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Tuesday, June 30, 2009

Another Argentine Involved In A Big Scandal

Private Banker Moved Funds Undetected

Published: June 29, 2009

He grew up in elite circles in Buenos Aires, acquiring the polish and privileged connections that paved the way for him to become a star private banker in New York to wealthy clients at UBS and JPMorgan Chase.

Diego Giudice for The New York Times

HernĂ¡n Arbizu said private bankers were under pressure. “We feel like we can take risks that other people don’t even dream to do, and that we can manage that risk — I don’t know why.”

But as HernĂ¡n E. Arbizu tended the fortunes of his gilded South American clients, he says he also illegally took millions of dollars from them for years while at both banks, without being detected.

What is more, Mr. Arbizu said he regularly dipped into UBS client accounts — and even visited the Swiss giant’s offices in Manhattan to ensure that the illicit transactions went through — for at least a year after he left UBS for a new job at Chase in the fall of 2006.

The fast-lane world of private banking has hit some serious speed bumps in recent months, its affluent clientele hit by Ponzi schemers, failed hedge funds and tax evasion investigations from Washington to Europe.

Several big European banks stumbled into the Madoff swindle, for example. More recently, UBS agreed to a $780 million settlement with the Justice Department to address accusations that it had helped wealthy Americans hide billions of dollars in taxes in secretoffshore bank accounts.

The curious case of Mr. Arbizu, whose career exploded when a Chase customer discovered and reported his crime in May 2007, offers a rare window into this well-shielded world, and raises questions about how carefully some of its largest institutions monitor their bankers.

In telephone and e-mail interviews held in the last eight months, Mr. Arbizu put himself in what he said was the “3 percent of bankers who at some point get confused because of the pressure. We feel like we can take risks that other people don’t even dream to do, and that we can manage that risk — I don’t know why.”

But he also said that UBS “didn’t have proper control over its bankers” and he accused the bank of creating an atmosphere of pressure to keep clients and reel in new ones. A spokesman for UBS declined repeated requests for comment on the case.

Mr. Arbizu, an Argentine native, fled the United States for Argentina in May 2008, just before he was to be indicted by federal authorities in New York on federal bank fraud charges. He insisted that he had not personally profited from his actions, but rather had shifted money between accounts to make good on unrealistic investment promises he made to keep important clients. “Of course I made a huge mistake — I feel really bad,” he said.

Yet while his actions pale in comparison with Bernard L. Madoff’s $65 billion Ponzi scheme, Mr. Arbizu’s tale contains the same “rob Peter to pay Paul” logic that apparently guided Mr. Madoff.

Mr. Arbizu, 40, said that in order to maintain an aura of success with major UBS clients, he pretended to remain their personal banker even after he left for Chase. His handpicked successor at UBS, Jose Cecilio Decastro, helped maintain the ruse until he resigned last July and moved to Venezuela.

UBS conducted an internal investigation of Mr. Decastro last year and determined that while he had “done foolish things” by helping Mr. Arbizu, according to a person briefed on the investigation, he did not warrant referral for prosecution.

In June 2008, weeks after Mr. Arbizu was indicted in New York, the Argentine authorities raided JPMorgan Chase’s offices in Buenos Aires and confiscated records of 200 wealthy Argentine clients, many of them Mr. Arbizu’s, whose names and assets were then published in a local newspaper.

But Mr. Arbizu, who says he is assisting an Argentine investigation of potential tax evasion and money laundering by Chase customers, was not caught by either bank’s tripwires and controls.

In fact, for more than five years, he was not caught at all.

In early 2003, he moved to Fairfield, Conn., to take a job at UBS as a private banker for wealthy clients in Argentina and Chile. He then worked out of the bank’s Park Avenue offices in Manhattan, where he earned $300,000 and bonuses for overseeing 13 accounts worth $200 million.

Mr. Arbizu maintained that he had felt overwhelmed by pressure from UBS early on to keep existing clients and bring in new ones. Just months after he joined the bank, he promised an important client, Alberto Lopez, a wealthy farmer in Argentina, that he would generate a 21 percent return on one of his accounts. “Of course, this was impossible,” Mr. Arbizu said.

Months later, Mr. Lopez wanted his investment return. Scrambling, Mr. Arbizu secretly dipped into Mr. Lopez’s principal, which he replenished by secretly tapping $2.8 million from another star UBS client, the Acevedo Quevedos family, wealthy and politically prominent in Paraguay.

Mr. Arbizu left UBS for JPMorgan Chase in November 2006 without informing the Quevedo family. The following April, the Quevedo family contacted Mr. Arbizu, saying that its members needed money from their UBS accounts to buy land.

Panicked about covering the shortfall, Mr. Arbizu said he “pretended” he was still the family’s banker at UBS, and secretly raided a JPMorgan Chase account held by Natalio Garber, a prominent media executive in Buenos Aires, for the funds.

He did so, he said, by faxing transfer requests with forged client signatures to UBS’s New York offices, and then visiting the offices to ensure with Mr. Decastro that the transaction had gone through. “Everybody there liked me and trusted me — ‘Oh great, you’re visiting us,’ ” Mr. Arbizu recalled. “I think that my presence there saying that it was O.K. made people not follow the controls.”

Weeks later, Mr. Garber learned of the ruse and called Mr. Arbizu’s boss to complain. JPMorgan Chase fired him and alerted federal prosecutors in Manhattan, paving the way to an indictment that accused Mr. Arbizu of 12 illegal transfers while at UBS and JPMorgan Chase, totaling more than $5.3 million.

Darin Oduyoye, a spokesman for JP Morgan Chase, said that the bank was “waiting for the U.S. government to pursue extradition” of Mr. Arbizu, but declined to comment further.

In the interview, Mr. Arbizu said the 12 transfers, some to client accounts in tax havens like Andorra and the Netherlands Antilles, totaled only $2.8 million.Mr. Arbizu secretly made eight of the transactions from accounts held by his former UBS clients from March 2007 through March 2008, up to 16 months after he had left for JPMorgan Chase.

JPMorgan has not dropped its lawsuit, but it has not made filings that would push its case forward. Last February it quietly closed a case that it had filed against Mr. Arbizu with the Financial Industry Regulatory Authority, the agency that monitors brokers, although a spokesman declined to say whether it had dropped or settled the case.

By contrast, UBS has not sued Mr. Arbizu. But in May 2008, it filed a report with Finra to declare the bank had initiated an internal investigation of Mr. Arbizu a month earlier. The next month, UBS amended the Finra report to include details of $2.8 million in illegal transfers from an unnamed Paraguayan client. But UBS said in the amended report that it had received complaints about those transfers only in May 2008 — one month after it began investigating Mr. Arbizu for illegal money transfers.

UBS quietly settled the Finra action for $1.44 million last December. In mid-June, UBS filed a broker report for Mr. Arbizu’s successor, Mr. Decastro, saying that he had left the firm amid an internal investigation of “violations of firm compliance and client confidentiality rules.”

“I know I am stupid,” Mr. Arbizu said. “I feel that in all these years I had my head divided into two sections, in one small section all this problem and in the rest my ‘normal’ life.”

Monday, June 29, 2009

It's Getting Tougher And Tougher To Hide Your Money From Tax Collectors

Swiss Banks Shun Americans as U.S. Compels Disclosure (Update1)

By Warren Giles

June 29 (Bloomberg) -- Swiss banks are shutting the accounts of Americans as the U.S. Internal Revenue Service accelerates the hunt for tax dodgers.

UBS AG and Credit Suisse Group AG, the country’s biggest banks, have told Americans to move their money into specially created units registered in the U.S., or lose their accounts. Smaller private banks such as Geneva-based Mirabaud & Cie. are closing all accounts held by U.S. taxpayers.

While the banks declined to say how many people are affected, more than 5 million Americans live abroad, including about 30,000 in Switzerland, according to estimates from American Citizens Abroad in Geneva. Swiss banks must register with the Securities and Exchange Commission to provide services for those customers.

“My bank doesn’t want to do that, so we wouldn’t accept an investment account for a U.S. person,” said Pierre Mirabaud, chairman of Mirabaud & Cie. and the Swiss Bankers Association, during a lunch at the American International Club of Geneva.

SEC registration means clients don’t enjoy the protection of Swiss banking secrecy laws, which make it a crime for money managers to disclose the names of clients without their consent. Switzerland said in March it would cooperate with international tax evasion probes after Zurich-based UBS admitted helping U.S. clients avoid taxes.

The IRS has since increased pressure on Americans to disclose offshore accounts as it seeks to recoup an estimated $50 billion in unpaid taxes. The agency set a deadline of Sept. 23 for taxpayers to declare all foreign accounts or face possible criminal prosecution that could result in as much as 10 years in prison and $500,000 in penalties.

‘Typhoid Mary’

The U.S. has also proposed increasing reporting and oversight requirements for so-called qualified intermediaries -- foreign banks that withhold taxes on behalf of the IRS. That may increase the cost of compliance and the risk of violating U.S. laws, said Charles C. Adams, managing partner at the law firm Hogan & Hartson LLP in Geneva.

“American citizens are starting to feel like they’re Typhoid Mary,” said Adams who hosted a 2008 fundraiser for Barack Obama that featured actor George Clooney. “The Swiss simply don’t want American customers because it requires so much infrastructure and hassle that they don’t make any money.”

Sandra Dysli, an American who has lived in Geneva for 40 years, said Bank Zweiplus AG, the Zurich-based joint venture of Basel-based Bank Sarasin & Cie. and AIG Private Bank, and a Geneva branch of Raiffeisen International Bank-Holding AG refused to open investment accounts for her.

“I was told that I cannot legally be a client because I’m an American,” said Dysli, who retired from the United Nations in 2001. “I couldn’t get an investment account and had everything in cash.”

45-Day Notice

UBS said last July it planned to stop all offshore banking and investment services for people subject to U.S. taxes, except through U.S.-registered units.

The company notified U.S. clients in a March 27 letter that it would close accounts within 45 days. Customers were asked to transfer assets to entities registered with the SEC, and asked to consult an adviser about the U.S. tax consequences, according to a copy of the seven-page letter seen by Bloomberg News.

“UBS will no longer be able to continue to provide services to you through your current account,” the letter said.

A spokesman for UBS, Dominique Gerster, declined to comment on how much progress the bank had made in moving U.S. clients or closing their accounts.

“We offer domestic and international wealth management services in compliance with all applicable laws, regulations, and policies,” said Jan Vonder Muehll, a Zurich-based spokesman for Credit Suisse.

‘Prudent’ Banks

Mirabaud is closing the “few remaining” accounts held by Americans, a company spokesman said, without providing additional details.

“We have to be prudent,” Pierre Mirabaud said during last month’s lunch at the American International Club. “There is absolutely no problem for U.S. persons to open an account in Switzerland as long as they are prepared” to sign a form that gives the bank the details it needs to report to the IRS.

Bank Sarasin offers U.S. expatriates investment and asset management advice only through its SEC-registered unit in London.

“It’s up to individual banks to work out which citizens it wants to do business with,” said James Nason, a spokesman for the Basel-based Swiss Bankers Association. “The reporting obligations certainly aren’t going to go down as the IRS is considering extending the QI, exporting its tax laws and trying to turn Swiss banks into agents of the IRS.”

Congressional Questions

Two members of the U.S. Congress, Carolyn Maloney and Joe Wilson, wrote a May 27 letter to Treasury Secretary Timothy Geithner saying that if the QI requirements are extended to cash or deposit accounts, “taxpaying Americans living abroad will have no place to bank.”

“If neither foreign nor American banks will take American customers, how will the millions of citizens living abroad bank?” wrote Maloney, a New York Democrat, and Wilson, a South Carolina Republican, who are co-chairmen of the Americans Abroad Caucus.

There is “massive” failure by U.S. citizens and green card holders overseas to make filings with the IRS, said Matthew Ledvina, an international tax lawyer in Zurich, adding that Americans have become “pariahs because they’re risky.”

Presumption of Guilt

U.S. citizens must file tax returns, report offshore accounts that contain more than $10,000 and pay tax on any income earned, no matter where they live. To take advantage of the amnesty program, taxpayers must file six years of returns, plus pay back taxes and a penalty, according to the IRS.

“The presumption is that you’re a bad person avoiding taxes if you live overseas,” according to Andy Sundberg, who founded Geneva-based American Citizens Abroad in 1978. “The IRS rhetoric is alienating and vindictive.”

The deadline and the UBS case have been the catalyst for a stream of Swiss banking clients who are seeking help to ensure they comply with U.S. tax rules, said Milan Patel, a former IRS litigator turned tax lawyer at Geneva-based Withers LLP. That includes “accidental Americans,” such as green card holders who live outside the U.S., he said.

“People come in asking, ‘How much am I going to have to pay?’” Patel said. “The real goal for voluntary disclosure isn’t about how much is it going to cost, but avoiding going to jail. The only legal option is voluntary disclosure.”

To contact the reporter on this story: Warren Giles in Geneva atwgiles@bloomberg.net

Last Updated: June 29, 2009 03:58 EDT

Sunday, June 28, 2009

This Says It All!


Print edition

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The Economist print cover

What's Wrong With AMerican Health Care

Heading for the emergency room

Jun 25th 2009 | WASHINGTON, DC
From The Economist print edition

America’s health care is the costliest in the world, yet quality is patchy and millions are uninsured. Incentives for both patients and suppliers need urgent treatment


Illustration by Otto Steininger

NO ONE will be astonished to hear that health care costs more in Indiana than in India. However, a few might be surprised to learn that Americans spend more than twice as much per person on health care as Swedes do. And many may be shocked to be told that in Miami people pay twice as much as in Minnesota, even for far worse care.

The American health-care system, which gobbles up about 16% of the country’s economic output, is by far the most expensive in the world (see chart 1). The Congressional Budget Office (CBO) estimates that on current trends spending on Medicare and Medicaid, the government schemes for the old and the poor, will rise from 4% of GDP in 2007 to 12% in 2050. The prospect of long-term fiscal disaster is the main reason why efforts to reform health care are gaining momentum in Washington, DC. As Peter Orszag, the director of Barack Obama’s Office of Management and Budget, puts it, “that ‘long term’ keeps getting closer and closer.”

The system has its defenders. They point out that countries should expect to spend more on health care as people age. Americans are wealthy enough to choose extra health care over other things. Their free-spending approach calls forth the invention and speedy adoption of valuable new drugs, devices and procedures, whereas Europe’s stodgy and stingy (not to mention socialist) health-care systems deny coverage and ration care, to the detriment of their people’s health.

A poll carried out for The Economist by YouGov highlights Americans’ beliefs about the state of their system. Although 68% of them rate the care they receive as “excellent” or “good”, 52% are dissatisfied with the quality in the country as a whole. Only 25% think the system works pretty well and requires only minor changes; 40% think fundamental change is needed and 29% think it should be completely rebuilt. Some results are shown in chart 2. A fuller version is available atwww.economist.com/yougovpoll.

The doubters have a better case than the defenders. Granted, medical inventions are readily embraced by American doctors and patients. In specific instances—technology to save babies born prematurely and statin drugs to reduce cholesterol, to take two—the benefits of spending greatly outweigh the costs. But if the system in general were providing value for money, America’s vast expenditure would at least be reflected in a healthier population than in more frugal countries.

Alas, it is not. Comparisons with other rich countries and within the United States show that America’s health-care system is not only growing at an unsustainable pace, but also provides questionable value for money and dubious medical care. Three troubling symptoms stand out: uneven quality of care, inadequate coverage and soaring costs.

Start with quality. Evidence is mounting that spending more does not necessarily buy better health. On the contrary, it appears that many Americans are getting mixed or even downright dreadful health care. In a recent study economists at the OECD found that America does indeed do well on some measures, such as breast-cancer survival rates and cervical-cancer screening, compared with other rich countries. However, it does worse in other areas. American infant mortality was 6.7 per 1,000 births in 2007, against an OECD average (excluding Mexico and Turkey) of 4.0. The death rate after haemorrhagic strokes was 25.5% in American hospitals but only 19.8% in OECD countries as a group.

Jonathan Skinner, an economist at Dartmouth College, cautions that factors other than health-care systems—attitudes to teenage pregnancy, say, or smoking—may influence the numbers. Even so, he thinks the system is wasteful. In a paper in theJournal of Economic Perspectives last year he and Alan Garber, of Stanford University, argued that America’s health system was “uniquely inefficient”, producing too little per unit of input and consuming far too much of the country’s resources.

Mr Skinner is involved with another worrying line of research. The Dartmouth Atlas project has scrutinised variations in health outcomes and spending involving Medicare. It has found wide differences in costs across the country—less than $5,000 per person in Salem, Oregon, in 2006; a bit more than $8,000 in San Francisco, in line with the national average; more than $16,000, and rising fast, in Miami—but no connection between higher spending and better outcomes. In fact, the evidence points in the other direction: outcomes tend to be better where costs are lower. Mr Orszag points to the Dartmouth work to argue that up to 30% of America’s health-care spending is sheer waste.

The second symptom is coverage. Uniquely among rich countries, America’s system of health insurance is not universal. Around 49m people have no health insurance. On current trends, within a decade 60m will be without cover. Studies have shown that not all these people are indigent: a quarter or more can afford insurance, but choose not to buy it.

They know they are unlikely to be left to die in the streets. With the truly poor, the free-riders turn up at emergency rooms. This is hugely inefficient, because pricey late interventions and operations could very often have been avoided with a much smaller investment in preventive care. Insured people and taxpayers are forced to cross-subsidise such “uncompensated” and wasteful treatments to the tune of tens of billions of dollars per year.

Other rich countries cover almost all their citizens in one of two ways. Some, such as Britain, Canada and Sweden, have “single payer” systems, in which taxes support a public service. Others, notably the Netherlands and Switzerland, oblige individuals to buy insurance. France has a mixed public-private system.

After decades of failed attempts at reform, a consensus appears to be emerging in America around the principles needed for universal coverage. One likely change means a restructuring of America’s failed health-insurance markets. Firms are today allowed to pick the safest patients and reject the sickest. In future they will have to take all comers. Because this imposes unfair burdens on firms that attract lots of older or sicker people, reform is likely to include government-funded mechanisms for risk pooling or reinsurance. The Netherlands, in particular, uses such an approach.

American health insurers, having long opposed this idea, have performed a startling U-turn in recent weeks. America’s Health Insurance Plans, their chief lobbying group, now says it is willing to accept such heavy-handed reforms—if they are accompanied by a requirement that all Americans purchase coverage. This may seem a cynical ploy to expand their business, but some compulsion is needed to get around the selection problem. Any legislation is likely to include subsidies to help the poorest pay for cover.

If done properly, this will in time move America towards the Swiss and Dutch models of universal private insurance. These are not perfect, to be sure. Regina Herzlinger of Harvard Business School observes that the Dutch reforms have led to rapid consolidation of insurers and hospitals, fuelling resented price increases. She favours the decentralised Swiss model, which preserves individual choice and competition. Others note that Swiss health-care costs are high by European standards. But they are a third less, as a share of GDP, than America’s, and the country’s excellent health outcomes should be the envy of American reformers. Our poll suggests that an individual mandate would be unpopular, with only 21% in favour and 53% opposed. Respondents did favour having the option to buy from the government, by 56% to 23%.

Such reforms would expand coverage, but could exacerbate the third symptom, cost, as the experience of Massachusetts, a trailblazing state that has already implemented a plan for universal coverage, suggests. The state faces possible bankruptcy unless it finds a way to rein in costs.

Your money or your life

Indeed, tackling inflation in American health care remains the most important and difficult part of the treatment. According to our poll, cost is a tender nerve: 61% thought the high cost of care and insurance was a bigger problem than the number of uninsured, against 31% who believed the reverse. Only 21% would be willing to support a reform plan if they had to pay more in insurance or tax; 62% would not.

Some common diagnoses are wide of the mark. One is price gouging by drug companies. In fact, pills account for barely a tenth of health-care spending in America and similarly small shares elsewhere. But aren’t costs lower in Europe because of price controls? Europe does indeed spend less on new branded drugs, but also uses fewer generic drugs and pays much more for them. And Switzerland actually has higher drug prices than America (as does Canada). Greedy drugmakers are not the main cause of America’s runaway costs.

Nor are baby-boomers, though they are often blamed for health-care inflation because there are a lot of them and they are getting old. Ageing will clearly push up costs in time (see our special report in this issue), but it is not the main culprit yet. The CBO estimates that ageing accounts for only a quarter of the health-care inflation to come in the next few decades, and the share in other rich countries is similar.

Doctors’ generous pay is another popular culprit. But doctors in several European countries are well paid too. The OECD estimates that general practitioners in America earn 3.7 times the average wage. Their British counterparts earn 4.2 times their national average. American specialists earn 5.6 times the average wage, against 7.6 times for their Dutch colleagues. Yet health-care costs in Britain and the Netherlands remain lower than America’s. The real problem is not how much American doctors are paid, but how. The system of medical reimbursement warps incentives for doctors, insurers and patients that lead Americans to consume more and more medical services. There is strong evidence that Americans use pills, procedures, scans and other expensive forms of health care more often than do patients in other rich countries, and not always to good effect.

America’s insurance system encourages overuse in several ways. One is the tax break that favours health insurance provided by employers, which leads to excessively generous coverage and hence over-consumption. Another is the fact that American health insurers earn a lot of revenue from administering the health plans provided to employees by big corporations which, in effect, insure themselves. This leaves insurers with no incentive to curb costs, because more spending means fatter management fees.

The incentives facing doctors are even more perverse. Most doctors are not paid a fixed salary, still less rewarded for better health outcomes. Integrated American systems such as Kaiser Permanente and the Mayo Clinic are exceptions to this rule, and Britain’s National Health Service (NHS) is trying to adopt a similar approach. But most doctors and hospitals are paid more if they provide more services, regardless of the results. Predictably, this leads to far higher rates of doctors’ visits, specialist referrals, scans and so on.

For instance, the OECD countries have an average of 11 magnetic-resonance imaging machines per 1m people. America has 25.9. America uses them more often, too: 91.2 times per 1,000 people per year, compared with the OECD average of 39.1. Similar tales can be told about other pricey kit.

This incentive problem even extends to patients. If patients pay very little out of their own pockets they have little desire to curb consumption. Though this is a problem in many OECD countries, in America the proportion of out-of-pocket spending has declined sharply in the past few decades. And a new report by McKinsey, a firm of management consultants, identifies a more subtle problem. Having examined insurance and out-of-pocket spending for several health risks, it concludes that Americans are generally “over-insured and under-saved”. It is prudent for individuals to have comprehensive health insurance against catastrophic health risks such as heart attacks or cancer. But McKinsey finds that Americans with private health insurance often have generous coverage for non-essential and even medically unjustified care (see chart 3). This encourages over-consumption.

The power of sunshine

A second big factor pushing up health costs is the lack of competition among operators of American hospitals. Thanks to a wave of consolidation in recent years, argues Harvard’s Ms Herzlinger, “most parts of the United States are dominated by oligopolistic hospital systems.” George Halvorson, who heads Kaiser Permanente, insists that “there is an almost total lack of price competition among providers.”

Nimble upstarts and innovators are challenging the incumbents in some areas. Such efforts range from specialist heart hospitals, which get better outcomes at more reasonable prices than local general hospitals, to retail clinics at Wal-Mart stores. Remote medicine, in the form of technology for tele-care or medical tourism to Thailand and Costa Rica, also poses a threat. But medical lobbies are using political influence and outdated regulations to thwart competition where they can (for example, through rules preventing a doctor from treating a patient in another state).

To counter this, reforms could allow federal regulators to overrule state-level obstacles to entrants such as clinics staffed by inexpensive nurse-practitioners. More transparency would help too, by empowering patients to choose hospitals and doctors providing good value and better results. Electronic medical records would make shopping around easier.

Another useful way to promote transparency and value would be to evaluate the cost-effectiveness of new drugs, devices and treatments. This may be common sense, but it is rarely done in America. Britain’s National Institute for Health and Clinical Excellence (NICE) pioneered this approach, and other European countries have followed it. Andrew Dillon, the agency’s chief executive, accepts that “the NICE model is not transportable in precise form” but he still insists that “one can dissect and apply what is relevant to other countries.”

Illustration by Otto Steininger

In America, the drugs and devices lobbies are violently opposed to a NICE-style agency that could issue mandatory rulings. They paint a scary picture of Americans being denied access to life-saving new drugs by faceless bureaucrats. In Britain NICE has come under fire for rulings that limited access to expensive drugs for Alzheimer’s and cancer on the NHS. America could get around this problem by requiring and perhaps even funding studies, but leaving insurers and individuals to decide whether to pay for treatments.

More competition and transparency would help, but the main goal of any reform plan must be to address the perverse incentives that encourage overconsumption and drive up costs. Medicare has been tinkering with “pay for performance”, a promising experiment. Mr Halvorson insists that by rejigging incentives other health providers can also create their own “virtual Kaisers”.

If American reformers doubt the power of incentives, they should visit Sweden. Like other relatively cheap OECD systems, Sweden’s single-payer model has been plagued by long waiting-lists—a sign, to American conservatives, of the rationing that goes with socialised medicine. Swedish health officials tried and failed to cut queues by increasing direct funding for hospitals and even issued an edict requiring hospitals to cut queues for elective operations to three months. Then, last year, the health ministry said it would create a fund into which it would pay SKr1 billion ($128m) a year for local authorities that managed to reduce waiting times to that threshold. Nine months ago virtually none of the counties passed, but this month the health minister revealed that nearly all had cut their queues to three months or less.

Anders Knape, the head of the organisation representing county governments, ascribes this to “a dramatic change in incentives”. In the past, he explains, hospital bosses believed waiting lists were a sign of being overloaded, so they tolerated them in the hope of winning more funding. With the new scheme, however, “no queues means more resources”.

If getting incentives right can mobilise even a state-run health system like Sweden’s, surely there is scope for such reforms to fix America’s mess too. If the United States couples its efforts to expand coverage with such a radical restructuring of the underlying drivers of cost inflation, there is every reason to think its health system can become the best in the world—and not merely the priciest.


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What Argentines Think About Ther Governor Sanford/Maria Belen Chapur Romance

Argentina Ponders Its Surprise Role in U.S. Political Scandal

BUENOS AIRES -- The headline in the newspaper Clarin called it "A love story as thrilling as it is impossible."

It was talking about the relationship between South Carolina Gov. Mark Sanford and an Argentine woman whom he traveled here to meet last week, causing a stir back home about his whereabouts.

Argentines tend not to get as worked up about political sex scandals as Americans do. Still, some tongues are wagging about America's rising political star who jeopardized his career over a daughter of Argentina.

Unconfirmed reports in the local media have named the woman and said she is 43 years old and separated from her husband. She lives with her two teenage children in a modern apartment building in Palermo, a leafy, affluent neighborhood, right across the road from the Buenos Aires zoo.

But the woman is no celebrity and it appears she doesn't want to become one. Since the story broke, she has disappeared.

Argentina is a hotbed of Freudian analysis, so the case is producing its share of armchair interpretation. In the U.S., an extramarital affair is "seen as an effort to destroy the very idea of family," said Sara Moscona, a psychologist, who wrote a book on infidelity. Argentines are more flexible and forgiving, she said. Love motels are common even in the best neighborhoods.

Ms. Moscona said Argentines tolerate infidelity among their politicians, "just as long as it's not too ostentatious."

Carlos Menem, Argentina's president through most of the 1990s, was a politician whose alleged philandering became the stuff of public jokes, not to mention epic battles with his wife at that time, Zulema. Mr. Menem once issued a decree ordering her to leave the presidential residence, then locked her out.

Some Argentines thought the prying coverage into Mr. Sanford's personal life by the media was perhaps as big of an offense as anything the governor did himself. "Poor guy. He's thrown away his political career," said Cristina Garre, a retired lawyer.

Asked if she was surprised that Mr. Sanford had dated an Argentine, however, Ms. Garre perked up. "Argentine women are great!" she said, throwing her arms wide open. "We have a lot of qualities."

Write to Matt Moffett at matthew.moffett@wsj.com, Taos Turner at taos.turner@dowjones.comand Matthew Cowley at matthew.cowley@dowjones.com

What Argentines Think About Ther Governor Sanford/Maria Belen Chapur Romance

Argentina Ponders Its Surprise Role in U.S. Political Scandal

BUENOS AIRES -- The headline in the newspaper Clarin called it "A love story as thrilling as it is impossible."

It was talking about the relationship between South Carolina Gov. Mark Sanford and an Argentine woman whom he traveled here to meet last week, causing a stir back home about his whereabouts.

Argentines tend not to get as worked up about political sex scandals as Americans do. Still, some tongues are wagging about America's rising political star who jeopardized his career over a daughter of Argentina.

Unconfirmed reports in the local media have named the woman and said she is 43 years old and separated from her husband. She lives with her two teenage children in a modern apartment building in Palermo, a leafy, affluent neighborhood, right across the road from the Buenos Aires zoo.

But the woman is no celebrity and it appears she doesn't want to become one. Since the story broke, she has disappeared.

Argentina is a hotbed of Freudian analysis, so the case is producing its share of armchair interpretation. In the U.S., an extramarital affair is "seen as an effort to destroy the very idea of family," said Sara Moscona, a psychologist, who wrote a book on infidelity. Argentines are more flexible and forgiving, she said. Love motels are common even in the best neighborhoods.

Ms. Moscona said Argentines tolerate infidelity among their politicians, "just as long as it's not too ostentatious."

Carlos Menem, Argentina's president through most of the 1990s, was a politician whose alleged philandering became the stuff of public jokes, not to mention epic battles with his wife at that time, Zulema. Mr. Menem once issued a decree ordering her to leave the presidential residence, then locked her out.

Some Argentines thought the prying coverage into Mr. Sanford's personal life by the media was perhaps as big of an offense as anything the governor did himself. "Poor guy. He's thrown away his political career," said Cristina Garre, a retired lawyer.

Asked if she was surprised that Mr. Sanford had dated an Argentine, however, Ms. Garre perked up. "Argentine women are great!" she said, throwing her arms wide open. "We have a lot of qualities."

Write to Matt Moffett at matthew.moffett@wsj.com, Taos Turner at taos.turner@dowjones.comand Matthew Cowley at matthew.cowley@dowjones.com