Monday, March 22, 2010

The coming Medicare catastrophe: Further evidence of what happens when health care is "free"

A health care problem in its own backyard the Obama administration could have addressed but didn't because it was too busy trying to take over the health care industry:

HT: Mercatus Center

51 comments:

Thomas said...

You are aware that the health care bill pays for itself, right?

http://voices.washingtonpost.com/ezra-klein/2010/03/what_does_the_health-care_refo.html

Thomas said...
This comment has been removed by the author.
Thomas said...

And here's the full CBO score: http://cbo.gov/doc.cfm?index=11379

Martin Cothran said...

Wall Street Journal today:

... the White House has already promised to restore some $250 billion in reimbursement cuts for doctors that were included in yesterday's bill to make the deficit numbers look good. Watch for these Democrats to pivot immediately and again demand "tough choices" on spending—and especially tax increases—but this vote has squandered whatever credibility they had left.

Martin Cothran said...

Also, does this take account of increases in premiums that will likely result from this bill? It may be revenue-neutral for government, but there is some question about whether it will be revenue neutral for consumers.

Lee said...

> You are aware that the health care bill pays for itself, right?

Yep. Exactly like I'm aware that little fairies leabe money under kids' pillows when they lose their baby teeth.

Name another entitlement bill that has come in on or under budget. Heck, find one that hasn't run wild with overruns.

If I want baloney, I prefer Oscar Meyer.

Thomas said...

I'm starting to wonder if anyone is actually familiar with the bill itself. It's already been suggested that the bill has a public option, that it will result in rationing care (which is dishonest for two reasons: care is already rationed by the insurance companies, leaving some 45 million people out; and rationing care this way is not part of the plan), and so on. I haven't heard any criticisms of the particular mechanisms the bill uses, and I've seen no indication that serious engagement with the bill is coming. Assessing the CBO score would be a good start (since that seems to be what you're disagreeing about). Being aware of the way similar systems have worked in Europe is another start (consider for example that Germany's system, which is close to ours, keeps health care costs lower as a percentage of the GDP and has stifled inflating health care costs more than the US, while still getting better health care than the United States).

The reason I'd like to see some engagement with the bill itself is to do away with my nagging suspicion that Randians have taken over the right wing. I'm hoping the difference is not between those who regard the physical conditions of the poor as a moral and political priority, and those who simply don't.

Thomas said...

The CBO reports that the Health Care Bill:

- Cuts the deficit by $143 billion in the first ten years (2010 – 2019).

- Cuts the deficit by $1.2 trillion in the second ten years.

- Reduces annual growth in Medicare expenditures by 1.4 percentage points per year—while improving benefits and lowering costs for seniors.

- Extends Medicare’s solvency by at least 9 years.

- Is fully paid for – costs $938 billion over a decade. (Americans spend nearly $2.5 trillion each year on health care now and nearly two-thirds of the bill is paid for by reducing health care costs).

Here's the summary of the CBO report, if you wish to debate its findings: http://cbo.gov/doc.cfm?index=11379

Thomas said...

And the exchanges are easily the best idea of the bill (and a good example how the free market does not always lead to competition): The exchanges will set up all one's insurance policies in one place, with all the prices set out, the policy features compared side by side, and reviews from consumers.

Considering that insurers say 40% of their spending comes through advertising and brokers, this will have the effect of both cutting those costs and enhancing competition.

Lee said...

Your brother has already debunked the notion that the CBO is giving us an accurate forecast.

> And the exchanges are easily the best idea of the bill (and a good example how the free market does not always lead to competition):

And you know the exchanges will work as intended...how? Through experience?

Thomas said...

My brother? And it wasn't debunked, it was an opinion column saying the CBO score takes the bill at "face value". I think, for Republicans, reading something at face value means reading it at all. The fact that the CBO performs the most rigorous financial analysis of bills, and that both parties, Republicans and Democrats depend on its analysis in formulating legislation, doesn't matter because, well, Fred Barnes said so.

Of course there is uncertainty in any projection, but the CBO's whole purpose is to try to tell the legislature as accurately as possible how much legislation will cost, and how much it will generate.

Fred Barnes, and you, offer no argument, no numbers that they got wrong, no analysis of why the particular mechanisms of the bill will fail. That is, the particular arguments the CBO uses are not treated at all. If that's your idea of debunking, I suppose I could quote some editorials from the other side that deal in rash generalizations and avoid any kind of economic analysis. That seems to be the kind of thing you're looking for.

Lee said...

> My brother?

Sorry, I thought you were Martin's brother.

> And it wasn't debunked, it was an opinion column saying the CBO score takes the bill at "face value".

So if it is a Republican opinion column, that means its arguments do not need to be confronted and refuted?

If Republican opinion columns are so low on the argument hierarchy, where do ardent pro-Obamacare liberals commenting on a somewhat conservative blog place on the spectrum? I'm just trying to figure out if I can wave my hand and dismiss anything you say because of the humble venue. (No offense, Martin. You get a lot more traffic than my blog does, and deservedly so.)

> I think, for Republicans, reading something at face value means reading it at all.

You can always complain that a Republican -- or in my case, a conservative who views Republicans with general disgust -- hasn't read quite enough of the bill to qualify for disagreeing with it. Aha! You missed a comma on page 1,694! You don't understand what you're opposing.

> The fact that the CBO performs the most rigorous financial analysis of bills, and that both parties, Republicans and Democrats depend on its analysis in formulating legislation, doesn't matter because, well, Fred Barnes said so.

I think it's appropriate to ask, has the CBO always been right? Or are they new to the world of "rigorous financial analysis"? And if Fred Barnes is right... well, no, they have not been right in the past. If Barnes' facts are wrong, you can certainly demonstrate otherwise. If they are right, though, then what makes this particular bill, at this particular time, so special that the CBO will get it right this time?

One of the things liberals pretend doesn't exist is the "Law of Unintended Consequences". Just because they intend a certain thing in a bill to have a certain outcome, does not mean that it will. Particularly in politics, where political motives rule the day.

> Of course there is uncertainty in any projection, but the CBO's whole purpose is to try to tell the legislature as accurately as possible how much legislation will cost, and how much it will generate.

"Try to tell"? I don't need to argue that they are insincere to point at their track record and show their shortcomings.

> Fred Barnes, and you, offer no argument, no numbers that they got wrong, no analysis of why the particular mechanisms of the bill will fail.

You are carefully *not* saying that Barnes numbers about the CBO's past performance is bad. You're simply shifting the burden of proof on us. I think past performance is a valid talking point. Why don't you?

> If that's your idea of debunking, I suppose I could quote some editorials from the other side that deal in rash generalizations and avoid any kind of economic analysis.

Pointing out in specific instances where the CBO was off by an order of magnitude is "rash"?

You're right: maybe I should argue only in terms of question-begging epithets, such as "rash".

Lee said...

If critics of the bill should read it before criticizing, should voters on the bill read it before voting 'yes'?

http://wolffiles.blogspot.com/2010/03/representative-dennis-moore-d-ks-admits.html

Lee said...

Economist Thomas Sowell explains why the CBO's projections aren't trustworthy. But don't worry, he's a Republican and an opinion columnist, so his arguments don't matter any more than Fred Barnes'.

http://article.nationalreview.com/429092/an-off-budget-office/thomas-sowell

Thomas said...

My objection to Barnes' column is that it doesn't offer any argument for why the CBO got it wrong, it just asserts it (and dishonestly ignores that the CBO has also recently been overestimating costs). In fact, the claim that the CBO takes a bill at face value is an outright lie (see my comment on that post).

And, Lee, I'm waiting on your economic analysis of the incentive mechanisms in the bill. You don't even have to read the bill, you just have to read accurate summaries of the bill. It will help change my conviction that you literally know absolutely nothing about what's in the bill. Because up to this point, the only thing you've shown you know is that there was a bill, it passed, and you have some vague idea that there's regulation, but it doesn't seem like you have the faintest clue of what those regulations are.

Let's start with the exchanges, since that's probably the biggest thing in the bill.

Lee said...

> My objection to Barnes' column is that it doesn't offer any argument for why the CBO got it wrong, it just asserts it (and dishonestly ignores that the CBO has also recently been overestimating costs).

He does more than assert that the CBO got it wrong in the past -- he provides actual numbers. Either the numbers he gives are wrong, or else they are right. If they are wrong, you haven't shown it. If they are right, they are some indication of present and future performance -- probably the best indication we have.

What's hard about understanding that? When someone or some organization makes predictions, are you saying past performance doesn't count?

> It will help change my conviction that you literally know absolutely nothing about what's in the bill.

Sorry, right now, I'm just having too much fun pointing out the holes in your statements. But just for grins, though, I will state now for the record that compelling someone to buy a health insurance policy is enough all by itself to earn my ire.

Thomas said...

Barnes gives examples where the CBO underestimated costs, but he doesn't give examples where they overestimated, including the most relevant case, the biggest recent expansion to Medicare.

Lee, in virtually every substantive discussion we have had, you have not had a basic grasp of the underlying subject matter. That was the case on the evolution question (by the way, have you signed up for a course on the subject? Made any major headway in learning the basics of genetics? Anything?) Here, you don't even seem to know what the exchanges were. You don't seem to know a single cost control mechanism in the bill. You don't know how the CBO got the number they did.

I get that you like to argue. But there's also a basic duty to try one's best to know what one is arguing about. In no conversation we've had that I can remember have you made any indication that you intend to educate yourself on the underlying material. I thought this was just sloppiness or intellectual laziness. But it's not hard to find out what's going on in the bill; one good newspaper article would give you a basic orientation. I thought after I accused you of having no idea of the basic regulatory structure of the bill, you'd google it and find out, but there's no indication you've even done that. My earlier impression that the problem was intellectual laziness is giving way to the conviction that you genuinely don't care if what you're saying is true or not.

Please, disabuse me of this notion. Let's hear something about the exchange system that's going into place. Convince me that this is worth my time.

Lee said...

Don't have time right now, except to say people who specialize in ad hominem shouldn't lecture others on how best to avoid intellectual sloppiness.

Lee said...

> Barnes gives examples where the CBO underestimated costs, but he doesn't give examples where they overestimated, including the most relevant case, the biggest recent expansion to Medicare.

So are CBO estimates, in your view, generally correct or generally too optimistic?

Cato claims that a lot of the costs of this bill are hidden from the budget in that they are foisted onto states, private companies, and individuals -- in their view, about 60% of the costs. If they're correct, then we are going to be paying in ways we can't yet imagine.

Lee said...

> Lee, in virtually every substantive discussion we have had, you have not had a basic grasp of the underlying subject matter.

Oh brother.

> That was the case on the evolution question (by the way, have you signed up for a course on the subject? Made any major headway in learning the basics of genetics? Anything?)

Yep, I can see you're riding high on your own scorecard.

> You don't know how the CBO got the number they did.

As I said, experience counts.

> Please, disabuse me of this notion.

I don't care to disabuse you of any notions. Not sure it's even possible. You labor mightily under the view that those who disagree with you have malignant motives. But I would have expected someone wants to keep the level of the debate high to refrain from ad hominem assaults and to avoid moral preening (yes, I saw the removed post). I put up with a great deal of that from you, just so that I can read the occasionally insightful and truly thought-provoking comments that you are also prone to make from time to time.

But really, it's as unbecoming of you as my "sloppiness" must be to you, if I may be so bold as, well, you are. Somebody who uses such slipshod argumentation really ought not lecture others about their own style. I don't care how smart you are, ad hominem is still ad hominem. (And using the Book of Acts to justify a coercive arrangement doesn't strike me as intellectually taut.)

I'm sure you're a smart fellow, and I have read enough of your stuff so that I can readily concede you're probably smarter than I am (which means, by the way, you must be well into Mensa territory), and you're certainly better educated.

But on this as well as so many other issues, you are air-boxing. Why don't I get down with you into the details of this bill (or that issue)? Why, it's intellectual laziness!!

Really? The bill has a mandate that coerces membership in a state-dictated scheme (is that even constitutional?), so is a principled objection to coercion on that scale intellectually lazy?

The bill raises taxes, and there are more tax hikes to come. So a principled objection to more tax hikes is somehow sloppy? And if this is going to be cheaper, why will they be raising taxes?

The bill will vastly expand the power of the government in one of the few remaining healthy economic sectors... so what do I do if I have a principled objection to the expansion of government power? Wait for your speculative verdict on my knowledge of the subject matter before I object?

The principles are there for a reason. Thomas Sowell said, "I don't have faith in the free market; I have evidence about the free market." What you dismiss as a mere political ideology is in fact the idea that made all this wealth liberals are so giddy to redistribute. One of these days, the golden goose won't recover.

And that day may be on us sooner than we'd like. The end result of where we are heading is playing out in Greece, Portugal, and Spain, as we speak. They are willing, in fact, to take the ship of state over the falls and die on their entitlements. Greece defaulting on bonds will be bad enough. Do we really want to see what the world will be like when the United States of America can no longer pay its bills? What good will that do for the poor?

Socialism takes away initiative on a grand scale and turns us all into dependents of the state. This bill takes us further in that direction than we were -- perhaps even past the point of no return. This, I suspect, is what Obama had in mind. It will permanently shift our political culture to the left. They're willing to lose a few seats in Congress in the short term to shore up their advantage over the long haul.

Thomas said...

What would it take to get you to familiarize yourself with the bill, Lee? If you don't even have any desire to know what you're criticizing, why would you expect anyone to take you seriously?

Lee said...

I don't know, Thomas, but you're still air-boxing. It has been your assumption all along that I am unfamiliar with the bill. I am not bound by your assumptions. Short of taking a Stanford standardized test on the subject, don't know, nor feel no need to provide, what it would take to get you to believe otherwise.

Meanwhile, the ad hominem is making you look no wiser, and quite a more condescending and less gracious.

Thomas said...

Lee,

Again, what would it take to get you to familiarize yourself with the bill? You're not even claiming you're familiar generally with how it works, and you're defending your unfamiliarity. That's not an ad hominem, that's a request that you live up to the basic demands of a political debate.

If you want to actually talk about the bill, let's talk about it. Let's start with the most significant provision, the exchanges. Good idea or bad idea?

Lee said...

> Again, what would it take to get you to familiarize yourself with the bill?

Do you see the complex question there? I do, and I'm sure you do too. I still don't know why, as well educated as you obviously are, you are always so willing to stoop to using logical fallacies. What do you want me to say, Thomas? "Complex questions (and ad hominem) are logical fallacies, but they look really good on you?"

> You're not even claiming you're familiar generally with how it works, and you're defending your unfamiliarity.

I never said I was unfamiliar with it; you did. That's what I mean when say you're air-boxing -- actually, I should have said shadow-boxing.

I've given you plenty of arguments to shoot at. But instead of shooting at them, you're shooting at me. At the very least, it's a distraction.

Now: why am I wrong for preferring the free market? Show me why I'm wrong. Why am I wrong for believing socialism will destroy our initiative? Talk me out of it. Proponents of the free market, by the way, have never claimed that it's perfect at allocating resourced; we just argue that it's better than government fiat. And so far, that's the way it has always worked out. Talk me out of it.

Why am I wrong for believing the bill will likely bankrupt us? And no, I don't trust the CBO's numbers. Maybe they got the numbers right on one or two occasions (you cited only one). That's nice. But there are lots of times when they were off by orders of magnitude -- and I think that's relevant. Sounds like a risk, doesn't it? What if they are wrong, this time? Does that mean we get to take the bill back to Congress, with a money-back guarantee? No, it doesn't. We're stuck with it, regardless of whether the CBO is right or wrong. Even if I were a socialist, with such a horrible recession, is this a good time to risk our solvency?

So let's just stipulate up front that I'm guilty of every bad thing you can imagine and more. Can we just do that? Because I'd really like to hear what your answers to some of these questions.

Maybe you just don't want to reveal your own philosophy, I don't know. But I do wonder if most liberals would still support the bill even if they knew it meant certain bankruptcy for the U.S. I wonder if you feel that way yourself. Do you? If I could prove to you that the bill will bankrupt the United States of America, would you still be happy with it? I'd like to know the answer to that question -- it would, in fact, make the entire conversation worthwhile, for me at least.

Lee said...

So what's your specific objection? That I don't know how the CBO came up with its numbers? Do I need to be an accountant to argue the issue, then?

Or can I understand the issue as best as I can, in layman's terms? I'm not a pro in the number-crunching profession, so I have to read what I find and distill what I can.

This fellow seems competent...

http://dmarron.com/about/

Mr. Marron certainly has credentials, up to and including he is a past "acting" director of the CBO.

So here is what he says:
http://dmarron.com/2010/03/11/how-much-does-the-senate-health-bill-cost-2/

What I get from the article is the CBO's numbers are optimistic. Marron seems honest. However, there is no discussion at all about how all the tax increases are going to affect the economy -- which in turn will affect tax revenues. We can't pretend the new taxes are going to help us out of our recession. They make me fear that, as one commentator said: European-sized entitlements are going to require European-sized taxes, and that will lead to European-style economic stagnation and unemployment.

Michael Cannon has credentials, too.

http://www.cato.org/people/michael-cannon

Here's the money graf from his assessment of the costs:

> "Moreover, the on-budget costs of the legislation probably account for only 40 percent of the total costs. The other 60 percent come from the private-sector mandates. But Democrats have systematically suppressed any estimates of those hidden taxes, probably because such an estimate would reveal the full cost of the legislation to be closer to $2.5 trillion over the next 10 years."

Is he wrong? Why? If not, can the American economy absorb a hit like this? I'd rather not find out.

Projections of increased tax revenue due to new taxes and increased tax rates are often more optimistic than they turn out to be, because people change their behavior when the incentives change. This happened, for example, during GHW Bush's term, when they increased the luxury tax -- it was repealed when it became clear that it was putting people out of work who make their livings by catering to rich people... who changed their purchasing behavior in response to the tax.

Lee said...

Okay, so I cited the hated Cato Institute. Call a foul, if you like. Let's cite someone at least a bit more liberal. Greg Mankiw is an economics professor at Harvard. He says (http://gregmankiw.blogspot.com/2010_03_01_archive.html and scroll down to the article, "Healthcare, Trade-offs, and the Road Ahead):

> "In the end, while I understood the arguments in favor of the bill, I could not support it. In part, that is because I am generally more of a libertarian than a communitarian. In addition, I could not help but fear that the legislation will add to the fiscal burden we are leaving to future generations. Some economists (such as my Harvard colleague David Cutler) think there are great cost savings in the bill. I hope he is right, but I am skeptical. Some people say the Congressional Budget Office gave the legislation a clean bill of health regarding its fiscal impact. I believe that is completely wrong, for several reasons [with links to them]... My judgment is that this health bill adds significantly to our long-term fiscal problems."

...and Mankiw adds this:

> "How long can the President wait before he comes clean with the American people and explains how high taxes needs to rise to pay for his vision of government?"

One of the links Mankiw provides reflects my personal thinking on the difficulty of using increased taxes as a basis for fiscal optimism because they change people's economic behavior:

http://gregmankiw.blogspot.com/2010/03/note-on-cbo-scoring.html

Money graf:

> "Here is one thing people should understand about [the CBO's] numbers: When they estimate the budget impact of a bill like this, they assume the path of GDP is unchanged."

But don't worry: when the economy delivers the less-than-expected revenues, they'll act surprised.

Mankiw's third link is a letter from the CBO to Rep. Pelosi expressing the CBO's own caveats and concerns about the legislation:

http://gregmankiw.blogspot.com/2010/03/caveats-from-cbo.html

So is there enough here to sink your teeth into? Or are you still going to come back to sinking them in me?

Thomas said...

I have more to say when I have time, but the Marron post you cited says that the bill will reduce the federal deficit over the next ten years, though perhaps not as much as some predicted. Sounds like a good thing to me.

The other articles appear to consider the quantifiable economic benefits, but not the significant unquantifiable human benefits (such as access to health care), or even many significant economic benefits (such as a healthier workforce).

Finally, raising the specter of a European situation is a bad rhetorical strategy. You're saying the US could end up like countries that have, on balance, better health care at lower cost, a better standard of living, both in terms of quality (lesser workweeks, etc.) and more economic measures like the Human Development Index. If you're trying to scare people, you should do it with something that's actually scary. Just a tip.

Lee said...

> I have more to say when I have time, but the Marron post you cited says that the bill will reduce the federal deficit over the next ten years, though perhaps not as much as some predicted. Sounds like a good thing to me.

Marron, as a former CBO guy, looks at the issue like the CBO and does not consider the effects (as Mankiw noted) of the extra tax burden on the economy. His assumption is GDP remains on course. That, all by itself, is sufficient to call the CBO's numbers into question. And yet even he pointed to factors the current CBO ignored and found expenses the CBO hadn't considered.

> The other articles appear to consider the quantifiable economic benefits, but not the significant unquantifiable human benefits (such as access to health care), or even many significant economic benefits (such as a healthier workforce).

That could simply mean we'll be living more highly on the hog up until we completely bankrupt. Or it could also mean we just go bankrupt.

> Finally, raising the specter of a European situation is a bad rhetorical strategy. You're saying the US could end up like countries that have, on balance, better health care at lower cost, a better standard of living, both in terms of quality (lesser workweeks, etc.) and more economic measures like the Human Development Index.

And Greece, Portugal, and Spain are heading off the debt precipice pretty shortly. Meanwhile, we are now into negative cash flow on social security. With the number of boomers heading toward retirement, it seems unlikely to go positive for very long.

> If you're trying to scare people, you should do it with something that's actually scary. Just a tip.

If you're borrowing like crazy, you can maintain a lifestyle bigger than your ability to pay for it -- for a while. Eventually, it catches up. It will be catching up in Europe sooner than here.

But I asked you a question to which I'd love an answer. I'll repeat it: if you knew for a fact the health care bill would bankrupt America, would you still be for it?

Thomas said...

Lee, you don't seem to be much for empirical proof. European countries have borrowed quite a bit, but their health care is, in most cases, less expensive (and better). The US compensates by pushing much of the debt into the private sector, making the middle class bear the burden.

And, at least in the case of Greece, the problem is in large part created by the rampant tax evasion of the wealthy, and the fact the government hasn't backed up their tax laws.

The problem in the United States is the lack of cost controls, and a perverse incentive structure (such as the fact that it's more profitable for drug companies to treat diseases over a long period of time than to cure them). Whether it's public or private debt, the costs of health care have to be arrested, because they are bigger and growing faster than most socialized health care systems in Europe.

This bill goes a decent way towards cost control. The most significant way is through the exchanges. The exchanges will increase the competition between insurance companies by increasing consumer information. Considering that insurance companies have said that 40% of their spending is in advertising and brokers, that in itself is an excellent start.

Lee said...

Even Michael Kinsley, hardly a conservative, gets it:

http://pajamasmedia.com/blog/obamacare-and-our-debt-death-spiral/?singlepage=true

Lee said...
This comment has been removed by the author.
Lee said...

> Lee, you don't seem to be much for empirical proof. European countries have borrowed quite a bit, but their health care is, in most cases, less expensive (and better).

Let's stipulate for the sake of argument you are correct, even if you haven't empirically proven it. Should we just ignore the fact that Greece, Portugal, and Spain are heading into default? Is the EEC going to bail them out? Can they?

> And, at least in the case of Greece, the problem is in large part created by the rampant tax evasion of the wealthy, and the fact the government hasn't backed up their tax laws.

Remember what I said about tax increases changing people's economic behavior?

> Whether it's public or private debt, the costs of health care have to be arrested, because they are bigger and growing faster than most socialized health care systems in Europe.

But why is the presumption that the problem is always not enough federal involvement in the market, instead of too much? There are already so many distortions in the market due to Medicare and Medicaid, and I suspect quite a few also because of the fact that health care programs are not taxed as regular income. I'm not arguing for the status quo (well, status quo ante, now).

As an aside, insurance companies are very inefficient when they have to cover everything in a comprehensive manner; they are much better at protecting someone financially from a major catastrophe. That's why I have $1000 deductible on my cars. I don't need to be protected from the first $1000 in damages; I only need protection from a true economic catastrophe -- say, I total my car, or cause an accident and destroy $100,000 or more of someone else's property.

If the same logic were applied to the medical economy, the average working stiff would be responsible for his own medical insurance. He could judge for himself the degree of risk he is willing to incur. If you want to allocate resources more efficiently, there is no substitute for not putting people in the position where they can spend other people's money.

But I don't think efficiency is what liberals are after. I think it's about control.

> Whether it's public or private debt, the costs of health care have to be arrested, because they are bigger and growing faster than most socialized health care systems in Europe.

And if I'm right that public involvement in the medical economy has brought things to this state, adding more public involvement is not going to solve the problem. People get used to spending other people's money, and after a while, they start to think it's their birthright to do so.

> Considering that insurance companies have said that 40% of their spending is in advertising and brokers, that in itself is an excellent start.

I don't think it will have the desired effect because it still doesn't solve the basic problem of efficiency in an economy that facilitates spending other people's money. It's about the incentives.

Private companies advertise, by the way, because they're in a competitive business. Competition creates a better product. It's just one of the costs of effiency.

When this effort fails to yield the desired effect, the liberals will then blame it on the profit motive itself, and the next logical step will be the public option. This is your basic "foot in the door."

Two questions you haven't addressed:

1. Would you still be in favor of this health bill if you knew it would bankrupt the U.S.?

2. If this program is going to save money, why are they raising taxes?

Thomas said...

I'm not sure why you think that shoving the cost into the private sector will avoid a national bankruptcy crisis. The middle class debt problem may actually be worse than the federal debt problem.

You seem to think that the cost disappears when it's moved over into the private sector. The only way that happens is if the middle class starts to forgo health care. Otherwise, they continue to pay for it, and they go bankrupt, which is exactly what has been happening. Bankruptcies are escalating, most of them are caused by medical bills, and most of those bankruptcies are by people who actually have medical insurance. Contra your claim, medical insurance is actually not a good solution to chronic, serious conditions.

The solution is not to choose between possibly bankrupting the public sector, or continuing the actual bankrupting of the private sector, it's controlling costs. The private sector has actually done an awful job of this, since the financial incentive on the part of the medical industry is not to cure but to treat over a long period of time, and the financial incentive for the health insurance companies is to ignore the sick, insure the healthy, and drop the healthy when they get sick.

The only viable solution lies in cost controls, which is the most significant part of this reform. Since I've brought this up many times already, and you've persistently ignored it, I'm assuming you're either not familiar with the cost control mechanisms, or you want to avoid the subject.

As I've said, the exchanges actually will increase competition and lower insurance expenditures, and the tax on Cadillac plans will penalize insurance policies that don't control costs well.

So as to your first question, you've posed it incorrectly. The question should be rather: do you want to possibly bankrupt the public, do you want to continue the bankrupting of the middle class (which is more likely because it's already happening), or do you want to control costs. Your second question misunderstands what the CBO report means.

My interrogatory for you, Lee, is this: say that the market demand makes the cost of health care unavailable to the lower and middle classes, and only available to the top 10% of earners. In such a situation would government regulation which controls costs and expands access to health care to the lower 90% be acceptable to you?

If you answer yes, you may be a Randian.

Lee said...

Well, I'm not sure why you think costs would remain constant if the private sector was where more of the decision-making took place, particularly if individuals made more of their own decisions and paid more of their own costs.

It's just too tempting for the government to step in and distort the link between costs and prices. (No cost is too high for my health care, if the price of more of it is essentially free.) And it's probably not just government doing this, but these so-called Cadillac plans that okay all these tests that are designed not to make you healthier, but to protect doctors from liability. (It's probably a bad idea to exempt health care work benefits from income taxes, too. Either that, or exempt everything!)

I think insurance is fine, if its goal is to protect individuals from catastrophe. Part of your insurance premium should also go toward preserving one's insurability -- sort of like an insurance option. If I'm 30 and in generally good health, it's probably a great time to buy insurability at age 60.

> The only viable solution lies in cost controls, which is the most significant part of this reform.

I don't think the cost controls will work as long as prices are kept low for political reasons and costs are paid by other people. To control costs, there are really only two things to do: increase supply or decrease demand. We live in a system where demand is inflated mainly because of the failure of the pricing mechanisms to accurately deliver information to the consumer, and the supply of doctors is low because the AMA works with accrediting states to keep the number of med school graduates low. (Milton Friedman described the AMA as 'the world's most successful labor union.')

> Since I've brought this up many times already, and you've persistently ignored it, I'm assuming you're either not familiar with the cost control mechanisms, or you want to avoid the subject.

I think I have addressed your questions -- but, you know, I'm not the only one in this thread whose persistent questions are ignored.

Lee said...

> As I've said, the exchanges actually will increase competition and lower insurance expenditures, and the tax on Cadillac plans will penalize insurance policies that don't control costs well.

"Will increase competition?" Is that an empirical fact? Or a desired outcome?

> So as to your first question, you've posed it incorrectly...

Well, it was posed correctly if I'm the one asking it. That's a nice trick, though; I'll try to remember it if I'm being asked questions in a courtroom by a judge or adversarial lawyer.

I meant it the way I asked it: if you knew Obamacare would bankrupt America, would you still be in favor of it?

> Your second question misunderstands what the CBO report means.

The second question was actually about the bill. My understanding is that the bill itself raises taxes... and there is probably more to come. Greg Mankiw thinks taxes will be raised, too. Why is he wrong?

> My interrogatory for you, Lee, is this: say that the market demand makes the cost of health care unavailable to the lower and middle classes and only available to the top 10% of earners.

I would say right away that doctors can't make a living just selling health care to rich people. They're going to have to sell their services at least to the middle class and find some way to package them so we can afford it. But, in the end, the middle and poor classes won't be any better off the the USA goes bankrupt.

> ... In such a situation would government regulation which controls costs and expands access to health care to the lower 90% be acceptable to you?

Government regulation will not control costs. It will hide them.

> If you answer yes, you may be a Randian.

Sorry, not a Randian. I don't have much of a beef with her economics, though; the problem is her atheism. I consider myself a mainly free market sort of guy, more along the lines of Milton Friedman and Thomas Sowell.

Lee said...

Any comment, by the way, on whether the CBO assumed GDP was a constant in their projections?

Lee said...

From CBS News...

[The bill includes:]

> Medicare Payroll tax on investment income -- Starting in 2012, the Medicare Payroll Tax will be expanded to include unearned income. That will be a 3.8percent tax on investment income for families making more than $250,000 per year ($200,000 for individuals).

> Excise Tax -- Beginning in 2018, insurance companies will pay a 40 percent excise tax on so-called "Cadillac" high-end insurance plans worth over $27,500 for families ($10,200 for individuals). Dental and vision plans are exempt and will not be counted in the total cost of a family's plan.

> Tanning Tax -- 10 percent excise tax on indoor tanning services.

And now the scuttlebutt in DC says Congress wants to pass a VAT.

So again: if this is going to save money, why the extra taxes?

Thomas said...

Lee,

You assert that government regulation can't control costs. Do you know what the exchanges are? Judging from your assertion that it won't increase competition, I'm guessing you haven't the faintest clue. Do you know what the tax on cadillac plans is designed to do? Nor, I suppose, do you have any idea how the bundling programs are going to work. Do you know any of the cost control mechanisms in the bill work? (You should know, since I've pointed it out repeatedly, that socialized systems have done a better job of controlling costs).

Nor, again, do you seem to realize that insurance is poorly set up to handle catastrophe. Again, most bankruptcies happen due to medical costs, and most of those happen to people who already have insurance. If you come down with a condition that makes it unprofitable for an insurance company to insure you (something that will require treatment for quite some time), the insurance company will drop your coverage, and they can do it legally (at least, before this bill was passed).

Neither, it seems, do you understand the basic principles of economics. The market doesn't strive to give the middle class health insurance. Like any other commodity available in the free market, it will be distributed however is most efficient. There's no a priori reason to say that that will include the middle class, and it's entirely possible that it may be more efficient not to, given that the cost of health care is increasing much faster than middle class incomes. In the case that health care coverage exceeds the capacity of the middle class to pay for it, would you still be opposed to the government stepping in?

Another basic economic error is the assertion that people are rational enough economic agents that they will buy health insurance when they should. That thesis was blown out of the water entirely, and it is well known that people prefer short term gains to long term risks, even when it's not in their best interest.

As to your question about the CBO's estimate of the GDP, where do you see that they assumed it was constant? (Warning: this may require you to look at the actual report).

You should take a look at the CBO's report anyway, since you somehow think that what they mean by saving money is exclusively cutting costs. And because it's generally a good idea to know what you're criticizing, because otherwise you just parrot ridiculous things like the CBO takes a bill at face value, etc.

Lee said...

> You assert that government regulation can't control costs.

To be fair, I didn't just assert it; I argued it. The incentives are wrong. The federal government will distribute largess to their favored constituents, using other people's money. This is what they do for a living. We just expanded the arena in which they could do it, to about 16% of the economy.

I actually kinda like the *idea* of the exchanges, on its own: I've often wondered why individuals purchasing health insurance couldn't find some mechanism to get deals like large employers get.

But the exchanges will have the power to dictate prices, and as political entities, they will have an incentive to set prices based on political considerations. I think there is already too much messing with the pricing mechanism. It's certainly hard to see how competition can flourish if prices are already set too low, or are controlled across the board.

Plus, they will dictate to the insurance companies certain conditions (can't drop an individual, can't turn away someone with pre-existing condition under certain conditions). However you feel about the justice of this, you can't argue it's a cost-saving measure.

> Judging from your assertion that it won't increase competition, I'm guessing you haven't the faintest clue.

You talk as if humanity has no experience with the productivity of government enterprise.

> Nor, I suppose, do you have any idea how the bundling programs are going to work.

That's right, Thomas: you suppose.

I know why the market works, and I know why government-run enterprise doesn't. It's all about incentives. There is no way this system is going to remain in its current form, even if it were already in an ideal form. As long as politicians can buy votes by promising more benefits to key constituencies, it will grow and grow and grow. You can take that to the bank.

> (You should know, since I've pointed it out repeatedly, that socialized systems have done a better job of controlling costs).

You have asserted it repeatedly.

> Nor, again, do you seem to realize that insurance is poorly set up to handle catastrophe.

Why is insurance poorly set up to handle catastrophe?

> Again, most bankruptcies happen due to medical costs, and most of those happen to people who already have insurance.

A lot of bankruptcies happen this way, I'm sure. But now aren't you talking about something different? This isn't about efficiency, is it? It sounds like it's more about "social justice". Saving someone from a bankruptcy is not the same thing as running an efficient health care system, nor is taking on a liability that an insurance company wouldn't touch of its own free will a cost-saving measure.

Lee said...

> ...the insurance company will drop your coverage, and they can do it legally (at least, before this bill was passed).

Canada and Britain have socialized medicine, and they deny coverage too. Only they don't call it that. They say, "Here, get in line...."

Prices can be controlled easily; costs, not so easily. If you're the federal government, you can set things up so that someone with an expensive disease can afford the price of his insurance premiums. But the costs are still there, and somebody pays. Insurance companies are afraid to touch those situations, but we shouldn't be concerned it could lead to American insolvency.

> Neither, it seems, do you understand the basic principles of economics.

Said the fellow who doesn't seem to understand that changes in taxation and regulation also precipitate changes in the way people behave economically.

> The market doesn't strive to give the middle class health insurance.

Wow, could have fooled me. I am middle-class. I have my choice of three health plans at work. All three plans give me fancy brochures every year, extolling their virtues to me. I may not know how best to characterize their efforts, but "striving to give me health care" doesn't seem completely off the mark.

> Like any other commodity available in the free market, it will be distributed however is most efficient.

There aren't enough rich people to keep 18% of the economy humming. That's why they have so far liked the middle class.

> ...and it's entirely possible that it may be more efficient not to, given that the cost of health care is increasing much faster than middle class incomes.

Imagine that. So much government involvement in the health care market already, and the costs are... rising? How did that happen?

> In the case that health care coverage exceeds the capacity of the middle class to pay for it, would you still be opposed to the government stepping in?

I would be in favor of them stepping out of it first and see if that does the trick.

> Another basic economic error is the assertion that people are rational enough economic agents that they will buy health insurance when they should.

I never said they would, so I didn't make that error.

> That thesis was blown out of the water entirely...

More shadow-boxing.

> ...and it is well known that people prefer short term gains to long term risks, even when it's not in their best interest.

So along comes the nearest liberal who proceeds to restrict everyone's options; after all, it's for our own good.

Liberals have a basic problem with freedom, which is completely at odds from their rhetoric on the subject.

> As to your question about the CBO's estimate of the GDP, where do you see that they assumed it was constant?

Why? Am I misinformed on that?

> because otherwise you just parrot ridiculous things like the CBO takes a bill at face value, etc.

What I'm saying is that the CBO bases its estimates on an assumption about the economy, that it will remain pretty much as is. Again, Professor Greg Mankiw of Harvard:

> "Here is one thing people should understand about [the CBO's] numbers: When they estimate the budget impact of a bill like this, they assume the path of GDP is unchanged."

If this is ridiculous, why do you figure a Ph.D. in economics, and a Harvard professor, would risk his reputation by saying something ridiculous?

Lee said...

About that CBO report...

http://legalinsurrection.blogspot.com/2010/04/numbers-were-lie-all-along.html

Thomas said...

From the news report that blog is citing from: "The report found that the president's law missed the mark, although not by much."

And there's no reason to believe this report is right and the CBO is wrong without taking a look at their analysis. From the news story it seems this report estimates that more people will have access to medical care than the CBO estimates. Whether or not that's true, I'll take slightly higher expenditures over depriving people of access to health care.

Thomas said...
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Lee said...

You don't specify what constitutes "slightly higher", and in a day and age when we're running deficits of over a trillion a year, I admit it would be hard to specify anything as more than "slightly".

But since one of the talking points of the proponents of this legislation was that it was going to "save money", or at least be "close" to what we're spending now...

If it turns out that CBO was wrong, and this will be a budget buster...

Can we take the legislation back and get a refund?

That's right: we can't.

Thomas said...

I'll just point out again that even with this report, it helps rather than hurts the deficit.

And while government medical spending may go up, it's still going to control costs (far) more effectively than the private sector. In other words, total medical spending will be lower under this bill than it will be otherwise. And more people will have access to medical care.

There are, of course, some total efficiency costs. But we ought to remember that the markets are subject to a universal moral order in which the value of every human being is infinite. When a society cares for the poor, it is as if they care for Christ himself.

Lee said...

I never read any admonitions in the Bible by Jesus that the Roman government or the local Judean province ought to help the poor. Any such admonitions apply to individuals, and for good reason: if I choose to give my money to help the poor, my generosity doesn't also come with a demand that the people I'm helping cede to me decision-making authority over their lives or other third parties.

The spirit of Christianity is not forcing others to be charitable, but doing it yourself.

Thomas said...

On this point, I'm in a way to the right of you, Lee. What I mean is that I don't believe in the general principle that the government cannot enforce morality. In many ways the government should. The Bible forbids adultery, and even though we might want people to not commit adultery out of loyalty to their spouse, the English common law correctly forbade adultery.

Today, the left views this as a claustrophobic restraint on our freedom. I disagree. I think it's a limit on our actions that actually leads to true freedom -- in this context, faithfulness to one's spouse.

This gets into the question of corporate morality. It wasn't long ago that conservatives were (rightly) lamenting the sexuality and violence in our culture, as expressed in our popular entertainment. The idea was that these private acts of immorality are not relegated to individuals, but implicate society as a whole. The immorality implicates us not only as individuals, but as a society. This rightly suggests that morality is not simply the practice of individuals, but the practice of society.

The final issue you raise is the fact that this is a positive obligation that, in a way, is imposed on citizens who disagree. Under our "contractual" democracy, we assent to those decisions that bind us, so long as they are made legitimately through the democratic process. It's not true to say that we're forced to give money as part of our aid to Africa, because we voluntarily participate in the political system. Our assent already been given to be bound by laws we don't necessarily agree with.

Lee said...

> On this point, I'm in a way to the right of you, Lee. What I mean is that I don't believe in the general principle that the government cannot enforce morality....

I see your point and raise it: your fellow liberals should be aghast that you are advocating the imposition of morality, Biblical morality to be precise. But of course, religious folks who go along with the liberal agenda are fine for liberal business, so that particular accusation is kept in the closet. It's only morality that liberals disapprove of that falls into the category of a dreadful imposition of morality.

But the truth of the matter is simple: all law -- every law -- is an imposition of morality. The only question is, whose morality gets imposed?

> This rightly suggests that morality is not simply the practice of individuals, but the practice of society.

I'm fine with that. But "society" is not "the government". I'm of the opinion that (where have I heard this before?) government is a dangerous servant and a terrible master. Much safer to do all this on our own nickel.

> The final issue you raise is the fact that this is a positive obligation that, in a way, is imposed on citizens who disagree. Under our "contractual" democracy, we assent to those decisions that bind us, so long as they are made legitimately through the democratic process.

"Assent"? Well, we *obey*. But if assent means we roll over and play dead while something we don't like is instituted, forget it. Contractual democracy often requires us to obey rules that are harmful for the country -- Roe v. Wade is a case in point. In our contractual democracy, fortunately, we also have the power and indeed the duty to fight such rules even if they have been instituted.

> It's not true to say that we're forced to give money as part of our aid to Africa, because we voluntarily participate in the political system. Our assent already been given to be bound by laws we don't necessarily agree with.

I would question the word "voluntarily" here, unless you mean it in the "love it or leave it" sense. But as I said, assent, used in this sense, does not imply a lack of legitimacy in an attempt to overturn or change the offending law. It only implies that, if we fail, we obey it.

Thomas said...

I'm not a liberal, I just happen to come down on the same side on this issue. Liberals would probably consider me something of a theocrat. If I were to have to pick a political category for myself, I'd probably have to go for distributism.

I agree with your concerns about the possibility of an oppressive government, but I wouldn't want to distinguish the government and the people too sharply. The government is one of the important ways that the people organize themselves as a society. It's not the government on one hand and society on the other; the government is one aspect of society.

When the government becomes oppressive, at least in the modern period, is when it puts an abstract ideology ahead of the concrete needs and interests of real people. The risk for oppression is low where the purpose of legislation is to help people in concrete ways. I think that's mostly the case here, though I have my concerns about the insurance industry.

The premise of American government is that every citizen assents to the Democratic process. That is, we all agree to obey the laws which are passed, and our recourse if we disagree is to elect different people and change the law. The exception to this, in my view, is in the face of grave injustice -- slavery, genocide, and the like.

Applied to the case of health care, the idea is that citizens agree, as a nation, to pursue the health care policy which comes out of the political process. This assent is conditional, because we can always vote in new people to change the policy. So I think it's fair to say in this sense that the health care mandate is voluntary; it's as voluntary as any law can be. It's the will of the people, as the Founding Fathers would say.

Lee said...
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Lee said...

> It's not the government on one hand and society on the other; the government is one aspect of society.

Yes, I agree, which is why I responded to your statement, "When a society cares for the poor, it is as if they care for Christ himself." Society has any number of ways, and employs more than a few of them already, to "care for the poor." It doesn't have to be through government.

In fact, one excellent way to help the poor is to have a strong economy and a stable, financially sound government that protects its people from threats both foreign and domestic. Anything that jeopardizes this is not good for the poor, or for anyone else, no matter how much flowery rhetoric accompanies it. And right now, we are going the wrong way at 100 miles an hour.

What we already have should not be taken for granted.

> When the government becomes oppressive, at least in the modern period, is when it puts an abstract ideology ahead of the concrete needs and interests of real people.

Man is a fallen creature. Government becomes oppressive when it can. Our own government does not have zero oppression. In my opinion, it oppresses substantially more than, say, fifty years ago. If you cede x amount of power to the government, they will take x plus x. And most of this oppression is done in the name of "helping people."

For one thing, I look at the disincentives in place for having children. A very nice couple at my church, for example, is being oppressed by the Social Services goons. They have been groundlessly accused of child abuse and simply labeled child abusers by the state. There is no recourse. The way the law is written, you can't win a lawsuit. You have to prove your innocence, they don't have to prove your guilt. They came in with video cameras and stripped four boys under the age of 6 naked and filmed every inch of their bodies. Tell you what: you try doing that sometime, and they wouldn't put you in jail, but under it. But they government can do it, and the parents can't stop them; it's all done "for the children."

I call that "oppression."

And that's just one example of millions. How about eminent domain abuse? Property seizure law? How about the tax burden itself, and the fact that we have to work until halfway through April to quit paying the government's bills and start being able to pay for our own?

Government oppresses whenever they can, because they can, and our only hope is constitutional government.

> The premise of American government is that every citizen assents to the Democratic process.

The premise of American government is that the people are the power, and we have a Constitution that was designed to preserve that power. But it has been severely weakened by over 200 years of whittling.

> It's the will of the people, as the Founding Fathers would say.

So then it's okay with you if I continue working to repeal the health care bill, then.