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Another Effort to Impose Philosophy on the Health Care Debate Print
Sunday, 01 July 2012 07:42

There should be an automatic fine of $10,000 for anyone who claims that a dispute between politicians is about philosophy. It should double the second time they say it and go up to $100,000 the third time.

Come on folks, this political science 101. The people that we see in Congress, the White House and elsewhere on the political stage did not get there because of their great philosophical works. They got there by appealing to powerful interest groups. And they stay there by appealing to powerful interest groups. So why are people in the media continually telling us about philosophy.

Glenn Kessler is the most recent sinner in his otherwise fine Fact Check piece on Sarah Palin's effort to bring back her "death panels" claims about ACA. Kessler notes that Palin now claims that her reference to death panels is the Medicare Independent Payments Advisory Board (IPAB), which she argues will be making life and death decisions about what payments to provide for various treatments.

Kessler comments that IPAB is an effort to contain the rate of cost growth within Medicare which is says is not very different from the system proposed by Republicans. The latter would provide beneficiaries with a voucher (which they like to call "premium support") whose growth would be restricted to a pace well below the rate of medical cost inflation.

Kessler then tells us:

"the dispute really centers on a philosophical divide between the parties. Democrats would rely on independent experts ...  Republicans would rely on the insurance marketplace to control costs."

What makes this is a question of philosophy? Let's be more concrete. The system put in place under the ACA would put the government in a position where it could squeeze money out of providers. It could specify prices for services and procedures and tell providers take it or leave it. Given the enormous and rapidly growing size of the Medicare market, most would likely take it.

By contrast, the Republican approach surrenders this market power. In fact, it increases by costs by relying on a network of private insurers that we know is less efficient than Medicare. (The Congressional Budget Office and other independent experts have documented this fact numerous times. Like global warming, it is no longer a debatable point.)

Kessler and the Post don't know anything about Republican's philosophical beliefs. They do know that they have proposed a Medicare plan that is likely to leave a higher share of Medicare dollars in the hands of insurers and give providers more money for each dollar of services. The paper should just stick with the facts and leave speculation about philosophy to readers.

 
The Washington Post Still Can't Talk Honestly About Mexico's Economy Print
Sunday, 01 July 2012 07:20

The Washington Post is heavily invested in NAFTA. At the time of the debate it abandoned any pretext of being an objective newspaper, allowing both its opinion and news pages to be overwhelmingly dominated by proponents of the agreement. Since its passage the Post has refused to acknowledge that the agreement has had the intended effect in the United States of lowering the wages of manufacturing workers. (This is textbook economics. By putting U.S. manufacturing workers into more direct competition with their low-paid counterparts in Mexico, the result is that wages of manufacturing workers in the United States fall.) 

The Post also refuses to acknowledge that the deal has failed to improve Mexico's growth. In fact, a lead Post editorial in December 2007 told readers that Mexico's GDP had quadrupled since 1988, which it attributed to the benefits of NAFTA. The actual increase over this 19 year period was 83 percent, which put Mexico near the bottom in growth for Latin American countries.

The Post's prohibition of honest discussion of Mexico's economy is apparently continuing. In a piece on Mexico's elections today, the Post told readers:

"But annual growth during Calderon’s six years has averaged a middling 2 percent."

This statement gives a whole new meaning to word "middling." If we turn to the IMF's data and look at per capita GDP growth in the years 2006-2011, we find that on average Mexico's per capital GDP shrank by 0.1 percent annually over this period. This is not middling; this performance places Mexico dead last among Latin American countries (several countries in the Caribbean did worse.)

For some reference points, per capita growth in Argentina averaged 5.8 percent, Bolivia 2.8 percent, Brazil 3.1 percent, Ecuador 2.6 percent, and Peru 5.6 percent. There is nothing middling about Mexico's economic performance over this period; it was bad. 

 
The Old "Solidarity vs. Rugged Individualism" Diversion on Health Care Print
Saturday, 30 June 2012 07:48

The elites continually try to give us phony political frames to divert the public from the real issues in politics. We have an excellent example of such an effort in the NYT's Economix blog where Uwe Reinhardt tells us that the health care debate is about "Solidarity vs. Rugged Individualism."

Reinhardt's story is that we have the solidaristic liberal types who think that everyone should be put in a single pool. If someone ends up getting really sick, then the healthy among us will pick up the tab. These are the supporters of Obamacare or other plans to extend health insurance coverage.

Then we have the rugged individualistic types who are willing to pay for their own care, but don't want to be stuck with the tab for others. Their philosophy is that if someone gets sick, then they should just get out of the way. There is no reason to stick everyone else with the tab.

That's a great way to frame the central issue in the debate, except of course that none of the leading opponents of Obamacare openly expouses anything like the rugged individualist view that Reinhardt wants to attribute to them. Instead they say things like they want to use market mechanisms to extend coverage. We can show that their approaches will not work, but that is not the same thing as espousing Reinhardt's rugged individualistic view that people just should not get care.

And, there is good reason to believe that very few people actually hold anything like the rugged individualist view that Reinhardt has outlined here. There is a little program called "Medicare" which operates in a way that is 180 degrees at odds with the rugged individualist view that Reinhardt has described. Incredibly, 70-80 percent of Republicans strongly support Medicare. In fact, 70-80 percent of self-identified Tea Party supporters strongly approve of Medicare.

This suggests that these people are not opposed to Obamacare because of their commitment to rugged individualism. It suggests that their opposition is gounded in something else -- perhaps confusion about the program, fear of a government mandate, perhaps dislike of the people who they see as the many beneficiaries -- but not a committment to rugged individualism.

If that is the case, the discussion of rugged individualism is a distraction from the real issues in the health care debate, perhaps front and center why health care in the United States costs twice as much as everywhere else. If the United States paid the same amount per person for its health care as Germany or Canada we would not be having a debate like this. Everyone would already be covered for less than we are now spending on Medicare, Medicaid and other government health care programs.

 
Politicians Do Not Always Say What They Mean: Romney on Health Care Costs Print
Friday, 29 June 2012 17:10

A NYT article on Mitt Romney's approach to health care told readers:

"Mr. Romney’s plan, like those being proposed by Republicans in Congress, would put more emphasis on controlling health costs and less on reducing the ranks of the uninsured, the primary goal of the Obama plan."

This should say that "Mr. Romney claims his plan would put more emphasis on controlling health costs." It certainly is not clear that it will actually do anything to control costs.

He does not propose any of the obvious measures to contain costs such as trade agreements that would make it easier for qualified foreign doctors to enter the country, driving down the cost of physicians' services or limiting patent monopolies, thereby bringing drugs closer to their free market price. If Romney was interested in controlling costs he could give people the option to buy into Medicare which would put considerable downward pressure on the prices charged by private insurers.

Since Romney doesn't propose any of these measures and the ones listed in the article would have a questionable impact on costs, it is wrong for the NYT to assert that his plan "would put more emphasis on controlling costs." This is simply a claim by the Romney campaign, it is not a fact.

 
Will the ACA Hurt Employers: Morning Edition Says It Depends on How They Feel -- see Addendum Print
Friday, 29 June 2012 04:34

Reporters at NPR have the time to look up the requirements of the Affordable Care Act and calculate their impact on employers. Its listeners do not. For that reason, it is incredibly irresponsible to simply report the views of one small business owner saying the bill will be a big burden and then another who says it will guarantee him and his wife insurance.

Morning Edition could have taken 30 second to give listeners an idea of the size of the burden that the ACA imposes. For firms that employ fewer than 50 workers, there are no requirements. Firms of 50 workers or more must either provide insurance or pay a penalty.

The size of penalty is $2,000 per worker, with the first 30 workers exempted. This means that if a company employs exactly 50 workers (as could be the case with the employer profiled), then the company would have to pay a $40,000 fine. If the average pay for a worker is $10 an hour (in other words, everyone gets close to the minimum wage), this fine would add 4 percent to the company's wage bill. If the employer currently pays for some care (as the employer profiled claimed he did), he would be able to stop paying for the care, which would offset much or all of this cost.

By comparison, past minimum wage increases have been on the order of 15-20 percent. Extensive research has found that these increases in labor costs have had little or no impact on employment, meaning that firms have been able to absorb this additional expense without substantially changing their operations. This research suggests that the burden imposed by the ACA would have relatively little impact on business.

[Addendum: I apologize, this is much worse than I thought. Jonathan Lundell calls my attention to Balloon Juice, which reports that NPR's small business owner, Joe Olivo, is apparently a regular on news shows and at congressional hearings, appearing most recently the prior night on NBC. Apparently he is a spokesperson for the National Federation of Independent Business (NFIB).

There is nothing wrong with presenting the views of the NFIB, but they should be identified as such. NPR misled its listeners when it presented Mr. Olivo as a random small business owner whom they happened to stumble upon.]

 
David Brooks Never Heard of Prescription Drugs Print
Friday, 29 June 2012 04:15

That is what readers of his column today on the Supreme Court's health care ruling would learn. Brooks sort of praised the restraint the court exercised in not overturning the ACA. He then went on to list the inefficiencies in the health care system that the ACA did not fix. Brooks mentions the malpractice system, fee for service care, and the government subsidy for employer provided care.

Brooks probably does not know anything about the ACA, since it is likely to substantially reduce employer provided care over time according to most analyses. More importantly, Brooks somehow overlooks the inefficiencies in the system that have the effect of giving more money to rich people and leading to poorer quality care.

At the top of the list is patent protection for prescription drugs. These government granted monopolies raise the price of drugs by around $270 billion a year above their free market price. This is roughly five times the size of the cost of the Bush tax cuts to the rich. Patent monopolies also encourage drug companies to mislead doctors and patients about the merits of their drugs, leading to poorer quality care.

A second item that Brooks somehow missed is the inefficiency of the insurance industry, which is left in tack by the ACA. We waste between 10-15 percent of our health care spending ($250-$375 billion a year) on unnecessary administrative costs as a result of our system of private insurers, as opposed to a public Medicare type program. Of course top executives at the insurers do very well with this system.

The third obvious source of waste that Brooks failed to catch was the excess pay for our doctors, especially highly paid specialists. If the pay for our doctors was comparable to the pay of doctors in Germany or Canada it would save us around $100 billion a year, or roughly two Bush tax cuts for the rich.

It is striking that Brooks has such difficulties noticing inefficiencies in the health care system that redistribute income to the rich.

 
Medical Trade: The Ultimate Check on U.S. Health Care Costs Print
Thursday, 28 June 2012 07:29

The NYT had an article on the surge in the number of people who are traveling to Mexico for medical care. This is hardly ideal, but since our political system is too corrupted by the insurers, the doctors, the drug companies and others who benefit from the waste in the health care system, this is likely to be the way in which the system is eventually reformed. People will vote with their feet and take advantage of the more efficient health care systems in other countries.

It's too bad that the economics profession is so corrupt that almost none of them ever discuss the barriers to trade in health care services and how they can be eliminated. A small protectionist barrier that might boost the pay of a steelworker drives economists up the wall, but huge barriers that cost U.S. consumers hundreds of billions annually -- and jeopardize their health -- do not seem to bother economists.

 
Conflicts of Interest at the Federal Reserve Board Print
Thursday, 28 June 2012 05:28
Very good piece by Simon Johnson. It would be good to hear someone try to provide answers to the questions he raises.
 
Transportation Spending: How About Some Context? Print
Thursday, 28 June 2012 05:14

The Washington Post ran a classic pointless killing of trees piece on plans for transportation spending in a bill being debated in Congress. The piece told readers, among other things:

"A group co-chaired by former transportation secretaries Samuel K. Skinner and Norman Y. Mineta has estimated that an additional $134 billion to $262 billion must be spent per year through 2035 to rebuild and improve roads, rail systems and air transportation."

Let's see, $134 billion to $262 billion per year over the next 22 years, is that a lot or is it a little? I really doubt that even 1 percent of the readers of the Post has any idea how much money is involved here. If you added or subtracted a zero from these numbers it would probably look the same to most readers.

Suppose we put that as a share of GDP, this would be something like 0.6 to 1.2 percent of GDP over this period. (I'm assuming that these are nominal numbers, but the article doesn't tell us and the report is horribly written so I couldn't find the numbers upfront.) Or, the piece could have told readers that this was between 3 and 6 percent of projected federal spending over this period.

There are other ways to put these numbers in a context that would make them meaningful to Post readers, but this article just threw out budget numbers like it was a fraternity ritual. As a result it may be the industry standard for budget reporting, but it did not convey useful information to readers.

 
The Housing Market is Recovering Print
Thursday, 28 June 2012 05:00
Good piece by Binyamin Appelbaum in the NYT. It's surprising that the positive data in recent months has not gotten more attention after so many previous false starts made the front page. Here's my take.
 
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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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