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Douglas Holtz-Eakin is a very good economist, and I believe he was also a good director of the Congressional Budget Office.  But is he a good political scientist?  (Is anybody a good political scientist?)  That's the question that his column this past Sunday in the Washington Post provokes.  The column, subtitled "Yet Another Unrealistic Budget," is important because it enshrines the conventional wisdom, that font of knowledge upon which op-ed columnists rely in their efforts to convince us they have a clue as to what they're talking about.

DHE lays out the untenable budget projections well enough.  The current deficit shortfall grows at an unsustainable rate.  Great changes will be required.  But what changes?  When?

Doug writes:

"Government forecasts predict that budget deficits will narrow as revenues rise from the current level, which is below the post-World War II average of 18 cents on the dollar, to a level near the postwar peak of 20 cents. Is that realistic? Historically, when taxes reach that level, U.S. politics drive them back down."

Really?  Since when?  U.S. taxes used to be much lower.  The run-up in spending was unprecedented too.  Medicare was unprecedented.
 
We could write a sentence like this:

"Government forecasts predict that Federal health care spending will continue to grow at a double-digit rate, only to be stopped in its tracks by tax cuts and deficits.  Is that realistic?  Historically, in the face of efforts to limit access to the latest medical advances for children and the elderly, U.S. politics has continued to fuel provision of increasing health care benefits."


When you hear somebody, let's say a fictitious corn shucker named Joe Lieberman, say "we can't afford Medicare increases," you have to think about what "we" means.  Most health care expenditures are not viewed as frivolous luxuries.  When something ails you and there is some medical service that can help, you need that service.  If Government or private insurance does not pay for it, somebody else does, or you pay yourself by foregoing the service.  Costs of this nature are not escapable.

"We" will not all be in the same boat, especially with increasingly individualized provision of insurance.  If Medicare spending growth is reduced, somebody pays.  There are better and worse ways to accomplish this.  We would like to shift dollars from lesser- to greater-benefit uses.  We would like to invest in the discovery and development of money-saving drugs, procedures, and technologies.  We would like to see more prevention.  All of this points to comprehensive structural reform, not miscellaneous, misbegotten feints at "savings."

Conservatives are fond of denouncing liberal rhetoric to the effect that tax cuts "lose" revenue.  They're right; the government's loss is somebody's gain.  But the same applies to spending cuts.  They are not "savings."  They are cost shifts that affect somebody.

Doug also has prognostications about the nation's love for defense spending.  In the 1962, defense was nine percent of GDP.  Nobody would have predicted it would someday sink to 3.0 percent (in 2000).  In the 1950s, defense was 14 percent of GDP.

Lots of things happen that have never happened before, like the Big Bang.  What a new precedent that was.  He who names the constraints controls the debate.  If you support social insurance and you acknowledge a lid on taxes and a floor on defense, you lose.


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The claim that the rise in spending is unprecedented is flat out wrong.  Spending on wars, major wars in the past, and all modern wars involving high-tech weaponry and highly paid soldiers, always produces spikes of this kind.

 

Nor, Mr. Sawaky, are you being clear and honest with your readers and the central issues.  

 

Costs are rising because technological advances produce increasingly expensive tests and cures,  because of the increasing demand for services by those who cannot pay at all - largely the very old (who consume a vast proportion of the pie) and recent immigrants, and because the disappearce of cheap land (due to population expansion) has driven up the price of everything.

 

Structural reform means either socialized medicine (less remuneration for doctors, less research, fewer people entering the medical professions, universal - instead of localized - bureacratic delays) or increased taxes on the middle and upper classes.  Probably both.  And neither is going to happen in the foreseable future.

 

There are only a few ways out of this mess.  The best is increased emphasis on prevention and healthy living.  The next best is less provision for the indigent elderly - a form of triage.  After that we are into ad hoc trials: Expanding clinic use, legal reforms to lower legal costs, more telemedicine and outpatient services.  Like that.

 

As for your more general point, non-payment of bills results in bankruptcy which means very, very hard choices must be made - often at the point of a gun.

 

 

Great post max.

I have been trying to get this across in a variety of ways in comments. To repeat - it matters very little whether the governemtn pays for something through taxes or you pay for it out of your own pocket unless there is an advantage in efficiency. In most cases, there is and the efficiency favors individuals making choices. However, in a insurance model, and empirically, efficency favors government payments.

To address parts of selfinterest's statement - socialized is a misleading term.

less remuneration for doctors, less research, fewer people entering the medical professions, universal - instead of localized - bureacratic delays)

less remuneration for doctors is probably true but should also probably be coupled with less med school loans, less time in medical school, etc. Countries with 'socialized' medicine pay doctors less, but get better results. So, yes reducing the cost of health care will most likely hurt the existing crop of doctors relative to what they have now, but there is no reason to believe that because of that the quality of care would go down. Because of unnecessary and restrictive professional groups and licensure, doctors have been getting monopoly rates on their services, which, as other countries have shown can be provided for less money without the increase in restrictiveness.

less research is not clear either, although Max's pal Dean Baker has pointed out many ways in which the current research funding is extraordinarily wasteful and poorly targetted.

fewer people entering the medical profession. Irrelevent and probably not true. A flattening of the rates paid to people in the medical profession would increase the number of people in the medical profession at a constant level of funding, but it is impossible to know what advances in technology and efficency will do to the requirements of healthcare in this country.

as far as delays, this is a bit of a red herring, but you would have to look to different countries data. I would assume, though, that the system would better off for those that currently do not have insurance. The bottom line is that the results would be superior and at lower costs than we currently have now.

 As far as values, I would prefer that a baseline be established that is indifferent to a person's wealth. Beyond that baseline if a person wants to spend their money on ineffective end of life care, then they are welcome, but your interests may vary.

" Countries with 'socialized' medicine pay doctors less, but get better results"

 

Not really.  Coutries with socialized medicine get better bang for the buck which - according to Krugmen - is a result of much lower NON-MEDICAL overhead.  Reducing doctor remuneration and training ALWAYS results in lower quality. 

 

"less research is not clear either"

 

It's not a necessary consequence.  Only a likely one.  That's because the same populist pressures which lower doctors' salaries also lower drug company profits.  Egalitarian lusts always blind adherants to the truth that abilities are not distributed in an egalitarian way.

 

"fewer people entering the medical profession. Irrelevent and probably not true."

 

It's already true today because of the changes in, and pressures on, the medical professions.  Fewer medical personal mean longer delays and poorer service.  Nothing could be more relevant. 

Medicare was denounced as socialized medicine but hardly seems to have been that.  Why do we need socialized medicine?  Not to flog a dead horse but we do not need government doctors in order to achieve chearper healthcare.  We, as a rich country, can afford to pay more for healthcare.  The problem is the uneven delivery of that care. 

Going back and forth over the merits of socialized medical systems or Americas seems pointless.  The reality is that employers our getting out of the medicla insurance business.  Who and how health insurance is going ot be provided and how medicalcare is going to be provided are related questions but not the same one. 
Daniel A. Greenbaum

I've posted this already at TPMCafe, but the info should be part of the Budget debate:

 An article first published in 1983 in the:

 Cato Journal. “Achieving Social Security Reform: A ‘Leninist’ Strategy” (PDF link) 

This is the strategy that Bush as "Reagan Redux" is implementing.

selfinterest made some factual claims that seem at variance with truth.

British system is perhaps the most socialized of them all, very stingy and with quite decent results.

 French have better results (perhaps because even their disadvantaged minorities eat mediterranean diet, but they do have them), and they spend less per capita.  Does selfinterest know for a fact that French doctors make less money?

 In any case, since our non-medical overhead is enormous and driving our health policies in wrong directions, eliminating it would be a worthy goal in itself.  Even if we do not decrease the rate of growth of medical expense, one-time cut of 20% is nothing to sneer about.  Trillion dollars there, trillion dollars here...

We, as a rich country, can afford to pay more for healthcare.

 

Countries don't pay for health care, people do.  Besides, we, as a country, already devote far more to health care than anyone else.

 

The problem is the uneven delivery of that

 

The world is an uneven place...or do you think that everyone should drive the same car, live in the same house, wear the same clothes, eat the same food, etc - all in the name of evenity?  It's been tried, you know, and it didn't work.

 

A certain amount of redistribution, of leavening of laissez-faire, is possible but there are limits and we're close to them. 

 

European and Canadian systems have been studied at length.  The trade-offs are as I've outlined although there can be legitimate discussion about their extent or degree.


Those who can afford our medical care do so.  We provide the best that money can buy. 

self-interest

i'm going to need some actual evidence on, well, anything.

more socialized medicine = fewer doctors?

the terms are imprecise, but, apparently the US is non-socialized and the rest of the world closer to medical socialism? the OECD reports that the US has fewer doctors than the OECD average.

if this isn't the proper comparison, let me know and i'll look it up for you.

the single biggest reason for the gap between the US and other OECD countries in medical spending is that medical care costs more here. Doctors cost more, drugs cost more, and medical equipment costs more. Utilization measures show the US to be a pretty decidedly middle-of-the-pack country in consuming actual care.

the "we're #1" meme in regards to advanced medical care is one that i'm going to have to get some proof on. it's said often, and supported almost never.

Re: Max's piece, i was really disappointed in the Holz-Eakin piece because he recently gave a really good speech about how the federal budget problems in the long-run were all about medical costs. in the WaPo piece he goes back to lumping Medicare and Medicaid in with Social Security and talking about growth in entitlements. this is a less useful contribution.

joshb 

 

 

Countries do pay for healthcare as a nations wealth is not simply a product of individuals.  Entire societial systems going into the generation of income and wealth.

When you say we are at the limit of redistribution on what do you base that on?
Life may not be fair and the goal is not to make everyone equal but as wealth is increasingly going untaxed even as the wealthy's income grows disproportionately to the middle class why should some people have cadillac helathcare while others have virtually none?
Daniel A. Greenbaum

Depending on the health care system, universal systems are getting better results generally. They also pay doctors less, and medical training can start earlier, requiring less years in training. Better care and less remuneration would pretty much ruin the statement "Reducing doctor remuneration and training ALWAYS results in lower quality".

That's because the same populist pressures which lower doctors' salaries also lower drug company profits.  Egalitarian lusts always blind adherants to the truth that abilities are not distributed in an egalitarian way.

You are just spouting ideological boilerplate which means nothing in this context.

 

You seem to miss the point again. The goal is results. If we can do so with some new contraption that ensures perfect health for everyone, but only requires a single healthcare worker that would not mean longer delays and poorer service. Using pressures taht exist in our current system to extrapolate to an entirely different system is an unsound approach.

Twice in the past couple of weeks I have watched DHE on TV, and I came away thinking he was more outspoken back at the CBO. He strains to be even-handed or better to the current administration, almost like Greenspan was while in office.

<blockquote>Those who can afford our medical care do so.  We provide the best that money can buy.</blockquote>

Which is great if you have money.

 And don't rely for that money on a large workforce of un-or-under-insured workers whose absenteeism causes inefficiencies in your business' operations.

 And don't really care about those of your fellow citizens who aren't as well off as you.

Depending on the health care system, universal systems are getting better results generally.

 

Translated this means some are, some aren't.   It's true that universal system, if they're good, provide better care for low income folks with little loss in the middle and not too much more at the high end.  However, they remain very costly...and stresses placed on them by the global economy are resulting in longer waits and poorer care. 

 

You are just spouting ideological boilerplate which means nothing in this context.

 

It means nothing only to those who don't want to acknowledge simple truths. 

 

If we can do so with some new contraption that ensures perfect health for everyone, but only requires a single healthcare worker that would not mean longer delays and poorer service

 

If manna falls from heaven nobody will need healthcare.  I'm trying to deal with present realities.  Nothing like what yousuggest is even remotely possible.   Trends, if anything, are entirely in the other direction.  Better technology is resulting in increased costs because it increases people's expectations and demands.  

Countries do pay for healthcare as a nations wealth is not simply a product of individuals.  Entire societial systems going into the generation of income and wealth.

 

Last time I looked either I paid for healthcare myself out of my earnings and savings (whether directly or through insurance) or govenment paid for it from taxes it obtained from someone else's earnings and savings.

 

When you say we are at the limit of redistribution on what do you base that on?

 

The results of elections.

 

wealth is increasingly going untaxed even as the wealthy's income grows disproportionate ly to the middle class why should some people have cadillac helathcare while others have virtually none?

 

I don't know.  Why do dogs have tails? 

more socialized medicine = fewer doctors?

 

Lower pay equals fewer medical personnel generally if other less stressful, better paying alternatives are available.

 

 
the terms are imprecise, but, apparently the US is non-socialized and the rest of the world closer to medical socialism? the OECD reports that the US has fewer doctors than the OECD average.

 

See my previous response.  Cross country comparisons are tricky.  I'm a citizen-director at a small local hospital.  I rely on what my doctors and administrator tell me.  But I would like to see the statistics you quote.  Foreign doctors are pouring into the US as fast as they can while American doctors are not leaving so how can they be true? 

 

the single biggest reason for the gap between the US and other OECD countries in medical spending is that medical care costs more here.

 

While what you say is true, that's not how Krugman analyzes things.  But if it is true, why is it true?  And what's your solution?  How are you going to force down those costs? 

 

the "we're #1" meme in regards to advanced medical care is one that i'm going to have to get some proof on. it's said often, and supported almost never.

 

I have a lot of wealthy European friends...and I talk to people from all over the Western world about it.   If that's not satisfactory you're going to have to find your own proof. 

 

a really good speech about how the federal budget problems in the long-run were all about medical costs. in the WaPo piece he goes back to lumping Medicare and Medicaid in with Social Security and talking about growth in entitlements.

 

It spells trouble either way. 

Which is great if you have money

 

Exactly, which is why everyone wants to be rich.

 

 And don't rely for that money on a large workforce of un-or-under- insured workers whose absenteeism causes inefficiencies in your business' operations.

 

I'm sure very smart and powerful businessmen are capable of analyzing their needs and attending to them.

 

And don't really care about those of your fellow citizens who aren't as well off as you.

 

I think it's fair to say that the rich care more about the poor than the poor care about the rich.  I also have to wonder why the poor are scrambling to get into this country from just about everywhere if we treat them so badly. 

 

 

 

 

Oh please. You sir make make many more unsupported assertions as Mr. Sawicky.

I have friends, real people, that live in France and Canada that are very happy with their health care, and it costs them half of what our system does. They report no delays, except for elective surgeries. And there are some things that are not covered, like boob jobs.

 

Structural reform means either socialized medicine (less remuneration for doctors, less research, fewer people entering the medical professions, universal - instead of localized - bureacratic delays)

So give me evidence that this is true. That is not what people I know have said about their health care in Canada. 

One more big piece of the puzzle needs to addressed.  Our fragmented system does not have adequate mechanisms for rationally deciding which innovations to fund research into and which innovations to actually put into use.  We have innovation in increasing performance but not in reducing cost while maintaining performance.  This is basically similar to military weapons research.

The way drug innovation is determined is doubly irrational.  The drug companies do half our research (government pays for the other half).  This they basically do for free.  In return, they are given monopoly rights for manufacture and they make a killing because the manufacture is normally cheap once the expensive research has been done.  There is no inherent balance or connection between these counter-balancing rip-offs.  And the choice of research is warped by the need of the drug companies to come up with patentable results.  This biases research funding toward the exotic and expensive.

Creating effective mechanisms for what is basically capital allocation will require deep structural reform.  A single-payer system might create such mechanisms.  Or it could paralyze them completely, resulting in either loss of innovation or wild costs.

 

This is false. No European, Japanese, Taiwanese, South Korean or Singaporean patients ("those who can afford our treatment") elect to come to America for treatment. Far more Americans elect to travel to Singapore for care than go the other way around.

One reason why almost no Europeans or East Asians come to America for care is that multinational insurance plans which cover many European and East Asian countries do not cover treatment in the U.S. That is because care is so much more expensive in the U.S., for the same procedures with the same level of doctor expertise and the same results, that multinational insurance companies refuse to pay for it. I know this to be a fact because I am on such an insurance plan myself; it covers full treatment, with no deductible, anywhere in the world except the U.S. and Switzerland. (Switzerland, like the US, has an almost entirely private medical insurance system, and is therefore the only country in the world where the price of health care is even close to the price in the U.S.)

I have a lot of wealthy European friends...and I talk to people from all over the Western world about it.   If that's not satisfactory you're going to have to find your own proof.

It is not satisfactory, and I have found my own proof. Having lived in Europe and the Far East for several years, I have found the level of medical care in both regions to be equal to America's in terms of quality of care, and far superior in terms of ease of access. Scheduling appointments and handling simple procedures - vaccinations, pediatric checkups, the occasional GI tract infection - is so much easier and less of a hassle (let alone cheaper) in Europe that it isn't even worth talking about. As a result, in Europe, far more people actually take care such minor problems within the health care system (rather than just letting them fester), meaning better overall public health stats and better quality of life for everyone.

The American healthcare system stinks, in the sense that it doesn't keep Americans healthy. If you are a doctor and you fail to acknowledge this, then you are part of a shrinking minority of American doctors.

France is good but I know many people in Canada and England who've had rotten experiences.  A normal range of experience, given the large number of people invovled.

 

So give me evidence that this is true

 

I've already provided the logic.  The evidence comes from my experience as a hospital director, and from what I hear on the street and among friends - not from large scale studies...but then you're evidence is no different.

selfinterest,

I'd welcome an opportunity to engage in a longer discussion with you on the topic of universal care/access.

I've personally worked for 3 separate state legisatures on Medicaid financing (yep, very aware that MD's feel the reimburment rates are lowsy - a subject worthy of time in and of itself).

My general feeling is that theTPM Cafe community might benefit from an exchange of our experiences and ideas.  I certainly feel qualified to speak to the efficiency of adopting a single-source of payment system.

Your thoughts?

Doc

"People don't develop their values is a vaccuum.  This might explain why people living in sprawl are so vacuous." me 

I said those who can afford US care do so.  Your evidence doesn't refute that.  Au contraire, you merely ASSERT that the quality of care is the same as in other parts of the world while costs are much lower.

 

Opposed, I know wealthy Europeans who can afford health care anywhere. They chose America.  I'm not knowledgeable about the far east. 

better overall public health stats

 

What stats? 

Your thoughts?

 

Engage to your hearts delight.  Maybe I'll learn something which will help me to keep my small rural hospital afloat.  Almost all like us are in bad trouble...and many big city hospitals as well.

 

Start by telling me how I can make my emergency room profitable.  It looses between a quarter and a half million a year.  If we close it we must close the hospital.  We pay minimum acceptable wages to our ER docs and half our patients don't pay which is typical (but we must see them).  Docs want better wages, not worse, because after many years of schooling and an accumlation of a huge debt they want to start families and live well in exchange for doing difficult work and accepting huge responsibilities.

 

Then tell me how to get qualified nurses at reasonable wages.  Their numbers have shrunk in recent years so they hold the upper hand and often will accept employment only on a temporary basis because that way they can get much higher salaries and still get all the work they want.

 

Meanwhile insurance rates, and equipments costs, and all other costs are going up and government reimbursement is going down. Somewhere - over the rainbow - a single-payer (or double payer, or triple payer or socialized medicine) system might show up which improves things but not anytime soon...because, on the conservative forums, people from all parts of the world tell much different stories about their experiences under such systems than I'm hearing here (stories that many of my docs and my friends confirm)...AND THEY VOTE.

 

Again, let me emphasize these are stories about European and Canadian systems.  I've heard good stories about Taiwan but too few of them to understand the systems or form opinions 

Let me be more specific about European systems.

 

A French health care professional who's my neighbor tells me they're system is excellent and that their doctors work well for half the pay.  But she also says that government takes a huge chunk of everyone's income in taxes, that the system is stifling and many people are looking to leave, and that it is financially unstable.  French friends who have left - to America, Vietnam, and other places - confirm theis.

 

My information is that English and Canadian systems suffer from long waits and poor quality service...and that many Canadians use the US system if they can.

 

My German friends tell me that their system is better for the poor, much worse for the rich.

 

Your thoughts? 

I forget a very important point - Europeans rarely, and I mean rarely, sue their health care providers.

While the United States has an excellent healthcare system based on mortality rates, infant mortality rates we are hardly the best syste.  The United States is provides healthcare in a very expensive manner.  Some of it is because the devices and drugs are expensive, but we also have a lot of undeed duplication and misdirected incentives in the system.

 We do not need to start with the payer for the system.  We should start with the system that will make the most people healthy at the least cost.


Daniel A. Greenbaum

Selfinterest, I work at a biotech lab providing highly advanced diagnostic services - the very kind you claim "socialized medicine"  would squelch.  As you're doubtless aware, the lifeblood of such a business is reimbursement.

 

I can tell you that your assertion that a "socialized medicine" as a gross concept will block innovation is totally unfounded.  Private payers presently have very little of the kind of responsiveness to customer interest that would prompt paying for our services.  Would an HMO accept an expensive cancer test presently?  Hell no.  The major hurdles in reimbursement are:

a) getting BCBS to pay you (these are weird quasi-government entities, so it's hard to call them exactly private)

b) getting formulary coverage from Medicare.

 
That formulary care sets the amount of coverage and price level (since nobody can pay less than Medicare).  Until then, it's all about trying to get a few payers around the edges to pay for you.

What will introduce delays and reductions in service is cost containment, whether that happens via private payers (remember the hated HMO rules) or via public funding.  Either somebody's gonna pay for advanced services or they ain't.  As it happens, I share your concern that the few (mainly folks near death) are consuming vastly more than the many, and thus view cost containment as a critical element of healthcare reform.  And that will always involve the unpopular process of drawing a line between established, formulary care and "advanced" or discretionary care.

 

Basic, routine care should never be addressed by "insurance", as the care is not stochastic in the least - it's highly predictable, and therefore in a functioning market would be commoditized immediately.  So to prevent a rapid drop in quality (you probably know firsthand what happens when the market moves towards low-cost, low-quality medical employees), you will need government intervention at the low end.  And lo and behold, for formulary care government systems like Medicare and the VA have unparalleled satisfaction metrics and track records.

 

Leave aside the tiresome and dated socialism-bashing - nobody here's asking the government to provide the services, they're asking who's paying and under what rules.  The key discussions that needs to be had are:  how do we provide humane basic care to people (and guard against public health threats) at low cost, and how do we draw and enforce the line between that basic care and discretionary expensive care.

I never said "socialized medicine" would block innovation, I said it would likely reduce it...and only likely because the same people who insisted on socialized medicine would insist that private profits in all aspects of medical care be reduced.

 

That aside, your analysis is good, and it describes what good people are really doing; breaking the problem into small pieces and trying new approaches to each. 

Sure, the Declaration of Independence isn't a statement of our rights as Americans... it just says what our founders, who went to war against England, wanted in the aftermath of the war they waged.

And, the primary words were, "the right to life..."

We keep debating healthcare in economic terms and, in a lot of practical ways, we have to, but... health care equals life, in a lot of ways.  No sense in writing about a "right to life," if it's just to create a society where an illness can kill you jjust because you can't afford treatment.

There's no constitutional right to health care but, seems to me that the previous document that justified the war that made the constitution possible pretty much called for it, and called for it before it mentioned any sort of economic issue. 

thosethingswesay.blogspot.com

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