Category Archives: healthcare finance

Quote of the day

Marcus Davies, an official of the Saskatchewan Medical Society, on the difference between Canadians and Americans:

Us Canadians, we’re kind of understated by nature.  We don’t go around chanting ‘We’re No. 1!’ But you know, there are two areas where we feel superior to the U.S.: hockey and health care.”

The quote comes from an article in Newsweek by T. R. Reid, the guy who put together a documentary about healthcare around the world for PBS about a year ago.  Reid says that countries typically develop healthcare systems that reflect their national character and Canadians have built a system that neatly fits theirs: “ferociously egalitarian, but thrifty at the same time”.

So where’s the American national character on this issue?  Hugely confused, I’d say.  Americans are not radically less egalitarian or thrifty than people in other countries.  Unfortunately, many Americans think that their fellow citizens can get all the help they need though emergency rooms and charity.  Or that unregulated free markets are the answer.  Or, even if they aren’t the answe,r government intervention will just make it worse.  Thus, contrary to the example of virtually every developed country around the world, we are doomed to deliver healthcare in an unethical and wasteful way.

Even after months of debate and publicity it seems that large numbers of Americans have little idea what happening around the world or in their own country.  Lovely.

Update:  according to Bob Laszewski we Americans are confused about another matter:  we think the healthcare we receive is generally based on scientific evidence, when it’s not.

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Filed under brain dead media, dignity, healthcare finance

Whew

What an unbelievable relief to have Peter Orszag at the Office of Management and Budget.  Here he is introducing Obama’s first budget:

“The single most important thing we can do to improve the long-term fiscal health of our nation is to slow the growth in healthcare costs.  …the path to fiscal responsibility must pass directly through healthcare”

Orszag is one of the few people I’m aware of who really understands that the federal budget (and realistically everyone’s budget) depends on getting healthcare under control.  If McCain had won in November, we would be listening to someone railing against “entitlements” and “government waste, fraud, and abuse”, and the desperate need for tax cuts.

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Filed under economics, healthcare finance

No compromise

In his blog Paul Krugman makes the point that the stimulus bill before Congress isn’t going to end up with bipartisan support.  The GOP wants tax cuts and the Democrats want spending.  The difference of opinion isn’t so much a debate over the proper course of action, it’s a “collision of fundamentally incompatible world views”.  Says Krugman:

If one thing is clear from the stimulus debate, it’s that the two parties have utterly different economic doctrines. Democrats believe in something more or less like standard textbook macroeconomics; Republicans believe in a doctrine under which tax cuts are the universal elixir, and government spending is almost always bad.

Republicans certainly like tax cuts, but I think it’s important to be clear why. It’s not because they think tax cuts will pay for themselves (even though they say so); it’s not because they don’t like the government to spend money (see Iraq War, et al); it’s not because they are particularly greedy (well, maybe it is, but let’s just stipulate that one).  It’s because the massive borrowing required by tax cuts will eventually accomplish what they can’t accomplish through more straightforward means:  destroy broad based social insurance programs like Social Security and Medicare.  This is the “fundamentally incompatible world view”.  For the modern conservative Social Security and Medicare are “European-style socialism”.  And if Obama tries to pass anything approaching national healthcare, he’s going to have a major collision with that world view.

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Filed under economics, healthcare finance, social insurance

Chart of the day

This is kind of fun.

The economists at the Center for Economic and Policy Research have put together an interactive chart demonstrating the effect of healthcare spending on the federal budget.  You can look at the federal budget as projected by the Congressional Budget Office—and recoil in horror as the deficit, which has bubbled along at 0 to 6% of GDP for decades, explodes to 50% of GDP by 2080!!!

budget-deficit-baseline

Then you can see how that projection would change if the US could deliver healthcare as efficiently as, say, Australia, Canada, Germany, or the UK.

budget-deficit-compared

If the US healthcare system wasn’t so grossly inefficient we would be projecting a massive surplus.

Update:  by the way, this is just healthcare.  No change whatsoever to Social Security.

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Filed under economics, healthcare finance

Health care stimulus

One of the strange things about our current economic situation is that, over the long run we need to save MORE, but over the short-term we are saving TOO MUCH.  Over the past ten years or so we have been saving almost nothing and consuming with borrowed money.  And the borrowing was against an illusory asset—housing prices in a bubble. Not good.

But now, fear has caused people to spend too little.  People are even afraid to save money in traditional ways; its all going to the safety of US Treasury securities.  So we need the federal government to step in and fill the gaps.  First we need massive spending to stabilize the economy; then we need a prudent level of savings to provide for investment over the long term.

Over at TNR Jacob Hacker makes the case for healthcare reform as the perfect stimulus:

During the campaign, skeptics complained that a health care overhaul would involve a lot of upfront costs and that the saving would only come later. But that’s exactly what we need right now. Health care involves major spending in the near future, but, more than other initiatives, it will put a brake on federal outlays in the far future.

Exactly.  Hacker has some of the detail of how this will work in the short-term, but in the long-term it could be a huge savings, plugging a large portion of the $53 trillion hole in the federal budget that our accountant in chief, David Walker, likes to talk about.

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Filed under economics, healthcare finance, social insurance

Fear Disbelief Relief

No posts since November 2.  What happened?  I think I’ve been going through the 3 stages of political grief (in reverse).

At first it was Fear that despite polls, Obama wouldn’t win.  Then, Disbelief that he actually won.  Then Relief that someone with brains, maturity, and a coherent value system is actually going to be running country; that he will be backed by large majorities in both houses of Congress, and all of this is happening after 8 long years of idiocy.  Whew. Unbelievable.

In any event, this is a blog, so what’s the topic of the day?  Ah yes, the auto industry.  To bail or not to bail….

I have a love/hate relationship with the big American auto makers.  I love my car.  I’m not sure I love Detroit cars.  At the same time American automakers literally invented the car market:  Henry Ford,  Louis Chevrolet, Cadillac, Nash, Packard….on and on.  It’s an American success story.  How can we just toss this industry overboard?  Particularly at a time of economic panic.  Do we really want to dismantle Ford and GM in bankruptcy court?  I don’t.  Would Japan or Germany dump on their major manufacturers that way?  No.

GM and Ford certainly have their problems; some of them self-inflicted, other not.  One that’s not, is their “legacy costs” associated with providing health insurance for retirees.  GM got efficient.  Now they have far more retirees than workers.  Should they be punished for that?  No.  Health insurance should have been nationalized fifty years ago, but the radical right blocked it then, just like it’s blocking it now.  It was a massive error to ask employers to provide insurance that really should be social insurance.  Now GM is paying the price.  And so are we.

But the radical right still doesn’t get it.  Yesterday, Mitt Romney announced that he favors letting the Big Automakers die.  Who cares what it does to the economy.  Apparently he puts Country Second and Destroying Unions First.

One other thought:  the automakers are asking for a $25 billion loan.  A lot of money.  But is it really?  Last time I checked, corporations were accumulating huge amounts of cash.   For example, Exxon (according to their 6/30/08 10Q statement) has accumulated $35 billion in cash.  That’s not just equity or working capital or short-term investments.  That’s cash.  I guess they can’t figure out what to do with it.  Maybe they should loan it to their friends at GM who make the cars that use their fuel.

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Filed under economics, elections 08, healthcare finance, obama, radical right

Accountant vs. Tsunami

Apparently America’s chief accountant, David Walker, is now a movie star. From the NY Times:

The movie, “I.O.U.S.A.,” debuting Aug. 21, is an 87-minute alarum on what it calls the tsunami of debt bearing down on the United States’ future, caused by the rising national deficit, the trade imbalance and the pending costs of baby boomers cashing in on entitlements.

Early reviewers have dubbed the film “An Inconvenient Truth” for the economy… .

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“I.O.U.S.A.” offers up as its action hero David M. Walker, former head of the Government Accountability Office. With movie-star looks that scream “accountant” rather than “Terminator,” Walker has been the Cassandra — or Chicken Little — of America’s growing deficit for some time. …

His message

“You probably know that the national deficit is $9.6 trillion and rising. What you don’t know is how bad things really are. If you include all the unfunded entitlement obligations — Social Security, Medicare, Medicaid and so forth — we are actually in a $53 trillion hole, Walker says.”

Action Accountant vs. Debt Tsunami. Actually, I think the premise has promise. Think Paul Revere. But maybe that’s just the accountant in me speaking.

Unfortunately, as I’ve written before, those like Walker who focus on cutting “entitlements” and federal spending as a solution to the problem are barking up the wrong tsunami. The problem isn’t entitlement programs; the problem is healthcare costs. That’s how they come up with a “$53 trillion hole”, by projecting trends in healthcare costs into the indefinite future.

Healthcare costs are a tsunami no matter who pays them, but if, as Walker says, the federal budget deficit is the problem, I have a simple solution: have the government get completely out of the healthcare business and have employers and individuals cover all the costs. Presto, problem solved!

Unfortunately that would simply move health care finance into the private sector;  Instead of taxes and debt service eating up a huge portion of our income, health insurance premiums and out-of-pocket costs would be eating up a huge portion of our income.   It would rearrange the deck chairs on the Tsunami, so to speak.

But, to paraphrase Walker,it’s really worse than you think. It turns out that healthcare financed by the private sector is even more costly than healthcare financed by the government. So, pushing more people into the private healthcare system (cutting back Medicare and Medicaid) would likely increase the problem.

I realize this is counter intuitive to free market believers, but the facts speak for themselves. Not only is our own public sector more efficient than the private when it comes to healthcare, if we look at other countries that adopted universal healthcare decades ago, we find them spending 3-8% less of their income on healthcare with similar or even better results.

The unavoidable (and apparently inconvenient) truth is this: we have the most private healthcare system in the world; it is also the most expensive. It’s hard to imagine how privatizing it even more would decrease costs, yet that’s the solution implied by those who want to cut government spending on healthcare and push even more people into the private sector.

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Filed under economics, healthcare finance