Audit Notes: Regulatory Capture, Monster Quotes, WSJ on Medicare Waste

I’m glad The New York Times is taking such an interest in the potential conflicts of interest among the staff and leadership of Elizabeth Warren’s new Consumer Financial Protection Bureau—however mild they actually are.

It reports that one adviser, Raj Date, is a part owner of a peer-to-peer lender that has lobbied for exemption from the financial-reform law to be regulated as a bank rather than a securities firm (see James’s comment below).

As Mike Konczal says:

The Times article relies entirely on the implied assumption that peer-to-peer lending is some sort of shady, fly-by-night operation. In reality, it is simply an over-hyped phenomena of trying to integrate the internet with new financial institutions.

It’s certainly worth noting, though the Times overplays it. But it sure would be nice if the Times would promise to deploy the same journalistic resources for the more profound conflict of interest that occurs the next time, say, a CEO of Goldman Sachs is nominated to head the entire Treasury Department.

— I haven’t got a copy of Michael Hudson’s new book Monster, which investigates the predatory lenders that caused the housing crisis, but I’m itching to read it, especially after reading this post where he pulls some of the best quotes from his book.

Here are a few gems from his interviews with industry insiders:

“I became a thief. And unfortunately, I found I was a very good thief.”

“We are all here to make as much fucking money as possible. Bottom line. Nothing else matters.”

“He fucked me. But within reason.”

“If you don’t find the true pain, you won’t write the loan.”


— The Wall Street Journal is running an excellent series on Medicare. Today’s page-one story looks at how a “secretive panel” put together by the doctor’s lobby influences how much Medicare pays doctors for procedures.

Guess what. There are some problems:

A Wall Street Journal analysis of Medicare and RUC data suggests that services were paid too generously in some cases because the fees were based on out-of-date assumptions about how the work is done. The analysis found more than 550 doctor services that, despite being mostly performed outpatient or in doctors’ offices in 2008, still automatically include significant payments for hospital visits after the day of the procedure, which would typically be part of an inpatient stay.

For instance, one operation to treat male urinary incontinence wraps in payment for 118 minutes of hospital visit time after the day of surgery, though 2008 Medicare data show it is done around 80% of the time outpatient or in a doctor’s office. Stephanie Stinchcomb, manager of reimbursement for the American Urological Association, says the surgery used to be largely inpatient; its payment was last updated based on a RUC evaluation in 2003. It’s not clear if a new analysis will find doctors should now be paid less for it, she says.

And the nut graph:

The RUC, as it is known, has stoked a debate over whether doctors have too much control over the flow of taxpayer dollars in the $500 billion Medicare program. Its critics fault the committee for contributing to a system that spends too much money on sophisticated procedures, while shorting the type of nuts-and-bolts primary care that could keep patients healthier from the start—and save money.

“It’s indefensible,” says Tom Scully, a former administrator of the Medicare and Medicaid agency who is now a lawyer in private practice. “It’s not healthy to have the interested party essentially driving the decision-making process.”

Good stuff.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.