Relative to baseline forecasts, ACA and otherwise

by on April 17, 2012 at 7:08 am in Economics, Medicine | Permalink

Ruritania is fighting a war, and the status quo setting is that 90,000 lives will be lost each year.  General Blythe comes up with a plan that increases the chance of winning the war, but is likely to cost 120,000 lives a year.  He claims his plan costs only 30,000 lives a year, relative to baseline.  General Smythe has a war plan which on net costs only 80,000 lives a year, so he argues that his plan saves 10,000 lives a year.

In comparative terms these claims are not incorrect, and there are obvious reasons why bureaucracies should draw up such estimates.  Yet an anti-war group, SDS, argues that the real cost of the war is 90,000 lives each year, and that the one alternative plan costs 120,000 lives a year and the other 80,000 lives a year.  If you are rethinking the entire war, the SDS estimates are relevant.

If we are going to keep at the war no matter what, the estimates of the Generals may be more useful.  In the meantime, the generals get upset that SDS is stepping out of the framework of policy discourse and refusing to offer or accept numbers “relative to baseline.”  Discourse fractures and names are flung.

To translate that into 2012, the “war” is the joint view — extremely common in America — that a) tax revenues are on an acceptable track, and b) we should spend more and more on health care each year at high rates, including in per capita terms.

If you think that dual project is sustainable, you may be relatively interested in estimates relative to baseline.  If, like me, you think that project is like a failed and failing war, a success “relative to baseline” won’t much impress you.  In fact it may scare you all the more to hear about success relative to baseline, as that can be taken as a signal that there is no really good plan behind the scenes.  Here are a few factors which could radically upset current mainstream baselines:

1. Rates of growth stay in the range of 1 to 1.5 percent, see the work of Stock and Watson, top macro econometricians.  Try redoing budget projections with those numbers.

2. Real rates of growth are higher than that, but they take the form of non-taxable pecuniary benefits.

3. Growth rates are acceptable, but more and more of economic growth is captured by private capital, which is difficult to tax for either mobility or political economy reasons.

4. The United States may need to fight a major war, or prepare to do so.  (I do favor cutting the defense budget now, but we can’t be sure that cuts can last.)

5. The political economy of revenue hikes and/or spending cuts becomes or remains intractable.  Buchanan and Wagner have been stressing this point for decades.  A decision to borrow forty cents of a dollar spent, right now, may end up as more or less permanent, at least for as long as markets allow.  Ezra’s excellent posts about how far “right” the Democratic Party has moved on taxes are along these lines.

6. Another major recession may arrive, perhaps from abroad.

7. Life expectancy goes up a few more years than we had thought, yet productivity for the elderly doesn’t rise in lockstep.  You don’t have to think of that as “bad news,” but it still would be a major fiscal problem.

Maybe none of those are modal forecasts, but add them all up and I say the probability of being way off baseline is greater than 0.5, and possibly more than one of those problems will kick in.  In expected value terms, the costs of those possible fiscal scenarios loom very, very large (yet suddenly the modern liberal desire to think in terms of “worst case scenarios” has diminished).

Imagine people sitting around in Spain, in 2006, debating various scenarios relative to the “baseline budget.”  Maybe that’s America today, though we do not face the same particular problems or timing that Spain did.

Now enter Chuck Blahous, who wrote an article charging that ACA is likely to prove very costly, and that we are spending our cost savings on Medicare and other programs in advance, when we in fact need those cost savings to restore fiscal sanity.  You will find responses here from Ezra Klein, Kevin Drum, Paul Krugman and there were many others, accessible through Google, Blahous counters here.

I have reread the Blahous article carefully, with an eye toward judging whether Blahous is simply playing “baseline games,” as some of the critics allege.  I do not see that he is.  He stresses that he is making economic, practical, causal, and public choice arguments, and that those trump baseline games in importance.  He is trying to get us out of an obsessive focus on the baseline game, not play it in some misleading way.

To be sure, my view, or at least my emphasis, is different from that of Blahous in at least two ways.  First, he is more worried about the political economy of Congressional responses when the trust funds are exhausted, whereas I am more worried about the list immediately above (that said, Blahous very clearly does discuss several other major concerns besides double-counting and he may well agree with these broader worries too).  Second, my inclination is to focus on the entire budget, as a unified entity, and not so much stand-alone ACA (or Social Security, as in other debates) per se.  I suspect Blahous may well agree with me, but as a more active budget analyst/specialist than I am he is forced into debates on stand-alone analyses, whereas I can play the role of aloof blogger.  In any case, “fixing” this difference of emphasis would strengthen rather than weaken the overall thrust of his argument.

At the end of the day, I agree with the basic point of Blahous, which is that ACA, should it stand, is spending potentially available budget savings which we will need for other purposes.  I also would argue, though I do not have space to do so here, that this has become standard practice in American politics, with Democrats too.

Here are some choice words from Steven Rattner, who worked at Treasury under Obama:

Given that context, the government’s accounting practice — counting $748 billion of cost savings and $259 billion of revenue increases toward both Medicare and the cost of the Obama plan — is particularly troubling. Moreover, this problem is largely hidden from public view.

Under Washington’s delusional rules, budget crunchers in both the White House and Congress credit this $1 trillion twice: once in calculating that the care law will generate more revenues than costs, and again in concluding that the Obama plan will chip away at the Medicare problem.

You can argue that Rattner isn’t quite correctly describing CBO procedures in his piece, but on the economic and causal arguments he, like Blahous, is essentially correct.

At the end of the day, economic models do not use a “relative to baseline” framework.  The effect of “Delta G,” “Delta T,” or any other variable, depends on realized and expected values of that variable and others, and not that the size of that variable relative to what other people are proposing.  As I mentioned above, “relative to baseline” does have legitimate bureaucratic and accounting uses.  But we should not let it blind us to a) the divorce of that mode of reasoning from traditional economics, b) the likely unsustainability of our current fiscal path, and c) that the actual reality of ACA and other policies that we are spending “cost savings” as soon as we create them or even sooner.

Addendum: I am happy to call out the various Ryan budget proposals as unworkable fiscal disasters, most of all on the revenue side.  I also refused to endorse the 43 Bush “tax cuts” at the time, though I was sent one of those pieces of paper to sign.  No point in throwing the “Team Republican” charge, which in any case disrupts discourse rather than advancing it.

david April 17, 2012 at 8:05 am

Blahous-troversy, briefly: is the ACA being compared to a hypothetical universe where there are cuts to Medicare, or to one without cuts?

It’s very tempting to play rhetorical baseline games, alas, which is probably how this:

“… the “war” is .. the joint view .. that a) tax revenues are on an acceptable track, and b) we should spend more and more on health care each year at high rates, including in per capita terms. … [I] think that project is like a failed and failing war”

turns into this:

“I agree with the basic point of Blahous, which is that ACA, should it stand, is spending potentially available budget savings which we will need for other purposes. I also would argue, though I do not have space to do so here, that this has become standard practice in American politics, with Democrats too.”

Oh come on, it wouldn’t have been that difficult to rewrite this so that it is clear that your assertion is about a (justified fear of a) ‘need for other purposes’, rather than the ACA per se. A lot of the sound and fury over Blahous is already over whether he is saying something trivial and then waggling his eyebrows to suggest something else, why contribute to that?

Doc Merlin April 17, 2012 at 8:02 pm

“is the ACA being compared to a hypothetical universe where there are cuts to Medicare, or to one without cuts?”

Baseline is not only without cuts it is with an iirc 6% increase year to year.

Teddy Groves April 17, 2012 at 8:07 am

I wonder if Tyler’s argument would also benefit from an even wider focus on the whole moral picture, including the not-obviously-fiscally-accounted-for costs/benefits of the ACA like the prospect of better-distributed or more accessible healthcare and so on. I think that many of his soon-to-be accusers might tacitly be thinking that, all things considered, the non-ACA scenario would be even worse than the fiscal disaster scenario, and this perhaps partly explains the accusations of partitioning of moral space misleadingly. This view might be obviously wrong and irrelevant to the baseliners’ explicit arguments, but I think it would be more charitable to suppose that the opponents have it than to portray them as partisan discourse disrupters.

Ryan April 17, 2012 at 8:16 am

People who want to socialize health care in any way (ACA, “single-payer,” whatever…) see health care as a public good. “We” spend money on health care and “we” face rising costs, therefore “we” should do something about it.

Once they are allowed that assumption, there is no possible counter-argument to be made. If you see the whole issue as what “we” should do about “our” rising health care costs, then the only prognosis is to fall headfirst into the “evidence-based cost effectiveness” vortex. A few of them admit that this is rationing, but somehow believe that a central authority’s rationing for individuals is equivalent to a market-based situation where we all have an equal fighting chance to provide for ourselves.

The issue isn’t “what would be best?” The issue is whether or not you’re the kind of person who sees issues as collective problems that require collective solutions. Some do, while others reject the whole idea as offensive. I think *any* dialogue in that kind of environment is bound to miss the mark.

Andrew' April 17, 2012 at 8:22 am

Wow. I cede all my time to Ryan.

david April 17, 2012 at 8:39 am

“a market-based situation where we all have an equal fighting chance to provide for ourselves.”

… we have equal incomes or ability to earn incomes? News to me!

TmC April 17, 2012 at 9:39 am

You missed his last four words.

Mike April 17, 2012 at 10:11 am

Give the full sentence another pass. He’s saying that some think that the central planner can give us the same outcomes as if that were true. If it were already true, no one would be advocating for the central planner’s disruption.

dead serious April 17, 2012 at 9:37 am

Fine. Eliminate the military and the MIC entirely.

The chance that someone in my family is at some point bankrupted by the healthcare system such as it currently exists is far greater than my home being invaded by foreign invaders.

Mike April 17, 2012 at 10:15 am

Not to be (too) snarky, but that wouldn’t balance the budget (especially if you look out a few years), so the health system would still be able to bankrupt you or your family. And no military would tend to increase the chances of foreign armies invading. Switzerland may stay neutral and not have been invaded recently (or have invaded anywhere else), but they also have compulsory military service just in case.

Andrew' April 17, 2012 at 11:23 am

I briefly interrupt Ryan’s use of my time to present THE KEY POINT

“These and countless other statements contradict the theory—on which the scorekeeping convention depends—that the extension of Medicare solvency is a budgetary non-event that leaves Congress just as likely to enact the same amount of further Medicare cost constraints as before the ACA was passed.”

Greg G April 17, 2012 at 11:53 am

Ryan, I guess I do have to admit that I am “the kind of person” who thinks that formulations like: “WE the people of the United States….” and “WE hold these truths to be self evident…” can be useful.

To be even more specific, I am not the kind of person who thinks that complex social problems can be best handled by simple rules like this. Almost everyone agrees that some problems require collective solutions. Urban sewage disposal and military defense come to mind as examples. “What would be best?” is a much better question to ask than “What ‘kind of person’ was that?”

Ryan April 17, 2012 at 12:24 pm

Greg, what I’m getting at is that if you are comfortable socializing your own personal health care costs onto the rest of your country, then there is really no way I can address the question of “what would be best?” in a manner that you would accept.

I can prove that socializing health care reduces supply, that’s easy.
I can prove that subsidizing health care costs more money for more “ordinary people” than just leaving people alone. That’s easy, too.
I can also show you that every historical example of socialized health care leads to bankrupt systems in which the pool of available treatments and the degree to which we receive patient-specific prognoses continually shrinks. Absolute child’s play to show that.

But what is the point of all of that if – before the conversation even begins – you have already managed to convince yourself that the problem in question is one that must be solved through collective action? Why even begin a conversation about the benefits of an extra-political solution to such problems if you have already decided that you aren’t willing to think about it?

We’d just be talking past each other. So why bother? No discussion can take place unless and until the parties involved share some sort of common universe. Collectivists don’t believe in individualism. Individualists don’t believe in collectivism. End of dialogue.

Daniel Dostal April 17, 2012 at 12:49 pm

You’ve already admitted that rationing is the problem. This is not a collectivist vs individualist holy war. This is about where rationing occurs. But neither side will admit it because their constituents don’t realize that rationing exists, will exist, and is necessary.

Chuck April 17, 2012 at 12:51 pm

Well, we in actual fact do share a common universe.

We don’t share a common ideology, which in my experience is what really prevents communication and progress.

Greg G April 17, 2012 at 1:31 pm

Ryan, Health care has always been rationed in some way and always will be. My own opinion is that market mechanisms should be an important part of how that works but cannot solve the whole problem. If I get in a car accident or have a heart attack or stroke the number of hospitals it makes sense for me to consider is one. People in that situation are not really shopping in a marketplace. And would you have hospitals turn away accident victims who cannot afford care or is it good that some of that is now “socialized”? I’m not sure of the best way to fix healthcare and my views don’t fit into the isms you have on offer here.

You present a false dichotomy in the form of a need to decide ahead of time whether to be ruled by a slavish conformity to rules of “individualism” or “collectivism.” A more genuine respect for individualism wouldn’t try to shoehorn every view into a Manichaean system.

Uninformed Observer April 17, 2012 at 1:53 pm

I’ll accept that car accident or heart attack or stroke victims aren’t really shopping in a marketplace for emergency care. But can we also accept that by and large they’re not the problem? Trauma and emergency care is a pretty small portion. The much greater portion is consumed by people very much in a marketplace.

Or at least, they would be if we let them.

Ryan April 17, 2012 at 2:02 pm

The “problem” is that people always want to pay less money and get more goods and services. The “problem” is scarcity. I’ll let you determine for yourself which method best reduces scarcity, in your opinion. My view is that economics solved that question a couple of centuries ago.

For the record, it is almost a certainty that my healthcare needs exceed yours many times over. I am one of those people whose health care needs will very realistically bankrupt me at some point in the foreseeable future. If either of us is ever going to be “turned away” at a hospital, it is me.

What I want is simply this: A chance to earn enough money to provide for as many of my needs as possible. Every tax, regulation, and government mandate that eats into either my total supply of health care or my ability to save for my own demise is an obstacle to my being able to get the health care I want and need. This isn’t hypothetical for me, it’s reality. I’ve lived the socialized medicine reality for nearly 10 years, and I can tell you, I don’t want it. If experience both as a consumer and a health economist is worth anything, that’s what I can tell you.

But again, I have never had a conversation about this with anyone who took these things seriously, unless they already shared my basic world view. For everyone else, I am always some kind of “exception” whose real-world experience with socialized health care doesn’t matter or is a bad example, or whatever else.

The dialogue simply doesn’t matter. People don’t want to change their minds. People don’t want to learn. People don’t want to consider that they might be wrong.

Greg G April 17, 2012 at 2:31 pm

Ryan, This isn’t hypothetical for anyone. I have two family members I am responsible for who have progressive disabling diseases. I believe that you are arguing in good faith and doing your best to pay your own way as I am also. If either of us are bankrupted by medical bills then our bills will fall on somebody else. That is one reason why some people feel that health insurance should be compulsory. It addresses the free rider problem.

Do you include yourself among the “people who don’t want to consider that they might be wrong?”

Greg G April 17, 2012 at 8:00 pm

Uninformed Observer, the things that make health care more resistant to market solutions than most problems go way beyond trauma and emergency care.

For example, doctors have a financial incentive to recommend more of what they are selling and health consumers often lack the knowledge to evaluate those recommendations. Yes, there is some asymmetry of information between sellers and buyers in almost any field but there are very few places where this is a bigger problem than healthcare.

Paul B April 17, 2012 at 1:44 pm

“Collectivists don’t believe in individualism. Individualists don’t believe in collectivism. End of dialogue.”

Ok, so where does that leave us? Do the self-aware collectivists and individualists retreat to their relative camps and try to convince the bulk of the voting public with over-simplified, misleading, and crass arguments? Can one side ever really win? Are more people actually individualists being hoodwinked by crafty collectivists? Or vice versa? If there is no room for compromise on healthcare, is there room for compromise on any issue of government? At any level?

Ryan April 17, 2012 at 1:54 pm

A compromise between a collectivist and an individualist results in more collectivism than an individualist would prefer and more individualism than a collectivist would prefer. Both sides lose. No, I don’t see compromise happening any time soon. I would really love if we as a society could figure out how to advance the dialogue, though. I’m just at a loss as to how.

Tom April 17, 2012 at 2:27 pm

Ryan, yes, part of the definition of a compromise is that both parties gains something and both parties lose something. And people compromise everyday, much more frequently than them getting their way completely. The inability to reach compromise is an abnormal state. You portray compromise flatly as “both sides lose,” as if that means achieving compromise is inevitably impossible. But that’s a silly mode of reasoning.

mpowell April 17, 2012 at 6:12 pm

Given the contrast in health care expenditures per person in many western european countries and health outcomes to what we have in the United States, I do not think it is easy to ‘prove’ what you think you can prove. You are assuming that all health care consumption is equally valuable. That is wildly wrong. I’ll grant that state coordination will undoubtedly be some form of rationing (but you can always have top off insurance if you really want it!), but it also includes a host of additional opportunities for efficiency improvement and the elimination of waste in insurance management processes. Without good examples, you might think these efficiency improvements are unattainable. Except that that cost/care tradeoff appears to have been improved in all the cases we can examine.

UnlearningEcon April 18, 2012 at 6:56 am

Resources are ultimately scarce and so every system must ration healthcare in some way. State systems do it by only selecting the most efficient drugs. Private systems do it by not treating some people. I know which I’d prefer.

‘I can prove that socializing health care reduces supply, that’s easy. I can prove that subsidizing health care costs more money for more “ordinary people” than just leaving people alone. That’s easy, too. I can also show you that every historical example of socialized health care leads to bankrupt systems in which the pool of available treatments and the degree to which we receive patient-specific prognoses continually shrinks. Absolute child’s play to show that.’

Please, back up your assertions. The UK’s NHS has reasonably low costs and always does fine for quality as far as international comparisons go.

And individualism versus collectivism is a false choice. If you genuinely believe that you either think people are isolated individuals separate from their environment and others, and think your opponents see people as nothing more than a herd of cows, then the dialogue truly is over.

Dan Weber April 18, 2012 at 2:32 pm

State systems do it by only selecting the most efficient drugs. Private systems do it by not treating some people.

That doesn’t seem like an accurate distinction at all. Private systems love to encourage generics. Many state systems (like NICE for NHS, which you reference) explicitly won’t cover everyone for everything if they don’t provide enough QALYs for the dollars spent.

If you want costs contained, at some point someone is going to get told “no,” no matter whether the system doing it is private or public. Lots of people pretend their favorite system won’t have this happen. They are wrong. Either health costs crowd out everything else, or people eventually get told “no.” We can’t proceed at all if people think they can avoid this.

UnlearningEcon April 22, 2012 at 2:47 pm

Fair point, but there’s a difference between telling everyone ‘no’ some of the time and telling some ‘no’ all of the time.

Costard April 17, 2012 at 12:29 pm

What is “best”? To preserve life at all costs? Respect personal dignity? Ration services practically? Defer to the wishes of the individual? There is no consensus on the proper role of medical care – this is an ethical and philosophical and often religious argument, not an evidentiary one – so what makes you think we can agree on a “collective” solution to what is essentially an individual problem? You are beginning from an assumption, and this was Ryan’s point. Some of us see healthcare as a personal choice, and an intimate part of other lifestyle choices that will increasingly fall under the regulatory scope. If individual liberty is as much an ideal as is personal health – and if people are justified in preferring one or the other – then perhaps you can see why this is a debate that will never be amicably resolved, and why there are those who believe that, fundamentally, healthcare is not a public good.

Daniel Dostal April 17, 2012 at 12:55 pm

It is necessarily a collective solution. We are a legal state with a governing body that we elect. The shots are called by elected officials for everyone in this country. All of human existence is a tug and pull between my personal desires and those of everyone else. Suggesting that any one of us can ignore the desires of everyone else is pointlessly idealistic. Holy wars are lame.

Andrew' April 17, 2012 at 1:46 pm

“All of human existence is a tug and pull between my personal desires and those of everyone else”

That’s what the man said. I don’t believe this. If you want to overpay for healthcare, I’m fine with it, as long as you don’t also force me to overpay for healthcare.

Daniel Dostal April 17, 2012 at 3:02 pm

You do realize that by me paying more for healthcare signals healthcare providers that they can charge you more as well, right? Collectivism happens without government involvement.

MD April 17, 2012 at 12:48 pm

Communist.

Greeneyeshade April 17, 2012 at 2:16 pm

“The issue is whether or not you’re the kind of person who sees issues as collective problems that require collective solutions.”

Actually, the issue is whether or not you’re the kind of person who understands that many issues that are collective problems defy “collective solutions”, because they are premised on the twin fallacies of superior centralized knowledge and political impeccability and in many cases, are the result of the unanticipated effects of previous efforts at “collective solutions”.

Government has been meddling in healthcare (and longer in the medical arts) for close to three quarters of a century. Maybe this time they’ll get it “right” and it’ll magically stay that state of rectitude.

The Original D April 17, 2012 at 3:04 pm

This is a false dichotomy. It’s possible to reside on a spectrum, and within that spectrum there are degrees of priority/importance.

If you’re offended by collective action, are you therefore offended by the very idea of a municipal police force? Of a judicial system to protect your property? No doubt some crank will pop up to argue it all should be privatized, but back in the real world we balance the need for collective action against individual responsibility on a case-by-case basis.

You’re trying to make the argument into “what kind of person are you” vs. the merits of a given policy in the context of a diverse society.

Greeneyeshade April 17, 2012 at 4:39 pm

I am not “offended” by “collective action”. I am skeptical of it when it is not used to address the provision of actual public goods (nonrivalrous and nonexcludable, as opposed to private goods peddled by politicians as vote buying schemes). Like fire, government is a wonderful servant, a fearsome master and all-consuming when wielded by the political equivalent of the pyromaniac-the statist politician.

The constabulary, fraught as it is with corruption and misuse of force is a legitimate government function. I’m not sure why you bring up municipal police forces, except as a red herring, because it is an example of decentralization, not centralization. LIkewise for the judiciary. Both are necessary evils required for civil society. Not everybody that opposes federal involvement in everything is an anarchist.

However when it comes to healthcare, we’ve had innumerable “collective actions” starting with unanticipated side-effects of WWII wage and price controls that limited cash remuneration, but not in-kind payments and thereby causing a critical mass of employer sponsored plans, the enactment of Sec. 106 of the Internal Revenue Code, which exempted employer paid premiums from tax on an unlimited basis as a part of the 1954 recodification and accelerated that same phenomenon, the creation of Medicare and Medicaid (another “collective action”), the 1973 HMO act, et al. This doesn’t even count the state laws, because they have been the principal regulators of insurers since 1869 and the medical profession from the creation of the states.

So I am considering the specifics of the matter. Unlike people who traffic in red herrings and nebulous platitudes like “merits of a given policy in the context of a diverse society”, I understand that the “diverse society” is best served by markets, rather than top-down autocratic solutions that always make promises of perfection, but deliver ever more problems, and insist on stultifying conformity. I especially understand that when the “collective action” was a 2700 page monstrosity that wasn’t even read, let alone comprehended, its pathetically naive to think such a thing could achieve its stated purpose.

Bender Bending Rodriguez April 17, 2012 at 6:33 pm

You’re missing the point. When he calls you out for not denouncing a municipal police force, you’re supposed to blithely accept that he’s won the
debate and that you need to buy a one-way plane ticket to Somalia. It’s all black and white: Shades of grey are not permitted.

Greeneyeshade April 17, 2012 at 11:04 pm

Oh. I thought it would be more fun to bury the troll.

Michael Cain April 17, 2012 at 4:19 pm

“People who want to socialize health care in any way… see health care as a public good.”

I wouldn’t have said “public good”, which has a rather specific meaning, but rather they think that there is a floor on health care access which everyone should be above. Even Hayek thought that should be true in a wealthy country (like the US in the 1920s) and that the state would have to have a role in achieving that goal, before he got strange in his old age.

rz0 April 17, 2012 at 8:35 am

To beat the metaphor a bit further, the SDS offers an alternative to the baseline – no war. What’s the alternative to ACA – entirely prizatized health insurance, with no Medicare or Medicaid? If that’s the proposal, go ahead and say it. Be sure to discuss the political expediency of your proposal.

Tom April 17, 2012 at 9:42 am

+1.

Critique doesn’t always have to offer a positive alternative, but my god, American politics has been debating health care economics for over 40 years. One political coalition, out of desperation and desire to do at least something, has just passed and begun to institute a reform plan based largely on a plan developed by the other major political coalition, but never really pushed for by that coalition. And what Tyler’s really concerned about is now criticizing that reform plan, but not really working to develop or push forward a set of real solutions as a replacement.

Daniel Dostal April 17, 2012 at 1:17 pm

Tyler has rightfully given up on a workable solution. Re-read The Great Stagnation and tell me how any proposed solution is viable. The first steps in a solution is accepting our slowed economy and that our healthcare system has been supported by future growth for decades. We as a society cannot afford our healthcare and rationing must take place. Ending social programs certainly solves the fiscal problem, but that creates social problems that few libertarians seem willing to accept. And, as quickly evidenced by the discussion on this blog, compromise is unacceptable to everyone involved.

The best strategy is not to play and hope our government institutions stumble into a workable compromise for both fiscal and social problems. Are economists any good at predicting social outcomes? I’d love to get Tyler or Alex’s take on the social ramifications of libertarian healthcare reform in our current predicament.

Tom April 17, 2012 at 1:28 pm

A lot of this seems like shrewd analysis to me. Thanks.

But I don’t really agree that there isn’t room for compromise. The Democrats have been willing to compromise: Dems (when they’ve been in sufficient majority power) get an expanded social program, Repubs get to extensively shape the institutionalization and cost-cutting. In that compromise, each party gets adequate cover for politically difficult manouvers and each party can trumpet a major desired party-ideological objective (Dems – social insurance, Repubs – fiscal prudence, responsibility, social stability).

Daniel Dostal April 17, 2012 at 1:36 pm

I do hope you are correct. This whole issue worries me about my (and my country’s) future.

Tom April 17, 2012 at 1:42 pm

I guess what I’m saying is, while one can always mount a structural analysis of some sort to prove that things only ever could have happened the way they did, I don’t actually think 2009-10 debates needed to turn out the way they did. It was a failure of nerve on the part of smart, powerful GOP leaders (politicians and thought leaders) that they didn’t play their hand differently and accept some path toward solving the health care/insurance problem. In these matters, I side with some of David Frum’s critique’s of the GOP in sacrificing policy to politics in a way that will ensure their longer term defeat on politics.

Andrew' April 17, 2012 at 2:06 pm

When did they say they could never revisit it and I must have missed the memo stating that during the great recession was the only time it could be fixed?

Now a poll shows 2/3rds prefer spending cuts over tax increases. I’ll take the other side of Frum’s wager.

ghostofwilliamsafire April 17, 2012 at 8:46 am

Please stop saying ‘at the end of the day’.

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Bender Bending Rodriguez April 17, 2012 at 6:35 pm

By enlarge, and maybe even for all intensive porpoises, I’m going to ignore you now.

Daniel Dostal April 17, 2012 at 1:18 pm

I had a co-worker who used that phrase to mean “I just said a bunch of stupid things, so we’re restarting the conversation”. It constantly bothers me. The repetition is probably good for my brain though.

Orange14 April 17, 2012 at 8:47 am

The ACA was always a kludge because 1) single payer would never pass and 2) any coherent private sector approach would never pass. One can argue whether Blahous is or is not correct and come up with different scenarios to prove either case. The more fundamental problem is whether the US can afford to spend twice as much per capita on health care than any other developed country. I think that most everyone will answer this as NO we cannot. Thus, one is left with how to solve this problem. The ACA does attempt to do this and has been roundly criticized by the Republicans who want to repeal it. I still have not seen the Republican counter proposal regarding how to control costs and get them in line with other countries (a number of whom have private insurance as part of the national healthcare; remember that not everyone is England with a socialized National Health Service). I’ve long been supportive of the original Victor Fuchs/Zeke Emanuel proposal to have a national sales tax fund insurance vouchers for everyone and eliminate Medicare and Medicaid. Of course this is too much of a legislative stretch which is another reason for the ACA. I’m generally pessimistic on the future of healtcare and believe the political exigencies will ultimately lead us to a single payer program. For disclosure purposes, I enroll in Medicare this summer so maybe I’m not the right one to propose solutions!

dead serious April 17, 2012 at 9:40 am

“The more fundamental problem is whether the US can afford to spend twice as much per capita on health care than any other developed country.”

Again, I say unto thee have a gander at our military budget. We have been spending orders of magnitude more than the rest of the world combined for decades. Where has the outrage been on the right side of the aisle at this “what we spend vs what other developed countries spend’ imbalance?

Cliff April 17, 2012 at 10:34 am

I’m confused. Are you saying the Democrats do not think it is a problem to spend way more on healthcare than any other country?

Bill April 17, 2012 at 10:54 am

Cliff, Our healthcare purchases are made in a market economy. If you would like to have a single payer, or similar mechanisms similar to other industrialized nations which have lower healthcare costs, just come out and say so.

Urso April 17, 2012 at 11:11 am

“Our healthcare purchases are made in a market economy.”

Yes, prior to the ACA I can’t think of a single government regulation affecting the provision of health care or health care insurance. The very epitome of laissez faire.

Cliff April 17, 2012 at 12:26 pm

Bill,

What in the world are you talking about? I am trying to understand the position of “dead serious”. I thought the Democrats were more concerned about this cost disparity than Republicans/others.

Bill April 17, 2012 at 2:24 pm

Urso and Cliff, What healthcare providers don’t like is having to bid for the pool. Didn’t you know that. Insurance agents aren’t happy either because there will be bidding without them either. The question you should have is: is bidding a market mechanism (answer: yes); will we have separating equilibria in insurance markets with very high prices and free riding without this (answer: yes).

Now, if Cliff wants single payer. rather than relying on market mechanisms. Urso, if you think insurance can exist without some form of regulation, I have a policy I want to sell you.

Urso April 17, 2012 at 4:40 pm

Of course I don’t think that. I think insurance is a heavily regulated industry for a good reason. But then, I’m not the one holding it up as a laissez-faire “market economy” when it’s actually anything but.

Ricardo April 18, 2012 at 5:42 am

In 2010, here is how HHS break down U.S. health consumption spending:

Government (unfortunately excluding public health programs and other miscellaneous government programs): $1,022 billion
Private health insurance: $848.7 billion
Miscellaneous third-party expenses: $247.1 billion
Out-of-pocket spending: $299.7 billion

So direct government spending was 42%. Other than that, it’s a total free market of course…

dead serious April 17, 2012 at 8:22 pm

I’m sorry you’re confused. Nowhere in my comment do I address anything about what the Democrats think.

My comment is in response to the faux outrage and sudden budget sensibilities on pet issues by Republicans while they simultaneously clamor for larger and larger military budgets that nobody needs.

If you’re seriously concerned about the national debt, cut the fucking military *for starters.*

Healthcare you’re going to have to pay for one way or another – either through the government via taxes or via increased premia as hospitals and healthcare providers aren’t going to have the fortitude to turn away the truly sick.

JWatts April 17, 2012 at 5:33 pm

“Again, I say unto thee have a gander at our military budget. We have been spending orders of magnitude more than the rest of the world combined for decades. ”

Sigh, either your guilty of extreme hyperbole or a basic misunderstanding of math, but either way that statement is:
a) completely wrong &
b) a non sequitur

You’ll never change anybodies mind with mindless rhetoric.

dead serious April 17, 2012 at 8:14 pm

You’re (sic) post is so full of speling errurs I can’t take your srsly. Dude.

What you quoted is in response to somebody else who claimed that we spend way too much – as compared to other first world countries – on healthcare. My point is that we also spend WAY too much – as compared not only to other first world countries but the rest of the entire world combined – on our military. Most of which is unnecessary.

And if I’m forced to choose a public good to support with my taxes – either baseline healthcare for everyone or crazy expensive military boondoggles that are supposedly “for everyone”, please give me the healthcare and do away with the military, the military industrial complex, and especially the contracting and outsourcing and black book budgets that we don’t even know about.

dan1111 April 17, 2012 at 10:14 am

Republicans have made various proposals for controlling costs. For example, market-based insurance reforms, tort reform, and replacing Medicare with a partially privatized system. What you think of these proposals probably depends on your political leanings, but I don’t hear anyone saying “Our health care costs are ok.”

I do share your pessimism about the problem in general. I don’t think either side is approaching the issue with enough seriousness.

Tom April 17, 2012 at 11:08 am

Responsible GOP members had a tone of chances to push strongly for those cost controlling measures back in 2009-10! Democrats in both the House and Senate would have allowed GOP proposals to be integrated into the final ACA legislation in exchange for more votes. But it would have entailed compromise in terms of policy, and a sense of realism in terms of how to deal with a governing situation when political power is not on one’s side (a desire to improve inevitable legislation should often take precedence over total refusal and demagoguing about “death panels” or acquiescing when one’s fellow coalition members are demagoguing).

byomtov April 17, 2012 at 11:15 am

Exactly.

It’s tiresome to hear complaints from Republicans about how this or that feature would have improved ACA tremendously. They were bent on defeating the whole thing, not shaping it.

msgkings April 17, 2012 at 12:16 pm

+1 to Tom and byomtov

Greeneyeshade April 17, 2012 at 11:05 pm

There’s an old expression- you can’t shine crap. It applies to Obamacare.

dan1111 April 18, 2012 at 6:15 am

The Republicans had zero real leverage in shaping the ACA. This is just common sense. The Democrats held a veto-proof majority and complete power to shape the bill. What incentive did they have to compromise? Furthermore, the conservative position was that the Democrats’ approach was disastrously wrong, even making things worse. Even if they could get some small concessions here and there, this would not have made supporting the bill worthwhile. From their perspective the best response was trying to defeat it.

Of course, the Republicans could have done much more when they controlled government. But that is a separate question.

Cliff April 17, 2012 at 12:27 pm

Ha! “Sure you could have gotten what you wanted, as part of a compromise where we shove really horrible policy that you cannot accept down your throat!”

Andrew' April 17, 2012 at 1:19 pm

I used to have a version of that conversation with my wife on a weekly basis.

I’d also argue that not only does it not make much sense that alternative proposals can only be offered during the time when the opposition decides the debate to happen, I’d argue that during the great recession was the worst possible time to have the debate.

Tom April 17, 2012 at 1:23 pm

Except the GOP didn’t even have sufficient alternatives that they really wanted to work to pass (because, remember, Democrats had already devised a bill for passage that followed Republicans’ existing avowed reform plans).

What other sufficiently comprehensive policies were the GOP considering in working toward solving the genuine problem of inadequate coverage and efficiency in health care and health insurance? The Democrats were open to them offering a bunch of policies and tweaks to further shape the GOP’s own original reform plan.

But the fact that they didn’t, and that they still haven’t been sufficiently honest with themselves about this, makes it hard to escape the conclusion that their political coalition, policy experts, and elite leaders simply didn’t see the problem as a true problem.

Andrew' April 17, 2012 at 2:16 pm

“Republicans’ existing avowed reform plans”

Are you talking about a think tank that talked about a mandate?

Andrew' April 17, 2012 at 2:17 pm

Btw, why should I care about the Republicans plan, especially if I think it is stupid enough to be accepted by Democrats?

Bill April 17, 2012 at 9:18 am

How about doin’ the expiration, and then continuation, of the Bush tax cuts relative to the baseline.

Or, how about criticizing tax cuts justified on “dynamic” models whiich presume that if we cut taxes, we won’t have a deficit.

Personally, I think our medical program–private and public–can’t get any more inefficient, meaning that someone’s going to make money taking money out of the system. It may be HMOs, it may be government, but it will come.

I would love to write a book taking collecting economic projections of x or y into the future, and then seeing what really happened twenty years later.

tt April 17, 2012 at 9:21 am

please, reality doesnt matter.
your job is to defend team R, well done.

Cliff April 17, 2012 at 10:35 am

Yes, Tyler is paid by the GOP to encourage veganism and immigration

Andrew' April 17, 2012 at 2:21 pm

And to promote The Fed as The Hero of the recession. And to promote state government bailouts. And to favor Barack Obama. We could go on-and-on. It’s hopeless.

Greeneyeshade April 17, 2012 at 11:09 pm

And his disclaimer is meant to assure his friends that he hasn’t left the reservation.

Shamus April 17, 2012 at 9:27 am

Health care in the US is incredibly expensive primarily due to rent seeking by incumbents. Changing this would require either a huge political fight or some surprising contrary trend (new technology, medical tourism, or something else) . The US has effectively already socialized health care, but done so in an economically inefficient manner.

Regarding the fiscal issue raised by the article, events in early 2013 may be interesting. I wonder what would happen if Obama wins reelection while Republicans gain control of both houses of Congress. It seems to me that it will be hard to deal with the expiration of the Bush tax cuts during a lame duck session, and harder to deal with raising the debt ceiling in the new Congress. This may have the effect of handling budgetary problems through an unanticipated austerity program.

Bender Bending Rodriguez April 17, 2012 at 6:38 pm

…expiration of the Bush tax cuts during a lame duck session…

What Bush tax cuts? They expired and were replaced by the Obama tax cuts.

Brian April 17, 2012 at 10:00 am

Blahous’s study: “when the trust fund reaches its expiration, it would automatically cut benefits.”

Blahous on the Washington Journal on CSPAN: “….So I would just say with respect to the viability of Medicare, you have a bipartisan commitment to upholding that…The caller should remain confident that the Medicare system will be kept solvent as it has for several decades”

Blahous: “I certainly didn’t do [the study] wearing my hat as a Trustee.”

Urso April 17, 2012 at 10:32 am

“Blahous’s study: “when the trust fund reaches its expiration, it would automatically cut benefits.””

Kinda reminds me of the chatter about the upcoming Mayan apocalypse. The Mayan’s calendar ended on Dec 12, 2012, so it must mean the world will end then. Medicare’s trust fund will run out in 20__, so it must mean that Medicare will entirely cease to exist on that date.

Jonathan April 17, 2012 at 10:37 am

No one thinks (including Blahous) that Medicare would really cease to exist. The point is that double counting the savings is inappropriate. You can’t both spend money to advance the Mayan calendar end date and use that same money to make yourself rich,

Steve April 17, 2012 at 10:50 am

Answer this easy question – is ACA projected to increase or decrease OVERALL costs? Hint the answer is decrease. The only way “double counting” gets into the picture is by intentionally twisting the numbers. This isn’t hard – if you are objective.

He He He Whaaat ? April 17, 2012 at 11:20 am

You do realize that it decreases cost via an additional 3.8% tax on capital? So it is a bit disingenuous to say it decreases cost, because if this new tax is sensible and doesn’t hurt the economy, then it could have been raised to pay off the existing obligations, but instead it’s being raised to pay off additional obligations. So those additional obligations most definitely do not reduce the deficit :)

imagine I make 10 thousand a month after taxes and I am spending 11 thousand a month on my credit cards which I can’t afford. So now suppose I get my manager to give me a raise of 1100 dollars a month. I have an extra 100 bucks. Does it make sense for me to raise my spending 95 bucks and claim that that was a deficit reducing measure? or should I take the extra 100 bucks, apply it to paying off my credit cards, and also reduce spending for the same purpose ?

Steve April 17, 2012 at 2:18 pm

He He He Whaaat? – the point is that the increased taxes for ACA cover the costs of ACA plus it reduces some Medicare expenses (if we assume we are going to keep running Medicare that is). So true ACA does cost us more money but I am not sure it is possible to get something for nothing. In your example if I ask the guy who got the $100 raise how much he is saving per month he will say $5 more than I used to. You can tell him he should have saved more than just $5 but there is no way to deny he is saving more than he did before. The same is true of ACA. That is why people are dismissive of these complaints about the cost of ACA.

I believe there is plenty to complain about with regards to ACA. But this particular complaint holds no water.

He He He Whaaat ? April 17, 2012 at 3:09 pm

Steve,

if raising taxes was a completely costless proposition, your logic would be correct

the problem however, is that taxes do have economic consequences and they are also hard to enact and hard to get rid of. So if you are going to enact extra taxes, why use them to create new entitlements when you cannot afford the entitlements you already have ? I think that’s a very logical question.

in order to keep existing entitlements intact, let’s say we need an extra 100 dollars. Does it make sense to raise extra 3.8 dollars, spend 3.7 of it on a new entitlement and congratulate yourself that you “saved” 0.1 dollars? or does it make more sense to apply this 3.8 dollars you raised in order to actually finance your 100 dollar deficit ?

Steve April 17, 2012 at 10:37 am

+1

Anyone who reads this comment should understand the point of Blahous’s study was not to critique ACA but to undermine it.

JWatts April 17, 2012 at 5:45 pm

It’s really hard to communicate with people when they assume any criticism is from malice and automatically discount it. It’s something the Right is often guilty of, but it seems it’s become standard policy on the Left.

mw April 17, 2012 at 10:28 am

The confusing part of this argument is the assumption that somehow the cuts and savings in ACA were low-hanging fruit for restoring ‘fiscal sanity.’ But if you’re so concerned with political economy arguments vis a vis the future, why not the present? Are there actually people who legitimately believe ACA’s cuts (the bitter medicine) could ever have been passed without the expanded coverage, etc (the ‘goodies’)?

As an opposite example, consider that the most ‘reasonable’ right-wing-inclined people incessantly harp on the tax reform strategy of
‘broaden the base, lower the rates’ such that overall revenue goes up. Well, by an *identical* argument to that you make above, *any* such strategy must automatically *increase* the deficit–because we ‘need’ those broadened-base-savings to restore fiscal sanity. So in fact any broadened-base-lowered-rates strategy is totally fiscally irresponsible. What say you?

Cliff April 17, 2012 at 10:37 am

Wouldn’t that only hold if you immediately spent the revenue increase?

Rich Berger April 17, 2012 at 10:45 am

For an ostensibly free-market, pro-liberty blog (maybe that’s just Alex), individual liberty seems to play a very small role in Tyler’s analyses. Tyler also seems to take pains to disassociate himself from Republicans (eww!) that he doesn’t seem to take for Democrats on the left.

Tom April 17, 2012 at 11:13 am

Um, he just framed his whole post in such a way as to render inadmissible the point that moving toward more comprehensive health care coverage for citizens has moral value and has been proven eminently doable in many other advanced industrialized countries. So he pretty decisively disassociated himself from both leftwing positions and from mainstream Democratic positions.

UnlearningEcon April 17, 2012 at 12:21 pm

Who wouldn’t want to distance themselves from the Republicans in their current form?

larrym April 17, 2012 at 6:59 pm

Well let’s see – 21 paragraphs criticising the Dems, one paragraph on the Reps. So it’s hard for me to see what you are going on about.

I see at least two reasons why Tyler sees the need to disassociate himself from both parties. One, he clearly doesn’t believe that the Republicans as currently constituted are big defenders of individual liberty overall. Two, he is clearly VERY concerned about long term budget issues, and the combination of refusal to consider tax increases, refusal (mostly) to consider defense reductions, and pandering to the elderly on spending issues, makes the current Republican party deply unserious on long term budget issues. The Ryan plan doesn’t contradict this, but reinforces that.

And “the Dems are worse,” true or not, would be relevant only if Tyler pulled his punches on Dem behavior. Which he does not.

Floccina April 17, 2012 at 10:56 am

Relax their is nothing you can, the government will borrow as long as it can. Then it will deal with the problem.

Why Eliminating the Deficit is Technically Easy but Still Politically Impossible
http://un-thought.blogspot.com/2011/09/why-eliminating-deficit-is-easy-but.html

byomtov April 17, 2012 at 11:32 am

Doesn’t the picture change if the war is unavoidable – if Ruritania is under attack from a particularly nasty enemy, and the consequences of giving up the fight would be disastrous? Isn’t the underlying problem the continuing increase in health care costs?

the joint view — extremely common in America — that a) tax revenues are on an acceptable track, and b) we should spend more and more on health care each year at high rates, including in per capita terms.

I don’t agree with either of these propositions, and I doubt the joint view is common. I think we will need to increase taxes at some point. I think we need to bring health care costs (in the aggregate) down. That reduction would be a bit easier if those who don’t wnat to be seen as members of Team Republican caled out the “death panel” hysterics as well as other right-wing idiocies.

Dan Weber April 18, 2012 at 1:33 am

People might agree in the abstract that costs should come down, but the instant any proposal comes out that reduces spending on their own health care (which, by definition, was what they wanted) they’ll scream bloody murder.

I truly believe that if I could get together with my 10,000 closest friends and set up a private health care pool run in some European fashion (ignoring for the moment that there are as many European health care systems as their are countries), we could contain costs without any noticeable effect on QALY. I also believe that the system would get sued into non-existence the first time some member got told “no” to a procedure, assuming it was even legal to make it to start (since we wouldn’t cover a bunch of things mandated by individual lobbies that have required them).

There are very very strong cultural norms in America that say more is better. Even if you want to opt-out of extreme end-of-life care just for yourself, it’s a constant struggle, to say nothing of trying to opt-out of paying for it.

Boonton April 17, 2012 at 11:55 am

I think what is being missed here is that unlike a war, no one is actually deciding to increase or decrease spending on health care.

Flash forward to 2035. What will ‘we’ spend on helath care? Beats me. The answer is what will health care do for health relative to what health care does in 2012. If it does a lot more, we will spend a lot. If it does a little bit more, then we won’t spend nearly as much.

In other words, suppose the pace of innovation slows down dramatically. There will be fewer new drugs, fewer new procedures to worry about and insurance companies will be able to spend their resources catching up on weeding out expenses that don’t do much to add to health. The cost of health care growth slows down, insurance premiums rise less quickly. The cost to get people to buy insurance from subsidized exchanges, therefore, appears less. People will declare Obamacare vindicated and Medicare ‘saved’ in the same breath.

But suppose the pace keeps up or even increases. It makes sense for health care spending to rise faster than the rest of the economy. That’s not fiscal insanity anymore than it’s fiscal insanity to spend much more on websites in today’s gov’t budget than in 1993 or for the military to spend much more on aircraft in 1951 than it did in 1916.

Say you have an economy growing at 3% per year. That’s just an average, nothing more nothing less. Some things will grow faster and others will grow slower. In 1951 growth in aircraft spending was much faster than, say, spending on work horses. That wouldn’t have made it ‘fiscally sane’ for a budget watchdog in 1951 to demand we cap aircraft spending and revert to the ‘cheaper’ spending on horses.

What if health spending keeps growing at say 6% per year while the economy grows at only 2% per year for the next century? Won’t that cause everything to blow up? Errr, it can’t. Health spending is a portion of the whole economy. If it happens that health spending grows at 6% per year forever then it’s mathmatically impossible for the economy to grow only by 2% per year forever. At some point the growth rate of the entire economy must either converge upon 6% or health spending must decline to 2% or some reasonable mix in between.

I suspect that the problem with the cries of impending fiscal doom is that you have forecasting methodologies that are OK in their proper context being straight lined out too far. It’s perfectly reasonable to project health spending by looking at how much it’s been growing over the last, say, ten years. Likewise it’s perfectly reasonable to see how the economy’s been growing on average for the last ten years. But if you want to put the two together and push them beyond ten years you have to consider that the two must feed off of each other. Rapid health care growth will cause rapid economic growth or slow economic growth will control health care costs. it’s not me, it’s math.

LarryM April 17, 2012 at 12:42 pm

Tyler,

I think the source of many of the “Team Republican” charges (admittedly not helpful to discourse) is that the pattern of this post is replicated in your overall output. A lot on the sins of the Dems, an occasional nod to problems with the Reps. A lack of balance, if you will. Where is the long post on the problems with the Ryan proposal, for example?

Now, it’s possible that this reflects a considered opinion on your part that the Dems are more of a barrier to meaningful deficit reduction than the Reps. I doubt that, as you are way too smart for that. It’s one thing to prefer the Reps because tax reduction is put ahead of deficit reduction, but that’s not your take. An honest deficit hawk … even a conservative one … really has to acknowledge that the Reps are at least as bad on the deficit.

Another, even greater example of this is monetary policy, where, as near as I can tel, you are more in agreement with the “left” than the “right,” yet you spend most of your blogging time critiquing the left, and/or opining that political realities will prevent the government from doing the right thing. Obviously we need a political sea change on the deficit, which you advocate strongly for. Why not a similar advocacy on fiscal policy, where your credibility as a market oriented libertarian may make your advocacy particularly effective?

LarryM April 17, 2012 at 1:06 pm

Err, I meant advocacy on monetary policy, of course.

Maxwell James April 17, 2012 at 1:13 pm

Tyler – I’m curious to hear how your support for Medicare Part D figures into your baseline skepticism.

Boonton April 17, 2012 at 2:47 pm

I think the important point here is that the baseline is a myth as far as Medicare, Medicaid and the ACR is concerned. We know over the past X number of years health care has risen by Y% per year. From that we can come up with a ‘baseline’ for what, say, Medicare, will cost in 15 years adjusted for demographic changes. But this tells us nothing and likewise programs to ‘fix’ this are built on nothing.

What is Ryan’s proposal other than wishful thinking? Does anyone here believe that if in 2035 there’s some new type of chemotherapy that has an 90% chance of a total cancer cure for grandma but it costs $75,000 a year she is going to be allowed to die because Ryan’s ‘voucherized Medicare’ won’t pay more than $15,000 a year for premium support? On the other hand, if the best chemotherapy in 2035 costs $75.00 then all the baselines of the ACR will go out the window.

At the end of the day in any given time period we are spending so much on various goods and services. In a future time period we are going to be spending something else on those goods and services. The change depends not only on the nature of the individual products but all other products. In 1980 we spent relatively little on mobile phones and computers. In 2012 we spent much more. What happened? Between 1980 and 2012 our income went up and so did our spending on just about everything. But the value of various goods and services didn’t go up evenly. Some things got much better much faster and as a result we increased our spending on those things faster than our income went up. Other things didn’t get better at all or not as fast, we likewise did not allow our spending to go up as fast as those things.

By, say, 2035 maybe health care will get better faster than, say, TV’s. As a result we will spend much more on health care than on TV. That’s not a problem, in fact it would likely be a good thing. I’d rather know by 2035 cancer was defeated than to know cancer was as bad as it was in 2012 but the 3-D super-high 360 degree holographic TV’s are amazing.

Mogden April 17, 2012 at 3:24 pm

At some point before I am dead (I hope), there is going to be a government borrowing hardstop. The detonation will be astonishing to behold.

Tom April 17, 2012 at 4:53 pm

Nihilism — catch the fever!

JWatts April 17, 2012 at 5:48 pm

“Nihilism — catch the fever!”

Maybe you should consider what’s happening in Greece and realize this isn’t a fantastical concept.

byomtov April 17, 2012 at 6:55 pm

Maybe you should consider what’s happening in Greece.

Uninformed Observer April 17, 2012 at 5:49 pm

Truly a fascinating discussion to this point.

I’m curious about reactions to Ryan’s post above, about the basic disconnect between so-called ‘collectivists’ and ‘individualists.’ One problem I see is that, for academics and politicians, the temptation to see every issue as a problem to be solved through policy is unavoidable. If I enact a large set of arcane and complex regulations to direct the way you provide for your own health care, then I have not really escaped collectivism, I’ve simply obscured it. The individualist approach is to let individuals provide for their own care, or not.

The market works best when it is minimally regulated. Why should I not be able to go to any drug store or Walmart and pay $20 to get some nurse to look inp my kid’s nose and ears and tell me if they have an infection? It’s not that hard. The expertise required is not that expensive. It’s not a public good to make sure every mother whose kid has a fever is able to do so for free. And if she chooses not to do so, then that’s on her, just like her decision of whether to give her kids food, or warm clothes to wear in the winter. Or not.

Bender Bending Rodriguez April 17, 2012 at 7:03 pm

The cynic in me says that intelligent proponents of single-payer understand that there are actually several different markets for healthcare (preventative care, emergent care, maintenance care, regular office visits, etc.) but don’t care to admit it because it lessens the power of their appeal to emotion.

If any intelligent proponents want to debate me, I’ll be over there pushing grandma off the cliff…

MD April 17, 2012 at 9:49 pm

“It’s not a public good to make sure every mother whose kid has a fever is able to do so for free. And if she chooses not to do so, then that’s on her, just like her decision of whether to give her kids food, or warm clothes to wear in the winter. Or not.”

But it’s not on her: it’s on the child. If the mother cannot afford to go to the doctor, the child is the one who might die, not the mother. If you want to say fuck the kid, say fuck the kid, but at least be forthright about you not giving a fuck about the kid, instead of making about the consequences being on the parents.

Tom April 17, 2012 at 10:47 pm

So you suggest we border the kids until they are 18? Or you just don’t care about the kid?

MD April 18, 2012 at 1:41 am

I’m suggesting that Marginal Revolutionaries not pussyfoot around with the consequences of their ideas. If you love the market and hate taxes so much that you are cool with poor kids suffering because their parents are poor and can’t afford a visit to the doctor, then just say, “Fuck those poor kids.”

Jason April 17, 2012 at 7:22 pm

Units of fiat currency equivalent to human lives?
How about: Monetary policy as analogy to controlling the population growth rate? Repurchase agreements as abortions?

In your analogy the people are being killed; in the ACA you are purchasing something with the money (health care), not burning it.

Talk about not advancing discourse!

JonF April 17, 2012 at 7:49 pm

The assumption here is that we can so mehow not pay those costs (I am speaking at the level of the entire economy, not just the govermment’s finances). Guess what– we can’t. Cost shifting in healthcare is nothing more than a shall game: in the end the bill still comes due. Rather than play silly games thinking we can fool ourselves we should act like adults and just pay the damn bill and get it over with. The only way to avoid doing so would be to resurrect Dr Kevorkian’s Machine of Death and make it mandatory for the sick.

Tom G. April 17, 2012 at 10:10 pm

I continue to be truly disappointed (as only a long-time fan can be) with Tyler here.

I would summarize Tyler’s position as we have a looming fiscal crisis and so it is a mistake to commit to spending more money on providing health care to the uninsured. That’s an arguable position that I can understand.

Blahous position was totally different (and not just in “emphasis”). His claim is that cutting Medicare does not generate savings because it’s trust fund accounting will ensure cost cuts anyway. This is completely inconsistent with the perspective adopted by everyone else, even by Blahous himself in other settings, that the Federal government will not impose dramatic Medicare cuts as soon as the trust fund is exhausted. I can not help but regard it as a smokescreen designed to discredit a law he dislikes for other reasons. That requires intellectual garbage clean-up not strained justifications.

Tom

Yancey Ward April 18, 2012 at 3:45 pm

One, last time, Tom:

You are acting like Congress wouldn’t do something about Medicare in the future. Blahous told you that Congress would likely act to get Medicare costs under control, with or without ACA- one baseline is to simply not allow spending beyond the trust fund amount, but this is not the only baseline available and he pointed this out- Congress could do something more comprehensive or less. Those cuts had to be made regardless. What wasn’t tenable was doing nothing which is the baseline that ACA proponents want to use. However, here is what ACA did- it made the cost reductions (supposedly, at least), then went and spent all the savings on a new program, leaving the future with the same fiscal problem it is going to face in the future, which is a Medicare trust fund that will draw those savings back from the general fund to be spent on Medicare beneficiaries, sooner or later.

You have to choose one of the following- ACA is partially paid for by cost savings and payroll taxes from Medicare, and the Medicare trust fund has to draw presently non-lawful funds from the general fund sooner than it would have to do otherwise to continue as is now constructed, or ACA has to be funded with new borrowing beyond it’s own dedicated revenue stream, and the Medicare trust fund has to draw presently non-lawful funds from the general fund at a later date.

How you and others keep missing Blahous’s main point is almost comical. Now, if you want to argue that the only way to get Medicare cost controls in place is to promise to spend all the savings on something else, then do so- this is at least an honest argument. However, don’t then pretend that the government is saving money with ACA.

Tom G. April 18, 2012 at 7:50 pm

There are a number of problems with your argument. But let’s make this simple – what do you think is the appropriate baseline to evaluate Medicare spending?

The first problem is not crediting an action because “something had to be done.” If the ACA cost cutting does not count because something has to be done, then no deficit reductions ever count. Can you show me any place where you or anyone has applied this logic on another topic? Under this logic, can you tell me what you would count as reducing the deficit (after all something will have to be done there as well)? How can we even discuss the relative efficacy of various cost-cutting proposals if we estimate that against undefined “something must be done” baselines. And how did you ever come to the conclusions that “Those cuts had to be made regardless.”

Here’s my choice – the Medicare trust fund is irrelevant – Medicare revenue and spending should as Tyler noted be viewed as part of the overall government budget.

Separately, why do you describe the ACA as spending “all the savings?” This is not true. The CBO scored the ACA as deficit reducing in total, and it did that without crediting a number of the included cost savings devices, not because it doubted that any had efficacy but because it could not figure out any good way to estimate their impact.

Tom

rhonda April 18, 2012 at 1:19 pm

Tyler: were you against the Bush tax cuts? Were you vocally opposed to them? This is different from not signing a paper endorsing them, which could have been done for other reasons besides opposing them. Vocally opposing them would have been the Conservative position, or at least the position of someone truly concerned about government balanced budgets and fiscal prudence.

obd2 April 20, 2012 at 5:47 am

I’m suggesting that Marginal Revolutionaries not pussyfoot around with the consequences of their ideas. If you love the market and hate taxes so much that you are cool with poor kids suffering because their parents are poor and can’t afford a visit to the doctor, then just say, “Fuck those poor kids.”

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