Michael Hiltzik on Social Security and the "Chained" CPI

For many years, some observers have argued that Social Security cost-of-living increases are too generous. They argue that the public fisc could save billions of dollars by using a "chained" consumer price index (CPI). The idea is that CPI increases should not be based on increases in the cost of a static market basket of goods because as the price of a product rises, consumers tend to substitute lower-priced products, use less of the product, stop using the product, etc.

In this LA Times article, Michael Hiltzik says that the chained CPI makes no sense for social security benefits for several reasons, one of which seems quite important: For the kinds of things that senior citizens need -- medical care, for instance -- it is often not reasonable to assume that there is a substitute product or that the person can do with less of it. (As Hiltzik puts it, "it's not as though you can forgo a prescribed heart bypass operation and opt for a cheaper hernia operation instead.") Moreover, the CPI underestimates inflation for seniors because medical care is a disproportionate part of their spending, and medical care "has risen in cost at nearly twice the rate of overall inflation over the last couple of decades." So, at the very least, you wouldn't want to go with a chained CPI until you fixed the CPI for seniors. Hiltzik's article talks about efforts to do that as well.

Another Viewpoint on Restaurant Calorie Disclosures

[Ed. note: One of our readers read our recent posts on the value of calorie disclosure laws and wanted to join the discussion.]

by Thomas McSorley

I read this week’s earlier posts [here and here] about the questionable worth of calorie disclosure laws as a solution to the nation’s obesity epidemic with very mixed feelings. While I appreciate the importance of using data to discern good policy, I also personally know how effective calorie disclosure can be in effecting weight loss. Until a year ago, I had been obese nearly my entire life. (I’m 27.) After a series of false starts (over a period of years), I finally began to achieve sustainable weight loss by logging everything I ate on a “food diary” website, and also by exercising fairly regularly (for thirty or so minutes most days . . . by no means training for a triathalon). After a week of focused effort, I lost a couple pounds. By keeping up the program over a year, I had lost seventy, 1 to 2 pounds a week. I’ve now kept it off for a year (and lost a handful more). (In the spirit of full disclosure, I also eliminated most meat and dairy from my home consumption and bulked up my diet of vegetables and fiber-rich grains and legumes.)

The key—the absolute, unquestionable key—to my weight loss was a clear daily calorie target and the availability of calorie data. When I would eat at restaurants where calorie data wasn’t available, I would work hard to eat the healthiest thing I could figure out and overestimate the calories on my food diary. This worked fine, and most chain restaurants (the only ones affected by the new national calorie disclosure law) have calorie data on their websites so I could plan when I ate at them. However, now that I’m in the “sustaining” weight loss phase, I especially appreciate those restaurants that have calories right on the menu or package. If the calories are there, I cannot ignore them. I always get the right thing. If they are not, I’ve been known to cheat. In the short term, this hasn’t had any adverse effects, but over the long run, I know that having calories printed right there on restaurant menus (the way they are on everything I eat at home) will significantly bolster my ability to stay at a healthy weight.

Calorie disclosure laws certainly aren’t a panacea; they require the recipient of the data to be serious about using the information. But, sustainable weight loss isn’t just about a wishy-washy attempt to “eat better, exercise more.” To lose weight effectively and in a way that keeps it off, I had to be serious and scientific about hitting a hard calorie goal every single day. Even though I probably wasn’t going to order the bacon double cheeseburger whether or not I knew it had exactly 1500 calories (seriously, without fries), the difference between a grilled salmon dish with 350 and one with 450 calories meant a significant difference in a carefully calibrated program.

So, I celebrated the news that restaurant calorie disclosure was going to be nationally mandated, and I know of at least one person who will be using the data. (I already love walking into take out places in Philly and New York, and Pret a Manger, that have the numbers printed right there.) Like the new gruesome cigarette packs, I’m not sure that the calorie disclosure laws will save many lives or make many more people healthier, but I’m not complaining about them.

More on Today's House Oversight Hearing on the Consumer Financial Protection Bureau

Jeff Sovern posted earlier on today's House Oversight & Government Reform hearing on the Consumer Financial Protection Bureau. Jeff described it as the House majority's "one last shot" at Elizabeth Warren before the CFPB officially opens its doors on July 21. Today's Washington Post has another article on the topic, and Committee Chair Darrell Issa has this hearing "Preview Statement" on the Committee's website.

The Haggler, Deception, and Google

by Jeff Sovern

The Sunday Times Haggler column took on lead generation companies in the context of Seattle emergency locksmiths.  As David Segal (the Haggler) explained:

Last Tuesday, the Haggler typed “emergency locksmith Seattle” into a browser, and the top results — most notably, the seven that appeared in the highly coveted Google Places spots, which are marked on an area map — appeared to be lead gen sites.

That is to say, they are not locksmiths at all, but phone banks that dispatch locksmiths.  So what, you might say.  According to Segal "Some are legitimate, but others may all too often do shoddy work and/or charge two or three times the estimate."  And if you are seeking a Seattle locksmith, would you rather call someone who works in your city and so depends on local good will, or a service that might be located far away that has no such interest, and that has attained prominence on Google by gaming its algorithm? Consumers reading such listings are deceived into think they are calling a locksmith, but they are really calling a phonebank.  Segal observes that this practice is not limited to Seattle or locksmiths, by the way.

Google is fighting such efforts, and Segal reports that state attorneys general have also become involved.  But maybe it's time for Congress to look into improper lead generation practices and consider legislation to prevent them.

Coventry First’s Abuse of Trademark Law to Suppress Criticism Falls Apart

by Paul Alan Levy

Coventry First is in the viatical business.  It buys life insurance policies hoping to profit from payment of the insurance proceeds when the insured dies.  It recently got a spate of publicity for its trademark action against one of its critics who anonymously set up a parodic Twitter account, using the Twitter name coventryfirst, to publish a series of messages focusing on the ghoulish aspect of Coventry First’s business —the sooner the insured dies, the better the return on the investment.  As one blogger noted,  “it has been criticized as an industry that basically bets on death.” Coventry then sent a subpoena to Twitter demanding the identity of the account holder.

We at Public Citizen have defended consumers’ rights to use trademarks in domain names,  Facebook account names, titles and meta tags of web sites and web pages that criticize the trademark holder.  The ability to put the company or product name in those locations is important both because it identifies the subject of the criticism and, in many cases, may help consumers who are using search tools to find information about companies to find criticisms as well as the companies’ own self-aggrandizing web sites.  We have also been concerned about efforts to overcome anonymity based on legal claims without a realistic chance of success because it puts speakers at risk of retaliation for speaking out against powerful and well-connected companies and politicians, and our client was worried about what she considered to be Coventry First’s pleasure at using its economic clout against perceived enemies.  We were thus happy to help the Twitter user defend herself against the suit.  We thus undertook to file a motion to quash the subpoena.  

Generic Drugs: Their Use Saves Consumers Billions of Dollars, But Consumers Could Do Better If Doctors Cooperated

About 70% of all prescriptions for drugs are filled with generic drugs. The move to generic drugs has occurred for many reasons including a landmark 1984 federal law that encouraged their development. Another reason is that laws in many states require pharmacies to give consumers the generic version of a prescription drug whenever a generic version is available, even if the doctor prescribes the brand name. In the aggregate, these laws, pressure from insurers, and growing acceptance of generic drugs by many doctors, save consumers (and their public and private insurers) tens of billions of dollars every year.

But there is a big exception in the state "generic substitution" laws: When doctors prescribe brand name drugs and demand that the pharmacist "dispense as written" (that is, when they write "DAW" on their prescription pads), the pharmacist generally must fill the prescription with the brand name drug. About 5% of all prescriptions are DAW, costing consumers lots of money.

How much money? Well, the difference in price between brand name and generic drugs can be very large. Here's one example from an informative article in today's Washington Post on DAW prescriptions:

Take . . . the popular anti-cholesterol drug Zocor. According to Drugs.com, a 90-pill bottle costs $459.98. But 90 pills of simvastatin, the generic version of Zocor, are only $83.97. Buy simvastatin at Wal-mart or Target, which offer special pricing programs, and the cost comes down to just $12.

Why do doctors insist on DAW? According to the Post article, because (1) some doctors wrongly believe that generic drugs are unsafe or ineffective; (2) some doctors frequently remember only the brand name not the generic name of the drug (which doesn't seem like a reason to use DAW); and (3) some doctors are influenced by brand name advertising.

As the Post explains, some states trying to curb DAW prescriptions:

 In 2009, for example, Massachusetts began requiring doctors to explain in writing why they were insisting — via a DAW — on a brand-name medication as opposed to a generic. The results were dramatic. According to the Generic Pharmaceutical Association, the state’s Medicaid spending for drugs fell by $150 million within a year.

It will be interesting to see whether other states follow Massachusetts' lead.

The Hill: GOP gets one last shot at Consumer Protection bureau before it opens

by Jeff Sovern

Here.  The article is mostly about Elizabeth Warren's upcoming appearance before the House Oversight Committee on Thursday.  A couple of quotes:

“This hearing will give Professor Warren an opportunity to provide clear information – which has so far not been articulated in public statements, budget justification, FOIA responses, or previous congressional testimony – about how the administration intends to go about protecting consumers,” said an Oversight spokesperson.

* * *

In perhaps a taste of what is to come, Raj Date, the CFPB’s associate director of research, markets and regulations – and a potential candidate for the agency’s director – got his share of GOP grilling at a House Financial Services Committee hearing last week. Date faced several questions from Republicans, yet again, about the CFPB’s role in ongoing settlement negotiations between federal and state investigators and mortgage servicers over widespread documentation problems.

Perhaps the Committee spokesperson should take a look at the Bureau's web site: the spokesperson might see there how the Bureau has already started working on mortgage disclosures.  I wish the Committee would hold itself to its own standards and explain how interrogating Bureau personnel about its role in advising attorneys general helps consumers.

Alcohol Consumption and Cancer Risk

Read about it here.

Do Government Policy Makers Care About Unemployment?

No, says University of Massachusetts economist Nancy Folbre in this N.Y. Times opinion piece. She says that there "are three possible reasons":

First, unemployment is concentrated among the less educated, blacks and Hispanics who lack political or economic clout. Second, high unemployment is not hurting overall business profits, which have soared to historic heights. In the 1930s, joblessness reduced the demand for consumer goods, idling many businesses as well as workers, creating economic incentives to support public job-creation efforts. Today, our largest corporations and richest investors are well positioned to take advantage of growing demand in emerging markets far from our shores, whether in the form of increased exports or new investment opportunities. * * * Third, the jobless individuals, public employees and small-business owners who could, in theory, form a strong political coalition to support more active job creation are constantly subjected to a barrage of arguments that we should do nothing but cut government spending and hope for the best.

More on Calorie Disclosure

I blogged earlier today on the possible ineffectiveness of laws requiring restaurants to disclose the calorie content of the foods that they sell in an effort to curb obesity. I suggested that current disclosures may be retooled as we learn more about their impact, just as tobacco warnings have been changed over the years.

A reader, Colin Hector, has responded with this interesting comment:

[O]n calorie disclosures, I think it's important to note that some of this retooling is hopefully going on. Although not in the context of menu labeling, the FDA's announcement in October 2009 that the agency is considering different forms of front-of-package labeling gives some hope that we may see more effective forms of calorie disclosures in grocery stores and elsewhere (http://www.fda.gov/downloads/NewsEvents/Newsroom/MediaTranscripts/UCM187809.pdf). One promising model is the "traffic light" system, using the familial colors of the a traffic light to express relative levels of fats, sugar, and sodium. Sadly, while the British Food Standards Agency advised the use of the traffic light system, the EU recently rejected making the system mandatory. A less consumer-friendly model is the Grocery Manufacturer Association's "Nutrition Keys" model, which fails to utilize any effective signals for calorie information (and would only require information on saturated fat, not overall fat), and has been criticized as an attempt to circumvent more effective government regulation.

Colin's comment reminds me of a recent post by Jeff Sovern, who noted that, although most disclosures are ineffective, disclosures may work if they are simple and easy to understand.