I’d like to throw a question on the floor. Is healthcare cost control possible without healthcare wage control? At least within the context of reasonable levels of public health?

I used to think that it was possible but I’m increasingly coming to doubt it. There really is no working market in healthcare (other than, as it has been mentioned, by measures like medical tourism). Without a functioning market, “market-friendly” reform approaches are doomed to failure.

It strongly seems to me as though the idea that we can have healthcare cost control without healthcare wage control assumes one or more of two things:

1. That healthcare providers will willingly take a pay cut.
2. That healthcare providers have significant amounts of excess capacity.

I see no evidence of the latter. Indeed, I know more docs who are working too many hours than are sitting idle. If healthcare providers are at or near full capacity, if you reduce compensation for procedures, providers will have the alternatives of prescribing more procedures or raising the rates for current procedures. Claiming that providers would never simply prescribe more procedures or raise their rates denies the experience of the last forty years.

If Medicare, Medicaid, and insurance companies cap compensation by any method, providers still have the alternative of billing patients directly. That could result in a market system by default but I don’t see such a system as compatible with decent levels of public health.

I’m open to suggestion on this. Ideas?

Update

More grist for the mill. Doctor Unavailability Syndrome?

There is a new disease spreading like a cancer in doctors’ offices and hospitals throughout the U.S. I have named it Doctor Unavailability Syndrome (DUS). It is characterized by a rising shortage of doctors, both specialists and primary care, as well as the growing inability of the doctors we do have to take care of patient needs.

What good is a shiny new insurance card if there is not a physician available to see you?

This disease can be traced back to 1997, when Congress, anticipating a doctor surplus, included a section in its budget-balancing law that froze the number of Medicare-sponsored residency positions.

But instead of a surplus, a shortage soon developed, and has worsened over the years, now reaching epidemic proportions. The Association of American Medical Colleges Center for Workforce Studies just reported an anticipated shortage of 90,000 doctors of all kinds over the next decade, with half of them being primary care physicians and the other half surgeons and specialists.

I find this extremely difficult to understand. Why go back only as far as 1997? The number of physicians per 100,000 educated in the U. S. has been shrinking for decades. We’ve only maintained anything like a reasonable ratio (particularly of general practitioners) by importing doctors like mad. Other OECD countries have begun competing with us on price for GPs.

And why is a subsidy required to train more doctors? (BTW, the Medicare system has subsidized medical residencies at a ferocious level for the last forty years.)

I can understand why physicians would want fewer physicains. That’s been the profession’s policy for a century: fewer, better doctors. I read of waiting lists for U. S. medical schools and American students going to foreign medical schools for training all of the time. Are billets actually going wanting? Very puzzling.

I’ve been nibbling around the edges of this point for some time but I think that a major culprit in the difficulties in which we find ourselves is the process that’s being used in Congress these days. The process has been used in legislation that has “succeeded”, e.g. healthcare reform, and in legislation that has “failed”, e.g. energy policy.

Here’s what I think has been happening. Legislation has been essentially a two-step process. The first step is to determine the contours of the end result. The second step is horse-trading among legislators until you’ve got enough votes to pass the legislation.

I don’t think this is a new phenomenon. It may date from the earliest days of the Congress. However, it has some built in assumptions. It assumes that the end result is acceptable to enough legislators that the horse-trading phase can be kept within bounds. As the parties have both increasingly moved in the direction of programmatic parties at the expense of being catch-all parties, that has become increasingly difficult.

And I also think it takes a view of Congress’s work as being something other than a zero-sum game. In the virulently partisan environment of today that’s no longer a good assumption.

Some seem to blame this on compromise but I think that’s precisely the opposite of the problem. What’s been going on isn’t compromise, it’s log-rolling, a completely different phenomenon. Compromise is only possible within the context of shared goals and values and those are becoming increasingly divergent.

I don’t see any easy solutions to this procedural problem. Potential solutions like electing more moderates (who would, presumably, have more commonality than ideological opponents), limiting the scope of bills (which would, presumably provide less opportunity for log-rolling), or starting from the compromise position (at this point so limited as to be virtually meaningless) look decreasingly likely.

I’m afraid that things will need to get much, much worse before they get any better. Not a pleasant prospect.

This morning there are statements from four governors, Gov. Rendell of Pennsylvia, Gov. Schartzenegger of California, Gov. Patrick of Massachusetts, and Gov. McDonnell of Virginia, on facing their states’ budgetary problems in an op-ed in the Wall Street Journal. Gov. Rendell proposes economizing on purchases, particularly healthcare and points out his state’s wellness plan and increasing economies of scale in the state’s public employees’ health insurance. Gov. Schartzenegger takes not of the elephant in the room, public employee pensions, and reports his own state’s modest moves towards coping with the problem. Gov. Patrick suggests increasing investments, mostly in education. Gov. McDonnell points to his own state’s hiring freeze and requirement that new state employees contribute to their own pensions.

Information on the state budget of Pennsylvania is here, California is here, Massachusetts is here, and Virginia is here. In each of these four state’s budgets three quarters or more of all spending is in just two departments: education and health and human services (translation: Medicaid). In each of these four states the two greatest budgetary problems are public employees’ pensions and healthcare spending.

All four states are experiencing growth in the spending on their public employees’ pensions far in excess of the state’s growth in income or population and all four states are experiencing growth in healthcare spending in excess of the states’ growth.

There is no mystery about what needs to be done with public employee pensions. Public employee pensions must be converted from defined benefit plans to defined contribution plans, a transition which took place in the private sector decades ago. The great difficulty is what can be done about the years of profligacy during which public employee pensions were drastically underfunded. Some states may be able to escape this problem by reneging on their promises. Others will partially reneg and partially fulfill, presumably by raising taxes substantially. Other states may only be able to save themselves through bankruptcy. For still others and in this case I’m thinking of Illinois and its unique issues even bankruptcy may not be a solution.

Increases in taxes will certainly be part of any solution in Illinois but, since all of the revenue streams on which the state depends, e.g. retail, property values, income, are declining it means the state will be taking a bigger cut of the state’s income. At the margins that will result in at least some of the income fleeing Illinois.

In Illinois city and other local governments do not have the power to impose income taxes on their own so they are more completely dependent on property and sales taxes. Chicago’s sales tax is already among the highest in the nation. Illinois’s bizarre multiplier system results in a disproportionate amount of property taxes falling on homeowners. At the margins that will result in people on fixed or moderate incomes losing or leaving their homes, already a problem during a home mortgage based fiscal crisis.

I see no way that the states can solve their budgetary problems without healthcare reform that reduces costs, not by wishful thinking as with wellness programs but by real reductions now. But we’ve already had healthcare reform.

An article at Business Insider proclaims Chicago as the Second City once again and not in a good way. Chicago, after Philadelphia, is the city whose city employee pension plan is most likely to run out of money. Read it and weep:

Unfunded liability: $44.8 billion

Unfunded liability per household: $41,966

Solvency horizon: 2019

I am flabbergasted that neither Calculated Risk’s readers nor, apparently, Calculated Risk recognize that the NFIB survey that CR posts on does not say that small businesses reckon inadequate demand as their only problem. Indeed, as I read the graph that CR reproduces fully 2/3s of small business owners report that something other than low demand is their main problem.

I’m a member of NFIB, participate in these surveys regularly, and read them when they come out. If you add concerns about regulatory uncertainty and taxes together, more small business owners report them as their main problem.

If you add to those the number who view the high cost of healthcare insurance as their main problem, it accounts for nearly all small business owners.

Whenever I read something like this statement in a recent Wall Street Journal article it irritates me:

Republicans would do exactly what House Speaker Nancy Pelosi so memorably predicted would happen once the health-care bill passed: find out what’s inside it. Mr. Boehner says his priority is full repeal. But he also knows he is in for a fight. In this fight, hearings would help Republicans accomplish several things.

First, they would help define the law’s problems for the American people.

Second, by defining the problems, Republicans would be in a better position to define and sell their more market-friendly fixes.

Third, by doing the first two, Republicans might get enough votes here and there to kick out key rungs of ObamaCare.

The emphasis is mine. Doesn’t there need to be a market for “market-friendly fixes” to function?

That’s a key problem. There is no market in either healthcare or health insurance or whatever market exists is so restricted, has so many barriers, and is so convoluted that it’s barely worthy of the name.

The essential problem is that it’s not entirely clear that we want a market in healthcare or that such a thing would be even barely tolerable in terms of public health. Our choices lie in how to maneuver the current oligopoly and oligopsony.

I think that Anne Applebaum misses the point in her recent column on what she terms “anti-elite-educationism”:

In America, the end of the meritocracy will probably come about slowly: If working hard, climbing the education ladder and graduating from a good university only wins you opprobrium, then you might not bother. Or if you do bother, then you certainly won’t go into politics, where your kind is no longer welcome. We will then have a different sort of elite in charge of the country — and a different set of reasons to dislike them, too.

Is the problem that “working hard, climbing the education ladder and graduating from a good university only wins you opprobrium” or that doing so appears to be good enough for government work? Being an Ivy Leaguer is no guarantee that you’re smart and hard-working nor is having graduated from a school other than Harvard, Yale, or Princeton let alone not having gone to college at all a guarantee that you’re an anti-intellectual oaf, incapable of looking after your own affairs. Our culture is simply too brand name oriented. That’s not meritocracy; it’s the illusion of meritocracy.

Despite their many virtues neither the present Harvard Law graduate incumbent nor his Yale Law graduate Secretary of State nor his Harvard Business graduate predecessor nor his Yale Law graduate predecessor gives me, at least, the impression of being a scintillating intellect who has a right to rule by virtue of his or her mighty brain.

They won elections. Elections are not IQ tests or measures of the ability to do anything other than win elections.

Does Ezra Klein know the difference between cyclic and structural unemployment? Consider this:

To see what he means, consider a Michigan construction worker laid off in early 2008. He didn’t lose his job because he was bad at it but because his firm lost access to credit. He hasn’t been able to find another job, because no one is hiring in his area, and he can’t sell his house, because it’s now worth less than what he owes on his mortgage.

Right now, he’s an example of what economists call “cyclical unemployment.” He’s unemployed because of the business cycle. But if his stretch of joblessness lasts for too long, that might change. His skills might deteriorate, and so too might his confidence. He might join an altogether more troubled group: the “structurally unemployed” — the out-of-work who can’t get jobs because they’re not suited for the jobs that employers are offering. The long-term unemployed, Posen warns, can become “de facto unemployable over time.”

If you answer, “I can’t tell because there’s not enough information” I think that would be a fair response. However, if you say “yes, that’s cyclical unemployment”, I find that pretty puzzling.

Item 1. Michigan, as the result of an ongoing decline in the U. S. automobile industry, has been growing at a rate slower than nearly any other state in the Union for decades now. The automobile industry’s decline is structural. Hence, declines that follow that decline are structural, too.

Item 2. While you can’t attribute any single job to cyclical or structural unemployment, in what world will we ever return to the frantic level of activity in the construction industry we’ve seen over the last decade (let alone the last 30 years)? There’s a year’s worth of housing inventory right now and sales are flat. Commercial real estate is in at least as big a fix. Certainly there’s got to be some contraction in the construction industry, doesn’t there? That’s structural unemployment.

Does he mean something else by the terminology?

I’ve just published a foreign policy-related post at Outside the Beltway:

“Hungary’s Environmental Disaster”

In this post I summarized the unfolding environmental disaster in Hungary. Last Monday a containing wall at an aluminum plant gave way, releasing 700,000 cubic metres of “toxic red sludge”, probably a combination of compounds including cadmium oxides and cyanates. The disaster has claimed eight lives, has caused the evacuation of several villages, has polluted miles of land and waterway, and bids fair to pollute a vast part of southeastern Europe depending on its consequences for the Danube.

Why is it receiving so little attention here?