Then What?

Megan McArdle asks this about healthcare reform:

Assume this passes; what happens afterward? I don’t think that many people believe that the answer is “Nothing: the bill becomes law, and we sing happy smurf songs all the way to the longest life expectancy in the Western world!” Even the bill’s proponents expect it will need some follow-up work. But what will that follow-up work look like?

Her view of the “worst case scenario for Democrats” is that a reaction not unlike that which followed the Catastrophic Care Act of 1988 sets in. I’ve been reminding of that possibility for some time. That’s what always occurs to me when progressives chortle about the enduring character of entitlements. It ain’t necessarily so.

To refresh your memory the Medicare Catastrophic Care Act of 1988 was an amendment to the Medicare Act passed under Ronald Reagan. It provided protection against catastrophic medical expenses under the aegis of the Medicare system and, indeed, it’s not a bad idea and not dissimilar to things that I’ve seen proposed lately. Despite its merits the system was phenomenally unpopular for a fairly obvious reason: the benefit was paid for with a Medicare premium tax to be paid by everyone eligible for Medicare.

Human nature is remarkably durable over time; just as today people have little problem with accepting benefits, it’s paying the tab they don’t much care for. The act was repealed in a panic as long-serving Congressmen came under heavy fire for their support of the act.

Here’s my prediction. The House will ultimately pass the Senate bill. The Congress will then add more benefits and repeal the meager “curve-bending” components of healthcare reform via reconciliation. People will see tax increases, premium increases, employers dropping their employee insurance plans at an accelerating rate, and not much in the way of benefits (that’s the way the law is written). Will the Congress then repeal the bill in a panic? Beats me. Either way we’ll be in worse shape than we would have been in had we done nothing, passed Wyden-Bennett, or about a half dozen other approaches.

Congress will have lost its appetite for healthcare reform (although progressive strategists will not). And Medicare’s default will be that much closer.

32 comments… add one
  • Either way we’ll be in worse shape than we would have been in had we done nothing, passed Wyden-Bennett, or about a half dozen other approaches.

    You Republican douchebag! You are evil. Evil I say!! Evvviiilllllll!!!!!

    Don’t tell us how you voted for Obama, your still evil.

    Congress will have lost its appetite for healthcare reform (although progressive strategists will not). And Medicare’s default will be that much closer.

    All kidding aside, I think this is right on the nose.

  • Michael Reynolds Link

    The problem with predictions of doom is that I’ve already survived 55 years’ worth of doomsdays. Sooner or later doom will no doubt come. But my willingness to believe is impaired by the fact of so many failed predictions. Overpopulation, nuclear war, resource depletion, unbreathable air, the Arabs/Japanese/Europeans taking over the world, terrorists with anthrax/smallpox/nukes and on and on.

    Most recently there was the confident prediction by many that the dollar would absolutely collapse. Today the Euro is at 1.37. If I’d been able to buy a Euro for 1.37 when I was living in Italy two years ago (and paying $1.60) I’d have danced for joy.

  • PD Shaw Link

    I’m starting to consider the possibility that the Senate bill will pass, through a process that is later deemed unconstitutional. And that this is considered a desirable outcome by Democrats.

  • Andy Link

    Michael,

    The difference is that fiscal doom is easily quantifiable and solutions to the problem are politically difficult, to put it mildly.

  • Drew Link

    Michael –

    Andy beat me to the essential point. As a general proposition I agree with you that the doomsdayers have consistently misssed it. Its easy to ponder nuclear catastrophy. But our debt situation is something more tangible and quantifiable. I don’t know if you took me up (in a previous post) on viewing this:

    http://www.usgovernmentspending.com/downchart_gs.php?year=1950_2010&view=1&expand=&units=b&fy=fy11&chart=40-total&bar=0&stack=1&size=l&title=&state=US&color=c&local=c

    website. But do yourself a favor. Go look at what happened when the government got in the business of health care, education and pensions: huge spending increases as a percent of GDP.

    When you consider that taxing has ranged between, what, 17 – 21% of GDP for the last 50 years, can you satisfy yourself that the result of this legislation won’t take us into another world ?

    Again, I share your view on generic doom and gloom. But I think you need to make the argument that a draconian increase in taxes, or Chinese driven increases in interest rates because of further debt expolosion would not be a dramatic drag on the economy, with costs to a lot of Average Joe’s.

    I, for one, think they will be (no matter how many more books you intend to write to pay your increased tax bill) with very material consequences.

  • I agree with Michael, it wont be doom. Not in the Mad Max/leather outfits/last of the v8s style doom anyways.

    What it will be is lower economic growth, higher taxes, and probably less health care over time with probably even less innovation. Is that good? I don’t think so, but it sure as Hell isn’t doom.

    I think we’ll end up like the Japanese. End of the world? Starvation? Riots? The Running Man? Nightrider? Tina Turner in a chain mail cocktail dress? No.

  • And no…no guys in ass-less pants with mohawks either…well except maybe in San Francisco during a gay pride march….not that there is anything wrong with that….

  • I’m not predicting doom. Just needless misery.

    BTW, there’s a fairly simple two word description of that graph: compound interest.

  • BTW, there’s a fairly simple two word description of that graph: compound interest.

    As a percentage of GDP? Sure. But the point you seem to be missing is that the “interest rate” for Medicare is larger than the “interest rate” for GDP. That is it is unsustainable and HCR will do f*ck-all unless Medicare is addressed. Since that is unlikely given our political system your needless suffering outcome is the most likely.

  • Summary of the Growth Rates (GDP growth then Gov’t Health Care):

    1951-1660: 6.1%,7.0%
    1961-1970: 7.0%,16.0%
    1971-1980: 10.4%,15.0%
    1981-1990: 7.6%,9.9%
    1991-2000: 5.6%,7.7%
    2001-2010: 3.9%,8.5%

    That is using the data in the table at the above link. The growth rates may look a tad high for some decades such as the 70’s but the GDP that the site uses is not adjusted for inflation.

    This is not a sustainable path and no amount of wishful thinking about turning health care into a right will solve the problem.

    -1 for the creative liberal progressive geniuses.

  • Oh and the percentages are averages for each decade. Sorry, forgot to include that.

  • Michael Reynolds Link

    If there is going to be doom I’m afraid I’m going to have to insist on someone like Tina Turner (only younger,) running things. I can see Uma Thurman pulling it off.

    But back to the topic at hand. As Dave is fond of saying, if it cant be sustained it won’t be. (Paraphrasing.)

    The past isn’t always or necessarily prologue. There are factors that could over time begin to have a favorable impact on health care costs. Technology, advances in treatment, advances in prevention, a more efficient player entering the clinics and hospitals business, political changes. Imagine the savings that would come from a cure for Alzheimers.

    We might even have a salutary change in philosophy. A small example. My doctors have been pushing PSA tests on me for years and I’ve been getting them. I just came from my newest doctor and we agreed the science and common sense don’t support that . The decision was left to me, and I could have insisted on it. I didn’t. It wasn’t me avoiding a cost, it was me making a better-informed and less paranoid decision.

    Part of our problem in this country is that we just aren’t very mature when it comes to death. We treat it as a moral failure, or as an aberration. In part because of religious dogma we cling to life even when it makes no sense and can only mean pain and enormous expense. I wonder what the effect would be if more people began to see their own deaths, and the deaths of elderly relatives, as a normal consequence of having lived. I don’t know what we’re spending on pointless efforts to keep 80 year-olds alive only long enough to die at 81, but it must be many billions.

    I don’t mean to be Pollyanna, I do understand that the facts look very grim. But projecting medical costs out more than a decade is probably foolish.

  • [/snarkiness]

    The past isn’t always or necessarily prologue.

    True, and if that is all that people were pointing at you’d have a good argument. However, the argument is not just that history looks bad and if we keep going it will look really bad, but that the reason why history looks bad is that we have set up, as official policy, a system where the incentives are totally insane.

    Don’t save, don’t worry about insurance, you don’t even have to worry about keeping your health; because in the end Uncle Sugar is going to make sure that the bulk of your health care needs are met.

    I know many people on the Left side of the spectrum probably consider HSAs to be some sort of evil conservative/market oriented plot to make the elderly die early…but did you know it is a key component in the only health care system in the world that is currently sustainable (the Netherlands is looking good, but it might be a bit early to tell). Now that doesn’t mean that implement HSAs and Nirvana will come about, but it would help. Would have been better 15 or even 20 years ago.

    Also, maybe we can vary some aspects of care. Do you need a private room? How about a ward floor instead which can help keep costs low. If you really insist on a private room, fine, but you will be paying alot more for that benefit. Again, something we see in Singapore.

    But there is still the 800 pound gorilla in the room…what do you do about Medicare and its $89 trillion dollar imbalance?

    I don’t mean to be Pollyanna, I do understand that the facts look very grim. But projecting medical costs out more than a decade is probably foolish.

    Sure, its hard to do it with accuracy. But I’d argue that given that 75% of the time growth for government health care is higher than growth in GDP, and that the reason is most likely Medicare and that isn’t going anywhere, I think we are safe to say that for the forseeable future, health care spending will outpace GDP. Eventually that becomes unsustainable.

    We’ve seen unsustainable trends before.

    Stock prices: 1924/5 – 1929.
    Housing prices: 2001/2002 – 2006.

    We’ve also seen the fallout. The Medicare problem makes them all look small by comparison.

  • steve Link

    Feel free to do the same numbers for private health care during those same time periods.

    “I know many people on the Left side of the spectrum probably consider HSAs to be some sort of evil conservative/market oriented plot to make the elderly die early…but did you know it is a key component in the only health care system in the world that is currently sustainable (the Netherlands is looking good, but it might be a bit early to tell).”

    Singapore? Most folks I know on the left would kill to get a Singapore type system, assuming you get the total package including the retirement part. Of course, Grover Norquist and his group, and libertarians would have a heart attack over it, which would drive up costs but might be worth it. The key being , as you phrase it, HSAs are just part of the puzzle. I think HSAs are worth a trial, even in our system, but doubt it will do much to costs given the way our spending works, ie, most of it comes from big ticket items.

    What about Japan and Taiwan?

    Steve

  • Brett Link

    Again, something we see in Singapore.

    I’m for the Singaporean health care system, with its

    1)government-provided catastrophic insurance,
    2)mandatory contributions to HSA-equivalent,
    3)cost controls on hospitals and the like.

    Are you?

  • steve Link

    Thank you Brett (got home late from the shelter and too tired to write much). I am dubious about HSAs alone without other factors. Without going into a longer critique, let me remind you that the large majority of health care consuming is done by a small majority of people. The problems there should be obvious. The second problem is the “savvy consumer” part. This would take a huge cultural shift. This is the country which just set records for the amount of personal debt being carried. If the country were made up of people who post on blogs about health care, I suspect it would work, but that does not describe the patient population I see every day.

    Steve

  • Thank you Brett (got home late from the shelter and too tired to write much). I am dubious about HSAs alone without other factors.

    Thank your for making my point.

    The biggest objection I see to HSAs is that they wont help the poor. BFD. Its is not totally dissimilar from means testing Medicare and Social Security save that it works in the opposite direction. So lets describe a typical Left approach to the issue:

    1. Means test Medicare (take away a benefit for those who have too much money).
    2. Not let them have access to an alternative that would encourage savings specifically for health care.

  • Feel free to do the same numbers for private health care during those same time periods.

    Oh I’m sure it has gone up, but lets consider why. You always fail because you see the word “private” and something unpleasant and figure, “Oh okay, failure of the private sector.”

    But, why might we be seeing a rise in private health care spending? Let me think of two reasons:

    1. Medicare

    As Medicare spending increases it will gobble up more and more resources making the remain resources more scarce and thus push up the price. In other words, private spending has to compete with government spending. Medicare is like a rightward shift in the demand curve, and if the supply curve is held fixed then price has to go up. So even if you buy just as much as you did previously as a private individual you’ll have to spend more.

    2. The tax exempt status of employer provide health care

    This creates and incentive to put more income into health care plans, at least up to a point. Suppose I want $100 in health care, but my employer provides just $50, and my wage income is $200 and the tax rate is 10%. I get $230 in wages and benefits. If the employer shifts another $50 to health care I get $235 which makes me better off. Of course, if health care expenses start to rise fast enough I might start to regret this set up.

    So, in the end we see two reasons that have as their root source the same thing:

    Government.

    I’m sure that isn’t the whole story, but to leave that part out and pretend like it is a failure of the private sector is…what was that term you used on me….hmmmm….. Oh yeah! Intellectually dishonest.

  • Drew Link

    I’m always fascinated by simplistic observations that private enterprises don’t always yield optimal results……………..and then reflexive advocation of government intervention. And yet, government’s track record is horrific.

    If you hired a manager who didn’t work out as expected…….in response would you then hire a monkey to fix the problem? If you discovered that you had a poor surgeon on staff, would you go out and hire a butcher? Its a crazy worldview.

  • steve Link

    “As Medicare spending increases it will gobble up more and more resources making the remain resources more scarce and thus push up the price. In other words, private spending has to compete with government spending. Medicare is like a rightward shift in the demand curve, and if the supply curve is held fixed then price has to go up. So even if you buy just as much as you did previously as a private individual you’ll have to spend more.”

    Sounds good, but it is not what happens in the real world. People make a lot more money from private insurance cases. In my own specialty, we make 3 to 4 times as much, though for most specialties it is 20-30% more. People jump at the opportunity to do private insurance cases rather than Medicare. There is never a shortage of people to do surgicenter jobs because of that discrepancy. Indeed, physicians are opening up short stay hospitals just so they can skim off the private cases and leave the Medicare cases at the big hospitals. People do Medicare cases because they have to do them. Many docs are actually dropping Medicare, as I am sure you know. Plus, the private insurance patients are younger and almost always healthier. Less work, easier work for more money. It remains a mystery to me why the private insurers pay so much more. Mind you, it is good for my bottom line, but it is not sustainable.

    “2. The tax exempt status of employer provide health care.”

    Yup, tax cuts are bad. 🙂 More seriously, I have agreed with this many times. I agree with Dave that total compensation should be taxed. Dump the mortgage deduction too while we are at it.

    “I’m always fascinated by simplistic observations that private enterprises don’t always yield optimal results……………..and then reflexive advocation of government intervention. And yet, government’s track record is horrific.”

    I have observed that the private insurance system over the last 30-40 years has not controlled costs. If you can offer evidence otherwise, please do so. Given that every other country in the world with quality medical care does not do what we do, is it simplistic to suggest we at least look at what they do? Maybe trial it in some parts of our country. From my POV, it often looks as though there is a simplistic view that private enterprise will always do better. Based upon international observation, that does not appear to be the case here in health care. Even Steve’s suggestion of the Singapore model employs significant government intervention.

    HSAs- What happens when people realize it makes little financial sense to have insurance while you are young? It makes more sense to just carry an HSA. What will that do to insurance costs? Remember that most health care expenditures are by few people. It means that hose who are actually ill will not be able to afford insurance, which is really not insurance at all. Kind of like losing your car insurance just when you have an accident. You may save some small amount on routine care for those with HSAs, assuming that your consumers become savvy (this is the country where people thought you could make money be granting mortgages to people without asking them their income). However, it does nothing for the big ticket items that drive our costs.

    Steve

  • Sounds good, but it is not what happens in the real world.

    Oh boy here we go.

    People make a lot more money from private insurance cases. In my own specialty, we make 3 to 4 times as much, though for most specialties it is 20-30% more.

    See, here is the problem with this “real world” thingy here. The procedures for Medicare patients still get done. Resources are consumed. How much you make is not really all that relevant to the macro picture. So long as the resources are consumed then that is going to put upwards pressure on the costs for everyone…including the Medicare cases.

    Yup, tax cuts are bad.

    It is actually a subsidy. Next time you want to call me intellectually dishonest please pick up your coffee cup and hit yourself in the head repeatedly with said coffee cup.

    I have observed that the private insurance system over the last 30-40 years has not controlled costs.

    How can it when the government is spending money like there is no end in sight?

    Here is a quick and dirty test.

    Look at the increases in health care costs before 1965. Look at the increases in health care costs post 1965. If the latter period has higher rates of increase I’d say that is at least weak evidence that Medicare and increased government spending on health care is driving up costs…for everyone.

    Given that every other country in the world with quality medical care does not do what we do, is it simplistic to suggest we at least look at what they do?

    Sure, but that isn’t a solution, its a first step at a solution. And pray tell…what is France doing about their escalating health care costs?

    HSAs-

    Yes, we already knew you really didn’t like them.

    However, it does nothing for the big ticket items that drive our costs.

    Yeah, like Medicare. Until that is fixed, HCR is doomed to utter failure. Even if the bill passes we’ll still lose in that it wont to anything to stop the rising costs. Oh I know, you’ll point to $170 billion over 10 years. Whoopie. Medicare is $89 trillion in imbalance. Even if they are off by a factor of 2 its still really bad.

  • steve Link

    “See, here is the problem with this “real world” thingy here. The procedures for Medicare patients still get done. Resources are consumed. How much you make is not really all that relevant to the macro picture. So long as the resources are consumed then that is going to put upwards pressure on the costs for everyone…including the Medicare cases.”

    This makes no sense. 1/2 of the population is getting care at price X. This leads private enterprise to provide the same care to the population at price 2X. What should happen is that providers should attempt to maximize the care they provide when paid 2X. They then do work at X only as they have time. Your scenario assumes that people provide all the care they can at X making resources rare, so that private insurance must provide that 2X payment. Remember that the 2X patients are also much easier to care for and have fewer complications. Less work and better pay.

    Given all the stories about cost shifting, I think you can make a better case that Medicare payments are inflated to keep up with private insurance payments. Google it find out what percentage of providers no longer accept Medicare. It surprised me how high it was. Here is a question, how did they set the initial Medicare fees? As I recall, they were set as a percentage of private costs.

    “Look at the increases in health care costs before 1965. Look at the increases in health care costs post 1965. If the latter period has higher rates of increase I’d say that is at least weak evidence that Medicare and increased government spending on health care is driving up costs…for everyone.”

    There were no CT scans or MRIs before 1965. We did not have widespread cardiac surgery. Cancer care was primitive. There was no such thing as a pediatric ICU. Women could not get epidurals because plastics were so primitive we could not make the tubing. No robotics. No laser treatments. I think health costs were going to go up with these innovations regardless of financing. Are you saying it was government spending that lead to all of these innovations? Is that weak evidence that Medicare improved quality of care for everyone?

    Note at the link below, that private costs were increasing at nearly 3% ahead of inflation before Medicare was enacted. (Interesting article with good points but conflicting conclusions.)

    http://reason.com/archives/1993/01/01/the-medicare-monster/4

    Steve

  • This makes no sense. 1/2 of the population is getting care at price X. This leads private enterprise to provide the same care to the population at price 2X.

    You know the next time you want to call me intellectually dishonest when it comes to economics please refer back to this thread to see your own level of ignorance first.

    Okay, here we go….

    Lets use a three period model and a very simple economy.

    Period 1.

    We have a resource and there are 100 units of it. So supply is fixed at 100, in a supply and demand graph it is simply a vertical line at 100.

    Demand on the other hand is given by:

    Q(p) = 200 – .5*p

    The 200 is due to the fact that our model has 200 people. So, we solve for the price and equilibrium demand.

    p* = 200.

    At that price the market clears, 100 units of the good are consumed.

    Now suppose we give half of the good to 50 people. We’ve decided that these 50 people need it the most so we ensure they get 1 unit each. Now supply is 50, and demand is determined by,

    Q(p) = 200 – .5p

    Now we solve for the market clearing price again,

    p** = 300.

    Why didn’t I change the 200? Because nothing says that people cannot consume more than 1 unit of the good. So even though we’ve given the 50 1 unit they may go back and buy more on their own.

    Notice what happened to the price. It went up…for everyone. Total spending is now, $3,000 vs. $2,000 without the subsidy.

    Now this is not exactly what happens in that Medicare recipients don’t get their care for “free” as in this example. But they do get it for a discount, so a more “realistic” model would find a price between $2,000 and $3,000. But the qualitative aspect is very true. Since resources have been consumed by one group at a below market price, there are fewer resources to be consumed hence driving up prices for the remaining resources. The latter is true for everyone.

    In fact, if we were to construct a general equilibrium model we’d find that that the subsidy in one market has an impact the remaining N – 1 markets. Granted in some cases it might be small, but it would change prices in all markets to some degree by introducing a distortion into the market. If we factored in taxes we’d have an additional distortion due to the deadweight losses associated with taxes. Would this make the situation worse or better? Hard to say, since we are no longer in a “first best world” at that point.

    Note at the link below, that private costs were increasing at nearly 3% ahead of inflation before Medicare was enacted. (Interesting article with good points but conflicting conclusions.)

    Really, I looked and found nothing like that. I do see where they point out that hospital costs were rising at a rate 2.7% above the rise in wages (e.g. if wages increase at 2% hospital costs increased at 4.7%). But I don’t see the point of this in that I gave you two reasons, one of which was in effect from sometime in the 1940’s to today. So I don’t find this point you bring up as all that terribly shocking.

  • Here is some research on the impact of Medicare,

    http://www.nber.org/aginghealth/fall05/w11619.html

    The results from this analysis suggest that, in its first five years, the introduction of Medicare was associated with a 23 percent rise in total hospital spending (for all ages).

    I’ve highlighted the important part for this conversation.

    Extrapolating from these results suggests that the overall spread of health insurance may be able to explain at least 40 percent of the dramatic increase in health spending in the U.S. between 1950 and 1990.

    Here is another bit of research that looks at the benefits of Medicare,

    http://www.nber.org/papers/w11609

    The abstract (note the working paper will cost you $5):

    We study the impact of the introduction of one of the major pillars of the social insurance system in the United States: the introduction of Medicare in 1965. Our results suggest that, in its first 10 years, the establishment of universal health insurance for the elderly had no discernible impact on their mortality. However, we find that the introduction of Medicare was associated with a substantial reduction in the elderly’s exposure to out of pocket medical expenditure risk. Specifically, we estimate that Medicare’s introduction is associated with a forty percent decline in out of pocket spending for the top quartile of the out of pocket spending distribution. A stylized expected utility framework suggests that the welfare gains from such reductions in risk exposure alone may be sufficient to cover between half and three-quarters of the costs of the Medicare program. These findings underscore the importance of considering the direct insurance benefits from public health insurance programs, in addition to any indirect benefits from an effect on health.

  • steve Link

    But supply is never fixed. Here is what I see really happening. Docs, the procedural oriented ones where the big bucks are, almost always have the ability to hire physician extenders. Hospitals are 24 hour factories. If they have the opportunity to run longer, they will, especially if it is the private insurance patients.

    So, we make sure that all of the demand for the 2X patients is met. If we have time left over, we provide care for the 1X patients. If there is not enough supply, there are waiting lists. What you see in my area, is waiting lists for urology and geriatrics. There is no waiting time for sports medicine, a private insurance dominated market.

    In this system, would it not be the private insurers driving up the costs for Medicare, assuming Medicare wants its patients treated? The kicker here, for full disclosure, is that hospitals tend to do much better with Medicare than docs. They may want us to provide care to Medicare patients when we do not. They will supplement docs salaries if needed to keep their Medicare patients.

    Your numbers fit and I tried to do some of the same thinking (I always screw up supply and demand. I think Sumner is right about it and it is too easy to screw up.) It is just when I put in observed behavior, it does not fit. I have emailed Cowen, he usually answers, and asked Frakt. If they answer, I will let you know.

    BTW, Frakt, via Klein, says European systems, like France, are sustainable.

    http://theincidentaleconomist.com/chart-quote-website-of-the-day/

    Steve

  • But supply is never fixed.

    Of course not, but adding in that kind of complexity and reality to the model would make it beyond the scope of the Glittering Eye’s comments functionality. I can’t really do a dynamic model with sub-scripts, etc. Let alone whipping out the really heave mathematical artillery to tackle the problem.

    However, intuitively think of this, if we are going to add to health care resources that are available we have to divert other resources in the economy. This is why health care is a grow as a share of our GDP, we are allocating more and more resrouces to that endeavor. Since resources are scarce it drives of up the price of the remaining resources. Further, it is not a stretch to see that the reason for this is that the rewards offered for such diversions is also increasing or at least has a substantial “profit”. So while quantitatively the model is lacking it makes the qualitative point I’ve tried to make.

    If there is not enough supply, there are waiting lists.

    Seems my little model might be more accurate than you think. If there are waiting lists it says two things:

    1. Allocation of resources is not being done by price.
    2. As a result of 1, there is excess demand that is not being met.

    What you see in my area, is waiting lists for urology and geriatrics. There is no waiting time for sports medicine, a private insurance dominated market.

    Yes, that’s fine, but when they are seen they are still consuming health care resources. My point still stands. The only way for your point to be valid is if such patients are never treated. They may not be treated today, but they are treated at some point. And today a patient that has been waiting is being treated.

    The bottom line is that the subsidies for health care are what are driving the rapid rise in health care costs. There is no dodging this, just as there is no dodging gravity.

    BTW, Frakt, via Klein, says European systems, like France, are sustainable.

    That is incorrect. And in looking at the article I see no evidence to support your claim. None. To quote a poster here, “Wo that is not very intellectually honest of you.” What I do see that post as saying is that “if we can get our growth rates for GDP and health care to match the OECD growth rates, then that can solve the deficit problem.” I’m highly doubtful of this claim as I’ve already noted that Social Security and Medicare are in imbalance to the tune of $89 trillion. Considering the historical growth of GDP in OECD countries that is going to entail some pretty nasty cuts to Medicare which simply wont happen.

    As for France specifically, Alice Teil, says the problem in France is pretty much the problem here in the U.S., just not as advanced. I’ve likened health care to each country being in a car racing towards a cliff. The U.S. is “winning” in that we are clearly quite a ways out front. Is France’s system better than ours? Yeah, they are not nearly as close to cliff and aren’t moving as fast. Can their system be made sustainable? Sure, all of them can in theory, problem is that in reality when you try to do what needs to be done, the ruling political party gets its ass kicked.

    Really Klein is not this great health care guru, the guy is a journalist who is barely above being innumerate–i.e. he knows enough about numbers and excel to get himself into trouble.

  • Or let me put it this way regarding Klein’s stunning graph and article a TL;DR version:

    “If we assume sustainable growth numbers for health care and GDP growth, why the system is sustainable.”

    Thanks Ezzie, and for your next trick can you show how you apply begging the question to marriage?

    Jesus H. Christ on a pogo stick.

  • steve Link

    Dissolve Medicare, which would probably make us both happy. Assume the Medicare folks now get insurance from the private sector. What happens? Why would the private insurers now decrease their costs or charges? These people would still need care.

    “1. Allocation of resources is not being done by price.”

    Again, what I see happening, have seen happen in my medical community, is that when an insurer dramatically increases payment, physicians find a way to prioritize those higher paying patients. They are allocating by price, they take care of the better paying patients first, then the lower paying cadre only if they have the time. Medicaid pays even worse than Medicare, as I hope you know. Successful groups stop taking Medicaid patients entirely.

    I have yet to hear from Cowen, but Frakt seems to suggest you may be right, but for a different reason, cost shifting. He linked to a paper I will try to get to later on cost shifting. If that is the reason private insurers charge more, it would seem to imply that Medicare is not paying enough.

    On France, I was assuming that at this point, GDP growth for the US and France is closer than I thought. I rechecked and I am wrong. A downward curve with our GDP does not necessarily mean sustainability for France. My bad.

    “Really Klein is not this great health care guru, the guy is a journalist”

    Which is why I refer to Frakt, with Klein supplying the reference to the chart.

    I assume you mean this series from Tell’s 2007 visit?

    http://findarticles.com/p/articles/mi_qn4188/is_20070826/ai_n19490720/

    Interesting that she is going to a place that effectively espouses cost effectiveness research.

    Steve

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