Several days ago, Tyler Cowen triggered some righteous rage for suggesting that the administration's promises to cut health care costs "runs the risk of becoming the new voodoo economics". He was expressing a growing frustration among reputable conservative economists that the promises of health care cost control have turned into the Laffer Curve of the left: a way to pretend that their favored policies don't have any costs.
It is true that some countries have controlled costs, and therefore made it easier to afford coverage for more people. It is also true that some countries have cut marginal tax rates, and thereby actually raised the tax revenue they collected. For all the derision about the Laffer Curve, it is absolutely correct--indeed, it has to be; it's basically just an identity. Tax revenues peak somewhere. If you're to the right of that peak, you could raise revenue by lowering rates.
What's left is the empirical question: are we to the right of that peak? Empirical answer: no we are not. It was not unreasonable for Ronald Reagan to believe that we might be, since the world didn't have all that much experience with lowering 70-90% marginal tax rates. (Indeed, arguably, we were to the right under JFK, and his tax cuts may actually have raised revenues).
But the empirical answer, when all was said and done, is that we were on the left-hand side of the curve. Moreover, we remain on the left-hand side of the curve. Moving further left will just make the revenue picture even worse. The Republican wonks and politicians who claim otherwise are either really, really dimwitted, or engaged in an intellectual sham of breathtaking dishonesty. The rank-and-file who have accepted this nonsense have been hoodwinked, and should be righteously angry at their leaders.
And what about health care costs? Is it reasonable to believe that we are going to control them? After all, other countries have.
I'd say we have substantial empirical evidence that we are not going to control the health care cost inflation which is busting Medicare's budget, much less the new costs the administration is planning to add. We have been trying to control health care costs since the 1970s made it clear that Medicare was going to get really, really expensive. And any idea that you care to name, from comparative effectiveness research to healthcare IT to preventive medicine . . . these have all been on the table for more than thirty years, under one name or another. They haven't happened.
The answer that those promising magical cost reductions need to ask is "Why haven't they happened?" and "What has changed to make them feasible now?" But when I ask this question, I get angry demands that I put forward my plan for cost control, rather than merely critiquing everyone else's. This seems rather like demanding that I put forward my design for a perpetual motion machine before I am allowed to point out problems in the US energy market.
To those who say, pretty reasonably, "Why not demonstrate that you can control these costs in Medicare before asking us to believe you can do it with a broader program?" the response is something like a snapped, "But I don't want to just control Medicare costs! I want universal coverage!" Ah. Well, Republicans don't want to maximize tax revenue; they want to cut taxes. This does not make their now-deliberate wishful thinking any prettier. Nor obligate the rest of us to fulfill their desire at the expense of sound budget policy.
Both Medicare cost control and Republican tax cuts are like the Red Queen's strategy in Alice in Wonderland: "Jam yesterday, and jam tomorrow, but never jam today". They promise sweeteners to sell their favored policies, but when the day actually arrives, time and time again we're left holding an empty jar.
Copyright © 2010 by The Atlantic Monthly Group. All rights reserved.
Though empirically, everywhere else in the world has cut and stayed away from 70-90% marginal tax rates. Even Sweden.
And cutting 70% marginal tax rates to 50% might possibly raise revenue over a longer time horizon, rather than a shorter one.
Though certainly that doesn't mean that cutting below 40% raises revenue, even in the long term.
I would argue that while never-to-be-passed health care cost savings are like the Laffer Curve, the closer approximation for the Left is the miraculous Keynesian multipler for government spending, which is also used in a grossly simplified way by some followers. (And well as exaggerated far beyond what the empirical evidence shows.)
I'd like to nominate another category for the left's new Laffer curve: the extraordinary effect of green regulations, which create massive numbers of new jobs and high economic growth. Tight new environmental restrictions will also make us world leaders in technlogy. Really, we can't afford not to pile on more environmental restrictions, to get that massive economic growth.
Another nominee, the idea that paying workers more money will be profitable for a company because then the workers will be able to buy more of the companies product.
There are reasons a company can benefit by paying workers more. They may have to in order to get employees, or keep them, or attract the best, or they may get some other benefit. But the idea that "the employees will buy more of our product if we pay them more", is a net win for employers is silly.
Or what about the idea that because firms pay many healthcare costs, we will experience sudden prosperity if instead the government bore those costs? If that is the case, we would be all the more prosperous if the government paid wages as well.
The Laffer Curve doesn't suggest that tax cuts normally increase or don't reduce government revenue, only that tax cuts can increase or avoid decreasing revenue (at least if they are from very high rates) and that from lower rates the revenue loss is likely to be less than the percentage of the tax cut (cut taxes by 1/4 revenue goes down less than 1/4th).
Some people run with that idea and say things like "tax cuts increase government revenue", full stop, without any qualifications or limitations on that statement, but that idea isn't the Laffer curve.
A lot of criticisms of the Laffer Curve are not really arguments against it but arguments that we are on the left side of the curve, or arguments against misstatements of the idea behind the Laffer curve.
Sure, but by the same vein, there are some cost controls that an all-encompassing Medicare could create that the current one cannot(be they efficiency-based, bargaining-based, or whatever). Those savings exist, and could easily be made real under a universal medical program, just like how tax cuts generate positive second-order effects on revenue.
In both cases, you have politicians taking facts, distorting and exaggerating them to prove their case, and ignoring the qualifications that ought to be attached. A politician talking about how the Laffer curve will triple revenues when you cut taxes to zero is in exactly the same boat as a politician talking about how if medicare is universal everyone will get twice the coverage at half the cost. They're taking one part fact and 10 parts BS in order to generate talking points that support a conclusion that they've already reached. You can't really put up much of a defence of one that doesn't defend the other.
Easily make? That's far from clear (esp with the "easily" added on). Medicare could just refuse to pay as much, but that's not what's normally meant by "cost controls" or bargaining, its closer to "price controls". As for efficiency, its possible that Medicare is more efficient in some ways (by economies of scale if not by anything else), but some of the overhead/processing for processing medicare is handled by the private sector (which is curious if the idea is supposed to be that in this area large government programs are so much more efficient), and other parts of the overhead simply aren't counted because they are handled by other parts of the government (IRS collecting revenue, support from the GSA, law enforcement going after medical fraud substituting at least in part for the type of claims scrutiny that private insurers provide, etc.) not by the Medicare program.
Still I agree with your more general point about how politicians will take solid facts and reasonable logic and twist them in to something exaggerated or even outright false in order to support their pre-determined agenda. And also agree with your more specific statement - "A politician talking about how the Laffer curve will triple revenues when you cut taxes to zero is in exactly the same boat as a politician talking about how if medicare is universal everyone will get twice the coverage at half the cost."
In fairness, a number of your commentors have made concrete suggestions. RW wants to cut doctor salaries dramatically, Nimed wants prescriptions to be cheaper (cost plus, maybe), and there is talk of rationing end of life care. These are meaningful budget cuts. So not everyone is in la-la land.
Of course, none of your commentors are elected officials with any power.
That you know of.... :)
Prescriptions being cheaper is a personal bugbear. Drugs are already cheap compared with other medical interventions. The cost of proving and demonstrating efficacy of medications is high; removing profit from them would be a rather . . . interesting . . . decision.
As for generics (drugs out of patent), I can find Chlorthalidone for $10 for a 90 day supply (Walgreens). This is not a price point from which huge savings are possible.
Fast changes in MD salaries are tough to implement, although slow and gradual changes might be very effective. End of life care is intriguing but it is hard to deny life saving treatments (and whether it is actually end of life or a bad episode can be hard to guess in advance). You'll end up with general rationing.
Don't get me wrong -- this could be good. Canadian Health Care is not a complete disaster zone, by any means.
But cost cutting takes real sacrifices -- which ones are we willing to make?
Like our grain supplies, water sources, military defense, transportations systems, or any other critical public function, health care is not the sort of thing that can be processed by capitalist "markets," or even patched up with market reforms.
Markets must maximize returns by pricing out marginal buyers, much like a Laffer curve in reverse. To have a market system for health care, we would have to lock the emergency room doors to millions of people and create prophylactic walls to keep all the returning epidemics out of gated communities.
It should not be impossible to create a rational distribution of health care if that were the actual problem under discussion. Even Cuba managed. But it is very hard to do so using price systems that will maximize returns for the financial sector.
Grain supplies? If I recall, the biggest government intervention in grain supplies is to try to spend billions of dollars to reduce supply. The other three are valid, but those are also public goods. Aside from outbreaks of epidemics, health is a private good, and as such is in the same boat as grain supplies. The private market can provide all manner of goods at all manner of price points(see Rolls-Royce, , and it doesn't need the government's help to do it. That's not to say that government has no role, but it's not the end of the world if you let healthcare be privately run either.
Sorry, that bit is supposed to say (see Rolls-Royce, Honda)
HI,
I think you miss a bit here:
I think the key insight is that we *have* controlled heathcare costs in many counties and regions of the country right here in the U.S.A. We don't need to look to other countries, we are doing it well right here in many places. The problem is we are failing in many other places. This was well articulated in the now famous Atul Gawande piece in the New Yorker a few weeks ago. Counties in TX with similar demographics and similar health care outcomes vary by as my at 300% the healthcare spending per head. It is easy to dismiss countries with very different systems such a singapore as being unrealistic for the US, but is it really too much to ask that we should be able to use our *own* best practices to reduce costs?
I don't get it. They haven't happened because their was not sufficient political leadership to make the tradeoffs needed to get a coalition to support them. That doesn't mean they won't work. And it doesn't mean we shouldn't rally around a popular president who just might have the political capital to get sufficient interest groups to buy-in to real reform.
This is cheap as argument: (a) the cost reductions are not "magical"--we have lots of regions and hospitals that have achieved them already. (b) it is fairly clear that they haven't happened because of the political coalition that supports the status quo, it is not rocket science. (c) A lot *has* changed to make them feasible now: not least the economy, the administration, the congress and public recognition of the growing crisis by some of the interest groups that have fought change in the past. It will be hard for Obama to get smart, practical, meaningful reforms through--that is sadly all too true, but the stars are radically better aligned than in the past 30 years and other presidents have been able to drive what may have seemed to be equally large changes that had been impossible in the previous 30 years to them (eg, Reagan and the Tax Cuts, Nixon and the Endangered Species Act, Johnson and Civil Rights, etc etc.) Obama has a shot and it is worth spending energy figuring out how to make the reforms smart and meaningful instead of your blithe dismissal.
Really? We've just lacked political leadership for the last thirty years? We haven't had any political leaders?
The thing to remember about the disparities in Medicare spending is that they aren't results of policy choices. They just happened, and indeed, the disparities seem at least somewhat persistent in private practice as well. Spending isn't lower in Rochester Minnesota because some top-notch bureaucrat willed it so. It's just lower.
It is not "just lower". That is silly. (I say that with all due respect--I appreciate your column--usually--immensely.) It is lower because of a combination of culture, management, incentives, training, organizational structure, etc.
Is the Japanese auto worker "just better" than the US autoworker? No, but the Toyota manufacturing paradigm was radically better than the Fordist one at least in the last few decades. But have the Japanese transplants and even many examples of the big three been able to adopt "lean manufacturing" in the US (in union and non-union plants), JIT manufacturing and concepts like "kaizen"? Yes. Similarly, why shouldn't we really focus on putting incentives (and where appropriate regulations) in place that drive high cost hospitals/regions to adopt best practices of low cost high performance hospitals and regions.
I may have missed this, but why can't we implement these "best practices" in medicare or medicaid? Why can't we prove that we're willing to make sacrifices before moving to universal healthcare?
Really? We've just lacked political leadership for the last thirty years? We haven't had any political leaders?
This is the most disingenuous thing ever written in the English language, though only topping the sum total of your written output by a narrow margin.
That's because there's a bunch of old people retirees living in Mexico, who skip back over the border to get their medical care taken care of. There are two large towns nearby each other but McAllen has the higher median income, which I would assume translates into better hospitals and nicer neighborhoods.
It's fun to watch some lefties fall all over themselves to talk down, discount, gloss over, etc., any and all estimates for health care reform that show that, gosh, reform is going to be VERY EXPENSIVE, and may not produce the savings promised.
The truth is they know, deep down inside, that the price tag for just about any kind of real reform bill is going to be very difficult to sell politically. They also know that their methods of paying for it will be even more difficult to move--or are total bullshit (health care IT will save hundreds of billions of dollars, promise!) But instead of just coming to grips with this and doing the heavy spade-work, they pooh-pooh negative information and start spouting Pollyannish nonsense. Jonathan Cohn's "The Treatment" over at The New Republic is a perfect example of this type of Pravda-esque cheerleading.
Almost as fun as watching righties depict all taxes as evil.
If righties backed off the grover-norquist ring kissing, lefties might talk realistically about the cost of health care.
Which righties? The ones who have a filibuster in the Senate? Oh, I guess not. The ones who dominate the House? Hmmm, nope. The one in the White House? No, he left six months ago.
The point is this: who cares what the righties do, whose rings they kiss or what press releases or policy statements they put out? They can all go dance around a statue of Ayn Rand in the basement of the Heritage Foundation, for all anyone cares, BECAUSE THEY DON'T MATTER!!!! They hold virtually NO power over the federal political process AT ALL. If they want to keep acting like blinkered ideologues instead of learning how to be responsible, that's their problem. But their doing so in no way absolves the Democrats from going down exactly the same Path of Intellectual Dishonesty that the GOP did.
How does the Democrats engaging in the same old tired Kabuki theater--passing an expensive, watered-down piece of shit bill that covers more people but leaves the big problem of cost totally unaddressed, all the while grandly calling it "reform"--help the nation?
If all the Dems want is their own "Mission Accomplished" moment, will we be better off?
But all taxes are evil. Some taxes are a necessary evil. They're still evil.
Liberals share the attitude of medieval French aristocrats, who plundered their peasants unmercifully.
It's not the government's money. It's our money.
and they're our roads; our schools. Our parks and forests and museums. Our concert halls. Our universities.
Nice strawman zic.
and they're our roads; our schools. Our parks and forests and museums. Our concert halls. Our universities.
Then why do they have Robert Byrd's name on them?
Taxes are evil. Just because something is necessary does not make it any less evil. Only necessary.
One bit folks don't quite grasp is that health care costs for "the average joe" are, in a large part, driven by the costs of Medicare/Medicaid. The issue here is that in many cases Medicare/aid have drawn a line and said "We will pay X for procedure Y" even when procedure Y costs more than X. The result is that the losses are averaged and passed on to the folks "with good insurance." The costs here are then used as justification of why health care is out of control and needs further intervention.
Additional government meddling in health care will most likely follow the same formulas... again paying less than cost to the providers and expecting "all those other insurance companies" to buckle down and take up the slack -- and ultimately driving many of them out of business.
The bottom line is: there won't be any real health care cost reform until the market is allowed to control the costs.
I think you've inadvertently made the opposite point if what you intend, it's entirely probable that we're on the right side of the health care Laffer curve, we spend more than everyone else and we get a lot less than almost everyone except a few that pay a small faction of what we do.
You seem to make the assumption that because people have made campaign promises to reduce costs through small incremental changes but keeping the overall framework in place, then the current level of costs must be endemic to the U.S. as a nation.
Maybe it's just that our system is broken and needs a complete overhaul. Maybe Medicare can't reduce its payment rates enough because no matter what it has to pay something related to the bloated costs created by the employer-provided health insurance system we have.
Megan,
As a conservative-leaning independent, my personal thought is that I am for cutting taxes from high rates....but i'm also for increasing taxes on alot of people. I consider a fair tax system to quite literally BE fair....the way justise is supposed to be blind. Apply taxes evenly across the income strata, and then insert incentives where needed.
Much like I feel affirmative action should not be raced based (unequal and based upon skin color which is an unfair way of assessing someone) but upon actual economic assessment. That is, if you are going to have affirmative action at all.
Anyway, back to taxes: I met a terribly brilliant self-proclaimed democrat who sufficed it like this: "I'm a democrat because I believe we should tax dollars on social programs."
I really thought that summed it up well and he was brilliantly honest about it.
I'm, personally, for limited social programs designed to provide safety nets and help people get on or stay on their feet. I like the idea of privatized social security (rather than a ponzi scheme as we have now).
When it comes to health insurance (or the providing of healthcare, subsidized or unsubsidized):
1. Why not make standard a federal no-cost basic health insurance that people would automatically receive when terminated, laid off, or otherwise seeking employment (i.e. that 1 week when switching between two jobs), to be matched with the payment of unemployment dollars (term wise)? Sure, it would be costly. But make it alot more basic than COBRA offers, cause COBRA is freaking expensive.
2. Why do we provide the elderly with such comprehensive services as provided under medicare? Why do we not take from the elderly a certain portion of their retirement income to help finance medicare? Why don't we have a hard point at which we stop subsidizing the health care of the elderly?
#2 is impossible because elderly people vote in large numbers. And the baby boomers, who contributed mightily to our current predicaments, aren't going to give up any of their entitlements and will also vote in large numbers. Until we get 6 foot blondes in white spandex outfits running the ethical suicide parlors, I'm afraid we younger peeps are SOL.
The faulty argument made by many advocating for a national health care plan is NOT that we cannot control costs, it's that we can control health care costs without reducing the quality of care. This is just false. Cutting "waste and fraud" cannot pay for national health care because waste and fraud do not make up a large enough percent of total health care spending. Nor can we fund the cost of providing everyone health care simply by eliminating "marketing costs" from prescription medicines. The ONLY way cost controls can "pay for" national health care is to ration care (create waiting lists for many procedures and/or simply refuse to pay for some treatments for some or all patients) and by reducing the rate at which new (and more expensive) treatments are brought into the system.
Now I have some doubt that the US government will actually be able to accomplish these changes- it doesn't have a good record at standing up to AARP yet, and it won't be pretty when doctors start telling boomers that Medicare won't necessarily pay for their stents - but I don't see any reason to think that theoretically we could get spending down to European/Australian levels without sacrificing quality.
So while cutting costs would certainly change the type of care delivered- fewer hip replacements, less heart surgery, etc.- it need not change the effectiveness of the care.
What is this magical procedure that would make hip replacement obsolescent? Right now, Canada just dopes up people waiting for hip replacement. Yes, they may be in "less pain" but their quality of life suffers greatly. Or, is this one of those "end of life" issues that those kind of people have to suck up and deal with?
Or at least easily identifiable and cancelable waste and fraud do not make up a larger enough percent of total health care spending.
If you use the broadest possible definitions of fraud and in particular waste, then they could be significant, but such a broad definition would include things that the Obama administration will be unable to do anything about or even specifically recognize.
Wrong. We *already* have many examples, in the U.S., of communities and hospitals with per capital healthcare costs at 50% or less than other communities, with same demographics and same quality of outcomes. See Atul Gawande's much discussed article here: http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande?currentPage=all
We already have many examples of communities in the US with low tax rates and growing tax bases. Why can't we just mindlessly extrapolate?
Why the rush to sarcasm? Who said anything about "mindlessly"? If there are things we can learn about communities with low tax rates and growing tax bases that we can apply to other areas, why wouldn't we?
The policy solutions are not obvious or easy, but it is pretty clear that it is very possible to spend less on healthcare without either worse outcomes or tops down rationing. Given the dramatically rising percent of our GDP consumed by healthcare (and not in exchange for the best outcomes in the world) why shouldn't that be a cause for valid optimism and serious efforts at policy innovation rather than dismissive sarcasm. Incentives matter, and we have a bunch of incentives right now that seem to be causing us bad outcomes (eg, too many specialists, not enough general medicine practitioners; pay for procedure causing unnecessary procedures; lack of comparable effectiveness data and/or lack of incentive to use it causing doctors to prescribe more expensive meds (or procedures) than needed.)
why not, indeed. Mindless extrapolation seems like the right play.
dm said
All this is very true, and IMO caused by our inability to measure the outputs of our health care system. We have no real way of quantifying how healthy someone is. Life expectancy is related to health, but is related to many other factors as well. When we cannot measure the output, we switch to measuring the input. This problem plagues health and education worst. Imagine if a mechanic tried to charge you more because he had to do the job twice, having done it incorrectly the first time. You'd laugh at his face.
Still, How would putting all health care under a single gov't umbrella make measuring the outcomes any easier? Or, if you don't agree with my reasoning, do you really think that under a gov't system doctors will not be paid for procedures? And if so, how would they be paid?
(replying to Ken Megalnik)
It's simply not true that we don't know how to measure output. They do it in government-funded clinical trials all the time for oncology research; they measure QUALITY OF LIFE outcomes. The only measure of a trail is not if the patient lives or dies.
They know how to do this; and do it really well.
But there are a host of special interests who are sitting on data that are proprietary or have a vested interest in having inquiry structured in certain ways or not done at all.
But to say they cannot do this is ludicrous.
It's data mining at this point.
Gawande's article was great but while he has a finger on the problem I'm not sure about it when it comes to causes or solutions. Obviously they have an oar in this particular water but the WSJ references a study - which I don't have a link for, sorry - that claimed that medicare spending went up in places that had low spending on private health care. Implying that there was a consistent amount health care that either people wanted to receive or Dr.'s wanted to provide - and that amount would be spent one way or the other.
Gawande seemed to take a knock on bringing patients into the mix with regard to spending. There was a line about putting sheep amongst the wolves if I remember correctly when he talked about HSA's. I think that's selling people really short.
And Gawande's solution seemed to be - have Dr's who don't care about making money like the one's at the Mayo clinic. This seems suspiciously like trying to change peoples fundamental nature. Maybe it's not impossible but I think it's going to be really hard. Gawande himself said that the wonder wasn't that Macallen existed but that any place that wasn't like that did exist.
I went and read this article, and, well, it doesn't seem to say what lefties seem to think it says. It says that at some places (like the Mayo Clinic) they've managed to reduce overall costs by pooling all the money that comes in and paying doctors a salary. This reduces the incentive to do useless things and gets the doctors focused on patient care.
It's possible that the Mayo Model would work if applied more widely, but it's also possible that it wouldn't. Does the existence of New Trier, the Illinois Math and Science Academy, and the Bronx High School of Science prove that all public schools can compete with elite private schools? Maybe the Mayo Clinic has certain advantages over other institutions? Like, I dunno, the fact that they are the MAYO CLINIC and get the pick of the litter when it comes to doctors?
Note also that Gawande's article isn't an Ode To Government-Run medicine. In fact, the county that he highlights as being particularly bad when it comes to costs seems to be one where Medicare and Medicaid make up the bulk of the problem.
Let's suppose he's right. Suppose the problem is the fee-for-procedure system and going to a more Mayo-like system will reduce costs. How, precisely, do you run a massive government system of medical care on that model? Doctors and hospitals have to get paid somehow. What do we replace the current system with? Frankly, the Mayo Model, writ large strikes me as being a lot like an old-style HMO, which was something that was supposed to save all this money. But people hated HMOs, because many of them, unlike the Mayo Clinic, reduced costs by bean-counting.
Maybe Gawande is right and he's got the health-care-cost silver bullet. Let's suppose he is, just for the sake of argument. Well, then, why do we need a massive new program for all of health care? Why not let, say, two or three states adopt new mechanisms for payment within Medicare and Medicaid? See if it saves money without reducing quality.
If these ideas work in pilot programs, then you can expand it to cover the whole country, and eventually you can have a national health care system built on these principles. But Gawande's article isn't an argument for Obamacare; it's an argument for experimenting with the way Medicare and Medicaid pay doctors.
Gawande is a moron. McAllen is a border town. Moreover, it's a border town close to the more populated by ex-pat retirees parts of Mexico than any of the towns to the north. This means that when the old peoples want their US .gov subsidized health care, they skip their merry way to McAllen. In order for the average MediCare dollars to actually mean anything, you would have to divide that by the number of separate people that money is actually spent on, not on the general pop. of the town. Of course, that would actually require real investigative journalism, which is why it isn't done.
(replying to zic)
zic, you have a point, but you should also consider how the FDA treats outcome measures for the purposes of new drug approvals.
The FDA absolutely doesn't accept QOL measures.
I have heard of clinical trials where the FDA accepted Time to Progression or Time to Relapse as endpoints, but this certainly isn't automatic. The gold standard for oncology outcomes is straight survival.
Of course, the incentives in NIH-sponsored trials and FDA-reviewed trials are dramatically different.
btw, how many total people are now being covered by Medicare/Medicaid/SCHIP and similar programs? What total portion of GDP is used to pay for those programs? Do any of them have a working model where they have been self-sustaining?
Also, the democrats are proposing a "public plan" to "force the healthcare companies to compete".
Why aren't they competing with each other? What's stopping them?
How exactly do you run a non-profit public plan to make for-profit companies compete with each other? Isn't that destined to drive health insurance companies out of business? Of course, if the insurance companies DID out-perform the public plan that would be a black eye on the government....
What total portion of GDP is used to pay for those programs
According to http://www.usgovernmentspending.com
Total US government spending (Fed, State, and Local) for Health Care was 6.37% of GDP (~$900 billion) in 2008.
It is likely to go to 7.32% of GDP (~$1 trillion) in 2009.
Medicare has about 45 million beneficiaries. Medicaid provides health coverage and services to approximately 49 million low-income children, pregnant women, elderly persons, and disabled individuals. As of 2001, about 6.5 million Americans were enrolled in both Medicare and Medicaid. So there are about 88 million people in Medicaid and Medicare.
SCHIP covered 6.6 million children and 670,000 adults in 2006.
This statement assumes that the curve between zero revenue from zero tax rate and zero revenue from 100% tax rate is a simple function with only one maximum. I've never seen any real data to suggest that this is true. Is it not possible that there are several maxima and thus several minima between these two points? I do a lot of nonlinear optimization, and my experience would suggest it's more likely that the shape of the laffer curve is actually far more complicated than a hyperbolic function with zeros at 0% and 100% tax revenue.
That's possibly true, but that doesn't change the fact that none of the tax cuts since 1980 can plausibly be claimed to have increased the amount of revenue collected.
Yet the US hit a balanced budget in the late 90s. None of that could be attributed to any previous changes? During Clinton's terms, a fiscally conservative congress reigned in spending (avoiding Clinton's earlier promises to "invest in America").
Following Bush's cuts the feds were collecting more taxes than ever. However, Congress lost its fiscal conservatism and the SPENDING portion of things went up leading to increased deficits.
The "peace dividends" and the technology bubble provided most of the revenue for the balanced budget, not a fundamental change in US taxing and spending habits. That extra income was wiped out by a severe recession in 2000 and following. Comparatively, a lot of people had a lot of real estate equity accrued up until about last September, but what good was that when the bubble popped? The equity was lost and in some cases the value of it declined below the value of the debt obligations associated with it.
No but it does point that the Laffer Curve isn't "absolutely correct". I'm not deriding it here, I'm simply pointing out that when someone draws a parabola on a piece of paper and say "we're shooting for the maximum" it starts off at a (likely) flawed assumption that this singular peak exists and is static. Even if the parabola does exist for any given point in time, the peak is likely to shift significantly with transient events (inflation, changes in regulatory structure, etc.).
True, but most people aren't aiming for the maximum. Even lefties buy into the idea that government should take less than all it can(hence the various tax cuts they throw at low/middle brackets).
The only times the Laffer curve gets raised in political discourse is to either say that we might be taxing in a way that is just wholly indefensible(i.e., destroys so much economic activity that everyone, even the government, is worse off - see Britain's 98% marginal rates in the 70s), or to say that tax cuts will generally cost less than straight-line estimation will claim that they cost. The first is historically true but presently false, the second is pretty much always true.
But I can't think of anyone who aims for maximal tax revenues this side of the 1700s, and I can't even imagine anyone who would use the Laffer curve as an analysis tool to achieve that goal.
Megan, is that really true? I mean, I'm sure you're right that changing the top bracket from forty-some percent to thirty-some percent will decrease revenue, but 70% seems pretty draconian. I know that if my marginal tax rates were that high, I'd engage in as much tax avoidance as I possibly could.
On the main issue, of course you're right. Your Bloggingheads with Mark Schmitt was quite instructive -- you kept asking him how he was going to save all this money, and he kept answering with vague generalities.
I mean, maybe we want universal coverage, or single payer, or even full-bore socialized medicine. But given our political culture and set of institutional constraints, it's going to be very, very expensive. When liberals start going on and on about how this is going to save all this money, I have the same reaction as I have to Catholics who claim to believe in the miracle of transubstantiation. They actually believe the wafer turned into the body of Christ? Literally? Really?
it's entirely probable that we're on the right side of the health care Laffer curve, we spend more than everyone else and we get a lot less than almost everyone except a few that pay a small faction of what we do.
Ah, but unlike taxes, for which there is a pretty unabiguous dollar figure in terms of the amount collected, the public uses the excess health-care which "should" be cut (if we're on the right-hand side of the curve) as the metric for whether they're getting good health-care.
If your metric for health-care *is* the number of MRI's you get when you have a problem, it's pretty hard to cut the number of MRIs and keep people's perception that health-care has not been slashed...
To use my analogy yet again, the health professionals may care about if you get from point A to B, but the populace (and thus the politicians who must answer to them) care whether they're travelling in a Lexus or a Corolla. (Once again, we Canadians have the health-care savings advantage by having all the Lexus's hidden over the border.)
I agree with your point on the advantages, but maybe it's time we expected the rest of the world to shoulder its part, by attempting to drive down the cost of medical care here might force medical technology/pharmaceutical research to try and wring some of its profits from the rest of the world instead of allowing US patients to foot the bill.
Seriously, though, I don't think there is any reasonable measure of general health where we fare among the top, so even if health care quality is an abstract fuzzy concept, we're not getting what we should from the money we put in.
I will ask the same question I asked last week- how do we know we can actually spend less without getting worse outcomes for Americans?
Because literally every other industrialized country in the world does it, and we are certainly not more incompetent than all of them.
I really think this is the great unanswered question for those that argue from Megan's perspective. I mean, what she says all makes sense as long as you pretend there aren't any other industrialized nations. At some level, the logic of 'sorry, every idea you have to improve is doomed to increase costs/destroy liberty' has to come up against 'surely we can do better than at least SOME of them', right?
Regarding the Laffer Curve-
The government's job is not to generate peak revenue for itself. Its job is to maximize the size of the economy, either today or in the future.
If the government generates peak revenue, it is always at the expense of today's economic output-the economic curve peaks at a lower tax rate than government revenue. Always. It's basic calculus and also easy to prove graphically. The peak economy by definition cannot occur at a higher tax rate than the peak of the Laffer Curve-you'd be taking a bigger percentage of a bigger pie. The peak economy cannot occur at the peak of the Laffer Curve unless there is a discontinuity in economic output at that tax rate. Therefore,the peak economy must occur at a lower tax rate than the peak of the Laffer Curve.
If you see the private economy as the key to long term growth (through savings and investment) you want an even lower tax rate than the peak economy. This maximizes the after tax income, provides for the highest savings, and hopefully long term growth.
This puts three elements into tension in tax policy-long term growth, employment, and government revenue.
You want your government operating on the left hand side of the Laffer Curve (though not too far)-it's better for both employment and long term growth.
Once upon a time, the government's job was to "to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity."
It's only in the age of Keynes, with the Full Employment Act, that we decided that the government was responsible for actively managing the economy so that everyone would have a job. Once you've read the idea of "promoting the general welfare" that expansively - that it's the government's job to create such a booming economy that even a sad sack like you (or me!) can find work, it's not such a stretch to argue that the government ought give us all healthcare next. Or free lollipops, for that matter, if you can only make the case that it could make us all nicer to each other. &c. Pretty soon, however, you're headed for Gerry Ford's government with a twist: A government powerful enough to assure prosperity for all is expansive enough ruin everything we have when it screws up.
Obama has been pretty good at promising everything. I thought his speech at the AMA was a little short of hilarious when he asked the doctors 'not to be bean counters.' Heh, we've got that box checked off, baby. Hospitals are gushers of wasteful spending; MRIs and EMGs when it looks like you have panic disorder accounting for the symptoms. Obama was on to something when he looked at the variance in costs and highlighted the problem of McCallen, TX, being a high spending outlier. The problem with the prominent national health services is that they have controlled costs by the socialistic and 'equitable' mechanism of 'so many years of life (55),' no dialysis, no coronary artery bypass grafts etc.
Let's engage in a bit of cosmic handwaving and assume that everyone is given two option as to lifespan:
Option A: you live until age 85, remaining in reasonably good physical and mental health until the very end, and then go quickly, painlessly, and inexpensively.
Option B: you live until age 90, in other words five years longer than in Option A, however your last ten years will be spent hopelessly senile and wearing adult diapers in a nursing home. When your time finally comes, heroic treatments will be attempted at astronomical cost, all to extend your life (or what passes for a "life") a few more weeks.
The real reason why health care is bankrupting the country is that most people would choose Option B. Life must be extended at all costs no matter how abysimal its quality.
My mother died of a stroke in her late 80s. Prior to that she'd been very, very healthy. The stroke put her in a coma. There was no hope of any recovery. She was in that coma for 2 months before dying.
You cannot believe all the things that the hospital tried to talk us, her children, into doing. All the hospital needed was to have just one (of 5) of her children approve some procedure and they could do it. Again, it was the hospital (doctors) wanting to do this stuff, not us. We all said no.
My guess is that the hospital, and doctors, wanted to bill medicare for a bunch of stuff, even though there was no hope of recovery, improvement, or anything else. What other reason could they have? Nothing was going to change.
My guess is that the staff was wanting you to work a bit, include you in your mother's health care team. Rather than establish a central monitor for the family's opinions and also ask the doctor, 'Did you talk to John and cross check with Mary and Sam about procedure x, later y, later z?' they simply asked Mary and Sam about x, then y, then z when she/he showed up and as the questions were relevant. In this way the (rest of the) team felt they had the familys input.
Ask me that question today and then again when I'm 84 and I may give you two different answers. :-)
With option A, you get more soylent green. ;)
One of the reasons we spend more is that our nurses, doctors, x-ray techs, lab techs, etc. make far more money in the US than in any other country.
It's funny how we have an industry that pays decent middle class wages to millions of nurses, physical therapists, speech pathologists, lab techs, etc. and liberal like RW want to crush them.
Additionally, reducing salaries in places like NY would probably require crushing a variety of unions which represent hopsital staff and basically run the hospitals. I don't see that as particularly likely given our current president.
I don't want to cut taxes because it increases net revenue to (federal) government. It's ok by me if it does, but that's not why I favor a lower-tax environment.
I want to cut taxes because my presumption is that people, not Congress, has the right to the fruits of their labor.
It's a fundamental aspect of liberty, and a bias towards a higher tax environment, all else being equal, is an encroachment upon liberty.
The higher the tax rate, the more meaningless property rights become.
I oppose higher federal tax rates, too, because to the extent high taxes are anti-growth, high federal taxes crowd out revenue available for states and municipalities - who actually provide the bulk of schools, hospitals, police and fire, and other truly meaningful services.
I think it's a mistake to take this "cost reduction" stuff seriously. Lots of people want national health care and are willing to lie about its being a money-saver in order to get it. We are, remember, getting this cost-reduction nonsense from a president who said repeatedly during the campaign that he wanted to cut total federal spending. I didn't believe that one, either.
To those who advocate comparative effectiveness, Megan's point is more political than medical - it's not that we couldn't theoretically cut care without major impact on life expectancy, it's that we've never had any luck doing so politically, because special interest groups hate it.
It's true, if you let 28 week old infants die on a gurney somewhere instead of giving them heroic care, and if you don't give people MRIs that have a 0.5% chance of finding something actionable, and if you tell 85 year olds that you won't give them more than $50,000/year in medical care because it won't do any good, you can save a lot of money with almost no cut in life expectancy.
If, like Cuba and Europe, you define all 28 week old infants as "stillborn", including living ones, and get them off your mortality rolls, you can actually decrease your infant mortality rate and increase your life expectancy, while saving the money you would have spent on those kids that you have now declared were never alive and therefore don't count.
Unfortunately, the American people hate when you tell them they can't have care. This is why the HMO experiment of the 80s failed - if you let them, insurance companies are very good at cutting out care that costs a lot but doesn't produce much benefit. The only problem is that when it's your daughter who needs the liver transplant, most Americans won't take no for an answer.
We as a nation are not very good at telling old people they can't have things. Are you lefties confident that you can ration care based on scientific criteria, as opposed to lobbying?
The ONLY way cost controls can "pay for" national health care is to ration care
This is a red herring. We already ration care. People in the US literally die because of their inability to get care. Other people are financially wiped out.
Anyone who claims that rationing is currently not a factor is either ignorant or dishonest. Every economic system has a form of rationing. There are not enough resources for everyone to consume in unbridled quantities.
Free enterprise doesn't promise unlimited resources to everyone, but an efficient allocation of resources to those who can afford them. But unlike unfulfilled demand for designer clothes, luxury cars or caviar, a population with unmet health needs to stay sick and die.
Doctors are in the top 5% of income earners. Obviously, we can't really afford to keep paying wages like that. Nobody else is getting ripped off like this, with the furriners "suffering" the price by getting more care to more people, and by living longer.
This statement is also inaccurate as to what remedies are available. We can also reallocate medical work so that more work falls to nurses and pharmacists, so that doctors don't act as costly bottlenecks to delivering routine care. We can also stop paying for heroics for those who are unlikely to get any real benefit from it. We could also remove some of the incentives that require excessive care because they can pay for those aforementioned high wages.
Or I suppose that we could do nothing, and have it explode in our faces under the guise of some ideological act of faith. Being proactively inactive works so well with everything else.
"Doctors are in the top 5% of income earners. Obviously, we can't really afford to keep paying wages like that. Nobody else is getting ripped off like this, with the furriners "suffering" the price by getting more care to more people, and by living longer."
I found this to be a humorous statement. The top 5% is roughly $150k and greater household income.
In my suburban area, two teachers in their mid 40's would breach that mark. Many dual-income families breaches that mark and are solidly middle class.
Also, the education requirements of an M.D. currently entail ~8 years of almost no income whilst taking massive loans and then a few subsequent years of low income work (i.e. 40-60k). There is a real case to be made that the current process of becoming an M.D. or D.O. REQUIRES that doctors bring in $150k a year or more simply to pay back the loans + interest that those 10 years of their life took out of them.
If nothing else, paying doctors less might actually reduce costs, unlike many of the vague promises for better health care IT and evidence-based medicine.
However, you might consider the incentive effect such pay cuts would have. Why would somebody with an IQ of 140 and plenty of choices go into a field that required them to go to school forever, follow school with an ill-paid training period, incur huge debts, and generally work their asses off if at the end of the rainbow they make $45K a year? Sure, being a doctor has intrinsic rewards as well as status rewards, and I'm sure some folks just HAVE to be a doctor.
But a government-mandated cap on doctor pay would almost certainly reduce the quality by a fair amount.
8 years of school + residency, and you get $45k/year at the end? That would actually make an M.D. less profitable than a Ph.D (and a Ph.D. is currently less profitable than a B.S.).
Anyone who claims that rationing is currently not a factor is either ignorant or dishonest. Every economic system has a form of rationing. There are not enough resources for everyone to consume in unbridled quantities.
I think very few people are claiming that rationing does not occur at all. However, you seem to be flirting with the notion that anytime someone needs something and cannot afford it, the price itself is "rationing" the availability, which it is not.
I would also suggest that if you make any healthcare argument where "food" can be substituted for "healthcare" and the statements are still technically true, it's time to consider whether you are really making an argument for universal care, or just an argument for a bare-necessities fallback option available for the truly destitute. People have many needs, without which they will die, but the normal state of affairs is that people labor to meet those needs. The state cannot provide everything just because it would be nice to go to heaven without having to do what it takes to get there.
My understanding is that current payment available for primary care doctors isn't enough to keep them in the field, with the result that there are far too few primary care doctors available, and fewer medical students going into primary care. Cutting the pay for those guys will not lead to more available health care, even if we make some kind of societal commitment to providing everyone care.
One rather unsexy proposal that might help is to pay off the medical school tuition of anyone who goes into primary care and stays in the field for a certain number of years. Another might be to offer primary care doctors some kind of personal income tax benefit or something (though God knows the tax system doesn't need another one of those).
This is a red herring. We already ration care. People in the US literally die because of their inability to get care. Other people are financially wiped out.
Yes, but the rationing is not a political decision.
No, it's a profit-driven decision for people who have to buy insurance for themselves.
That's why I want a government option; I want a choice that's based on outcomes, not on somebody's quarterly earnings report.
Right, because the government won't try to minimize its costs.
zic must not be aware of Cook County and how its government works.
What makes you think it will be based on outcomes? There will be enormous political pressure to expand coverage - for ever. Collectively, we will help ourselves to whatever treatments we want by voting for politicians who promise them, under the belief that 'someone else' will pay for it.
I'm wondering if the new public plan will be subject to a "patients bill of rights" of the kind the Democrats favor for HMOs. Can we sue when it denies us care? If so, whither cost-cutting?
Perhaps we can create a "trust fund" to pay the cost of those lawsuits through a system of IOU notes purchased from the Treasury. After all, the government doesn't default on its obligations, even if Timothy Geithner has to nationalize Random House to acquire enough printing press capacity.
The anti-laffer aquiencers always ignore the effects of compounding growth. The Laffer Curve is about the immediate impact. But, any tax cut that increases real economic growth (non-price inflation/bubbly activity, non-goverment spending) will eventually lead to greater tax revenue than there would have been otherwise.
Much as I really like that argument and want it to be true, you neglect such factors such as discount rates, and whether it is an economic profit for the government to do that instead of, say, paying down the debt.
If paying down debt is worthwhile, the cut wouldn't produce more growth. The interest expense would washout the gain.
We'll probably get to that point this year.
If we're not already there.
That's pretty much my point. Paying off the debt doesn't lead to more economic growth automatically, but it can still be a better idea than cutting taxes if one's goal is long-term strength of government finances. It's not just as simple as tax cuts = growth = better in the long run, sadly.
No, it's cut spending (on non-physical infrastruture) that should lead to better growth in our current state. That also means trying to put the Genie of October/November and the recent stimulus back in the bottle. Magic won't fix things.
We need more and better roads (and managment), power, ports, and more efficient/comfortable airports.
(wasn't trying to sound like I was disagreeing, just saying raising taxes to pay down debt won't help growth with useless spending going on)
You frequently heap scorn on folks who think we're too the right of the Laffer curve peak, but you do it in a way that makes it hard for folks who've never read seriously about that topic to follow.
From what I've read about the Laffer Curve, I can imagine two distinct curves. One shows variance in total tax revenues you'd collect THIS YEAR at various tax rates. The other merely shows relationships between total taxes you'd collect over the long run at various tax rates and thus lets you choose a way to maximize long-term government revenues.
Which is the actual Laffer Curve and where is the research that makes it perfectly clear that current tax rates put us on the right side of it?
Good point that the immediate revenue maximizing rate is probably higher than the long run revenue maximizing rate.
But two curves probably wouldn't be enough to cover this. Go further and further out and I suspect the revenue maximizing rate gets lower. Go long enough in to the future and even .000001% additional economic expansion would more than make up for a 50% cut in rates.
You would really have a a massive number of curves, but as you go further out confidence in the curves accuracy would get lower and lower. Since it doesn't start out very high (we don't even really know the revenue maximizing tax rate for this year), I wouldn't view any projected Laffer curve as hard data, but rather just a way to illustrate a simple but important general principle.
Quick crunch in excel,
Assuming a tax rate of 20% yields a real GDP growth rate of 3% and a tax rate of 18% yields a real GDP growth rate of 3.25% the first year and 3.125% thereafter, real tax revenue excedes the 20% rate after year 52. Total revenue excedes the 20% rate in year 77.
The priciple is valid. Real tax revenue will eventually excede that of the higher tax rate (so long as GDP growth is higher with the lower tax rate).
It could be argued that the horizon is much longer though. The initial bump may be smaller and over time the GDP growth rate is likely to converge for both scenarios.
Yes it could take a long time for a small amount of extra growth from lower taxes to make up for the revenue lost from the lower rate.
And in practice you never get that long time, because tax policy doesn't stay stable for decades. So the very long term benefit is hard to measure. You can compare different countries, but there are always many other factors that are different in the different countries so such comparisons are not always highly convincing.
Eventually, a marginal tax cut would probably reduce real GDP growth (As an aside, I think government spending shouldn't be included in GPD. We should consider it investment and only count the return, not the outlay.) as interest expense would excede the return on investment or spending that actually generates growth would need to be cut.
The real question is what government spending actually produces a return.
At some point sufficiently low taxes would rob the government of enough revenue to perform even is essential core services, or at least enough to cover the most clearly beneficial non-essential services, and thus might lower growth (esp. since your counting government spending itself as part of the GDP that your measuring the growth of), but I'd submit that it would be at a pretty low rate, significantly lower than our current tax rate.
Another issue is that if the politicians are sufficiently stubborn about not lowering spending, that a tax cut could lead to a fiscal crisis which could lower growth, even when the tax rate isn't quite so low, but I'd blame that more on overly high spending, than low taxes.
Yup. I'd say spending on pretty much anything non-infrastucture should be cut. Roads, ports, power, and traffic managment. That's about all we should be spending on.
Degregulate transit, lease roads to toll companies, get airports back to pre 9-11 security checks...
Maybe add some traffic regulation, sperate commercial truck and passanger vehicle traffic. Or, again, lease the roads and let well paid operations and traffic engineers figure it out.
Tell people that accelerating slowly doesn't save fuel and causes congestion.
I think we need to keep in mind that one reason Reagan cut taxes was not only to increase tax revenues, but also to starve the beast; i.e., federal spending. What is the value of the marginal federal dollars spent? For a lot of us, not much. I don't want to maximize tax revenue. I want to minize government spending.
On a separate note, I sometimes wonder whether we should eliminate employer-provided health care (and the tax benefit that goes along with it)? If individuals have to buy their own health insurance, would we see a change in behaviors, both from a demand (for medical services) and supply side (insurance options)?
just a couple notes on RW's comment:
"... a population with unmet health needs [tends] to stay sick and die."
I would point out that the statement is both under and over inclusive. First, everybody alive dies eventually. Second, the premise of the Administration's (and most Western societies') cost control agenda is that there should be unmet health care demand because demand exceeds true need. So I am not sure this, as stated, is a successful defense of that agenda.
"Doctors are in the top 5% of income earners." I would point out that practicing medicine requires an investment in education and training and equipment and staff that is easily in the top 5% of similar investments made by all income earners.
See my notes above on the income piece...I totally agree, but also the top 5% is not really that high anymore....it sounds high on paper though.
Doctors tend to give up their 20's before they can actually earn reasonable income, while simultaneously taking on huge debt loads. They NEED to be in the top earning segment because of the process of becoming a doctor (in the U.S.)
Joe
There's also the question of is all the process necessary for all doctors? Certainly some education and training can be cut for certain specialties.
Niggling point, except for all those Carroll fans: twasn't the tyrannical Red Queen, but the absent-minded White Queen who uttered the delicious jam quote.
Moreover, we remain on the left-hand side of the curve.
Seems likely.
We have been trying to control health care costs since the 1970s made it clear that Medicare was going to get really, really expensive. And any idea that you care to name, from comparative effectiveness research to healthcare IT to preventive medicine . . . these have all been on the table for more than thirty years, under one name or another. They haven't happened.
The core problem will never go away, which is that the marginal value of continued healthy life approaches infinity. There will always be a market for expensive new treatments.
Unfortunately, as Kling has pointed out, the whole U.S. system is built to insulate doctors and patients from making cost/benefit decisions. Moreover, most people like it that way.
I think one has to conclude two things from this: one, private health care costs will continue to increase regardless of what happens in public health care; two, no one is going to like public rationing.
We're left in an untenable situation where he voting public will probably not accept siginificant public rationing, but we can't afford it. It's a recipe for fiscal disaster. The Republicans won't do anything, and the Dems' price/wage/profit controls are worse than nothing.
We'd better hope Ray Kurzweil was on to something, because unmodified humans aren't going to solve this.
We'd better hope Ray Kurzweil was on to something, because unmodified humans aren't going to solve this.
Health care will continue to get more expensive as we figure out how to treat more specific diseases and keep old people alive at great expense for a few more years until they die of something else. Curing aging is the only approach I can see for reducing costs. And as a side benefit it would tremendously improve our quality of life, so I say go for it. Even as a long shot it's worth spending a billion or so a year.
Nearly every encounter I've had (or heard of) with the medical system recently involved the discussion of what insurance will pay, if it will pay, what it will cost without insurance. . .But all are done without real understanding of the costs/benefit since prices for individual procedures are not necessarily related to the actual delivery cost. Some things are highly inflated, some done at a loss, to iron out the high overhead of a medical facility. And there's that lack of empirical studies. . .
Again, and again, and again I repeat.
Health care costs go up because the people who pay the bills do not make the decisions. The market for free healthcare, unlike food, has no satiation point.
If the government pays the bills it will have to explicitly ration care. If you want (or need) anything extra you will have to go outside the system or be politically connected. The bureaucratic overhead will balloon. The quality will shrink. The restrictions will tighten. There will be a thriving market in private medical care.
If you pay the bills directly you will draw the line somewhere. Some people will spend their last pennies on nostrums. Some will choose death rather than reduce their childrens' inheritance.
Either way you ration care.
The government created this mess in WWII. They set wage and salary controls. Companies desperate for labor evaded those limits by adding benefits, including medical care. Those benefits continued, untaxed, after the war. Now all but the medical benefits are taxed, and they are disappearing except for people at the top, for whom they are symbolic, and who have somebody else fill out the forms anyway.
I really don't see a way out of it.
Please. This hasn't been true in a wide range of countries and even in many communities in the US. For a long time I used Kaiser Permanente in California. I got great care, and their health care costs per head are much lower than the hospital I use now (I moved to the East Coast). In both locales I am using my employer funded healthplan with a co-pay. "Who pays" is not a major factor at all in why Kaiser delivers the same (or often better) care at materially lower cost. This is just one of many such examples. In this case, reality trumps theory (and ideology) soundly.
"'Who pays' is not a major factor at all in why Kaiser delivers the same (or often better) care at materially lower cost."
That's true. When something is not variable, it generally is not a cause for differences. But having consumers that are shielded from the real cost of service does contribute to rising healthcare costs. I don't know how much, but I'm willing to bet big that this isn't the one area where incentives don't matter. There may be other more factors (I'm guessing the economic protectionism provided to doctors, regulation in general, and maybe the threat of frivelous lawsuits) but people typically respond to incentives.
And as for comment on trumping ideology, I'd take it more seriously if you could provide a reasonable argument for why we can't prove we are willing and able to cut costs in Medicare before enacting "universal healthcare"
Who says we can't? This isn't a question of possible or not possible, it is a question of politics. The basic Obama line is that he believes we can and must fundamentally lower costs *and* we must offer universal care (and or something approaching it.) They have impact on each other (eg, the former could help fund that latter, and aspects of the latter *might* make the former easier) but from my point of view they are mostly seperate goals that are being bundled together because he (and fairly widespread opinion) believe they are both worth pursuing. He may have the political support to pull that off, or may not but he may have a better political position by bundling them than through decoupling them (eg, there are people that don't really care about cost reduction but will support it as part of an overall reform package if it includes universal care, and vice-versa.) I can't provide a reasonable argument for why we can't prove the cost cuts first because we could, *if* we wanted to. That is an ideological question or at least a question about values and priorities as well as a question about political tactics. But just because you differ in priorities, values or tactics, no reason not to pursue entirely practical and already working approaches to cost reductions.
"I can't provide a reasonable argument for why we can't prove the cost cuts first because we could, *if* we wanted to"
This probably takes us into the new post, but that's my point. I'm starting with the assumption that it matters whether we can afford it. But if you're of the position that universal care is important enough that we'll simply cut services/treatments when there is a crisis, and any resulting pain before hand or after is worth it in exchange for universal care, that's probably not relevant.
But if people are going to pretend there will be cost savings, I don't understand why we don't prove that we are interested in controlling costs. If we don't have the political will to control costs, we should enact universal healthcare with the full knowledge that costs will simply explode until we are forced to make painful decisions. Probably too much to expect honest debate, and honest debate may not even be that desirable in the grand scheme of things, but it sounds nice.
I think you are mistaken.
The only price pressure comes from the payers.
Since the major payers (Medicare, Medicaid, the insurance companies) only pay a set amount per procedure providers can game the system by performing unnecessary procedures. The payers cannot ask if the second (or third, ...) MRI is truly necessary, for each and every case for each and every patient.
And there is currently no standard that when certain symptoms present, you do steps one, two, three, and so on. Such a standard would need detailed variations so that in the desert southwest you check for Hantavirus sooner than you would some place else. Good luck keeping that up to date!
A patient who pays out of his own pocket is more likely to question that second MRI.
Government doesn't technically have to explicitly ration care, at least not at the patient level.
Since the Medicare model involves a price schedule, you just set the price lower than the market-clearing value. As a result, you get fewer MRIs, kidney transplants, etc. than are currently produced, and you allocate them under some system of triage, waitlists, etc.
I'll grant, the government is rationing care in that model, but I don't think that it's explicitly rationing care. In fact, the bureaucrats doing the rationing may not even be aware themselves that they are doing it.
Yeah but Medicare is doing a terrible job of it. It seems to be that they're paying half what everyone expects for an MRI but then go right ahead and pay up happily if a Dr. says that patient X needs *two* MRI's.
Explicit rationing might be more effective. And by more effective, I mean effective.
We're left in an untenable situation where he voting public will probably not accept siginificant public rationing, but we can't afford it.
We'll we can afford it. It just depends on what we want to spend our money on. Once 90% of the popualtion were farmers. Then the % of farmers fell as people moved to the factories. As of 2007 US industrial production was higher than it had ever been - but with far fewer people. There is nothing to prevent a future world in which 75% of a much larger pie goes to healthcare - and nothing wrong with living in such a world.
3% GDP growth would make us twice as rich in 23 years. If we were twice as rich, what would be spend our money on? Bigger TV's, bigger homes, bigger cars, or perhapse more healthcare.
There is nothing wrong with spending a larger portion of a larger pie on healthcare.
I agree with your thesis overall, I mean "we can't afford it" in the sense the tax revenues aren't there to support is as a universal public good.
Sorry, that last sentence should really end "support it as a universally available, publicly-provided good."
Yeah but Medicare is doing a terrible job of it. It seems to be that they're paying half what everyone expects for an MRI but then go right ahead and pay up happily if a Dr. says that patient X needs *two* MRI's.
What you're observing is Medicare's remarkable savings in administrative costs in action.
I read a study that showed that our cancer outcomes were better than those of the UK. We detected cancer earlier and treated it more successfully. This was interesting because it was a different measure from the infant mortality and life expectancy numbers that everyone throws out (that are affected by other factors). Have other studies been done to show how our system handles things like heart attacks, major trauma, etc... compared to other countries?
MartyH stated:
"The government's job is not to generate peak revenue for itself. Its job is to maximize the size of the economy, either today or in the future."
I certainly agree with the first statement, but don't know that I agree with the second.
The Enlightenment Philosopher Adam Smith introduced the concept of 'Economic Liberty,' whereby the individual was free to determine how to expend his productive labor and capital. Our founders incorporated the concept into the constitution, in the takings clause, and in the original limits on taxation. So maximizing economic activity is a discretionary power of the Congress, rather than a constitutional duty.
I would argue that many of the most robust earners, by investing their capital as effectively as they can, serve as Smith's 'invisible hand,' by trying to promote increases in productivity. In general, our government's 'investments' do nothing to increase productivity. Thus the government is less effective than the private individual at optimizing economic efficiency, and hence the common welfare. It follows that the Congress serves the people best by refraining from the destruction of our capital pool through taxation.
I'm waiting to hear the counterargument.
Thanks
We have several different systems of care: private insurance, which might be subdivided into BCBS, Aetna etc., VA, Medicare, medicaid. These provide supervision in different ways. I think what the government ought to start with is having teams or masters directed at outliers of Medicare payment such as the McCallen area the president spoke about. This would to some extent bring aspects of other systems to the Medicare population and treatment there. For instance, doctors and reviewers could be sent to outliers. Within the outliers area special payment rules would apply. The master or team would take greater control of spending and reimbursement and provide more direct supervision for the area for a while.
There are so many special interest groups in health care that it is, right now, impossible to review our system and evaluate it for empirical evidence of what works and what doesn't.
I'm certain insurance companies know; to some extent. But their search for information controlling cost does not necessarily coincide with the public good measures of controlling cost. Much of the denial they do right now is, I'm sure, based on their notion of control.
Until we evaluate the medicine we already practice for outcomes, we don't know what's possible, what's reasonable, or what's economical.
And the math and science of doing this isn't that complicated; we already know how to evaluate preventions, treatments and outcomes. But too many special interest groups spoil the broth.
zic:
What are special interest groups? How do they differ from general interest groups?
Since it is well known, perhaps you could explain how we quantify health outcomes. What units is general healthy-ness measured in? If you look at two individuals of similar age and built, with no pre-existing conditions, which one is more healthy? How is that health level correlates to the individuals life expectancy, and how many years of his life will they spend healthy?
Far from being "not complicated", these questions are absolutely impossible to answer at this time.
You want to measure good health, (which is a nice utopian notion,) when we have so many in poor health?
It's kinda obvious, for the most part, when someone's sick, Ken. How 'bout we start there?
Say you've got prostate cancer. I know a bit about that one, it killed my dad. And the treatment he received kept him alive for about ten years longer than expected when he was diagnosed at age 58. It was also five years out of date; according to the cancer research doctors my husband worked with.
He lived, (good outcome?) for 10 years, but the quality of life was horrible, and the treatment (massive doses of radiation to his abdominal cavity,) caused lots of other expensive medical problems.
Well I happen to think that the purpose of our medical system is to keep people living, instead of merely keeping them from dying.
But, if you insist, we'll talk about your personal case. Is 10 years of a horrible quality of life better or worse than 5 years of good quality of life? How do you make such a decision? What units do you compare?
To begin with, in order to measure anything, you have to have units in which to measure. We have no measurement system for quality of life, and no amount of data mining will get around that.
The truth is that the health care market has been manipulated by politicians for decades. It's a myth that we have a free health care market. We don't. Employer health benefits are tax free, even though they are a form of compensation. Insurance markets are heavily regulated and insurers are not free to offer packages that people would like to buy. Med schools are subsidized, resident/intern compensation regulated. Medicare/Medicaid introduce cross-subsidies and don't pay their own cost. Lawyers feed like carrion eaters on the system. Drugs have reduced health care costs, not raised them. Medicare spends too much on dying people, due to the reimbursement rules. Medicare spends on junk tests and medical devices.
Who says physicians are overpaid? Compared to what, lawyers? At least the market for lawyers is comparatively free. You won't know what a competitive rate for physicians is until you deregulate all aspects of the health market and even the playing field. Which means we'll never know whether they are over- or undercompensated.
And, get this, people here love to consume health care. What's wrong with that? Other countries like stoopid things like Australian footy or, worse, cricket and warm beer. WE LIKE HEALTH CARE. If Americans want to consume health care, who's gonna stop 'em? Not Obama-care, that's for sure. He'll get electrocuted on this rail. Too many entrenched interests.
The pols have already made a mess out of our health care system. They made an even worse mess out of Medicare that no longer can sustain itself. And you trust them to fix the entire market for health care? What, you've been smoking, shooting, snorting, sniffing, drinking, inhaling, chewing something? I think Obama has, that's for sure.
The argument that doctors are overpaid is one of those that doesn't really do it for me. It appeals at first, because doctors are definitely upper class and certainly that is one of the reasons our healthcare is more expensive than other nations'.
Upon second thought, however, I can't think of another person whom I'd rather have amply compensated for his work than the guy/gal that's about to cut me open and perform some highly specialized skilled labor on my internal organs. Not to tread too far into reductio reasoning, but I trust the doctor with social capital and pride in his "product" far more than the disinterested and unhelpful government-worker stereotype at the DMV that tells me that I've just been standing in the wrong line for 45 minutes.
In Cuba (to continue with the reductio -- and yes I know it's absurd, I'm just making a general economic point), taxi drivers are often better paid than doctors because they have more contact with dollar-carrying tourists. That may or may not be "fair," but it certainly can't lead to better doctors, if only because a lot of smart people who would otherwise go into medicine instead spend their time chauffering around Che-loving American sandalistas and European sex tourists.
Megan,
In the first half of your post, are you arguing that we should raise taxes?
In the second half of your post, are you arguing that we should not try to reform health care?
Thanks
It seems to me that the problem of healthcare is multi-faceted but the biggest problem, imho, is the LACK of free market solutions.
Doctor's ought to be able to advertise their office rates. I think the AMA prohibits this. Doctor's ought to be able to advertise the average time between your appointment time and actually being seen by the doctor. Have them advertise a rate system, $75 gets you seen today, $125 paid up front means you are the next patient the doctor sees.
Non-physicians should be able to treat patients, think Nurse Practicioners (i know I spelled it incorrectly, sorry). They too should be allowed to advertise rates.
If you have a non-emergent procedure, you should be able to call different hospitals and get cost information. For example, if your physician says you need to have your gall bladder removed you should be able to call as many hospitals as you want and ask for (and receive) the average cost, infection rate, complication rate, and mortality of that procedure done that that location.
Filing insurance on your behalf should be illegal. You have to get the bill, file your own insurance, and pay the hosptial. For office visits you should pay for it and file to be reimbursed. All of a sudden people will want to shop around for the best rate to be seen by a doctor, and they will want to call hospitals to find out how much procedures cost.
Incentives should be created so that health insurance really is insurance. Right now people treat health insurance this way: Let's say I have beer insurance every time I want beer I expect to go the grocery and pay a $10 co-pay and take home a keg, I don't understand why the beer industry is in financial straits.
Car insurance is mandated by law, it is cheap, plentiful, and easy to obtain. That's because when it comes time to use it you must have a need that exceeds a dollar threshold.
While you are at it, make the necessary tort reform to make medical malpractice insurance cost less. I am not taking a stance here on what should be done, merely that the lawyer's lobby needs to be made to heel on this one.
If you really want to set up universal care, then set a threshold say $65000 a year, if you have a procedure that cost more than that, then you are universally covered. This means heart surgeries, cancer treatments, transplants, etc. Ration it, make the rationing rules known to all. Require oversight and multiple Inspecotrs General to make sure the connected do not get more than non-connected individuals. Index the (payment) number to medical inflation. Allow people to purchase plans to suppliment procedures/treatments. If you were to do this then the actuarial tables would adjust and the cost of a medical insurance policy would come down mightily.
All this, imho.
While I really like this post, I'd like to point out that car insurance companies are allowed to total a car, this gives them a fairly concrete dollar amount they are on the hook for. Totaling a person is not going to be nearly as acceptable, making the risk much less known.
Ken, this is a really good point. It illustrates that it will ALWAYS be difficult to find the "true price" of medical services, no matter who is assigning them. That, unfortunately, complicates things for both free-market proponents and government-services advocates.
Not to split hairs here, but I would agree that it MIGHT always be difficult to find "true COSTS" but true prices seem to be to be rather easy to find. The true price of the watermelon i bought was $3.48. The true price of my house was $160000. I know these things because it was at that level I wanted those things more than I wanted the money I used to buy them.
One of my points was that if you make people shop, they will shop. Food is a necessity even more than healthcare and people manage to shop for it very well.
And I would like to thank you for partially making my point. By having a ceiling, an insurance company can "total" a person for a year. By placing a very large amount at which point (rationed) universal government insurance kicks in you could get "totaled" in the eyes of the insurance companies.
Basically, my proposed version of universal coverage is universal re-insurance (in part).
I can see how we could lower doctor salaries... at least for part of their careers. Training in exchange for service.
We train fighter pilots who fight for us on military salaries for a specified number of years. After the service term they can use their training however they see fit, including flying commercially at market rates. We could do the same with doctors. Patients who are poor get the government sponsored doctor or doctor in training. The short term savings are arguable, but I can see long term savings coming from the increased supply of doctors (more people could afford to become doctors, therefore more will become doctors).
You mean like the military? Which does this with doctors right now, just like they do with fighter pilots?
I've not dug into black-and-white statistics, but I was under the impression that they aren't able to fill the required demand with this deal. And that's for a small segment of society, which is obligated to exercise five days a week and maintain a rigid body fat standard. I have my doubts about being able to expand it to cover all of the population.
Of course, you have to become a military officer as part of it, which could scare many people off. OTOH, if the people you're trying to recruit are frightened off by being part of a huge faceless bureaucratic machine, then a universal heath-care apparatus which would probably be bigger than the Army won't have much more success.
The top 5% is roughly $150k and greater household income.
Actually, the top 5% would be around $200,000. http://pubdb3.census.gov/macro/032007/hhinc/new06_000.htm
I would also suggest that if you make any healthcare argument where "food" can be substituted for "healthcare" and the statements are still technically true, it's time to consider whether you are really making an argument for universal care, or just an argument for a bare-necessities fallback option available for the truly destitute
If chemotherapy was the price of a Big Mac, then we wouldn't be having this discussion, and we could simply give Medical Stamps to those few people who would need them.
The issue with healthcare is the cost, and what that high level of cost does to the individuals who can't pay and to the society in general that has to deal with the consequences. It's all about money.
We could devise ways to address this on a piecemeal basis, but those won't fix the problem of the underlying cost structure. If trends in healthcare pricing continue unabated, it will just suck large amounts of money out of the system that would be better deployed someone else.
There is nothing sacred about the compensation of physicians. Clearly, we can't afford to pay them. We should be deploying them so that they are better utilized, and figuring out how to pay them less. If that was coupled with federal malpractice insurance and tuition reimbursement for those who have contributed a certain amount of service time (a reverse GI Bill of sorts for MD's), then that might make the pay cuts more palatable. If they still want to make more, then they'll just have to become i-bankers and create disease on Wall Street, instead.
The issue with health care is the cost...
There is nothing sacred about the compensation of physicians.
We should utilize them better and pay them less.
"What you mean, "We", White Man ?" :)
Dr. Helen has promised to "Go Galt" if health care is nationalized;
How many will follow her example ?
What percentage of our already inadequate number of health care
providers can we afford to lose ?
Or perhaps "We" should change the laws governing "their" work;
Maybe draft them, order them to heal, and put the disobedient
in the brig, on a ration of bread and water, until they obey.
Equipping them with implants which stimulate the trigeminal nerve
should be a last resort.
Lowering the cost of health care through technology would work,
but a bunch of profiteering free enterprise private sector
entrepreneurial scumbags would get rich inventing and producing
the technology, so _that_ is a non-starter.
I don't believe this is true. Life expectancy and infant mortality are too dependent on lifestyle to be good measures of a health care system's efficacy. It's no surprise Japanese people live longer - they have a better diet and they're far more active. A more relevant public health measure would be something like five-year cancer survival rates, where the US does better - in most cases significantly better.
I think "somewhat better" might be more apt. However, even this statistic is problematic. The US is known for doing many more tests than in other countries, and in the process, a lot more things that are "wrong" are discovered, even though they may never become a problem.
If you discover 10% more cancers, all of which are curable because they would were never end up life threatening, you can up your survival rate quite nicely. It also has the effect of making Americans look rather sicker than they actually are.
Against this, American hospitals have to deal with patients who might not have had health care until they were in an emergency situation. This would be bound to push survival rates down.
Comparing statistics is hard.
Sure. You have to compare specific types of cancer, and that's something people have done. I'm not a doctor, but I'd be very surprised if, for example, a statistically significant number of malignant breast tumors never end up to be life threatening. People have done this analysis, and the US fares very well.
Don't Democrats have the same right to impose their health care folly on the body politic that the Republicans had to cut taxes? "Don't forget, we won the election!"
Yes, and the Republicans have the same rights to democratic opposition that the Democrats did.
I agree with Larry. Let us adopt this "folly". We won. Yes, we can. I love to hear people on medicare and those on Capitol Hill with their great health care coverage squawk about socialized medicine. Let them try arguing with one of these private health insurance that are so great at shafting and chiseling every medical bill submitted to it.
The thing about this that I see as someone with cancer and such an "private" insurance company is that you can no longer live your life without fear. I think this is unfair not because life is unfair but because everyone in my position and those who do not yet know about it are spending a fortune on health care insurance which is worth nothing. I would rather have to go to Post Office every week and clear my medical bills that deal with the Kafkaesque scenario I have with my so-called provider.
In any event this new flu will probably take care of a lot of the demographic problems in the Fall if not too many of young ones also go.
Well, McKinsey did a very good study about a couple of years ago with the Dutch health ministry - I think it was called "sneller beter" (faster, better) about how new technologies and governance changes could lead to very large cost reductions.
Given that many parts of the healthcare system have not adapted to technology as has other parts of the economy (I write as I look at my written and illegibly signed paper prescription sitting on my desk), there is at least reason to believe, per the McKinsey study, that reductions are possible now which were not at least a decade ago.
Those things are necessarily synonymous with reduction though. Look at the introduction of IT technology in industry - it's really hard to find the cost reductions there. It seems to me that just as likely as a reduction is getting more for the same amount of money (and more importantly the same rate of increase in money spent). Frankly it's not hard to make the argument that if you increase efficiency you'll spend *more* money, after all suddenly health care is a better value, why not buy more of it? Of course that kind of logic leads to the idea that we could save money by making health care less efficient which is nonsensical.
"Tax revenues peak somewhere. If you're to the right of that peak, you could raise revenue by lowering rates."
Megan, megan, megan: yes, duh. But, in practicality, the Laffer curve is theoretical. Nobody, including you (the esteemed econometrician that you are), knows where the peak is.
What people fail to realize is that the impact of the theory is what's important. Listen up, there'll be a quiz later: Tax policy affects behavior. Period. Should I say it again? Maybe. . . because the CBO doesn't score it that way. PayGo doesn't score it that way. All pols don't want to admit it.
Heard the phrase: "Gone Galt?" lately? Why? Why are tax revenues down so much even though tax policy hasn't actually shifted yet? It's not the recession. It's the anticipation of the lingering recession, and the likelihood of things getting worse.
No offence, but you ivory tower types, which includes journalists, although that's a stretch, even in your case (and I hold you in very high regard), haven't the foggiest idea what makes the world go 'round.
It's simple. Really. Risk-reward ratio. That's it. Which depends on the certainty and/or predictibility of future returns. Why is this so complicated for people? There is no, I repeat, NO, certainty at this point. Bondholders? Fucked. Dollar? Fucked. Trade? Fucked. Labor? Can't tell what your liability is. Public offering? Insanity. Real Estate market? Fucked. Residential, certainly; Commercial, just wait.
What? You think we do this for Blue Chip Stamps?
Who would go big now?
Jason gets it. More as an altruistic liberty thing - which is good enough by me.
Oh, and the Red Queen didn't say that. The Red Queen said, "It takes all the running you can do to stay in the same place. If you want to get somewhere else, you have to run at least twice that fast as that." Well, she never met Obama. I think we better up the benchmarks.
Megan,
You are wrong about which side of the Laffer Curve we are on because I don't think you (or for that matter anyone else) really understands the impact of the Laffer Curve. The problem is that everyone assumes that the marginal tax rate simply reduces expected after tax returns by whatever the tax rate is. This would be true if all investments had positive returns, but in the real world this is not the case at all. In case of new business formation (which is the driver of economic growth and tax revenue growth), you have very asymmetric returns; a lot of losers and a few big winners. As a result a small change in the tax rate (even when rates are low to start with) can make a huge change in the expected after tax returns and have a huge impact on new business formation. If you made the modest mental exercise to understand this relatively simple math, you would realize we are still on the right hand downward sloping side of the curve.
Playing the smug jerk on the Internet is really best done when you have a stronger command of the facts than your opponent. In this case, neither of you has a clue, but Megan is at least willing to admit that her opinions are guesswork. I must say, honesty seems a better defense to me than self-righteousness.
But haven't people here argued that 'healthier lifestyles' - for example, not smoking - will increase the costs of health care because these types of people will live longer? Smoke and die of cancer at 72 vs not smoking and dying at 85? The two statements cannot both be true.
IIRC, the factoid is that 10% of all doctors are responsible for 90% of all malpractice claims. Wouldn't this be a fairly clear metric for weeding out the chaff from the grain, the way some sort of evaluation is supposed to do the same thing for teachers? The other point is that as medicine becomes more advanced, the need for certified M.D.'s for certain routine procedures lessens. Give nurses more power to perform these procedures, or create another level in the tier of health care professionals between doctors and nurses who can handle these responsibilities. It's not all "House" you know, and most people can recognize and treat an allergic reaction to poison ivy without a doctor to say, "That's poison ivy."
I don't understand your argument. So the laffer curve aims to illustrate the functional dependence of government revenue on the rate of taxation. Your leftist analog to the laffer curve would show the functional dependence of health care costs (presumably) but on what exactly? How am I supposed to know if Lefties are erroneously arguing from the perspective of being on the right side of their laffer curve if I don't even know what left and right mean in this context.
She's suggesting that they occupy the same rhetorical position(i.e., an excuse to claim that preferred policies are free to implement), not that thy are similar arguments mathematically.
If you made the modest mental exercise to understand this relatively simple math, you would realize we are still on the right hand downward sloping side of the curve.
If you made the modest internet exercise of reading the data re: historical tax receipts, you would see that we are most likely on the left-hand side of the curve.
The Bush tax cuts resulted in substantial losses in collections that were not sufficiently recouped once recovery was underway. A chunk of the Bush deficit is attributable to this notable failure to turn reduced rates into increased receipts. Those cuts were a failure.
Defenses can be made of the Reagan cuts, which did show increases in nominal revenue. Of course, the maximum tax rates were much higher at that point, so a comparison to today that ignores our lower rates is apples and oranges.
If you want to argue that we're to the right of the curve, then the results of 2001+ give you plenty of explaining to do. Your theoretical regurgitation of the concept of the curve, without any data that can be used to prove the peak as being below current rates, is really a cliched non-answer. I suspect that you'd argue for a 0% rate, just because it sounds nice.
RW
Reasonable points, but I think what are the non cyclical drivers of changes in tax revenue are capital gains and to a lesser extent distributions out of S Corps and LLCs to cover the tax bills. There is typically a pretty long interval between when investments are made and capital gains are realized. Accordingly it's hard to measure the impact of tax rate changes over a short period of time. Also, I don't recall the exact numbers but I believe there was a pretty substantial uptick in revenues in the latter Bush years before the credit markets blew up.
Can someone please just itemize the major contributions to health care cost and compare that to other countries that provide comparable levels of care for half the cost (i.e. Canada, UK, France). My guess is that you'll find the big culprits are the following:
1) private insurance profits (guess what public run insurance is non-profit and therefore cheaper)
2) exorbitant doc pay (about 2x more then Canada, UK, France, why?)
3) expensive drugs
To address these issue we need to know the cost breakdown. Is this so hard?
Yeah, because as much as we think of these as bugaboos, you're going to account for maybe 1/3 of expenditure difference there.
I'm all in favor of Universal Health Care, but to say these are the entirety of the difference 'twixt Us n' Them' isn't addressing the differences.
I'd like to go square 1, because I think I'm missing something.
The total h/c $$$ is about 16% of GDP, which works out to be apprx 2.2T. We also know that there are apprx 50 million not covered.
Now to be simple minded, let's pretend that the 50 million pay nothing to h/c....which means that 250 million spend the 2.2T.
That works out to be apprx $8800/year/person. Now take that $8.8K / year and give it to the 50M...
That costs about $440B / year. That is 4.4T over 10 years.
Hmmmm....Obama doesn't say that much. He want 1.3T / 10 years, or roughly a third of the money needed.
So implicitly he is cutting the entire system from current levels by 10% (26.4T / 10 years, to maintain current levels of service spread to all 300M) vs.
(cut 2.9T over 10 years. ie, 4.4T-1.3T.
it is late...hopefully is this somewhat coherent. But O wants a 10% slice of h/c to disappear??
Well, you see - going back to square one as it were - here's the problem. Megan isn't doing anything but engaging in a bit of rhetoric. And asking certain people to trade in their worthless, trashy 2009 Toyota Corolla for a truly excellent 1966 Dodge Dart to boot.
Talking about about the Laffer curve and health care reform as if they are both theories about economics is trying to get people to believe as if they are, in fact, 'facts' of economics on a par with each other. They aren't. One is a small (and demonstrably erroneous) piece of theory, the other is restructuring a business sector. Not the same thing. Further, we are being asked to give up something of much greater potential worth, better health care, for something that never had much utility except as a 'scientfic' explanation for a policy that certain people had been bound and determined to implement for decades, Laffer curve or no. Even assuming that health care reform is really some sort of theory implementation, I'm going to want to see people on the right give up a lot more than the already discredited Stockman schtick. I want them to give up blaming CRA, give up supply-side/trickle-down, give up vouchers, etc; iow, I refuse to trade in my Volvo for a K-car, despite whatever the fast-talking salesman may say.
Note we don't have to cede anything for the sake of argument. Getting back to the point in block quotes, we aren't talking about a theoretical outcome with no practical evidence to support it. In fact, there are several working models out there right now that seem to deliver more bang for less buck. It's just that the rhetoric of 'liberal theorizing' falls down even if we accept the premises.
Finally, observe the frame-forcing. Last I heard, very comfortable majorities were all for health care reform. Trying to paint, what, 80% plus of the electorate as being somehow 'liberal' or 'leftist' really isn't cricket any more. While this trick may have worked up to about five years ago, it's utility has been vastly diminished. Not the least because many people who think of themselves as baseline conservative are astonished to find themselves being labeled 'leftist'. To mix metaphors, critical mass for this trick was reached long ago, and that ship has sailed.
80% may be too high but I'm sure a majority is for health care reform. The question is, is a majority for the reform Obama is offering? And beyond that, is a majority in favor of the reform that will be delivered?
Megan
"For all the derision about the Laffer Curve, it is absolutely correct--indeed, it has to be; it's basically just an identity. Tax revenues peak somewhere. If you're to the right of that peak, you could raise revenue by lowering rates."
Is this really all the Laffer curve says? I also take it to mean that as you move right at any position the economic cost of gathering an additional tax dollar increases. So at a 5% flat tax rate collecting the marginal tax dollar might cost the economy $1.10 (number made up). While at a 35% flat tax rate the marginal tax dollar might cost the economy $2, (or $4). Saying the Laffer curve is not relevant if we are to the left of the apex seems to say the effect on the economic loss ratio isn't relevant. Or do you read Laffer more narrowly to not include this issue?
If our increased spending results in tax increases raising the economic loss ratio then the Laffer curve is relevant even when we are left of the apex.
I believe it has been adduced that the rate which collects the most taxes is 20%. We are well above that.
I'm sorry, but this is flat out wrong. Let's combine the GDPnumbers for 1981 and 1988, which are 5,291.7 and 6,742.7 respectively. Alternately, take the Per Capita GDP values of $26,002 and $31,096. Then use the Tax receipts as a portion of revenue for those two years from the CBPP, certainly no fan of tax cuts, of 19.6% and 18.1%. We end up with lower overall tax rate at the end of the Reagan years, but up going from 1,037 billion dollars in revenue to 1,220 billion in chained 2000 dollars. The per capita figures went from 5096 to 5628.
There is no way to use the actual figures to claim that Reagan was proved wrong in the long term, and responses to tax changes are not instantaneous. These numbers don't prove him right either, since a whole of other things changed in the intervening years, but I would really like to see empirical values which show that we were on the left hand side of the curve. Of course, there's a fundamental flaw in most discussions, since there is no particular reason to believe there is only one point where reducing tax rates would increase revenue. There could be numerous local optima.
If you were wondering, I first ran these numbers back in 2003 after seeing a link to that CBPP article, since they apparently completely misunderstood the reasoning behind the laffer curve. This was repeated in future articles which mentioned it as well.
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The biggest waste in our system is that old people are not dying fast enough. With courage we can finally solve that problem.
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