count 370 thousand new jobs in landscaping services, 300 thousand new jobs in security guard companies and investigation services, 242 thousand new jobs in janitorial services, 471 thousand new jobs in child day care, 151 thousand new jobs at telephone call centers, all since 1990. Include 90 thousand new jobs at parking lots and car washes, 92 thousand new jobs at collection agencies. No one should forget 1.187 million more jobs for those employed through temporary help agencies.

Restaurant jobs are up 3.1 million also since 1990 along with 172 thousand new jobs in gambling and casino hotels, 273 thousand new jobs at amusement parks, arcades, golf courses, country clubs, ski hills, and marinas. Include fitness centers with more jobs than all of gambling and 236 thousand new jobs since 1990. Count 255 thousand more jobs in pet supply stores, and pet care services, including veterinarian services.

These are the industries where America works when technology saves labor and we create jobs with the Parkinson policy. More jobs in computing technologies relieve the decline, but not much. If we look at all the job growth in the multiple of computing industries, by adding new jobs since 1990 in software publishers, data processing, Internet service providers, web search portals, custom computer programming, computer system design, computer services management and related services, computer and office machinery rental and leasing and computer and office machinery repair, the gain comes to 1.334 million new jobs; less than half of jobs lost in manufacturing or jobs gained in restaurants in the same period.

Engineers are high tech, but the majority of them need work in manufacturing. The just published Bureau of Labor Statistics occupational data for 2008 shows 1.516 million engineering jobs just 65 thousand more than 2000. Education jobs are up with 4.1 million more jobs since 1990, but those are mostly public jobs. As such they are part of the Parkinson Policy, hardly the economist’s solution.

The Obama administration will have nightmares trying to replace the jobs already lost, just since taking office. Economists have faith in reallocation, but America needs jobs. The Parkinson Policy will create jobs. Long live Parkinson, only he is not the solution, but solutions are topics for other articles.

Wednesday, June 3, 2009

Banks and Nationalization

First published on

In the current banking crisis there continue to be people in banking and business calling for nationalizing banks. One recent example was an article in the Atlantic Magazine titled “The Quiet Coup.” It turns out the author is from the International Monetary Fund with experience from international financial crises. He writes nationalization would not mean permanent state ownership. “It would allow the government to wipe out bank shareholders, replace failed management clean up the balance sheets, and then sell the banks back to a private sector.”

Nationalization does not solve one problem that could not be solved without it. America has to have a banking system and wiping out one to replace it with another does nothing to address the political causes of the banking crisis. America’s bankers played the central role in creating America’s banking crisis, but their influence continues to prevent the reforms that are needed.

Bankers and the financial community gained extra political power beginning in the Reagan administration, but continuing through the Clinton years and to the present. Congress slowly changed or abandoned regulatory protections that began as far back as 1933 with the Glass-Steagall Banking Act.

America’s banking regulations previously recognized the unique and paramount responsibility of commercial banks. That is to provide customers with checking account services and guarantee reserves are available to pay on customer checks. Congress passed the Glass-Steagall Act to prohibit commercial banks from diversification into other financial services such as using loanable funds to underwrite corporate security offerings.

In 1933 Congress feared a bank’s security offerings department would pressure the bank’s lending department to take risks that could lead to bank failure. They feared banks could manipulate stock prices or pressure their loan customers to buy stock offerings, or take control of other non-financial corporations.

By the 1980’s and 1990’s, the relentless pressure of financial groups and plenty of campaign contributions turned caution into compliance; Congress allowed banks to diversify and consolidate into giant risk takers too big to fail.

Million bought bank stocks because banks will never be obsolete and they had the reputation of being steady, safe and conservative investments paying steady but modest dividends. Even without nationalization those millions have lost dividend income that will never be recovered and 50 to 90 percent of stock value. Those same millions had nothing to do with the gambling and risk taking of the banks they supposedly own but do not control.

Wiping them out with no further chance to recover some of their losses is unfair but also unnecessary. The so-called toxic assets will have to be written off with or without nationalization. Reserves will have to be restored to the banking system with or without nationalization. Nationalization does not reform the banking laws but just starts the whole thing over. Nationalization does nothing to encourage anyone to invest in banks, ever.

We can be thankful the Obama Administration has been resisting these calls. We hope they continue and we hope they will get around to proposing the necessary return to cautious banking practices. Perhaps the time is not right in their political judgment. We will wait, but in the mean time nationalizing banks is a loser.