Economist's View: Equity and Efficiency in Health Care Markets

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Economist's View « What's the Matter with the Blue Dogs? | Main | Where are the Technocratic Institutions? » Tuesday, July 28, 2009

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Equity and Efficiency in Health Care Markets This is an attempt to clarify a few of the remarks I've made over the last several days regarding the need for government intervention in health care markets. There are two separate reasons to intervene, market failure and equity. Taking market failure first, there are a variety of failures in health care and insurance markets such as asymmetric information, market power, and principal agent problems. These can be solved by the private sector in some cases, but in others government intervention is required.

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I believe that economists have something to offer in both cases. In the first, economic theory offers solutions to market failures, and though not every market failure can be completely overcome, the solutions can guide effective policy responses. I prefer market-based regulation to command and control solutions whenever possible, i.e. I prefer that government create the conditions for markets to function rather than direct intervention. But sometimes the only solution is to intervene directly and forcefully.

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In the second case, the idea is a bit different. Here, equity is the issue so somehow society must first designate the outcome it is trying to produce before economists can help to achieve it. Right now, it is my perception that the majority of people want to expand to universal or near universal coverage if we can do so without breaking the bank, and without reducing the care they are used to. If we can find a way to do that, the majority will come on board. If that's the case, if that's what we have collectively decided we want, then the job of the economists is to find the best possible way of achieving that outcome (or whatever outcome is desired) given whatever constraints bind the process (whether political realities should be part of the set of constraints is a point of contention, so I'll stay silent on that).

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My interpretation of an excellent paper by Uwe Reinhardt is consistent with these thoughts. See http://tinyurl.com/nrf24u for that and a link to Reinhardt's paper.

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Reply Tuesday, July 28, 2009 at 03:05 AM

Ben said... Now we have Feldstein, notorious reactionary economist, saying we "can't afford" the costs of universal health insurance. Yeah, it would be terrible since it might mean high taxes on the rich and we know that simply cannot be allowed. Of course we could handily pay for the costs by cutting the budget of the Defense Department by the needed amount, but we can't do without our empire and military machine either, can we? And if we stopped being at war with Islam, Israel would start screaming, and we can't have that either, can we? Reply Tuesday, July 28, 2009 at 03:51 AM

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Ben said... Feldstein estimates the costs of Obama's plan at "a trillion over the next ten years". Of course the US spends a trillion on military and defense now every single year. And raising the taxes on the rich would have terrible effects of reducing the overall tax take. If I recall correctly the higher taxes on the rich during the Clinton years had no such effect at all. More reactionary scare tactics to stop a move to more social justice in the US. Social justice, like liberalism have become swear words to many. Greed, obscene excess, and inequality are the right way to go. Yeah. Reply Tuesday, July 28, 2009 at 04:02 AM

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Here's an interesting element of one version of the draft HC bill, reviewed in this article ("Are big insurance discounts for healthy behavior unfair?") here: http://www.mcclatchydc.com/politics/story/72532.html A solid step towards Preventive HC would increase the cost of both obesity and its consequence, high cholesterol. The above article describes a discount to those who bring their weight and cholesterol count in-line with modern health guidelines. Since we seem not to be sufficiently intelligent to do so, why should healthy people bear the burden of those who decide a way of living that is patently unhealthy? That is not exactly what is intended in any sort of "Socialized Health Care". The latter implicates all individuals to maintain a relatively good standard of healthy benchmarks, weight being the most important of them. HC-insurance is intended for those of us who get sick through no obvious self volition. Overweight and obesity are indications of a chronic overeating habit, which should perhaps be addressed by a trained psychologist. But a "fine" on overweight status could be a viable inducement as well. Meaning both are perhaps necessary. At the very least, a periodic check-up could (by which either a medical aide or a doctor verifies one's weight) would assist also in the advanced diagnosis of other illnesses that might be caught in time?

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No one knows what the process will eventually provide as a comprehensive system. But the status quo does know that prohibiting the initial adaptation, particularly one that includes a public option, is a necessary step in preserving it's status.

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Time and money are on the side of the status quo. Anything that postpones the initial adaptation increases the probability of reform failure.

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President Obama should announce this explicitly and explain this struggle in those terms. Instead of working to improve the nation's health, there are many forces who would sacrifice the public good for their private gain. Votes agains real reform should be framed this way. Those who would prohibit reform are in favor of preserving a system that costs almost twice as much as other systems that have proven to be more effective. Who precisely is gaining all that additional money that other systems with better outomes don't spend? Where is it going? And if the system were reformed who would be the new recipients of that money? This is how the argument should be framed. The current system is a tremendous wealth transfer from the majority of citizens to a minority of citizens, and it delivers an inferior product as a result of that transfer.

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Such forced transfers can only occur in a non-competitive market. Where are the non-competes? First the medical profession. Gaining a degree is expensive and eliminates from competition many talented individuals. This also forces those who do gain degrees to develop specialties which charge more than general practice resulting in a mis-allocation of investment. Two, disputes over care are funneled directly into the legal profession alone. This is a tremendous subsidy to the legal profession, on both sides, and it drains valuable resources from the delivery of medical care. Three, both federal and state regulations have forced a powerful consolidation of insurance companies where competition is absent. Protected from competition, these companies prosper on the basis of denying medical care, which is considered a "loss" when computing their profits. Drug companies and medical device suppliers sell into this non-competitive industry and can charge higher prices as a result. This is our current system and this is how it transfers wealth from the majority to the minority. Only reform will bring the delivery of health care into balance where it can efficiently serve the nation as a whole. Reply Tuesday, July 28, 2009 at 04:29 AM

ken melvin said... To this market agnostic, the question is, 'how best?' To the extent markets are the answer, use them. If not, don't bother. Why should markets be the preferred approach? The status quo is but a fluke, not sacred - a happenstance. If it is legit to spend upwards of $1 trillion/yr on 'defending' the nation from every imaginable, then it sure's hell legit to protect the health and well being of that group of poor bastards we've ask to do most of the defending. And, it follows, it is legit to ask those who benefit most to pay. Reply Tuesday, July 28, 2009 at 05:40 AM

sewells said... Well, I'm probably going to get raked over the coals for this but here goes anyway. What is this notion of equity? In what context is the notion of equity framed? In the context of mutual social obligation? In my grandparents time, the predominant social obligation seems to me to have been not being a burden on society. Now, it seems to be making sure that everyone who is a burden on society gets their needs met. It's not hard for me to see the injustice that resulted in my grandparents time from the dominant set of social norms. Jim Crowism, poor educational opportunities, etc. I'm just not naive enough to think that the new set of social norms won't have its own set of problems. Will equity be better served or worse served with the new set of social norms? I don't see much reason to think equity will be better served. Many reasons for this view but bottom line my reasoning is that it is no better, on net, because in both cases the balance of social obligation is not observed, is not sufficiently in focus. Most people here see the problem of my grandfather's time with capitalists running rough shod over worker's rights. Is it not just as unjust for people to have children they can't rationally expect to afford? In both cases, other people are treated as a means to one's own ends, as things to be used. Is it not just as bad to have someone play crazy for a couple of years so they qualify for disability income? I know of two people who have done this in my community. Now they will be on the public dole for essentially forever. I'm not opposed to notions of social equity. It's a goal we should strive for. But if we are going to finance health care thru a public option, then it should also be illegal for people to smoke, for people to become obese and for people to have children they can't reasonably expect to provide for. I guess what I'm saying here is that in my grandfather's time the fundamental problem was defection from the social compact. The rich ran rough shod over the poor. It seems to me that now the problem is the same and that the irresponsible are running rough shod over the responsible.

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save_the_rustbelt said... Mark:

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You are way too reasonable and thoughtful for this debate :)

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There are a couple of problems. Separating the debate from politics has never been nor will it ever be practical.

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Government can create market distortions and government is not inherently efficient, so proper program design is critical. Our track record on that is not so encouraging.

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Reply Tuesday, July 28, 2009 at 06:10 AM

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bakho said... I suggest adding "external costs" to your discussion. NOT providing health care has external costs. NOT treating communicable diseases can create health problems for everyone. NOT treating mental illness can lead to people who make our society less safe and a lost opportunity cost. NOT having a healthy workforce creates absenteeism and reduced productivity problems for employers. People who go bankrupt due to medical expenses make credit more expensive for other borrowers. These are all costs that are charge to the current system that are a HUGE drag on our economy. OAN- The US Public Health Service had a wonderful track record in improving sanitation and disease prevention that has completely revamped the list of Top 10 mortality factors since 1900. One way to reduce costs is to do better screening and primary care. We should expand the PHS.

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Reply Tuesday, July 28, 2009 at 06:33 AM

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anne said... http://www.nytimes.com/2009/07/28/us/politics/28baucus.html

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How does that result in an equitable situation? Reply Tuesday, July 28, 2009 at 05:53 AM

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The problem is political, of course, and it's a mighty struggle between the administration and the status quo interest's ability to control enough votes in Congress to thwart the initial adaptation.

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Reply Tuesday, July 28, 2009 at 04:25 AM

The goals have been clearly set by the administration, which has also provided the initial adaptation(s), including one called a public option.

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Beezer said...

Did macroeconomics give up on explaining recent economic history? - mainly macro

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There is a fundamental nonuniqueness here; economics only takes one so far. That's not a knock on economics. It is just to point out that one can agree on the economics and then still disagree on what specific policy to support.

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Well put. Where I get tripped up, along with many (all?) other economists is what form the government intervention should take. Would it be enough to remove the special tax treatment of employer-based insurance and to provide low-income subsidies for purchase of insurance in a non-group market? Should the government encourage risk pooling arrangements in the non-group market? Should there be a public plan? And so on.

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Reply Tuesday, July 28, 2009 at 02:00 AM

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I must say you have a very touching faith in government and bureaucracy to work efficient solutions in health care. Just don't believe it - period. I live in a country - Britain - which has had universal health care for 60 years and complaints and debates about its effectiveness and efficiency are remorseless and endless, year in year out. One comes to believe that government exists solely to run a health care service. Whatever happens now in America, agonising over health care will not abate it may well intensify. But...but...nobody should suffer the vagaries of fortune in health and mortality. If government has to be brought in so be it, but advocates must resist getting starry eyed over it. Its just a case of the lesser evil - just as government is a necessary evil.

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Both reasons, equity and efficiency, can justify government intervention into health care markets. I think equity is of paramount importance when it comes to health care, so for me that is enough to justify government intervention, and the existence of market failure simply adds to the case that government intervention is needed.

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But if we are concerned with equity too - and most of us aren't comfortable watching people suffer when we know that help is readily available (perhaps nature imposes this externality upon us purposefully) - if we won't let people die on the street or suffer needlessly due to our sense of fairness and equity - then we will want to intervene to achieve broad based coverage in the least cost and fairest manner we can find (and there may be other equity issue that are important too).

Posted by Mark Thoma on Tuesday, July 28, 2009 at 01:08 AM in Economics, Equity, Health Care, Market Failure | Permalink Comments (84)

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So those opposed to government involvement in health care markets have to first argue that there is no market failure significant enough to justify intervention, a tough argument in and of itself, and also argue that people who, for example, go without insurance or cannot afford the basic care they need deserve no compassion whatsoever from society more generally. That's an argument I could never make even for those who could have paid for insurance but chose to take a chance they wouldn't need care, let alone for those who cannot afford it under any circumstances. I want everyone to be covered as efficiently as possible, and to be required to pay their fair share of the bill, whatever that might be, for the care that's made available to them.

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But even if the private sector or the government can solve the market failure problems adequately, there's no guarantee that the resulting distribution of health care services will be equitable. We don't expect the private sector to, for example, make sure that everyone can live on the coast and have an ocean view if they so desire, we use market prices to ration those goods, but we may want to make sure that everyone can get health care when they have serious illnesses. So equity considerations may prompt the government to intervene and bring about a different distribution of health care services than would occur with an efficient market.

So if we are only concerned about efficiency, we do our best to resolve the market failures and leave it at that. We make sure, for example, that people have the information they need to make informed decisions about their care, that there aren't incentives that cause doctors to order too much or too little of some type of care or test, that monopoly power is checked, etc., etc. There's no guarantee that everyone will receive care, or that the distribution of care among those who do receive care will be as desired.



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July 28, 2009

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Health Policy Now Carved Out at a More Centrist Table By DAVID M. HERSZENHORN and ROBERT PEAR The health system overhaul largely rests on six senators who have tossed aside core Democratic priorities like a government-run plan. [Meaningful health care reform has virtually no chance. Voting for a Democratic President and Congress has evidently meant voting for a continuing of Republican conservatism on health care policy which is called centrist because conservatives such as Joe Lieberman are the dominant policy makers just as they were through the Bush years.]

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Ben said... I'll make the point only once to the "we can't afford it" crowd. The only reason we can't afford it is that we are still stupidly determined to be the one world empire. If we gave up world empire we'd have quite enough money to pay for healthcare for all. Our "defense" (LOL) expenditures total more than all the defense spending of the rest of the entire world. Use some of that for healthcare. Oh, but you say Israel won't like that since it might lessen our imperialistic commitment to it. Yeah, I do think Israel and its US minions are in the main cheerleaders of our imperialist policies. So will you let Israel stop us from giving all our people the healtcare they need?

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Reply Tuesday, July 28, 2009 at 07:03 AM

Fred said... >It seems to me that now the problem is the same and that the irresponsible are running rough shod over the responsible.

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Amen. Liberty has to be balanced with responsibility.

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Reply Tuesday, July 28, 2009 at 07:13 AM

Walt said... The implicit assumption of many is that the US can achieve the same efficiencies as the Europeans have (or at least some of the efficiencies). Most of these plans were set up when health care costs were low and expensive "life-saving" drugs and procedures were scare. So it was easier to contain and continue to contain costs. My prediction is that this will not occur in the US because we are starting at a different point and in a more contentious political environment. Instead,I believe, politicians will fight to increase benefits to everyone. I may be wrong, but I just can't imagine one party (say, Democrats) pushing to cut back costs and the other party agreeing. It has happened (for example, closing of military bases). But, as they say, that is not the way to bet.

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Reply Tuesday, July 28, 2009 at 07:42 AM

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R.L. Love said...

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I agree with nearly every word set down here except for those of Sewell and Fred. As for the equity issue,there is the problem of exploitation. Find a way to eliminate exploitation, including that of those making sacrifices in the defence of others, and then we might be ready to talk about responsibility. I doubt that day will come any time soon, but that time could be hastened if we solve our problems in their natural order. Reply Tuesday, July 28, 2009 at 07:44 AM

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BLIND FAITH TIE: There is a fundamental nonuniqueness here; economics only takes one so far. Yes, when it traipses into the domain of political policy making.

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There is no real economic justification of Health Care as a Public Service. But other countries had the wisdom to recognize that it was an oligopolistic market that was far too important to leave to market forces to manage. The US, with its blind faith that markets can do everything right, got it wrong ... and is presently paying the consequences. Namely, very high per capita cost of a nonuniversal service. Consider the share between private and public costs amongst OECD countries in this report here: http://www.oecd.org/dataoecd/46/2/38980580.pdf Note that the US has by far the highest percentage of private costs, at about 57% private and 43% public. Whereas the OECD average breakdown between the two is about 25% private versus 75% public. (Data from 2007.)

Summer Program on Monetary Policy for Students

Macro Musings Podcast 102 – Morgan Ricks on *Money as Infrastructure* and Bank Regulations 101 – Ioana Marinescu on Universal Basic Income 100 – Ryan Avent, Cardiff Garcia, and Heather Long on Lessons from the Great Recession

The unfairness of American HC is that 25% of it is paid for from the public purse, but 16% of the population does not benefit whatsoever from that expenditure.

99 – Edward Nelson on Money, its Role within Monetary Policy, and the Monetarist Legacy

Reply Tuesday, July 28, 2009 at 08:00 AM

[Rebroadcast] Daniel Griswold on the Basics of Trade 98 - Noah Smith on Immigration Economics

Lafayette said... HOUSE OF FOOLS donlast: I must say you have a very touching faith in government and bureaucracy to work efficient solutions in health care. And you have a blind faith that markets get it right all the time.

97 - Kevin Hassett on Growth, Technological Change, and the Trump Administration’s Economic Policies

Worthwhile Canadian

We have poured over the evidence as regards Health Care in this forum for nigh on to two years. We have compared that evidence to other countries that have National Health Systems. We have also had a fair airing of all points of view. It takes a fool not to understand the very cogent argument in favor of a National Health Care System that offers care equity to all citizens regardless of whether they have a job or not.

Initiative "Trickle Down", "Magic Dirt", memes and deep parameters The evolving gender gap in student satisfaction Do students choosing liberal arts degrees regret it? The National Graduates Survey, student satisfaction, and the politics of statistics

Reply Tuesday, July 28, 2009 at 08:15 AM

Shenpen said... " deserve no compassion whatsoever from society more generally"

It's time to blunt dentists' incentives to use general anesthetics

The problem is society is not the same thing as government.

Could you pass a 1950s Econ 1000 exam?

Have ever thought about it this way? I.e. If government = society that leads to an alienated, atomized, individualized future: people will be only individuals who always look to the government for help and not to each other, thus, relationships between people will be hardly more than superficial friendships.

Is the war over higher education spreading north?

And it would be sad because serious, deep community-life, where people turn to each other for help, when people feel obligated to care about each other personally, is at least half of what makes life worthy to live. But it can only happen by understanding government isn't society, society is the community of people themselves.

Roger Farmer Moving the Overton Window: Let the Debate Continue Standing on the Shoulders of Giants

Government is something that outcompetes the community of people.

Large Scale Econometric Models: Do they Have a Future?

Reply Tuesday, July 28, 2009 at 08:17 AM

What Does it Mean to Have Rational Expectations?

mark said...

The Household Fallacy Ergodicity

Even though I will somewhat disagree with you on the merits, I thought that was a thoughtful and intellectually honest post. The main reason I disagree with you relates to your final sentence -- in brief, I don't believe that any American has any intention of either limiting his or her medical utilization to a "fair share" or of paying his or her "fair share" of the costs of such utilization, and no politician has any intention of making him or her do so. The entire "reform" exercise is shaping up as just an effort to find a way to shift those costs to someone else, either in the current population or in the future and leave demand unchecked. Were we to be more self-disciplined and impose Pigovian taxes on items that drive medical utilization, like fast foods, sodas, snacks, red meat, alcohol, motorcycles, skiing, and so on, tax employer sponsored health benefits as income, and more forcefully address the major drivers of cost increases, namely obesity and end of life demand, we would not only have a healthier society and one in which universal coverage would be much less of a fiscal drain but a more productive society for nonhealthcare businesses.

Confidence and Crashes

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Reply Tuesday, July 28, 2009 at 08:21 AM

Rethinking Macroeconomic Policy

sewells said... R.L.Love, it might interest you to know that the irresponsible I am mainly talking about are mainly those feeding at the public trough without holding themselves accountable for really producing a value equivalent to their consumption. That is mostly defense contractors, agribusinesses, and other forms of corporate welfare in my view. Yes, I do think that people who receive a public subsidy for their health care should be required to stary fit, use birth control, etc. if they are not mentally defective or otherwise disabled. But that segment pales in comparison to bailouts for factory farmers and the military industrial complex in my view.

Environmental Economics Is this the Kudlow question? Teaching environmental economics with miniresearch projects Scorecard is in and it looks like conservation is losing December 2007: “There’s no recession coming. The pessimistas were wrong. It’s not going to happen. ...The Bush boom is alive and well. It’s finishing up its sixth consecutive year with more to come. Yes, it’s still the greatest story never told.

Reply Tuesday, July 28, 2009 at 08:24 AM

Patrick said... Thanks for an excellent explanation. Sadly, I think Obama et. al. will fail to get any meaningful reform. If you think Bush/Cheney was bad, just wait for Palin/Joe the Plumber. Mark my words, corn pone fascism is coming.

Update: journals making it difficult to review a paper

Reply Tuesday, July 28, 2009 at 08:24 AM

What should a reviewer do when the journal increases the costs of providing a review?

Lafayette said...

Krugman on renewables

HOUSE OF FOOLS donlast: I must say you have a very touching faith in government and bureaucracy to work efficient solutions in health care. And you have a blind faith that markets get it right all the time. We have poured over the evidence as regards Health Care in this forum for nigh on to two years. We have compared that evidence to other countries that have National Health Systems. We have also had a fair airing of all points of view. It takes a fool not to understand the very cogent argument in favor of a National Health Care System that offers care equity to all citizens regardless of whether they have a job or not. If this is called "socializing medicine" or "socialist medicine", then so be it. It works. Reply Tuesday, July 28, 2009 at 08:45 AM

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Lafayette said... sp: "If government = society that leads to an alienated, atomized, individualized future: people will be only individuals who always look to the government for help and not to each other, thus, relationships between people will be hardly more than superficial friendships." Purely American and myopic view of what government means and does not mean. I happen to live in a highly socialist country and have done so for a great many years. There is NO alienation of the individual for as long that person senses that if something goes wrong, they can turn to someone for help. And that someone is there because many people do need help to cope in a complex world. The itinerant cowboy, independent, brave, stalwart ... that's all Hollywood myth-making and cinema pap for the masses. The "help" in question (here, today in this forum) is Health Care. There is not a person on earth that expects his/her neighbor to help them with a serious illness. They can and do expect their government to assist in the recovery process, however. In terms of a standard-of-living, therefore, Health Care is the sort of help that is key to any nation that purports to be "civilized".

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Beat the Press Finance 202 Meets Economics 101 NYT Ignores Lower U.S. Food Prices as Benefit from Trump Trade War China's "Currency Devaluation Game"

Reply Tuesday, July 28, 2009 at 08:52 AM

DM said... Good post Mark. For me, the debate needs to be about equity and the end result, because the economic discussion is just a diversion. I’m a “market oriented” individual, but the required outcome goes beyond what any market can provide. Healthcare is a scare, expensive service, not a commodity, and it’s going to be rationed by any market in a way that will never meet most liberal’s equity objectives. Given the need to provide good, affordable healthcare to all, gov’t intervention is a must. We could argue if the goal of equity makes sense, but there seems to be little point as the debate has gone beyond it. So, with that said, whey the need for so much intervention? Why not get everyone out to the individual market and provide vouchers for those that can’t afford healthcare? Here’s where I think the diversion comes in. Most liberals would rather see a more centralized system since they have a greater trust of “experts” and less faith in the individual’s ability. Because of issues like adverse selection, or the fact that we spend more on healthcare than other with mixed results, or that profits are a waste of resources, we need more intervention, even if solutions requiring less intervention would work towards solving these problems. There’s an aspect of faith. Here’s my fear, and it’s more of a long term fear, is that healthcare is going to get so expensive that real rationing is going to eventually be a must. This will be an issues regardless of system as our beloved European friends (Anne… I’m just being snarky, so don’t ding me) are experiencing cost growth and an excess of GDP growth as well. Now their baseline is lower, but year over year spending is growing at a rate that will eventually require a “bending of the curve”. Now, who does the rationing? I would prefer a system that allows that choice to be distributed; to be pushed out the doctor and the patient. In the end, I fear that choice will be taken away from me in the name of equity, and I’m not a fan.

The Tax Simplification H&R Block Won't Allow: Let the IRS Do It The Median Wage for Black Workers: Why Isn't It Rising? George Will Argues that Amazon Needs Tax Subsidies Limits on Tax Deductions for States and Local Taxes Are About Cutting Off Options for Progressive Policy at the State Level

Jared Bernstein Employment Breakeven Levels: They’re higher than most of us thought Three pieces on why work requirements won’t work Real wages for mid-wage workers actually haven’t grown much over the past couple of years. Some lynx: Unions, CBO’s new baseline, the Bernstein Rule… March jobs: Topline miss but solid trend, plus a deeper dive into the current wage story Enough already with GDP growth… Musical interlude: Steve Winwood can’t find his way home.

Reply Tuesday, July 28, 2009 at 09:03 AM

Bruce Wilder said...

Robert Reich

This is one of my soapboxes, but I'll try to keep it relatively short. One of the problems with the whole "market failure" framework for analyzing deficiencies in economic organization is that it is about "markets" and allocative efficiency, when, in real life, economic organization is a matter of markets AND hierarchies, allocative AND technical and managerial efficiency.

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One of the capital features of 300 years of industrial revolution has been the development of technical innovations and novel forms of social organization, applied to the problem of better technical control and management of production processes.

5 REASONS THE NRA IS WRONGThe next time you hear someone...

To "oppose" command-and-control to "market solutions" reveals a basic misunderstanding and a remarkable blindness to economic history, a failure to acknowledge the role of social hierarchies in achieving advances in economic development and productivity.

April FoolsCon Mannity here. Shrink deficits! States’...

With regard to health care, one of the most remarkable features of our health care dynamic over the last 50 or 100 years has been the continuing ratcheting up health care costs. It is that seemingly inexorable and accelerating rise, which is driving the search for a political solution.

Rortybomb

It is not clear to me that the cost ratchet has been identified with a well-categorized "market failure". Oh, I know people have suggested that consumer incentives in the presence of third-party (insurance) payments play a role. And, of course, some with a smattering of economics will trot out "information asymmetries". It is also a commonplace to attribute the cost ratchet to the advance of technology. Or, to "Baumol disease" -- again among those, who know a bit of economic esoterica. It's confusing and complex. I think a "technological advance" story, while unspecific, is basically correct. The emerging problems in allocative efficiency and market organization are by-products and side-effects of technological advance and consequent breakdowns in technical efficiency. I am going to suggest that what we are witnessing is a kind of pressure to innovate: the economic motive for a continuing and pending social and institutional transformation of medicine, medical practice and health care. There is no optimal, market equilibrium to be sought, by design or repair. We are fumbling to find a way to organize the practice of medicine and provision of health care by "bureaucracy". We need to find ways to embed medicine and health care inside some kind of social structure, capable of effective command-and-control, capable of achieving a higher degree of "technical" efficiency. Whatever institutional reform is initiated by Congress will be a framework, within which that social transformation to achieve some form of command-and-control in medical practice (and I mean, quite, literally, completing the transformation of medicine from a professional craft into the task of social hierarchies) can be achieved. That's why questions like "comparative effectiveness" studies and "medical records" computerization figure prominently alongside insurance mandates. It is a serious shortcoming in economics, that economists don't have more to say about the role of command-and-control and hierarchical social organization in achieving and advancing technical efficiency, other than that they are agin' it.

The largest block of voters in America isn’t Democrats...

Dollars for Decency

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Reply Tuesday, July 28, 2009 at 09:24 AM

Bruce Wilder said... Technical efficiency in medicine is serious stuff. Hospital error is a leading cause of death and serious injury. (And, no, medical malpractice litigation is not a serious cost driver, despite the persistent myth.)

Does It Matter That The Fed Has Been Wrong For Years? Which Radical Liberal Policy Proposal Is Worse? The Fed’s Projections Don’t Add Up

Much of the discussion of "rationing", I think, is about the ethical dilemmas posed by advances in technical efficiency. Advances in technical efficiency, for example, mean a kind of clarity for some kinds of decisions, we were previously able to leave to "accident" and the "hand of God". When you achieve control over some process, you become responsible. So, medical suicide and euthanasia will necessarily become both increasingly common (they are already pretty common) and harder to obscure or ignore, culturally and socially.

Angry Bear Candidate Specific Response Bias in Polls What Happened to the Political Price for Lying?

Reply Tuesday, July 28, 2009 at 09:34 AM

The Citigroup Analysis of the Amazon – USPS Relationship

mrrunangun said...

Is the US economy booming? April 2018 update

How much equity? How similar should the availability of service be among socioeconomic strata? IMO the Obama program is going to be costly if it is to be adequately equitable. We should face that and justify it rather than deny it. Efficiency is a mirage. The practical argument for HMO theory propounded by Dr. Enthoven to the Nixon administration 35 years ago was predicated on eliminating inefficiency. Little or no inefficiency was eliminated at least in part because it was a viewpoint issue. My test/surgery is necessary, yours is justified, hers and his are unnecessary. Variable ranges of ability among doctors etc. is another obstacle to efficiency. A relatively poorly skilled operator is going to have more errors than a relatively highly skilled one whether it is a machinist or a surgeon. Neither machinists nor surgeons are created equal in terms of productivity or skill. In a machine shop errors are referred to as scrap and discarded. In surgery errors probably have another name, but cannot be discarded and have to be managed at increased cost to the system. Errors occur in the hands of even the best operators, so it is not simply a matter of discharging the those who make errors. A sufficient supply of product must be available to satisfy demand and as long as the operator's production is in excess of his costs, he is an asset. In medical care, where demand is less elastic in terms of timing and quantity than in goods markets, it may be necessary to bear more inefficiency in order to supply the needed services in a timely way. A fundamental error in economics has been to apply lessons learned in goods markets to markets where they do not apply, e.g. asset markets where the efficient market theories applicable to goods markets we have found to operate perversely in asset markets. It may be similarly erroneous to apply goods markets theories to a market where temporal urgency and necessarily very limited knowledge on the part of the consumer constrains choices to so great a degree. There is also a limit to the number of people able and willing to become competent doctors, nurses, technicians, etc.

Thoughts on Capehart on Kagan Open thread April 18, 2018 February 2018 JOLTS report: positive trend revised away

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Reply Tuesday, July 28, 2009 at 09:43 AM

Rickstersherpa said... First, a couple of points of comparison. We have just spent, or spending, 700 billion in one year to bailout the Financial system, almost what extending health insurance to the uninsured would cost over a decade. Second, we have spent almost 2 trillion dollars since September 2001 to the present on the Afghan and Iraq wars, and it looks like we will easily spend a trillion and a half for more the next 8 years. And many of the folks complaining about health care want to spend at least a trillion dollars over the next decade on dubious military programs like the F-22, Strategic and Space base Anti-BM Missile Defense, and sundry boondogles. But spending money on the working and middle classes, those fat slugs, well that is something we can't afford!!! The attitude of the supposedly elites in America toward the non-elites, is supposedly classless America, evolves steadily toward the view that the non-elites as sub-human (no wonder Sarah Palin and her elite bashing plays so well, there is unfortunately an element of truth to her demagoguery).

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Greg Mankiw

We do, and will continue to ration care by price even under the Obama/Congressional Democrat proposals. But at least they put a basic level of care in reach of everyone and perhaps this discussion of costs and budget will force the changes that will create the ability to bargain price and costs with the health care players and thereby saved country from the trainwreck health care costs will cause as Herb Stein's rule about "when something can't go on forever, it won't" finally acts on health care inflation.

Cloak and… Megaphone

Reply Tuesday, July 28, 2009 at 10:16 AM

Metrics meet the Null Hypothesis

SS said...

Demonizing those who disagree

A MODEST PROPOSAL! SEND THE SICK AND DYING TO THE FRONT!!

Were mortgage securities badly mis-rated?

There are many social problems that impact one's health: unemployment on stress and overheating, smoking and drinking. Modern life style, automobiles and exurban geography can impact on ones ability to exercise and resulting obesity. Divorce on stress, drinking, drugs and one's overall economic well being as well as that of children. Constraining and overwhelming work schedules on diet and fast food consumption, stress, nutritional deficiencies and obesity. Obesity and stress are well known factors in diabetes. Drinking and work related fatigue on accidents. Stress on sleep problems and fatigue. Republican politics and fluoride on sanity (oops slipped that one in but you get the picture).

The solar exponential

Many of these "social" ailments are best dealt with through preventive medicine, routine visits to a doctor or health practitioner before they lead to more severe ailments which are much costlier to treat and impact one's well being, productivity and ability to a much greatere degree. Public medicine informational and promotive of healthy habits can also play a role in enhancing preventive behaviors.

2:00PM Water Cooler 4/19/2018

But treating people, even preventively and public medicine cost money. Given the cost of medicine in this country many people as we know do not have access to health care and are unaware or unmotivated to take the necessary preventive measures or in the case of medications try to self-medicate stress and sleep-deprivation with alcohol and drugs. The few who remain unaffected, and even some who are, are too stingy to contribute to national health, perhaps some studies show due to an excess of fluoride in the water!

Through the Revolving Door, with a Few Stumbles – Health Care Corporate Executives and Consultants Continue to Become Leaders of Trump’s Department of Health and Human Services

But that's their problem say the critics! So how about trying something else?

2:00PM Water Cooler 4/18/2018

Let's take all the obese, stressed out, divorced and overworked individuals, anyone who uses drugs or alcohol, has problems sleeping or otherwise is on the cusp of serious and costly health problems and ship them overseas. More particularly to Afghanistan, Iraq and future conflicts of our choosing where we place them in the front lines and hope for the best. Boy, would that get their dying carcasses out of the emergency rooms, hospices and off the streets. Resolved the burial problems, doubly costly in the case of the obese, resolved the military recruitment problems, no more crowded waiting rooms and cramped airline seats. That'll show those foreigners to underestimate American resolve. After all they don't call us "can do" for nothing. What's all the fuss about health care when there is a truly American solution right at hand. The only downside - we'd still be left with the over fluoridated "crazies" back here. SS

R.L. Love said...

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save_the_rustbelt said...

America's Worst Humans

I have files on health care reform dating back to the late 80s, and a lot on the Clinton attempts, and for two decades a dominant theme has been: "Health care spending is too high as a % of GDP." In the last three months that argument seems to have, at least temporarily, evaporated. Thoughts?

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Steve Benen

Reply Tuesday, July 28, 2009 at 10:57 AM

Thursday's Mini-Report, 4.19.18

Min said... In addition to efficiency and equity, there are considerations of social welfare. That is, my welfare depends upon the health of the general population. As Red Green says, "We're all in this together." :) Reply Tuesday, July 28, 2009 at 11:28 AM

Ignoring slavery, Trump says human trafficking has reached all-time high At international meeting on women, Team Trump pushes abstinence message Thursday's Campaign RoundUp, 4.19.18

Roger Chittum said... Bruce Wilder: "It is a serious shortcoming in economics, that economists don't have more to say about the role of command-and-control and hierarchical social organization in achieving and advancing technical efficiency, other than that they are agin' it." Indeed. Within firms, nobody (I think) advocates atomized markets of individual freelancing employees trying to discover the best goals to pursue and the best ways of getting there by constant bargaining. Everybody (I think) understands that within a business unit only command and control is efficient. Yet, outside the firm some say they believe command and control is always bad. Logically, that anoints CEOs as a ruling class who should make all economic decisions by bargaining amongst themselves. Is that what market fundamentalists believe and advocate? Reply Tuesday, July 28, 2009 at 11:31 AM

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Davis X. Machina said...

Nota bene: Guilt trips

Efficiency is one way to think about the issue. But equity isn't the only framework for thinking about the other half of the problem. There is a moiety, perhaps a substantial one, who have no use for equity, who instead want deserts, even at the expense of efficiency, and certainly at the expense of equity. They see social provision as a cosmic moral drama, where being able to observe virtue being rewarded and vice punished is worth paying a substantial premium for, efficiency be damned, and equity is seen as positively perverse, since it means rewarding vice and punishing virtue. Reply Tuesday, July 28, 2009 at 11:31 AM

Dirk van Dijk said... One of the traits that people prize most in Dogs is loyalty. However, the question then becomes loyalty to whom or what? In the case of the Blue Dog Caucus which has emerged as the major player in Health Care reform, it appears that their loyalties are first and foremost to their big campaign contributors, the health Insurance firms and the drug companies. The general claim that they make is that they are worried about the fiscal consequences of health care reform, but when it comes to specifics, they are most opposed to the very elements of the reform package that are most likely to be successful in driving down the over all cost. It is easy to figure out why the GOP is united in opposition to the plan (ok there are several plans on the table from several different committees, but pretty much the bottom line for the GOP on all of them is NO). The GOP hopes that if the plan fails, so will the Obama presidency. Sen. Jim DeMint of S.C. pretty much came out and said so (“it will be his Waterloo”). What the Blue Dogs are up to is harder to figure out. The main answer I come up with is the campaign contributors. For example Mike Ross (D-AR) who has emerged as the Blue Dog leader on Health Care got more than twice as much from Health Care professionals as any other source in the 2008 election campaign. Above all Dogs are loyal. Probably the most important tool on the table for controlling health care costs is the public option. Essentially it will let individuals buy into Medicare early. Medicare is a FAR more efficient system than the private health insurance system. For a dollar that is spent on Medicare, more than 98% of that goes to paying for actual medical costs. At the major health insurance companies like United Health Care (UNH), Aetna (AET) and Humana (HUM) less than 80% goes to pay for doctors and hospitals. The rest of the money goes to overhead, principally trying to get lots of people to apply for health care coverage and then to weed out the ones that are likely to get sick. The also spend a lot of money on people who try to figure out if someone had an undisclosed pre-existing condition, so they can deny coverage to people who thought they were insured when they actually get sick and file a claim. The Health Insurance industry is rightly afraid of the public option, because it is a much better mousetrap and will eventually lead to the industry having a much smaller, supplemental role (equivalent to the current medigap policies offered to supplement Medicare) rather than being a huge industry. The Blue Dogs also want the public plan, and/or Medicare to increase the payment schedules for doctors and hospitals in rural areas. That is hardly a recipe for holding down costs, even if it does help solve the problem of not enough doctors in some areas. The Congress has large Democratic majorities in both houses, so ultimately if health care reform does not come about, it will be their fault, and I suspect that the voters will punish them for it. The current path we are on is not sustainable. If nothing is done, more and more people will lose their access to health insurance. In 2007, 46 million Americans were without health insurance coverage. Since health insurance is largely tied to employment in this country (until retirement) it is highly likely that the number right now is well north of 50 million given the number of jobs lost over the last 18 months. That is one in six Americans. If one considers that everyone over the age of 65 is already covered in a “socialized single payer system” it is more like one in five people with no health insurance. That does not count the huge number of people who are woefully underinsured. The current system also affects those lucky enough to have good insurance. We will never know for sure how many people would like to strike out on their own and form their own companies, but they (or a family member) have a pre existing medical condition. For them to quit work and start their own firm could be financial suicide, since they would most likely have to do without health insurance, or the premiums would be so high as to be unaffordable. As the graph below shows (from http://economix.blogs.nytimes.com/2009/07/08/ushealth-spending-breaks-from-the-pack/) the U.S. spends far more than any other advanced country in the world on Health Care as a percentage of GDP and while it has been going up in most countries, it has been going up much faster here. Considering that we have a much higher GDP per capita than most of the other countries on the graph, our absolute spending on Health Care dwarfs that of other countries. Yet on every major measure of health care outcomes, such as life expectance or infant mortality, the U.S. ranks mediocre at best. The projections are that if nothing is done, by 2025, we will be spending 25% of or GDP on Health Care. The last effort at health care reform in 1993 failed, but the political pressure and the movement of people into HMO’s was able to slow the growth as a percentage of GDP for a while. A rapidly growing GDP in the also helped in that regard. However then the health care spending cancer came out of its temporary remission, and started to soar again. The graph only goes through 2007, but it is likely that with the shrinking of the overall economy, health cares share has soared again. The bottom line is that we need a strong public insurance option, one that will have the clout to figure out which treatments work best and to promote preventative care. Without it the country is on the road to bankruptcy. The gap between what we pay and what the rest of the world pays for health care is sapping the country’s competitiveness and yes even preventing entrepreneurship. One can understand, but lament the political games being played by the GOP, but one must seriously wonder about what the Blue Dogs hope to accomplish. If the Health Care package goes down to defeat, or is so watered down as to be reform in name only (a very likely outcome at this point) the health insurance stocks will soar, and the Drug companies will be very attractive. Both have been beaten down to value levels on fears that their Oligopolies will be broken up and they will no longer be able to suck the life out of the economy. With a failure or an effective failure of health care reform, these companies will do very well, but the country will be in terminal condition. Reply Tuesday, July 28, 2009 at 11:46 AM

Beezer said... "What is a holistic doctor? Holistic doctors are educated and trained in traditional medicine and hold a medical degree. They are capable of addressing all standard medical needs the same as a traditional medical doctor, however, they adhere to holistic principles that use a variety of alternative methods to promote physical, emotional and spiritual health and encourage a better quality of life." From:http://www.holistichelp.net/holistic-doctors.html If we had a stronger base of general practitioners, one benefit I believe we'd see is a rise in the number of holistic MDs. Our system is engineering based and technical. This has resulted in terrific new surgery techniques as well as terrific new diagnostic tools. And we will eventually use computing power and information processing to both save money and increase medical care. But this focus, I believe, has also hurt our medical care delivery at the GP/patient level because instead of adding holistic medicine to their doctor's bag, most doctors add some technical specialty because that's where the money is. A side benefit of universal health care would be the proliferation of GPs and the expansion of holistic medicine practices. Probably everyone reading this has had an experience, or know of a friend's experience, where a holistic physician solved some seemingly unsolvable problem

Reply Tuesday, July 28, 2009 at 12:07 PM

Ben said... And when money is tight what happens? In California cuts are made in child welfare programs, medical aid to the poor, and AIDs prevention. Of course nobody could possibly raise taxes on the rich. Those people in Bel Air and Brentwood with 40 million dollar homes would not tolerate such terrible things. Their real estate taxes are low and untouchable. Can you imagine any of these people even thinking of living anywhere but in a palatial mansion? Yeah, the USA is wonderful to its poor, and its non-whites, isn't it? Reply Tuesday, July 28, 2009 at 12:40 PM

R.L. Love said... Ben, I agree with most of what you say, but... do you know that through-out the antebellum period slaves were not much used in manufacturing because, with all things considered it was cheaper to use wage labor. Of course wage labor in jobs commensurable to the work down by slaves is another matter and no doubt slavery has a seperate list of issues, however this working class white guy is beginning to see racism as a ploy. At the very least there needs to be a little more recognition of the fact that Many of our ancestors were forced to endure Many forms of hardship. At best we could could recognize our historic opportunity to let all of it go. Reply Tuesday, July 28, 2009 at 01:36 PM

Patricia Shannon said... If our society/country does not care about us, why should we care about it? Eg., why should we refrain from breaking into people's houses if we think we can't get caught? In addition to the many causes of weight gain listed by SS, add the fact that some medicines for the mentally ill cause weight gain. I don't know anybody who is perfect. And I am sure none of the people posting here, who think that imperfection deserves a death sentence, are perfect. Reply Tuesday, July 28, 2009 at 01:48 PM

Patricia Shannon said... There are several good comments from people who frequently post good comments. Rickstersherpa, I hope you will continue to join our discussions. Reply Tuesday, July 28, 2009 at 01:50 PM

Patricia Shannon said... Dirk van Dijk, I hope you will continue with our discussions, too. Reply Tuesday, July 28, 2009 at 01:51 PM

sewells said... R L Love, I could have said what I intended more basically and have saved you the trouble. I think the emphasis is too much placed on what do I get from the system and not enough on what do I need to contribute to the system. I think there should be a balance between the two and I think that balance is woefully out of balance at present. I am sick of fat cat bankers getting bailed out by people trying to raise a couple of kids on what passes for wages these days. I am sick of dickless wonders like our past president and vice president and cohorts starting wars that other people bleed and die in. I am sick of people having kids when they are not equipped to be fit parents. I don't think any of that gets fixed with a legislative program or pronouncement. That's a crisis of of ethics or should I say the lack thereof. Reply Tuesday, July 28, 2009 at 01:54 PM

SS said... FUNNIER THAN YOU THINK!! JOHN BIRCH SOCIETY, KLU LUX KLAN PROCLAIM FLUORIDE A COMMIE PLOT! In which the author recommends legalized prostitution and vouchers to fight the nations health wows. - So here we go again. In the 1950s of Senator Joseph McCarthy commies were thought to be, if not actually, everywhere. So perhaps it didn't take a great leap for the ultra Conservative John Birch Society- still around today- and the Klu KLux Klan to advocate banning fluoridation of water. Begun in 1946 in Grand Rapids Michigan, the JBS and KKK called fluoridation a liberal commie plot to undermine America. Fluoridation of water to 1 part per million was thought to be found scientifically beneficial to preventing tooth decay and is now done in most of the U.S. though not universally abroad. Though not all liberals defend all science there is not much evidence either to support any liberal commie plot on the nations reproductive organs or any other organs for that matter. Especially today when communists in the U.S.are rarer than atrophied organs. So if I associated Republicans with mental illness, craziness and a fluoride problem above this is the genesis not something I picked up on Saturday Night Live, not my favorite show, anyway. So we come full tilt to 2009 and health care reform. Hardly a red blooded communist, or even blue blooded one, for that matter left to find below the 49th parallel, but still universal health care is seen as a threat to American values and "socialism'' or a socialist plot if not fortunately a commie one. The John Birch and Klu Kluxers have perhaps moved on issue-wise but there are still plenty on the right telling us that immigrants are the problem - in my day those same 1950s and 60s, it was italians and other southern europeans of the swarthy type - that America is being undermined from within and if there is no longer a specific substance to point to, the reproductive tract, in this case focusing on female reproduction and abortion are always at the center of the debate. So what is a good man to do faced with this persistent and virulent opposition to all things rational and scientific? My solution is legalized prostitution, a la Dutch who allow regulated and medically checked prostitutes to practice. Give the Republicans vouchers for full therapeutic visits, and let them get over their sexual fears. We will have a much better society as a result. SS Reply Tuesday, July 28, 2009 at 02:08 PM

Patricia Shannon said... http://www.bloomberg.com/apps/news?pid=20601070&sid=ac_Ad5Car70M July 28 (Bloomberg) -- The last time a president tried to overhaul U.S. health care, Americans were spending $912 billion on the system and 40 million were uninsured. Today they’re spending $2.5 trillion and almost 50 million lack coverage. Reply Tuesday, July 28, 2009 at 02:20 PM

R.L. Love said... Sewells, I am just old enough to remember an inspired period in our nations history. That inspiration though was laced with folly and misconceptions of our role in regards to responsibility, as you suggested. I would add though that responsibility to eachother must now also be extended to include everyone and everything on the planet. We have a very long way to go and it would be nice to see some real progress during our lifetimes. We must not however let the small things obscure the big things. And if a few get something for nothing it is a small thing, and as you also suggested there is no shortage of big things. Reply Tuesday, July 28, 2009 at 02:48 PM

im1dc said... On NPR tonight: "Economists Krugman, Butler On Funding Health Care" Listen to the "Fresh Air" debate from the NPR site: http://www.npr.org/templates/story/story.php?storyId=111173038 Reply Tuesday, July 28, 2009 at 04:56 PM

anne said... http://krugman.blogs.nytimes.com/2009/07/28/irresponsible-punditry/ July 28, 2009 Irresponsible Punditry By Paul Krugman Pundits don’t have to be right about everything — in fact, if you write a newspaper column and you never make a prediction that turns out wrong, you’re not taking enough risks. They do, however, owe it to the public to make enough effort to get basic facts right. (Note to readers: having a different theory about how the economy works than the one you prefer is not an error of fact.) So Jonathan Chait * directs me to this doozy from, alas, Martin Feldstein: "Obama has said that he would favor a British-style 'single payer' system in which the government owns the hospitals and the doctors are salaried but that he recognizes that such a shift would be too disruptive to the health-care industry." Single-payer, as anyone who has paid the least bit of attention to the health care debate knows, means a system like Medicare, in which the government pays the bills. It absolutely does not mean a British-style system — and Obama definitely didn’t advocate anything of the sort. One possibility is that Feldstein really is that ignorant of the health-care basics; if so, he has no business writing an op-ed on the subject, just as he had no business writing an op-ed on climate change policy. ** (Yes, I write about subjects on which I’m not an expert — but I do my homework first.) The alternative possibility is that Feldstein knew that he was saying something false, but did it anyway in the hope of scaring his readers. I don’t know which is worse. I do know that if I misstated the facts like this in the Times, I’d be required to publish a correction. Will the Post require that Feldstein retract his claim? * http://blogs.tnr.com/tnr/blogs/the_plank/archive/2009/07/28/basic-facts_3A00_they_2700_re-important.aspx ** http://krugman.blogs.nytimes.com/2009/06/03/feldstein-on-global-warming/ Reply Tuesday, July 28, 2009 at 05:14 PM

anne said... http://krugman.blogs.nytimes.com/2009/07/28/speechless/ July 28, 2009 Speechless By Paul Krugman Bill O’Reilly explaining * that of course America has lower life expectancy than Canada — we have 10 times as many people, so we have 10 times as many deaths. I need a drink. * http://mediamatters.org/mmtv/200907270052 Reply Tuesday, July 28, 2009 at 05:15 PM

Ben said... Rachel Maddow this evening had a fascinating segment on a new conspiracy theory hatched in the right wing media (Republican of course) that claims Obama's health care proposals are really a secret plot to kill old people. Sounds crazy and it is, but it is also out there along with "Obama's not an American" birther stuff. The frantic desperation of the haves to hold on to their wealth and make sure none of the poor or "non-Americans" (you know: illegal immigrants and hispanics in general by extension) get any benefits is astonishing and amazing to behold. It makes clear what a society organized around unfairness like the present USA is all about. Greed, gluttonous greed and contempt/hatred for the unfortunate. And to top it off, lots of these people claim to be Christians. Reply Tuesday, July 28, 2009 at 06:16 PM

Ben said... I think it would be interesting to hear those who think the universal insurance proposals of Obama would be "too expensive" (like Feldstein) explain why they would not support taking money from the bloated "Defense Department" (really the Imperial War Department in fact) to pay for it? What is the overwhelming need for the USA to be the world's imperial superpower spending on its military empire more than all other nations spend on their military combined? Are we so despised, beseiged and under attack from all sides that getting out of Afghanistan and many of the other places where we keep troops at war would cause us to collapse? I'd like to hear about it all. Reply Tuesday, July 28, 2009 at 06:23 PM

Ben said... Well most of the manufacturing was in the North where there were no slaves. Slaves were very uneducated, probably not educated enough even for most of the menial factory jobs, but above all they weren't where the factories were. The South where they were. They had been imported for plantation work for which they were suited. What some U of Chicago economists discovered was that the slaves were better fed and probably had more leisure than the factory workers. I doubt this was due to any particular affection for the slaves, but simply due to the economic organization that existed. It didn't cost much to feed slaves on a plantation and for hard work in the fields they needed calories. Reply Tuesday, July 28, 2009 at 06:32 PM

R.L. Love said... Ben, I suspect that you already know this, but the common enemy of the working class is united along economic lines. The rest of us are divided along social lines and not well informed enough for the most part to take advantage of what little numerical advantage we have left. The social issues must therefore be set aside or resolved if progress is to be had. Reply Tuesday, July 28, 2009 at 06:48 PM

SS said... @ Ben "that claims Obama's health care proposals are really a secret plot to kill old people. Sounds crazy and it is, but it is also out there along with "Obama's not an American" birther stuff." Fluoride was worse, it cut down sexual prowess (see above explanation)! SS Reply Tuesday, July 28, 2009 at 07:16 PM

Patricia Shannon said... Ben, It would also be poor economics not to take care of one's slaves. They were a long-term investment. However, I'm sure there were slave owners who were, relative to their time, more moral and caring than others. ================= SS I guess flouride in water is the reason the U.S. is suffering from a population decrease. Reply Tuesday, July 28, 2009 at 07:31 PM

R.L. Love said... Ben, Mostly, wage labor was cheaper due to flexibility(lay-offs), and if a wage employee was hurt or sick he or she was easily replaced at no cost.Based on this countries very first tariff (1816) the Brits were able to manufacture goods at about 25% less than what we could. So moving slaves or facilities a few hundred miles would have been a very small price to pay in light of the fact that tarriffs are nearly always reciprical. And by the 1880s the U.S. levied tarriffs on some 4000 items. It was clearly just about money insofar as unskilled factory labor was concerned. And children with no education did much of this work so the premise that slaves were not able to do this work for any reason is a tough sell. Reply Tuesday, July 28, 2009 at 07:46 PM

Patricia Shannon said... R.L. Love says... Ben, I suspect that you already know this, but the common enemy of the working class is united along economic lines. The rest of us are divided along social lines and not well informed enough for the most part to take advantage of what little numerical advantage we have left. The social issues must therefore be set aside or resolved if progress is to be had. =============================== Very true. People of all shades in the south have been kept down by the elite deliberately fostering divisions between people of different shades, weakening their ability to work together for their common good. Reply Tuesday, July 28, 2009 at 07:50 PM

R.L. Love said... Mark, Well written and impressive. My vote is for social medicine as you might have guessed. Why doctors earn so much more than fireman or cops or nurses or so many others is difficult for me to get. Insurance, when all of those who benefit from it are considered, especially the stockholders, is a parasidic waste of time and money. I suppose the jobs and the economic activity is irreversible but it does not mean I have to like it. Nontheless, your fighting a good fight and the troops are too. All the best. Reply Tuesday, July 28, 2009 at 08:57 PM

Lafayette said... WE BEEN M-I-C'D SS: Let's take all the obese, stressed out, divorced and overworked individuals, anyone who uses drugs or alcohol, has problems sleeping or otherwise is on the cusp of serious and costly health problems and ship them overseas. Frankly, as ludicrous as this proposition appears, they would probably better taken care of under just about any European National Health System than in the US at present. In fact, I know some Americans who are, here in France, under treatment from the state's NHS. It is a shame they are too sick to be on this forum to testify. Fifty or so Democrat congressmen/women are blind to the efficiencies of quality health care, having been scared (supposedly) by the cost projections. But, where were their patriotic principles, along with those of the Replicant Party, when we spilled the same amount of money, in lesser time, into the Iraqi desert? Nowhere to be seen. Now they are all being "patriotic" by defending "the interests of the American people", treacherous nitwits that they are. We are being fucked royally, once again by the Medical-Insurance-Complex lobby. After having been screwed once already by the Military-Industrial-Complex in Iraq. Reply Tuesday, July 28, 2009 at 10:52 PM

Hal Horvath said... "Universal care without breaking the bank." Contrast to the open freedom to innovate and create unlimited new therapies, usually very expensive stuff... Then the desire for "equity." Keeping in mind the need for freedom of choice. All this implies the universal-care insurance will have to be only a list of proven, costeffective treatments. But intentionally allow and encourage supplemental coverage for more extensive options. The List, if you will. That's the "evidence based" "comparative effectiveness" stuff. The cost-effective care that doesn't break the bank. No one dies from lack of basic care, unless they refuse it, etc. Saying a List is "rationing" is disingenuous, as anyone is free to buy supplemental insurance, etc. (freedom to choose, etc.). This is the first of many pieces that compose good solutions to various aspects of the whole massive health care quandary. I've written on a lot of the pieces in the last two weeks here: http://findingourdream.blogspot.com/search/label/health%20care I'm starting to think maybe the nation needs months of debate after all, just for a process of education. Reply Tuesday, July 28, 2009 at 11:21 PM

Lafayette said... ICE AGE POLITICAL SYSTEM I think I've got it all wrong. After all is said and done: "The business of America is business". (Calvin Coolidge) Full stop. Until money no longer SHOUTS in Washington, nothing will change fundamentally towards a more liberal economic policy (aka Social Justice). We are stuck in the Ice Age Reply Wednesday, July 29, 2009 at 12:23 AM

Lafayette said... COLLECTIVE DELUSION HH: "I'm starting to think maybe the nation needs months of debate after all, just for a process of education." This may indeed be true. The hysteria that swirls around the Health Care polemic, so replete with dogma, is drowning the real debate. But where is that debate to come from? The buzz-about-blogs is that they are a new method for reaching and influencing public opinion. This one is amongst the best because of Thoma's ability to seek and find subject matter that provokes debate. Debate is certainly necessary, but never sufficient. I live in a country, France, that will debate anything -- including how many angels can dance on the head of a pin -- at the drop of a hat. And yet, for all the reasoned debate, nothing changes really. (Thankfully, we have had for four decades a National Health Care System that America can only dream about at present.) So, one is led to this conclusion: Without some catastrophic event, such as WW2, any societal change process seems to take decades (if not entire generations) to start, grow, influence, alter and enter, then finally fix itself in the common perception of reality. We have to start somewhere and the BO&Co administration is that somewhere, brought about largely by lead-head's Cataclysmic Combination of Failures that pushed American sentiment over-the-top and a bit leftwards. But we aint gonna do much changin ... Not yet. The country is still too settled into its just off center-right political configuration. Too many people believe that with a nudge here and a tweak there, all will be set right and we go back to the carefree 1950s and 1960s. To each country its own Collective Delusion. Reply Wednesday, July 29, 2009 at 12:42 AM

sewells said... R L Love, I have a friend, I've known her since she was 2 years old, who is a surgeon. She is just about, within the next year, to start her practice. She is 37 years old and has +100K in student loans that need to be paid. The reason doctors make a lot more than firemen, teachers, etc. is because what they do requires a lot more knowledge and a lot more, and lots more rigourous, training than teachers and firemen do. Seriously, you can't really think that compensation shouldn't be in some manner tied to levels of difficulty can you? Reply Wednesday, July 29, 2009 at 05:01 AM

mark said... Ben writes: "I think it would be interesting to hear those who think the universal insurance proposals of Obama would be "too expensive" (like Feldstein) explain why they would not support taking money from the bloated "Defense Department" (really the Imperial War Department in fact) to pay for it? " 1) I think the proposals are too expensive. 2) I also think that by the time any legislation gets signed the cost controls Orzzag talks about will be gutted. So the proposals would be even more expensive. See for example the woman who confronted him last night about ensuring she could get a hip replacement at 80 and his decision not to use that as a moment to communicate the tough choices that need to be made to keep costs down. 3) If costs were under control, then I would certainly support that shift. Clearly. 4) But, and this is really important for you to understand: health care, so far tends to grow about 7% per year, about 5% above recent inflation. The defense budget is not forecasted to grow at that pace and ought, actually, to shrink. Therefore, your funding proposal would not solve the problem after the first year. So it is not a solution unless health care costs are controlled. Which requires our leader to start telling citzens about the sacrifices required to do that and stop pretending it will be painless. Reply Wednesday, July 29, 2009 at 07:40 AM

SS said... @ Sewells "and has +100K in student loans that need to be paid. The reason doctors make a lot more" Sewells I try to make my psots funny when the situation is so desperate and the discourse has taken a turn beyond the rational. It is sometimes the only way to get back to the real situation. But you are truly funny. How many years fdo you think it takes for a Doctor to pay back $100,000. Now compare to a police officer or fireman with perhape $40,000 in loans for a community college or two year degree in criminal justice, or a teacher with $60,000 in debt going into elementary school teaching. What is funny is that you think all of us so stupid! We're laughing, Sewells, we're laughing. SS P.S. Maybe the RNC can provide you guys with a new set of talking points. These old ones are really weak. Reply Wednesday, July 29, 2009 at 07:53 AM

anne said... There has been and is a critical concern about supposed health care reform, a concern that Democrats have repeatedly added to, the concern is that health care reform will mean slashing Medicare and rationing care for people as they grow older. Democrats have repeatedly threatened cuts in Medicare, and only after being pushed are Democrats coming to understand that cuts will not be politically tolerable so that what were to be cuts will clearly become changes to increase Medicare efficiency. As for rationing, Republicans argued that health care reform would mean rationing and impossibly foolish or mean-spirited Democrats went along with the notion. President Obama may think that there is a need to ration tonsils, but people have rationing in mind that will directly harm them and they are easily and rightfully frightened. Reply Wednesday, July 29, 2009 at 08:07 AM

anne said... "See for example the woman who confronted him last night about ensuring she could get a hip replacement at 80 and his decision not to use that as a moment to communicate the tough choices that need to be made to keep costs down." Notice the intense meanness of the rationing monsters, actually meanness meant to foster fear to make sure there will be no meaningful health care reform. The President though may have finally understood, that for wild conservatives the need is to create fear to make sure that people are convinced health care reform means denying care for them. There is no need to ration tonsils or health care that I need, a country that spends $734.9 billion on the military in 2008 and more this year and more to come has no need to worry about my tonsils or hips or very life. Enough of the rationing monsters. Reply Wednesday, July 29, 2009 at 08:15 AM

anne said... "I think the proposals are too expensive." I could care less what rationing monsters think, we can afford universal health care, we can easily afford universal Medicare. Let the rationing monsters worry about rationing the bizarre needless destructive spending in Afghanistan and Pakistan, and stay the heck away from my right to medical care. Reply Wednesday, July 29, 2009 at 08:20 AM

DM said... It's not about whether healthcare will be rationed or not, becuase at some point, it will have to be, regardless of the system. Rationing in and of itself isn't a pro or con for UHC, Single-Payer or a more market-based system. It's how you ration that should matter. Reply Wednesday, July 29, 2009 at 08:45 AM

ken melvin said... Given that we are spending twice as much and getting half as much, I suspect that universal health care would cost a great deal less than we're spending. Reply Wednesday, July 29, 2009 at 08:51 AM

Barry said... Donlast: "I live in a country - Britain - which has had universal health care for 60 years and complaints and debates about its effectiveness and efficiency are remorseless and endless, year in year out. " And yet not even Thatcher was willing to dismantle that system, no matter what havoc she was willing ton inflict on the rest of UK society. This suggests that even a poor implementation is better than what the USA has now. Reply Wednesday, July 29, 2009 at 10:34 AM

Lafayette said... SS: "and has +100K in student loans that need to be paid. The reason doctors make a lot more" This argument is for dunces. Have you any familiarity at all with economics and the nature of an oligopolistic market? Apparently not, meaning you're in the wrong forum. Reply Wednesday, July 29, 2009 at 10:44 AM

SS said... @ Lafayette, I think you got Sewells confused with me, I said it was funny SS Reply Wednesday, July 29, 2009 at 10:47 AM

Julio said... BTW, Howard Dean hosted Olbermann last night. A lot of it was a discussion of the VA healthcare system, and how it outranks all other healthcare delivery including private hospitals, is cheaper than most, and has been CUTTING costs while improving delivery. Reply Wednesday, July 29, 2009 at 11:05 AM

anne said... http://thecaucus.blogs.nytimes.com/2009/07/29/senator-sees-good-news-in-costestimate-on-compromise-health-bill/ July 29, 2009 Senator Sees ‘Good News’ in Cost Estimate on Compromise Health Bill By David M. Herszenhorn By fully offset, Mr. Baucus means that the legislation would not add to the national debt but rather the cost of the bill would be covered through a combination of savings, mostly by reduced spending on Medicare, and new taxes.” [The astonishing stupidity of Democrats, who must slash Medicare to be able to afford, well, Medicare (taxes to be included). When Republicans refer to a danger to Medicare they are quite right even though they do not care a fig about Medicare. Medicare recipients have every right to be worried.] Reply Wednesday, July 29, 2009 at 11:40 AM

anne said... http://www.nytimes.com/2009/07/29/health/policy/29health.html July 29, 2009 Democrats Push Health Care Plan While Issuing Assurances on Medicare By ROBERT PEAR and DAVID M. HERSZENHORN President Obama tried to sell his health care plan to older Americans amid an outpouring of fear about Medicare cuts. [Never worry kiddies, we are just going to be cutting Medicare only not really cutting Medicare while we ration away tonsils * or life which ever costs more at the time. How to frame a public discussion. * Remind me to open a tonsil bank.] Reply Wednesday, July 29, 2009 at 11:47 AM

anne said... http://krugman.blogs.nytimes.com/2009/07/29/medicare-versus-insurers/ July 29, 2009 Medicare Versus Insurers By Paul Krugman I notice from comments that a fair number of readers think that Medicare has had runaway costs. What you need to ask is, runaway compared to what? Here’s the raw fact, from the National Health Expenditure data: * since 1970 Medicare costs per beneficiary have risen at an annual rate of 8.8% — but insurance premiums have risen at an annual rate of 9.9%. The rise in Medicare costs is just part of the overall rise in health care spending. And in fact Medicare spending has lagged private spending: if insurance premiums had risen “only” as much as Medicare spending, they’d be 1/3 lower than they are. We don’t have a Medicare problem — we have a health care problem. * http://www.cms.hhs.gov/NationalHealthExpendData/downloads/tables.pdf Reply Wednesday, July 29, 2009 at 11:51 AM

sewells said... SS - if you want a surgeon making 60k to do trauma surgery on you after a car wreck, be my guest. As for myself, I don't want that surgeon anywhere near me with a scalpel in hand. There's a dunce here but I'm pretty sure it's not me. Reply Wednesday, July 29, 2009 at 12:29 PM

R.L. Love said... Sewells, I suppose that I should have included this in my comment about doctors earning "so much more than fireman and cops and nurses and so many others" but I also think education should be free. As for a doctors job being more difficult, the fireman and the cop have more dangerous jobs. The person cleaning toilets has a more disgusting job with less respect. Should a second or third rate doctor earn a hundred times what a first rate toilet cleaner earns? When a fireman saves children from a fire does he get to decide what his time is worth? Reply Wednesday, July 29, 2009 at 12:41 PM

Julio said... What does "too costly" even mean in this discussion? Is the amount that the country spends on healthcare expected to go up? Or does it just mean that government pays for it instead of someone else? And where did this "must not add to the deficit" idea come from? [Meanwhile, I'm keeping my tonsils. When the time comes, I'll negotiate: "If you fix my gout, I'll let you take my tonsils out and make some extra money"] Reply Wednesday, July 29, 2009 at 01:03 PM

SS said... @ Sewells sewells says... "SS - if you want a surgeon making 60k to do trauma surgery on you after a car wreck, be my guest. " Dunces sometimes have flashes of genius but in my case you got my choice right at least. I'd much rather have a "Doctors Without Borders" Surgeon who probably doesn't make $20,000 a year than the best $1 mln. a year specialist one can find. In fact Michael Jackson seems to have had a few of the latter. In my case I roomed with a med student who spent his whole medical career with Drs. Without Borders. Hated American Imperialism but a better Doctor you couldn't find. By the way are you concluding that Michael Jackson was a dunce to hire the "best" money could buy? But in fact Sewell you distorted the whole argument as usual. What I said above was that Drs. with $100,000 in debt still made much much more than all sorts of people in other walks of life with much smaller college debt or none. If you can't discuss seriously on the basis of well known facts - average medical and professional salaries are readily available, than why discuss at all? Sewells I hope someone is at least paying you to be so silly. If not apply, the lobbyist have plenty to go around and are not worried about the facts. SS Reply Wednesday, July 29, 2009 at 01:53 PM

ken melvin said... given what I know about Montana, I'm guessing Max stands to inherit a ranch. Reply Wednesday, July 29, 2009 at 02:40 PM

Blissex said... «So those opposed to government involvement in health care markets [ ... ] and also argue that people who, for example, go without insurance or cannot afford the basic care they need deserve no compassion whatsoever from society more generally.» I have rarely seen this argument, and I think it is a travesty of -- the argument is that the "compassion" should be *volunary*, that is those who want to show compassion and donate free health care to the poor should be free to do so, but those who don't want should be left alone. There are 4 billion people who cannot afford health insurance, and what many people argue is that citizens of the USA should be free to choose whether or not to donate free health care to a citizen of any country on Earth. «That's an argument I could never make even for those who could have paid for insurance but chose to take a chance they wouldn't need care, let alone for those who cannot afford it under any circumstances.» There are 4 billion people "who cannot afford it under any circumstances", and you don't qualify at all your argument as to nationality, so I guess that you are advocating that USA taxpayers pay for free universal healthcare for all the poor in the world, because that those 4 billion "deserve no compassion whatsoever from society more generally" is an argument that you "could never make". Of course persuading the USA poor to "share the wealth" of the USA rich not just with them but with the poor of the whole world is a very noble stance, and I applaud it, but I suppose that is not a vote winner. I personally think that there are excellent arguments for universal health care restricted to USA residents only, with a poverty-insurance element, leaving the remaining 4 billion who cannot afford healthcare to be someone else's compassion. But so far I am astonished to see only arguments like yours that on compassionate grounds the USA should pay for healthcare insurance for 4 billion people who cannot afford it, or wishy washy arguments for "something", or pigheaded arguments for not even having a USA-only system. Very disappointing. Reply Thursday, July 30, 2009 at 02:23 PM

Lafayette said... SS: "I think you got Sewells confused with me, I said it was funny" Oopps, sorry. Reply Friday, July 31, 2009 at 02:01 AM

Lafayette said... THE MEDIA MACHINE SS: "By the way are you concluding that Michael Jackson was a dunce to hire the "best" money could buy?" Given the consequences, would you you not agree that he was? Poor soul. How about considering the sort of kind of market economy in celebrities that can, with mindless volition, make corpses out of immensely talented people such as Marlyn Monroe or Michael Jackson? We are coming upon the anniversary of Monroe's death, under similar circumstances, not but a few weeks after Jackson's. The similarities in both deaths are astounding, as they are in their lives. Euripedes: "Those whom the gods would destroy, they first make mad". (Mad meaning extremely foolish or unwise, imprudent, or irrational.) The gods, in this regard, being the Media Machine. Reply Friday, July 31, 2009 at 02:38 AM

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Sewells, I am 53 and I have not needed a doctor's care since I was 18 when I broke my ankle. When I was 13 my tonsils were removed and that is my medical story. The point is that this is perhaps my least favorite issue and has been for a very long time and I may have misunderstood your comment above. I have read each of your two comments at least twice and I am a little confused about what to say but it is very possible that the nuances of this subject are eluding me, I'm sorry if that is the case.

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The Baseline Scenario

We have to compare the proposed reforms with the status quo. No constraint on Medicare or Medicad costs. More employers dropping coverage and forcing employees onto the individual market. Insurance on the individual market that does not really cover any thing and which will, as business model, be operated to deny or delay the payment of claims. Rising bankruptcies for individuals who will bear the burden of their own medical bills. Rising number of serious illnesses and deaths arising from individuals delaying to seek treatment. The shifting of medical bills not paid to the entities (group insurance plans, Medicare, and Medicaid) that can pay it. More people going to emergency rooms for treatment and greater burden on the Government for reimbursing hospital emergency rooms. And the monopolistic forces in the medical market (insurance companies, pharmacy companies, medical device makers, and physicians) all driving the costs of medical care at 3 or 4 percent higher annually than the inflation (if any as we have deflation this year). In other words, what has been happening the last 15 years will continue and the Government will still face a Fiscal crisis between its Defense Budget and Health care budget causing a deficit of 5% of GDP or more.

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Reply Tuesday, July 28, 2009 at 06:50 AM

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Economist's View: Equity and Efficiency in Health Care Markets

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