The Value of (Not Having) the Public Plan

This guest post was written by Arindrajit Dube, an economist at UC Berkeley Institute for Research on Labor and Employment who is joining the Department of Economics at the University of Massachusetts, Amherst. His work focuses on labor and health economics topics, as well as political economy.

Why have pivotal members of the Congress been reluctant to allow individuals the choice to buy into a public health insurance option? A political-economic reason is that the “bipartisan” group of six senators responds more to the interests of health insurance companies than public opinion, including the median voter. While this is hard to assess directly (although we do know they receive substantial campaign finance from insurance companies), we can however observe the effects of (a somewhat unanticipated) decision they made on those who stand to privately benefit from that decision.

Here is how the share prices of three major insurance companies (Cigna, United Healthcare Group, Aetna) responded on Tuesday, July 28 to the Monday night announcement that the group of six senators is going to eliminate the public option from their version of the health care reform legislation [graph produced using Yahoo Finance]. We have basically an 8-10 percent gain for these companies from the Senate announcement. And as the graph below shows, the S&P 500 index (yellow) was essentially flat. The market caps of these three companies together are around $53 billion, which suggests a $4-5 billion value from the announcement by the group of 6.

publicplan

Since the change (due to the announcement) in the perceived probability of the public plan being instituted was less than 1 (i.e., it went from a middling number to a small number, as opposed to from a certain yes to a certain no), this is a lower bound estimate of the value to the insurers of protection from public sector competition – whatever the broader societal costs/benefits may be.

To get an estimate of the full value to insurance companies from killing the public option, we can use Intrade prediction markets to infer the unanticipated component of the Senate group of 6 announcement.

image002

It appears that after the group of 6 announcement on July 28, the share price of the Intrade contract, “A federal government run health insurance plan to be approved before midnight ET 31 Dec 2009,” fell from around 45 to around 30, a roughly 15 point drop. This suggests the true value to these insurance companies of not having a public option may be around 6.7 (=1/.15) times the $4-5 billion change due to the announcement, or around $28-35 billion dollars.

One can also use the prediction market more systematically to see how changes in the perceived odds of enactment of a public plan correlate with stock price returns for these three companies. Regression analysis confirms the qualitative findings from the event study analysis above, though the dollar value from protection is found to be more in the range of $10 billion. Below, I use the full set of daily Intrade (prediction market) data, available from June 10 when the contract originated. I also use daily closing stock price data for these three companies to construct “abnormal returns” (i.e., Raw Return – “beta” x S&P500 Return, where the market “beta” is taken from the Google Finance website). I then plot the (market cap weighted) mean “abnormal returns” against changes in the price of the Intrade contract.

image003

The correlation coefficient is -0.33, and the slope of the regression line is -0.21 (standard error of 0.11). This suggests that a 10 percentage point increase in the probability of the public plan passing is associated with a 2 percent drop in the price of in the stocks, and this is statistically significant at the 10 percent confidence level. If we are willing to extrapolate this, it would suggest an $11 billion (0.2 x $53 billion) gain for these companies from warding off a public option.

In summary, both the regression method as well as our event study method using the announcement by the group of 6 suggest large gains to insurance companies by avoiding competition with a public plan.

By Arindrajit Dube

118 responses to “The Value of (Not Having) the Public Plan

  1. Who would of guessed that estimates of private insurers future profits would be correlated with the odds of them having a competitor that doesn’t regard patient claims as a liability to be avoided at all costs? Basic economics clearly tells us that a system of regional oligopolies dominated by loosely regulated for profit companies ought to be the most efficient way to maximize quality of care, reduce costs, and minimize conflicts of interest. Oh wait…

  2. Thanks for this data. What irks me about the group of six bozo Senators calling shots is that they represent less than three percent of the total population.

  3. But what 3% indeed. The top 1% of income earners being the ones holding the purse strings to campaign financing. So who exactly are the “six bozo Senators” accountable to?

  4. I could not applaud this analysis more. Awesome stuff.

    AET appears to have the biggest *POP* in stock prices, and CI just a minor jump after the mean reversion for the day. Does that correlate to market concentration differences between the two?

  5. This is key stuff! This needs to get to the hands on an NPR producer ASAP and get on the air!! Don’t attack people personally, just tell the truth- like you have here. Every American is paying a terrible price for the perpetuation of the current, broken system and the insurance companies are, to a major extent, at the root it. I’m a cancer doctor and I see the truth of what our system does to people.

  6. I don’t consider myself to be particularly cynical. I do however see a public option as a trojan horse that will morph one day into the only option. I have no expectation that the gov’t will keep the playing field level.

  7. A cancer doctor Eric? Don’t you mean an oncologist. Me thinks you are an impostor.

  8. I am a financial economist and I am afraid that this analysis is very misleading. The stock market assesses the impact of an event on the profits of a company, and the profits of a company are the difference between the value society places on its services, and the cost to that firm of providing those services. Supply and demand, the way we want it to be in a free society. It is not BAD that the stock market sees government interference, a single-payer system, socialized medicine as damaging to the U.S. economy. It is simply a fact. Consider the stock market reaction as a consensus opinion on the impact of the plan. You can like it or dislike it, but you can’t say, as Dube tries to do here, that the reaction means something else.

  9. Eric Lester, MD

    I am a board certified oncologist who someitmes uses lay terms in hopes of aiding the comprehension of my listener. I graduated from the U of Chicago med school in 1972. I am not an imposter and I know the reality my many patients experience.
    Sherry’s economic analysis may be quite right, but there is more to life than money! There is justice, or the lack of it. The stock market does not create a consensus for our society- only among those with the money to be in the market. The real issues are larger than the economics, and are human issues, a matter of values, and our sense of ourselves.

  10. As Eric said,

    “The real issues are larger than the economics, and are human issues, a matter of values, and our sense of ourselves.”

    I am at the cusp of the income bracket that would have to pay for the new system, but I will be happy to pay more if we can get most people real access to healthcare. It IS a matter a values, and I am shocked by the typical southern conservative (usually religious) who is more concerned about money than people.

    The “strict constructionists” love to talk about following the design of our Founders, but they leave out the part of the Preamble to our Constitution that says we want to “promote the general welfare…”

  11. Thanks for your comment. I wanted to add that my post is not about money but about value. Value can be measured in number of goods or services, happiness, health, satisfication or, as is common in a developed country with a monetary system and a well-functioning capital market, with dollars. But using dollars is just a matter of convenience for bookkeeping, for writing and enforcing contracts, or for storage of wealth. We don’t eat money; we don’t survive with money; money isn’t inherently evil or good; money simply denominates real wealth.

    The stock price is the consensus market opinion of the value of the company, nothing more, nothing less. The value of these companies go up when they are more able to provide the services that consumers value without the distortion and costs of interference from the government and any other collective body that is going to try to make our health care decisions for us.

    You must agree that the further removed a medical from the patient-doctor relationship, the less well-informed that decision? The less valuable it is to the patient? These are the very human issues, justice issues, to which you refer. I think we are on the same page.

  12. Sherry, Dube’s analysis says nothing about good and bad – he simply is indicating that the market perceives the president’s plan (which is hardly “socialized medicine”) as threatening the profits of these healthcare companies. You might think that’s bad, I might think that’s good, but that’s beside the point of Dube’s essay. He’s simply showing that investors who have analyzed the probable impacts of the plan on the for-profit insurance companies (who likely have data as good as anyone’s) see negative impacts on those companies’ profits if the plan passes. Again, on those companies’ profits, NOT the US economy. Please don’t try to mislead the readers by conflating the two.

  13. Hmm, something odd in the data… You have a data point way on the right which is on the mean line. And some pretty serious outliers messing things up.

    Are your “abnormal returns” against the average for sector, or for market? You might want to investigate the outliers and clean up the model before presenting it. As is, it’s not terribly convincing. Your null hypothesis test would (just barely) fail at 95% confidence.

    You might want to try lagging the data… Or a moving average deviation. Or, looking it on a week by week basis rather than daily to smooth out daily volatility.

  14. CBS from the West

    “You must agree that the further removed a medical from the patient-doctor relationship, the less well-informed that decision?”

    Actually, I don’t agree. There is abundant data showing that despite well-done clinical trials that clearly demonstrate the superiority of one treatment approach over another for defined conditions and populations of patients, some doctors persist in using the demonstrably inferior treatment. Removing some decisions from the doctor and replacing them by evidence-driven treatment algorithms could be a good thing.

    I don’t for a moment pretend that doing this in a reasonable way is easy, or that it would not be subject to abuse. But I want to make a clear point that the notion that your doctor knows best is frequently just plain wrong. There is lots of inferior medical practice going on out there–and malpractice suits deal with only a small fraction of it.

  15. Hi Phil,

    I see what you are saying and we agree on one thing: Dube’s analysis (which I have lots of questions about from years of doing similar empirical analyses myself) shows that the stock market sees the Public Option of the Health Care Plan as harmful to the (present value of risk-adjusted) profits of these three insurance companies. In other words, when the likelihood of the public option falls, these companies do better. Dube interprets this as evidence that insurance companies do benefit when competition is reduced and their market power in increased. I disagree with his interpretation of the results. I say that the profits of the companies rose (or risks fell) when the costs associated with the public option were avoided. Both are consistent with his analysis.

    I think it’s fair to say that Dube’s interpretation of is results paints the insurance companies as “greedy” and “unfair” and puts them into a negative light; mine paints them as more “efficient” and “competitive” and puts them into a more positive light. I think it’s useful to make one’s underlying assumptions clear and one’s biases transparent. So I think I am comfortable with the “good” and “bad” wording of the first post.

    To your second point, that I am trying to confuse the readers by “confounding profits with the performance of the U.S. economy?” Hmmmm….GDP is the sum of net incomes earned by individuals and businesses…. meaning, the sum of the wages (paid out of business revenues), plus the profits left over after all other costs (including taxes and returns to investors) are paid out of business revenues. And GDP is what is used to measure the growth rate of the U.S. economy. So it is a fact that corporate profits and the performance of the U.S. economy are certainly strongly and positively related.

  16. There was a typo in my comment and I apologize if that led to any confusion. I should have said “the further removed a medical DECISION from the patient-doctor relationship, the worse the decision.”

    I wasn’t saying that a patient should blindly follow what their doctor recommends. I was saying that I want to deal directly with my doctor, not with some committee of bureaucrats “out there” telling us what treatment we can and cannot have based on some list of average, generic criteria that may or may not have anything to do with me or my situation. I want this decision to be as personalized as possible. I, as a consumer of medical care, gather all the information I can, including results of clinical trials, experiences of friends and relatives, everything I can find on the internet, my own personal research and, of course, the advice of a doctor that I’ve interviewed, questioned, and selected, and with whom I’ve developed a trusting working relationship. If my doctor “persisted” in recommending inferior treatment, I’d get another doctor. It takes two; the doctor doesn’t force treatment on anyone. It is up to the consumer to stay informed and, if they don’t, then that is their choice as well.

    Who in your scenario would decide which treatment I received? The head of the research facility? The funding arm of the clinical trials? Or is this one of the complications to which you refer? Yes, it’s complex I agree.

  17. Sherry, you write

    “The value of these companies go up when they are more able to provide the services that consumers value without the distortion and costs of interference from the government and any other collective body that is going to try to make our health care decisions for us.

    In Canada, where I live, we have national health care. I can tell you from personal experience, medical decisions are not dictated by the government or a collective body. Medical decisions made are between the doctor and patient(or parent or family).

  18. Sherry, you say that “The stock price is the consensus market opinion of the value of the company, nothing more, nothing less.” Whilst I am sure that is correct in a perfect market, surely stock markets are open to influences that have nothing to do with the value of the company, as most would perceive the term ‘value’.
    Karl Denninger here http://market-ticker.denninger.net/archives/1274-VIDEO-Ticker-TRIN-Data-Dislocation-Spikes-Market.html
    and here http://market-ticker.denninger.net/archives/1266-HFT-Flash-Orders-Nasdaq-Admission.html
    support the view that stock markets are badly rigged.

  19. Sherry you write:

    “I want to deal directly with my doctor, not with some committee of bureaucrats “out there” telling us what treatment we can and cannot have based on some list of average, generic criteria that may or may not have anything to do with me or my situation.

    We have national health care in Canada (the American’s call it single payer.) In Canada, there are no committees of bureaucrats deciding what medical treatments for a patient. The decisions are made between the patient and doctor.

  20. Very interesting links. Thank you! I think that both are predicated on fact that absent fraud and inside information, which I believe are the exception not the rule, observed stock prices do reflect the market’s opinion on the current discounted value of the companies future cash flows. I believe it is fair to say that both are talking about the marginal noise around the observed price, not the absolute level of the stock price. I do think there is a lot more to learn from the relationship between the trading process and the bid-ask spread (both level and trend) about how to make the trading process and resulting prices even more informative.

  21. “I was saying that I want to deal directly with my doctor, not with some committee of bureaucrats “out there” telling us what treatment we can and cannot have based on some list of average, generic criteria that may or may not have anything to do with me or my situation.”

    I agree that I don’t want bureaucrats making my medical decisions for me. The issue is that they already do, and the top priority of the decision makers is not which treatments are likely to be effective. I don’t know if you’ve had any serious health issues, but most health plans bought on the private market do whatever they can to force you into the cheapest treatment for the insurer regardless of what is best for you. Perhaps in a truly competitive situation insurers would have an incentive to be concerned about their customers’ welfare. Sadly, you are lucky if you have more than one choice when looking for an insurer. Once you have a plan switching companies is taking your life in your own hands since each time you switch insurers the chances of you being denied coverage in the future based on some technicality skyrocket. The market incentive for insurers right now is to gather as much in premiums as possible, to pay the minimum number of claims, and when a patients medical costs look likely to exceed their future premiums to encourage a course of treatment that will end their life as quickly and cheaply as possible.

    So yeah, I don’t like having bureaucrats dictating my medical treatment. If bureaucrats have to be involved though I would prefer that they not have an active conflict of interest with my well being. Maybe the market is concerned that competing against a not-for-profit insurer will force private insurers to spend more of the money they collect on the well being of their customers in order to actually retain any of them. That would certainly make me expect an insurer’s future profits to fall.

  22. My apologies Eric.

  23. I would love to agree with that idea and must bow to your expert knowledge in this regard; I’m just a layman. The implications if this were not true would be significant. However, do I really trust these (stock) markets? No.
    This doesn’t help http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a3Ta.LVhokdY

  24. Another good link, discussing the differences between current reported earnings and analysts’ stated earnings. Luckily, the capital market uses all available information to forecast a stock’s future cash flows and risks, and both current earnings and analysts’ opinions are but a small part. In fact, my research has shown that only about 20% of the stock prices we observe today are driven by the cash flows projected over the next five years; the rest occurs over the longer horizon. In addition, most reliable studies show that even though investors can be snookered in the short run with false or inflated claims about a company’s performance, we learn, and we learn quickly. So when you say you can’t trust the stock market, I think you mean you can’t trust it to accurately reveal value? That it is a biased estimate of how a company is going to perform? Well, the stock price is not a crystal ball or a guarantee of future performance, but it is on average an accurate unbiased picture of future performance. In other words, the price is as often wrong on the low side and by about the same amount as it is on the high side, and investors cannot profit by trying to time the market or by trying to find underpriced or overpriced stock. They earn an average rate of return that compensates them for their time and risk taken. If they make a killing, it is due to luck, not skill or superior information. Does that help?

  25. Tippy G wrote, “In Canada, where I live, we have national health care.”
    And indeed in the UK, my home country until a year ago. Poll after poll shows the British regard keeping the National Health Service, NHS, more or less intact a very high political priority. But with advancing life spans and ever more clever medical science, the costs of the NHS have to be curtailed. There are already many ‘rationing’ techniques being used although the politicians wouldn’t call it that!
    But polls also show that large sectors of the population would pay more tax, so long as they knew it was going directly to the NHS.
    Every time the subject of hypothecation is raised in the UK, as in a dedicated tax for a specific purpose, (in this case the NHS) there are howls of pain from the Exchequer. But without such a scheme, in my opinion, national health systems will slowly degrade providing the poor with a second-class service while the wealthy turn to private medicine, as has been happening in significant numbers in the UK.
    Many in the US say that the American system is broken and when I sought some fairly minor medical attention in Tucson it was a big financial ouch! But the treatment was superb.
    If the American system is changed as part of a political agenda then the odds of an improved outcome are slight.
    Somehow the debate needs to be held far away from politicians and vested interests. Again, in the UK we would call that type of enquiry a Royal Commission.
    Is there an equivalent in the US of A?

  26. Sherry, fabulous reply to mine. I am outgunned and outclassed :-)
    If I may, I shall include that reply in a post that will be coming out on my own Blog in the next couple of days, in the interests of balance.

  27. Of course the stocks reacted adversely to expectations of a public plan. With no public plan these insurance companies will get ALL the money Congress is now determined to divert to the medical racket. I would like to see data on how much privately insured health care is actually consumed by Americans younger than age 65. I suspect this health care crisis is very similar to other crises of recent memory: anecdotal evidence is being tortured to create a new opportunity for systematic ripoffs. It is absurd that nine or ten percent of GDP is spent on drugs, doctors and hospitals. Someone said recently in these pages that since doctors spend considerable time in school they deserve high incomes. Consider that medicine one hundred years ago was on a par with witchcraft, that its successes have been pretty much limited to a few antibiotics and vaccines. Has anybody read The Magic Mountain? Do we actually know how many cancer patients are killed by cancer as opposed to being killed by cancer treatments? Do we know how many people live long and happy lives only because they refuse to consult doctors and thus never get the cancer diagnosis? No, we don’t. Americans have been made terrified by relentless medical and drug company propaganda. Now we are all going to be forced at gunpoint to pony up to the insurance conspiracy to enhance this scam exponentially. Perhaps instead the government should tax private health insurance and use the tax money to pay cash awards to uninsured individuals who chance to develop specific medical conditions; let the victims decide whether to waste it in the hospital or leave it to their children?

  28. of course! Thank you for asking. Will you let me know so I can follow up with you? A very interesting discussion. I look forward to more.

  29. CBS from the West

    Relying on patients to keep themselves informed is a disastrously losing strategy. Look, I myself am a physician. And when I have to make decisions for my own care or my family’s in areas outside my own specialty, it is enormously time consuming and difficult for me to gather, digest, and analyze accurate information. Reading and critically reviewing clinical trials and synthesizing the evidence is an arduous task even for me — and that’s the biggest part of what I do for a living as a researcher! And I’m basically in good health: if I were seriously ill, I would be completely incapable of doing this effectively. And if the illness were a life-threatening one that provoked anxiety or depression I’d be even less competent to sort this stuff out. Now, there some people out there who can do this better than I can. Maybe you are one of those, Sherry. But I doubt there are many. And I really think that if somebody with my background and training isn’t capable of doing this, how can the ordinary lay person be expected to do it?

    So it boils down to having to perhaps a minor amount of “due diligence” by the patient, but ultimately it’s a matter of trust and having systems the promote good quality care. Who do I trust more, my physician or the well-reviewed collective wisdom of, say, the Cochrane collaborative’s reviews or some other such group? Well, the latter–hands down.

    I don’t want a “government bureaucrat” making my decisions, and I would trust even less an insurance company bureaucrat. But I would feel much safer getting health care if we had an agency that was insulated from both political influence and the bribes and importunings of industry, whose mission it was to identify the best tests and treatments (where there is sufficient evidence to do so–much of the time there isn’t) and with some kind of power to see that those are what gets used unless there is an extremely good reason not to.

    It wouldn’t solve all the problems, and it wouldn’t be easy to implement this. Given the pervasive corruption in our society, including the health care industry, it probably isn’t even possible in the foreseeable future. But it’s where we need to go if health care is to become safe and effective.

  30. Very thoughtful, informative reply. Thank you for explaining your view. Gives me something to think about…

    I didn’t mean to put myself out there as anything special! I just meant to say that I do do research and I do bring the research to my doctor and we discuss it as it relates to me or my children. Why couldn’t my doctor include the Cochrane Collaborative review or output of other groups in determining the best course of my treatment? In addition, I would be concerned that taken at face value in isolation, the collective reviews necessarily refer to the “average” or “representative” result, which may or may not apply to any one person.

    Just a few thoughts. So safe and effective health care is the goal? Or relatively safe and effective health care given limited resources and free choice? It’s a complex issue, for sure.

  31. “I don’t know if you’ve had any serious health issues, but most health plans bought on the private market do whatever they can to force you into the cheapest treatment for the insurer regardless of what is best for you.”

    I don’t work in health insurance, but I have had experience in the insurance industry and this doesn’t resonate with me because if it’s one thing insurers always keep in mind, it’s the lifetime value of a customer/policy holder. If an insurer pays out a claim for an inferior treatment and that inferior treatment increases the odds the insurer will have to pay out another claim, that would get taken into consideration, especially if there was another treatment that would be superior, cost more in the short-run, but virtually guarantee no more claims for that specific condition would be filed in the future.

    Also, this analysis seems to contain the assumption within it that the rise in insurance company value reflects the value that would have otherwise been created by a public plan instead flowing to private shareholders of these stocks. Is that correct? If so, I’m not sure that’s reasonable. As an analogy, if I threaten to blow up a building and the share price of the owner of that building goes down by X% (essentially the value of the building times the probability I will actually blow it up) and I then remove my threat and the share price goes back up by X%, no value has been created, only the destruction of value has been averted.

  32. The author’s logic is badly flawed. And it has very little to do with a discussion regarding health care.

    The author’s implication is that rising stock prices (and expected private sector profit) is “bad” policy. Ipso facto, falling stock prices must be “good” policy.

    If one follows this logic to its logical conclusion, then the optimal government policy is one that makes the stock market go to zero. That would be the nationalization of private industry. And that’s also been referred to as outright socialism or communism. Countries that have tried this approach have had uniformly bad results over the past century.

    Most importantly, the author fails to note that the OVERALL stock market has risen importantly as Obama’s ratings decline along with this Healthcare Bill. Rising stock prices may reflect an expectation of not only profitability, but higher productivity and real growth for the ENTIRE economy. This condition benefits not only shareholders, but also all members of the society.

  33. some guy in a cube

    The article shows without a doubt that health care reform “American-style” will do whatever it can to further entrench the three interests united in opposition to universal health care: doctors, big pharma and the insurers.

    Universal health care is a human right.

  34. Then Tippy, what Canada has is not what Obama and his Black Pill gang have in mind for the US.

    As for effectiveness, Forbes and Washington Post had reports on RomneyCare in Mass. The RomneyCare program so far is costing 30% more than expected and costs have risen 41% versus 18% faster than US health care costs overall.

    But the larger point is that the ObamaCare program is not really about healthcare. It’s a Trojan Horse to grab control of people’s lives and attempt to lock in votes through fear and intimidation.

  35. When an industry becomes less profitable it does not necessarily follow that this is bad for the economy. For example, if more people quit smoking, or did not become smokers, this would mean the tobacco industry and certain parts of the health care industry would be less profitable.

    But nonsmokers have more money to invest or spend elsewhere. There would be fewer cases of lung cancer, cardiopulmonary disease, heart and stroke, etc. There would be less demand on medical care for smoking related illnesses.

  36. Martin Fryer

    What confuses me is this…
    (Assumption) Those people/companies that have the money to buy or influence the decisions in Congress do so to have policies written that give them a competitive advantage to make large sums of money for 1. themselves. 2 their companies 3. their investors

    (Second assumption) Health care companies make their money by keeping more of the premiums they collect. Which occurs by not paying out on claims of the people who have bought the insurance. Is it not true that people buy health insurance to transfer the risk of paying for health care. Which is quite expensive especially if you are a walk up patient paying cash without the benefit of having negotiated rates for services by those same health care insurers.

    (third assumption) The public option for insurance would most likely be aimed at (for sake of brevity) two customers. First is the lower tiers of society as judged by their individual income brackets. Second would be the small business element (to me small business is the millions of mom pop shopes who may have a few employees who need insurance plus themselves (the owners)) Those people if they have purchased insurance for themselves are probably consumes in the blue cross blue shield type of insurance providers. Cigna AET, and United health group (seem to) provide their services to larger corporations such as FedEx GE IBM etc,and have no interest in serving the above special groups of lower tier of society and yes may have an interest in the small business customer as they are probably very numeroous and have some money to spend on health care. At least when their business’ are doing well in a growing and vibrant economy.

    So if those assumptions are true I would think that the insurance companies would want a public option that would effectively transfer to the govt sysytem all people who would actually be a drag on their profits by being regular claim filers. Plus they would have an automatic method of steering those consumers away from their plans and onto the govt plan. Leaving them with less claims against the premiums of the upper 60% (just a guess for arguments sake) who work for larger company who provides health care at a reduced cost as a benefit for being a loyal and productive member of their company.
    Also I would think that doctors would want a public option so that they have another source of income by serving those people who cannot afford or do not have the benefit of AET, Cigna etc, at least they are gtd some form of payment now as oposed to treating the masses for what turns out to be a walk AWAY customer.
    What am I missing???

  37. It does not always follow that if one industry becomes less profitable this is bad for the overall economy. For example, if there were fewer smokers, the tobacco industry and certain parts of the medical industry would become less profitable.

    But nonsmokers have more money to spend or invest in other parts of the economy. If there were more nonsmokers there would be fewer cases of lung cancer, cardiopulmonary disease, heart and stroke, etc. Therefore there would less demand for medical care for smoking related illnesses. All of this would be good for public health and the general economy.

  38. Sherry – are you self-insured? Somehow, I think not, or you would not view only the government as the “collective body that makes health care decisions for us.”

    Insurance companies today are the collective bodies that determine our health care decisions for us. Their for-profit model requires them to pay out less than they take in.

    To profit in the health insurance business requires limiting health care to patients. They routinely deny payment for covered benefits, requiring both patients and doctors to spend inordinate amounts of time chasing the money insurance companies have promised to pay.

    They dump patients when they need them (see Taunter’s post on this at: http://tauntermedia.com/2009/07/28/unconscionable-math/)

    The very human issue of health care – which is a life and death issue for us all – is today subject to the whims of the for-profit insurance companies and consumers are being very badly served by their products.

    If insurance companies were truly effective in helping to provide health care, we would not be having this debate today.

    In recent years (and perhaps for all time) the stock market has been turned into a craps table – so to equate increase in stock prices with the assumption that company is providing services consumers value is a huge stretch, IMHO….

  39. Mean to say “they dump patients when they need expensive treatment.”

  40. I think that looking to the stock prices of health insurance companies is irrelevant when discussing the reform of health care.

    Enron looked like a mighty good bet at one point, for those betting in stocks, didn’t it? But it was a valuation built on fluff and lies. And those who bet biggest, the employees who loaded up their retirement portfolios with Enron stock, they got nothing in the end.

  41. I personally consider for-profit health care in the United States — immoral. — It is also not good for the American economy. In Canada, our industries and businesses are more competitive and more profitable because there is national health care.

  42. “Most importantly, the author fails to note that the OVERALL stock market has risen importantly as Obama’s ratings decline along with this Healthcare Bill. Rising stock prices may reflect an expectation of not only profitability, but higher productivity and real growth for the ENTIRE economy.”

    Another possibility is that the stock values of insurers have simply followed the market up and aren’t linked to the news/speculation about the way health reform is progressing at all. Congress is pretty mercurial, so at this point the structure of reform is anything but certain to look even remotely like current bills. For example there is still significant (bipartisan) support for a plan put forward by Sen. Ron Wyden (D-Oregon) that is radically different structurally from what is currently on the table (http://www.fivethirtyeight.com/2009/07/on-health-care-bipartisanship-without.html).

    “If one follows this logic to its logical conclusion, then the optimal government policy is one that makes the stock market go to zero.”

    I got the impression that what the author was saying was not that all corporate profits are bad, but rather that the market anticipates larger profits for insurers if they needn’t compete with a not-for-profit solution. Indeed just by increasing competition in the current regional monopolies and oligopolies a public plan is likely to reduce the margins of private insurers substantially. Since (hopefully) corporate profits imply that corporations are providing some desirable added benefit to society they are in general good. Profits are a bad sign when an entity is able to shut out competitors so that it can continue to profit without providing additional benefit to their customers.

  43. I accidentally attached a ). to my above link. Here is the actual one. http://www.fivethirtyeight.com/2009/07/on-health-care-bipartisanship-without.html

  44. Some argue that the United States produces more useful medical innovation than Canada because the USA has a for-profit health care industry. This may be a false argument for the following reason:

    The United States has 330 million people. Canada has 33 million people. The USA produces more medical innovation than Canada. The also USA wins more Olympic gold medals than Canada. This is because the USA has a larger pool of citizens to draw talent from.

  45. “If an insurer pays out a claim for an inferior treatment and that inferior treatment increases the odds the insurer will have to pay out another claim, that would get taken into consideration, especially if there was another treatment that would be superior, cost more in the short-run, but virtually guarantee no more claims for that specific condition would be filed in the future.”

    You are right to point out that the interests of the insurer and the insured are often the same. An insurer wants clients to need as little care as possible which generally involves keeping them as healthy as possible. Its when you get into situations where fixing a health problem will not reduce future costs to the insurer that the conflict of interest comes in. Often chronic illnesses can drag on for years at great expense, and giving the best treatment merely prolongs the inevitable. In fact sometimes by encouraging a more expensive procedure which is more dangerous they can ultimately reduce the total they pay out. There are enough times where an insurance company incurs less total cost by working against its customers best interest to be seriously worrying.

  46. Paul,

    We have Royal commissions in Canada. (Our parliamentary system is closer to that in the UK than the USA.) In 2002, we had the Romanov Commission to examaine our national health care system. For-profit healthcare lobbyists tell Canadians our national health care system is terrible and unsustainable and they have the solution: Privatization. The Romanov Report had recommendations that sought to address funding problems while strengthening our national health care system.

  47. @Some guy in in a cube:
    You write: “The article shows without a doubt that health care reform “American-style” will do whatever it can to further entrench the three interests united in opposition to universal health care: doctors, big pharma and the insurers.

    Can you explain how you reach that conclusion?
    It seems obvious that your three nemesis’ would be among the major beneficiaries of “universal” health care…as they would have more customers, more demand, and more profits.

    If you substitute “Government-run” for “Universal,” then your statement might make sense.

    Next you write: “Universal healthcare is a human right.”
    That is a moral, not economic, judgment. It’s in the realm of “life is priceless, so we must prolong every life … no matter what the cost to the rest of society.” Some may agree. Some will disagree.

    But noone reading this blog will change their current opinion on this point.

  48. Sherry Jarrell and Rocky Humbert,

    Can you take a look at this video story on RAM Remote Area Medical and tell me how your vision of private health care will work to end this shameful state of health care in America.

    http://www.pbs.org/moyers/journal/07312009/watch_excl.html

    One of the saddest stories in this video is the young man who has had Type 1 diabetes, since age 4, and because he is working class has not had adequate care and has suffered kidney and vision damage. This is heart breaking.

    Sherry and Rocky, this young man is an American citizen. How would your vision of health care in American take care of him?

  49. Tippy, Thanks for your remark. I live in the U.S. and have health insurance provided by a private company through my employer. Echoing you, I can tell from personal experience, that treatment decisions here are made by bureaucrats (on the insurance card it tells the doctor to first call for approval, otherwise no coverage). And I had no choice in insurance companies.(So much for the much-advertised ‘competition’).
    And don’t worry about Sherry Jarrell, she probably gets paid for her posts. On her web site she prominently features a post from Newt Gingrich’s ‘Center for Health Transformation’ on the ‘Healthcare fraud, and her own on the ‘Damage of Government Spending.’ She’d never point out the fundamentals of health care economics, such as that:
    – other countries get better outcomes at half the cost per person, and moreover,
    – as much as ~27% (or some such number) of your health insurance premium dollars in the U.S. goes to overhead (Insurance administration, agents, CEO’s salaries, advertising, schemes to avoid covering actually sick people), and ~73% is used to actually pay health care providers.
    (I didn’t believe the 27% number until I had a quarrel over some bill; insurance claimed one payment amount (on the EOB [Explanation of Benefits], as payment, after rebate), but the check to the hospital -which hospital admins kindly faxed me – was some ~7 or 8% less (than the already rebated amount). I called the phone number on the check, and learned that this company – which processes payments for out-of-state insurers- takes out this amount for processing these insurance payments, and that the health care providers must give this fee as a rebate.) So if there’s such a big loss in one step, the ~27% overhead figure sounds believable. Some HMOs might be more efficient though.–
    So, if you hear some pundit saying that a government insurance scheme is an inefficient bureaucracy, this person hasn’t had to call his private insurance yet. (such as my colleague with diabetes; once a year his bills are rejected with the terse explanation, that his plan doesn’t cover this or that; and he spends then an hour on the phone pointing out that his plan covered this item like in the preceding quarter.) And this pundit does not want you to know about the overhead cost. (e.g. none of this is mentioned on Sherry Jarrell’s web site).
    This post, by Arindrajit Dube does us a great service, and allows us to recognize why health care in the U.S. is unreformable; the 20+% overhead and the value to the private insurance companies of no competition with a public option are so large; any effort to change will be opposed by a very well-financed campaign to bribe our legislators and scare and misinform the public, as we observe now.

  50. Background: RAM Remote Area Medical is a charitable organisation of medical professionals who hold free medical fairs for poor Americans. RAM also conducts free medical clinics in third world countries.

  51. Tippy
    to date it seems most suffering from the smoking ban are the little beer joints – how will people drinking and smoking at home get in the reckless money spending mood of throwing rounds would be interesting to find out – maybe they buy kitchen appliances from a TV-channel – I am playing the old cynic here making the argument that when you take business away from the small corner pub the money instead ends up in the pockets of a big seller

    – and now they have even forbidden because of their carbon footprint these heating mushrooms outdoors where smokers could get together for a social puff –

    – smoking is stupid, silly, dangerous and it makes you stink abominably but it sure LOOKS great in any ol’ black and white film clip on YouTube – I wonder how the next generation or the one after will still be able to see the glamour or only imagine the stink

    Somewhere I read that Dolly Madison hat a white carpet in a room in the White House that all too soon was horribly stained from ill-aimed tobacco chew spits – that habit got as far as I know quietly out of fashion without huge accompanying legislation … but seems to be popular again at the Marines overseas – makes one hope for the next Marlene Dietrich being able to light up again.

  52. Tippy
    without having looked at the video I know Bill Moyer’s style – sometimes it is great (he can be a phantastic interviewer) and sometimes I do not like him because I feel too heavily pushed in one direction.

    As to health care you will find ample horror stories in any system (Grisham has written very good thriller about one in the American system and he has a very endearing way of siding with the underdog) so it is hard to judge having never been in America how much of it is through intent or gross neglect or how much is through a combination of uncaring inanities.

    Roger Scruton recently complained at the BBC that Europeans give so little to charity and one US-journalist reported amazed from Holland that people would not want to give to charities like RAM but would not mind at all the state to tax them higher instead in order to provide the care to which any human inhabitant of a state has in my view an inalienable right

    I fully agree to that Dutch sentiment
    – were I needy I would feel humiliated if I had to depend on a charity to take care of me instead of having to battle it out with a state bureaucrat who has to adhere to laws which I have agreed to by voting and which I can contest in court via getting a free lawyer from the same state.
    Well that sounds very idealistic but I hope I could get the fundamental difference in attitude across (by the way until reading the American reporter looking at the system from afar I never imagined anybody could feel differently about it – I think it was Eric Berne who called this look from afar Martian, i.e. imagine yourself to be from Mars

    – by the way I get told that Europeans are way up on the ladder if not first when it comes to donating for charities in far away countries – for the tsunami catastrophe they were actually overwhelmed by the cash coming in – so other than Roger Scruton stipulates it is not due to our miserly egos we do not want to have charities between us and our health care and probably a lot of other things it is that we would feel humiliated by it.

  53. @Tippy:
    I did not watch your video — but I too can share many many stories in life about cruelty, unfairness and sufferring…in every facet of life and history.

    But there’s a saying in the law, “Hard facts make bad law.” One must not devise or change policy based on sad or troubling anecdotes. Particularly in this case since surveys show currently insured people are mostly satisfied with their healthcare.

    Please consider this way of thinking about the problem: Very few people “oppose” universal availability of health care.

    But the questions are how much care constitutes a reasonable minimum level…how does this standard get applied….and who pays the bill.

  54. Rocky Humbert
    “Hard facts make bad law.”
    I am a great admirer of the homely thruths of sayings and proverbs myself but that one is one out of the rich guy shutting up the rightfully complaining poor guy

    – Passing a law in a hurry without sufficient chewing it over and over makes for bad laws but unfortunately the sane procedure of chewing it over and over opens a huge entrance door for the obstructionists

    – how you could get in our world today some guys and girls together in conclave and make them write sensible law like the Americans did with Germans after WW2 which resulted in our Grundgesetz something like your constitution with its wonderful first sentence “Die Würde des Menschen ist unantastbar” … The dignity of the human is inviolable

  55. Silke:

    Your choice of rhetorical example is puzzling.

    You use a German quote and the Marshall Plan to argue that the “Dignity of the human is inviolable.” Turn the clock back just six months earlier … and the very same Germans were systematically murdering millions of entirely innocent men, women and children. If the Axis powers had been victorious in WW II, where would that leave you today? Likewise, if the aspirations of Iran, North Korea etc are left unchecked — where will that leave your children in twenty years?

    It’s seems that you ignore the existence of both good and evil in the world — and the true costs and sacrifices required to ensure that evil does not triumph. (Unless of course you were rooting for the Nazi’s … which is entirely possible.) Life requires choices, and the intelligent allocation of limited resources. Reasonable people can disagree on the optimal allocation, but it’s sadly impossible to eat one’s cake and have it too.

    But more on point, you failed to answer the basic pragmatic questions:
    1) What constitutes a reasonable level of minimal universal health care?
    2) Who pays for it?

  56. Rocky Humbert
    WOW must I have mis-expressed what I wanted to say
    I do not know how to correct all that
    just one thing it was not the Marshall Plan that put German lawmakers in seclusion and it was only in 1948 and then it were the occupiers who said: go and do it.

    And mark you! having been borne in 1942 into the later American zone and growing up there first in Nuremberg and then in Wiesbaden was pure bliss from the smell of my first Hershey bar wrapping all the way to my first T-Bone Steak in an American restaurant not to mention the delights of the Hainerberg Cafeteria – heaven on earth …
    – but seriously again just try to imagine how it felt for a kid being raised by ex-Nazis and so called non-Nazis and real democrats undistinguishably mixed but all very law and order when those huge American cars would stop and wave with a big smile for it to crossly safely not just at Zebra stripes but everywhere it might want? What politeness, such considerateness WOW, WOW and WOW

    here is the story of which the US, the British and the French have ground to be forever proud

    http://en.wikipedia.org/wiki/Basic_Law_for_the_Federal_Republic_of_Germany

    and as to
    1) What constitutes a reasonable level of minimal universal health care?
    2) Who pays for it?

    question no. 1 should be answered by the normal procedures democratic societies come up with to reach a consensus
    committees panels votes whatever it takes
    question no. 2 is currently being answered by my country with a wild mixing of public and private the result of which is from a patient’s point of view quite satisfactory not least it spares me any feeling of guilt towards the needy for that part of their life because they can in theory AND in practice see the same doctors on the same terms I do down to the most minute detail – I hope this system despite all the difficulties it involves can be upheld for a long long time to come because I consider that knowledge of being equal with all but a few contributing to my very personal feeling of well-being and yes the health insurance for the needy is paid by the state and yes I get taxed for it and gladly so but as I explained in another post somewhere that we citizens of “old Europe” have an obviously totally different attitude as to where the money for the needy should come from: in short NOT from charity of any kind but from the state via taxes because we would taking from charity degrading … and yes I am aware of that I didn’t feel at all degraded but only delighted when I got hold of my first Care package – but alas such is human nature, never of one piece

  57. Rocky Humbert you write: “Unless of course you (Silke) were rooting for the Nazi’s … which is entirely possible.

    Rocky Humbert, the United States has its own protracted history of slavery and genocide against Native Americans.

    Might I suggest: “Unless of course you (Rocky) were rooting for the Confederacy and for Manifest Destiny … which is entirely possible.

    Although, truthfully I have no real sense of where you are coming from.

  58. Tippy
    thank you for coming to my defense but wait till you get to read my rant in favour of aerial bombing and why I am forever grateful the British including the Canadians and the Americans had the nerve to do it and Nuremberg where I lived was a target. I doubt that you’ll still like me after that.

    … and if you know any Canadian who took part tell him a deeply and sincerely felt thank you from me – and no I am not being ironic it was cruel but did the job it was supposed to do contrary to what all those historians and other experts who love to malign the bomber pilots say today.

  59. Well sitting around buying stuff from the TV channel is surely far less satisfying than a reckless spending mood after a few more rounds at the pub with friends.

  60. Rocky Humbert, you write: “But the questions are how much care constitutes a reasonable minimum level…how does this standard get applied….and who pays the bill.

    Here is how we do this in Canada:

    (1) “How much constitutes a reasonable level minimum level of care?” See below.

    (2) “Who pays the bill?” In Canada, taxation, and the highest corporate and personal income tax brackets are roughly 50%.
    _____________

    Here are some facts about Canadian health care and economy:

    – 100% coverage at 10% of GDP
    – the World Economic Forum has ranked Canada as having the best banking system in the world
    – not one Canadian bank has needed a government bailout
    – we are the only G7 country to pay down its debt
    – we posted 11 consecutive budget surpluses
    – this year we posted our first budget deficit (after 11 years of budget surpluses)
    – the forecast is a $50 billion deficit (population 33 million people)

    While a majority of Americans consider their health care system broken. Moreover the crisis in the financial system is estimated to cost US taxpayers $12.5 trillion over the next decade.

    In the province where I live (British Columbia) a family of three or more pays $108 a month in medical premiums. This covers every major and minor illness, injury or need. For example: birth, premature birth, pediatric care, primary care, specialists, hospital care, vaccinations, cancer, stroke, dialysis, diabetes, organ transplant, HIV/Aids, broken limbs, spinal chord injury, catastrophic injuries, palliative care. You name it.

    In addition, many corporations (public and private) will top this up with benefits including:

    – paying the insurance premium
    – providing dental, vision and prescription benefits extended to dependents
    – life and injury insurance
    – paid sick days, extended maternity leave, bereavement days, extended sick leave
    – and more depending on your employer

    In Metro Vancouver (where I live) Microsoft, Electronic Arts and Disney Pixar have located large operations. While rural communities in my province have suffered from the downturn in the forest sector.

    Universal health care supports Canadian business operations and makes them more profitable and competitive. Thus, one of the incentives to locate in Canada. For those Canadians who have lost their jobs during this recession they and their children have the social safety net of universal health care.

    I agree with experts, like Dr. Michael Rachlis, who contend the Canadian health care system (after 50 years) can be improved by restructuring, and without the need for “large infusions” of private or public capital.

    Rachlis’ option being community-based health care, with family doctors and specialists, working as a team out of one clinic. I believe this approach received “high marks” in Dr. Atul Gawande’s now-famous article in the New Yorker.

  61. My goodness Silke. I’ve heard that British general who ordered bombing civilians as a war strategy against Germany was utterly mad and a war criminal.

  62. Seriously though, if there were more women in positions of power and influence I feel there would be less warfare and mindless cruelty in the world.

  63. Tippy
    Bomber Harris is the nickname of the man you are referring to and to the best of my knowledge he was an esteemed member of the military as long as the war lasted. Once it was over Churchill is said to have distanced himself from him and allowed him to be maligned (one American history seminar I am listening to from iTunesU put the number of dead at Dresden at 100.000 – that is 3 to 5 times as many as any serious estimate and that is taught to American history students at one of the big universities. As if they were into self-flagellation …

    – it is always the same story with wars, once they are over “they” start immediately working again at the fiction that honourable clean heroic etc war is possible.
    Churchill for whom I have a soft spot (not least because he writes such exciting books) is excused by people quoting him with to have asked “are we beasts”

    But once you come to think of the post war occupation of Germany and that people were too tired to be anything but docile you realize how many lives this demoralizing and wearing out of the population all said and done probably saved – and not only the lives of allied soldiers also of us ordinary civilians – if I look at the bloodshed the insurgency in Iraq has caused I am very grateful that the last Hitler Youth who went were too exhausted for any kind of fanatic action

    and never forget Germany started it, Rotterdam, London, Coventry and last but not least Guernica all bear witness to it – I think the English death toll from the Blitz alone was 50.000 – doesn’t give that them certain rights – we started it and they were the innocents forced into it – war is not an orderly thing, as one military said once the battle starts you can forget all previous plans

    as to women – well one of our national poets Schiller says while describing war “da werden Weiber zu Hyänen und treiben mit Entsetzen Scherz” Then women change into hyenas And make a plaything out of terror,
    he was a very good observer and knew a lot about human nature

    http://fathersforlife.org/hist/song_of_the_bell.htm

  64. Quote: It is not BAD that the stock market sees government interference, a single-payer system.

    I’m afraid YOUR bias is showing. How about this:
    Please ask your 3rd party rent seeking stockholders out of my doctor/patient relationship.
    Your point is OK if the sales, guys, CEOS and “financial engineers” don’t degrade my medical access with their profit seeking through, gold plated plans, caps, co-pays, pre-existing conditions, yada yada yada.

    You saying that Medicare [aka “socialized medicine” has more profit overhead per doc than for profit and admin than United Health Care? I don’t think so…

    Want to convert all for profit Insurance companies to not-for-profit organizations and put the profit and salary overhead into improving Medicare?

    Your private sector has been starving the customer beast too long, I’m afraid.

    Steve Har

  65. Sherry —

    “investors cannot profit by trying to time the market or by trying to find underpriced or overpriced stock. They earn an average rate of return that compensates them for their time and risk taken.”

    I work for a hedge fund, firstly because it’s incredibly fun, and secondly because the finance industry since the beginning of time has been two orders of magnitude more profitable than the classical theory of efficient markets suggests. We trade more interesting stuff than equities, but even in that space, simple momentum strategies have always made money, and still do, albiet less than in the 1970s. Value stocks still have higher expected returns than growth stocks, and this is *not* because they are riskier by any measure. Simple strategies that go long when market-implied cash flow discount rates are higher than their long-run mean of 7-8% and short when market-implied discount rates are lower have been very profitable since the beginning of the stock market. None of this is particularly consistent with market efficiency.

    Now, what about the relevance to the current topic? If you watch CNBC or any of the other god-awful live business/market news channels, the ideologically-driven commentators spew nonsense about “the communization of America” and “tax cuts pay for themselves” and so forth. Quite a few noise traders and mutual fund managers tend to believe this stuff, and markets move in response. Here is the question: is the dollar-weighted market consensus belief about the impact of policy X on company Y correct on average? Economists who like simplicity and tractability and don’t know how to do much math tend to write down models that assumes so, but frankly, there is no reason this must be the case, given a world of Bayesian uncertainty, complex interconnections and limits to arbitrage. I trade on a significant part of the investment community having an overly simplistic understanding of economics (“what US health care really needs is to just let the free market work!”), and I’m happy to take their money.

    So in short, while I agree that the stock price moves in response to announcements about health care reform are capturing market expectations, many people make a huge amount of money on the fact that market expectations are heavily influenced by people who are widely off the mark in terms of understanding the causal impact of X on Y.

  66. if you opposers of any change in your health care system approve of this (provided it’s true) then I’d love to hear why this is preferable
    – probably we have some fancy doctors in Germany who will not accept my public-private insurance coverage but no matter how good their treatment might be I find them reprehensible on moral grounds and therefore would refuse to see them
    – during times when I was privately insured I checked carefully whether a specialist had different waiting rooms for private and public patients. If I could find any I would visit another one – a doctor working in our system with that kind of money-grabbing mind would not be trust-worthy for me

    “private plans typically limit access to certain physicians or hospitals, and physicians often refuse to accept certain plans.” http://www.slate.com/id/2223911/

  67. Marty, Brentwood NH

    Thanks all for one of the more absorbing commentary threads that I’ve yet seen on reforming health care & insurance.

    I recommend that you read Uwe Reinhardt’s recent wise, tongue-in-cheek list of “Common Sense” requirements Americans have for reform. These are, of course, often mutually contradictory.

    http://economix.blogs.nytimes.com/2009/07/31/a-common-sense-american-health-reform-plan/

    By turns, one may be amused at human folly in our unrealistic desires, and then, when inevitable rationing affects one’s loved ones at some time, agitated to tears.

  68. “So it is a fact that corporate profits and the performance of the U.S. economy are certainly strongly and positively related.”

    It’s quite a leap from suggesting that corporate profits are strongly related to the performance of the US economy – a proposition in itself laden with all manner of assumptions and caveats – to the idea that corporate profits for 3 large health insurers correlates to the state of the US economy… at all!

    What’s good for Cigna, United Healthcare Group, and Aetna is good for America!?

    That is about as sensicle to the nation as it is to an insured party who’s policy has been rescinded within weeks of learning that he’s got lymphoma.

  69. “So it is a fact that corporate profits and the performance of the U.S. economy are certainly strongly and positively related.”

    It’s quite a leap from suggesting that corporate profits are strongly related to the performance of the US economy – a proposition in itself laden with all manner of assumptions and caveats – to the idea that corporate profits for 3 large health insurers correlates to the state of the US economy… at all!

    What’s good for Cigna, United Healthcare Group, and Aetna is good for America!?

    That is about as sensicle to the nation as it is to an insured party who’s policy has been rescinded within weeks of learning that he’s got lymphoma.

  70. “I believe it is fair to say that both are talking about the marginal noise around the observed price, not the absolute level of the stock price. I do think there is a lot more to learn from the relationship between the trading process and the bid-ask spread (both level and trend) about how to make the trading process and resulting prices even more informative.”

    It’s a little bit amazing that several years into this people like you are still drinking the cool aid.

    Don’t get me wrong: I come from about as conservative a sector of American society as can be found: Reagan Republican, ex military, I’m sporting the MBA…

    Hello! Even I can’t avoid the simple, clear conclusion: The market thinks that whatever the qualities of a public option, its creation will eat into the big three’s profits.

    The evidence grows more incontrovertible every day that those profits are NOT based on “satisfying efficiently consumer’s needs” – an attractive bit of free market theory spouted from the pulpits of those defending profit levels incomprehensible to everybody else – but rather on rationing health care and using every available legal chicanery to avoid honoring their commitments as insurers.

    http://www.pbs.org/moyers/journal/07102009/profile.html

    Seriously… what are you smoking?

  71. Might I point out that Congress and the President are their own enemies on health care. In the President’s press conference, he implied no one would suffer pain as a result of reform, except higher taxes on the rich, “who can afford it.” Then this week Pelosi comes out and says, twice (!), that the health care plan will have a cap on our costs, but no cap on benefits.

    Either they think they’ve invented perpetual motion, or they’re lying through their teeth. The American people may be gullible, but not *that* gullible. That Pelosi quote is going to make a great political ad.

  72. A,

    Lobbyists tell Americans if they had national health care bureaucrats will be interfering with their quality of health care.

    The reality is there is a — huge bureaucracy — in the American for-profit health insurance industry that makes decisions on patient care.

    Orwellian.

  73. If you’d like more of Sherry Jarrell’s non sequiturs, visit her website and read her explanation of the credit crisis. CRA, CRA, CRA + good mortgage bankers + bad economy in 2009 = mispriced risk, hence a credit crisis. Weird stuff indeed.

  74. Silke:
    Thank you for your comments about the Allies during WWII. While we evidently disagree on certain aspects of healthcare, the sentiments which you express are appreciated by many Americans including people such as my father and uncle who were among the “liberators.”

    Hopefully the lessons learned about vigilance against evil will be remembered for generations to come.

  75. Wow- THANK YOU for this. It is a gift of you putting words to my feelings and experiences as a critical care nurse trying to make sense of possible clinical trials for my Mom’s recent cancer mets. I have been in this position many times and never been able to describe the burden of it and the idiocy I feel- as if I should ‘know more’. Thank you also for your great words of support on single payer/medicare for all- the ONLY solution to our problems that I have learned of. Bottom line- thank you and thank you for all you do. Jeanie, RN

  76. Sorry to be unclear. GDP is defined as the sum of all net incomes, including corporate income, which is profits, and wages, which is income paid to individuals by businesses. Private industry is the only entity in the U.S. economy that creates wealth and supports taxes — the rest (government, consumers)cannot. There are no assumptions or caveats — just fact.

  77. Benn — Loved your response. Three things: the “market-implied discount rates” are backed out of models that assume symmetry of returns about their mean, which doesn’t hold. Two, I disagree that the long-short strategies you describe have generated above-average risk-adjusted rates of return in excess of fees for any one trader or investor or manager over time. Three, my understanding is that hedge funds do not seek mispriced securities, but charge a fee (and earn it!) for limiting the risk-exposure of their clients by holding negatively correlated assets.

    Also, those comments were made as a direct response to the clips the blogger had posted and had asked me to look at….taken out of context, they may appear more generalized.

    For what it’s worth!

  78. I might add here,

    evil resides in the absence of love

  79. oh Tippy
    if it were only so simple
    People could easily go about mass murdering during the day either via paper means or by the real job and come home in the evening and be genuinely loving spouses and parents

    with equal right I could claim that good manners could have prevented evil because nobody with good manners should have tolerated that old men have to clean a public sidewalk with a tooth brush and stuff like that happened already during the run-up

    “they” were not perverts or degraded or in any way different from any of us – to learn and to accept that one is always in danger of becoming one of them was the hardest part
    – and that’s why one has to have a set of rules/beliefs/principles that one abides by and that one is willing to defend and not willing to cross down to when it makes one seem very very uncool

  80. Rocky Humbert
    really glad I managed to make myself understood this time and tell your father and your uncle: they LIBERATED me and I loved every minute of being “occupied” by them.
    I hope you have also found my rant on aerial bombardement in this thread and told them of it so they know that after having thought long and hard about it I decided that the war crime yelling crowd has only very short-sighted arguments
    and last but not least a BIG Thank You to your father and your uncle – had they not done what they did I might have had to grow up under Hitler ….

    as to aspects of health care
    European states evolved out of fiefdoms, out of local aristocrats fighting and subduing eachother etc etc entanglements therefore had time to grow and develop for centuries
    – the US has a completely different history so it is more or less impossible that we agree the differences are just too fundamental. But that does not mean that we cannot learn from eachother’s experiences. For example the German health insurance system being probably the oldest on earth has for decades been trying real hard to come up with something that makes the kind of public/private providers of insurances compete in a free market way – I think that is because they see how beneficial competition often is.
    Of course there are Americans looking at Europe’s experiences but they seem always to be looking at the whole packages/systems instead of thinking about individual aspects which, suitably modified, may come in useful.

  81. Silke, you write: “People could easily go about mass murdering during the day either via paper means or by the real job and come home in the evening and be genuinely loving spouses and parents

    This is also true for those Christians who derived immense wealth from slavery and took land from Native Americans through genocide. Their entitlement justified through racial superiority.

    When I write: “evil resides in the absence of love,” this is a literary formulation that attempts to explain why there is evil. There is no definitive answer here. But the questioning is part of the essence of human experience.

  82. Karl Marx famously said: religion is the opiate of the masses.

    I wonder if the the “new opiate of the masses” is the free market. All happiness and public good reduced to that which can be distilled from a free market that promises a utopia of freedom, liberty, happiness and unlimited wealth.

    The conventional wisdom being (at least according to some parts of academe but not apparently the Chicago School) all utopias devolve into dsytopia.

  83. A free, competitive market dissipates power. It is the antithesis of Marxism. Don’t you know anyone that you like and respect in private industry? Aren’t most businesspeople honest, hard-working people, trying to do right by their customers and trying to earn a living to support their families? Profits are not evil; private industry is not the problem. It is us.

  84. …oops….”It is us” meant that we are private industry, not that “we are the problem!”

  85. Sherry,

    What do you mean when you write: “A free, competitive market dissipates power.

    I am not anti-business or against innovation and entrepreneurs. Trade has been part of culture since cities began in the distant past. I also don’t subscribe to the view that globalized trade is something new.

  86. Any concept including a free competitive market can go wrong once one person or one theory of how to handle is successful enough to dominate.

    That “proclaimed” I was obviously the only one getting upset when Michelle Obama somewhere during the campaign was quoted saying something to the effect that she didn’t want to stay at the lawyers’ office because she didn’t want to work in support of corporate America.
    Even living across the Atlantic I felt “hoopla” – I’ve earned my whole living with corporate Germany (one was even American owned) and so helped “them” making money to pay me with – does that make me a bad person?
    ;-((((

  87. Sherry and Tippy
    I remember having read a beautiful story how free market dissipates power

    when the British were trading in Japan they used a waterway that passed an island with a castle on high rock in which a Japanese lord liked to shoot at them with his quite fancy British made artillery.
    The British military asked and implored their merchants to stop supplying canons to this and other local lords. The merchants insisted on their right to free trade and at the same time on their right to have their sea ways protected by the British military.

    and if you want the “Marxist” view added – the whole scheme surely created jobs at the canon factory at the military with the merchants

  88. @Tippy:
    I have the utmost respect for Canada — I am not making an indictment of either the government or the healthcare system. However:
    1) Is it true (for example) that Avastin, a widely used drug in America to treat advanced colon cancer costs about $50,000 per year, and Canada’s national health system doesn’t permit its use?
    2) Is it true that 41% of colon cancer patients in Canada die each year, as compared with 32% in the USA?
    3) Is it true that the average wait for a colonoscopy in Canada in about 8 months, versus no wait in the USA?

    In any market you can set price. Or you can set quantity. But you cannot set both — whatever one’s good intentions.

    One more point: some folks point to the lower price of prescription medication (which are covered) in Canada as an example of “overcharging” in the USA. However, one can also consider that Canadians are actually be subsidized by the presciption prices in the USA. It depends on ones perspective. I predict that you will find shortages (or increased prices) in Canada for medications if your stated objectives are realized. We may also see less R&D and innovation among pharmaceutrical companies if drug prices are set by a single-payor.

  89. Rocky you write:

    1) Is it true (for example) that Avastin, a widely used drug in America to treat advanced colon cancer costs about $50,000 per year, and Canada’s national health system doesn’t permit its use?
    2) Is it true that 41% of colon cancer patients in Canada die each year, as compared with 32% in the USA?
    3) Is it true that the average wait for a colonoscopy in Canada in about 8 months, versus no wait in the USA?

    I am not familiar with these stats. Can you provide me with your source of information so I can take a look.

    Thanks

  90. Hi Rocky
    I tried once before to get an answer to this question – maybe you know it:

    here are some figures to give you an idea of how very very much your system must be different from the rest of the world 50 % on top for the up to 65 and 3 times as much for the more than 65

    – it is health insurance with no prior health issue excluded for travels up to 10 days covering emergency treatment until transfer back home is possible, transport costs included

    —–

    http://www.hansemerkur.de/produkte/reiseversicherung/urlaub/auslandsreisekrankenversicherung

    Auslandsreisekrankenversicherung weltweit ohne USA/Kanada ab 8,- EUR* bis zum 65.Geburtstag

    ab 18,- EUR* ab dem 65.Geburtstag
    Auslandsreisekrankenversicherung weltweit inkl. USA/Kanada ab 12,- EUR* bis zum 65.Geburtstag

    ab 54,- EUR* ab dem 65.Geburtstag
    ——–

    Now do you know how the chances of survival/good outcome are better for an elderly suffering a stroke/heart attack during his/her travel in the US as compared to Australia? or Japan? or any other country with a supposedly advanced health care system (my wheel chair bound colleague recovered very well from his heart attack in Hawaii)

    the insurance company having an intense interest of getting the patient home under the umbrella of the public insurance system as soon as possible and the foreign doctor/hospital having an equal strong incentive in keeping the totally covered patient in their care as long as possible the comparison should throw some light on the matter.

    I think the comparison could not be made with other EU-countries because there may be agreements between the different public health systems.

    If such data have been tweaked could they not give a real answer to whether US health care is superior? instead of throwing around questions about this drug or that?

  91. @Tippy:

    I don’t know whether these data are accurate or inclusive (and presumably a clever statistician can find alternative explanations). It’s also obvious to both of us that if you have no health coverage at all, then the statistics lack meaning. But…

    Here’s the avastin coverage in Canada:

    http://profiles.drugcoverage.ca/en/default.asp?DrugID=57

    Here is AARP’s comparison between the USA, Canada and Europe:

    http://www.aarp.org/community/groups/displayTopic.bt?pageNum=1&groupId=20522&topicId=3160292

    Some of the bullet points are that Americans have better survival rates than Europeans and Canadians for common cancers…but these statements may be statistically flawed. You can decide for yourself.

    My point is that we should all be very careful when we infer that the American healthcare system is “broken.” The system provides extremely good care for the vast majority of Americans (i.e. more than 80%).

  92. Well it seems a like a piece of quaint economic history to bring up a dust-up between:
    -landed Japanese gentry in their forts
    -[pirate] free-traders and the
    -the Brit Gov’t regulated cannon industry.

    What about in our times, what about the 27% “stockholder tax”, transaction authorizations, caps & recisions levied on my doctor-patient relationship to protect “profits”?

    I propose we shoot some “not-for-profit cannon balls” at those tory stockholder coupon-clippers, [pirate] lobbyist freebooters and their blue-dog re-election campaign dollars and break up the tax deductions and fire the rent-seekers abusing me and my doc.

    How about firing some “not-for-profit cannon balls” at our Fortress America Drug Industry protected by cross border drug-trade moats & tax deductions, their pirate lobbyists and our “regulated-industry” bureaucrats and congressional toadies?

    Sherry, thank you for your story-telling. Your views are true blue-blood, die-hard and tory capitalist.

    Your stories are not Marxist, but surely they are the opiate of the [very-well-off-thank-you-very-much] folk.

    You and a 20th C. Republican like Bob La Follette would have enjoyed each other’s economic history yarns for sure and entertained everyone else at the public sector poker party to boot.

  93. steve har
    I am not Sherry and my last name incidentally is Marx (but I am too stupid to be able to read his stuff)

    I thought the irony was evident when I called the story “beautiful” and it would be understood that I was making fun of the mantra of the market dissipating power

    it is a wretched story but as your comment proves one that hasn’t changed much in the roughly 200 years that have passed

    – the merchants cold-bloodedly letting the soldiers face death to enhance their profiteering

  94. I am pleased that most of the posting on this site is by people who are willing to read, think, and then write without the ranting on “popular” partisan sites.

    I am surprised that we get caught up primarily in the “cost” of reform, or the “stock value” issues, rather than in the issues surrounding HUMAN CAPITAL.

    The taxpayers spent over $1 trillion, and counting, to “liberate” IRAQ, and estimates are for significantly more to pay the costs of permanent care for the mentally and physically devastated vets. How is it that we have to debate spending money to bring excellent healthcare to the 45 million without it. Where are our priorities?

    Anyone who believes that for-profit decision-makers are per se better than government overseers, are only looking at part of the problem. I have been involved in the insurance business for almost 40 years and have fought on my behalf, and for clients to get done what our doctors wanted for us. What is the cost of the lost productivity of workers who spend time battling the claims departments? What about the cost to doctors of the personnel who fight to get paid.

    The Republicans gave the gift of high profits to big Pharma by making it illegal for Medicare to negotiate drug prices for Part D participants, AND provided no money to pay for the benefit. Now, when people are skipping needed pills because they can’t afford the cost, they are suddenly fiscally prudent. Really?

  95. Sherry, last I looked much of private industry is tanking right now, and as much as the people on the right like to point fingers at government, I like to hold those involved in private enterprise accountable for their errors.

    I still, after months of research, cannot for the life of me understand why ANYONE at AIG deserves a bonus on the taxpayer’s dime.

    Nor can I understand how Goldman Sachs can pronounce its health and profitability as bonus worthy in a year when both its health and profits are only due to a massive federal bailout.

    Our financial sector is very far removed from healthy right now.

    I still resent the fact that the money I spent on several GE appliances I bought when I redid my kitchen a few years ago went to finance Jack Welch’s flower fund and other fab perks he negotiated (in secret) for himself when he retired. Rick Wagoner only got half what he wanted when he retired – but when he retired after nearly 2 decades in the C-Suite, his company was in bankruptcy and open for business thanks only to a very large federal bailout. Why does he deserve 10 million in a retirement package for driving his company into the ground? That’s absurd!

    Private enterprise in theory is fabulous – but in today’s market, it is an ailing, cancer-ridden horror of an entity.

    I know tons of business people I like and respect – they’re not dragging down the economy like Wall Street is right now. And in fact, many of those wonderful people are getting laid off right now, thanks to the fact the economy is in the toilet.

    So much American capital is vanishing into our financial sector – and it is killing this country.

  96. Ric H:

    As you are posing rhetorical questions….

    What is the cost of needless tests and procedures which doctors prescribe to avoid potentially ruinous litigation, as they practice “defensive medicine”?

    Noticably missing from this discussion is any meaningful tort reform. Why might that be?

  97. I do not believe any private business should get a government bailout either. If a company can’t make a profit doing an honest day’s work, they should go out of business. All of them: financial service companies, insurance companies, and car companies. Big companies and small companies. Wall Street companies and Main Street companies.

    I think that the CEO’s who do a good job should get whatever bonus they lawfully negotiated with the Board, and that CEO’s who run a company into the ground should not just forego the bonus but should be fired.

    These consequences are an integral part of a well-functioning capitalist system.

  98. Here’s a possible reason I don’t think much about tort reform…it involves one MORE group Rent Seekers at say an add-on cost + 27% per medical transaction.

    Someone please add up out how much profit our rent seekers extract from my doc and me:
    -Rent Seeker A: patient insurance profit 27% add-on
    -Rent Seeker B: doc insurance against tort lawyers add on another… say 27% profit
    -Rent Seeker C; tort lawyer costs + say 27% profit.

    Two points:
    – in god we trust everyone else numbers please
    – seems like we have a large group of rent seekers trying to live off my doctor patient transaction cost

    And… you want to finger-point lawyers and forget about insurrance stockholders?

    Why?

  99. In a free market, details of CEOs parachutes would be made public in advance of the nasty divorce….

    Not happening in America’s “free market.”

    And just because a CEO can negotiate outrageous perks into his retirement bennies doesn’t mean it’s good for business. Because it’s not. Our titans of capitalism have forgotten that “business” is more than their bank account.

    I wish we had a “well-functioning capitalist system,” but we most certainly do not today in our country. We’ve turned capitalism into a casino – and the house (Wall Street insiders) wins every time.

  100. Silke wrote, “and never forget Germany started it, Rotterdam, London, Coventry and last but not least Guernica all bear witness to it – I think the English death toll from the Blitz alone was 50.000 – doesn’t give that them certain rights – we started it and they were the innocents forced into it – war is not an orderly thing, as one military said once the battle starts you can forget all previous plans”

    And has also been quoted about wars is, “The first casualty is truth!”

    As an Englishman born in London in 1944 the Blitz was something that my parents were more than curious about. The bomb craters were evident for many years after the close of the war and the shocking tales live on even today.

    I can remember years ago listening to a view that the Allies treatment of Germany after the end of WW1 set up the circumstances that eventually led to the rise of the Nationalist Party (hope I recall this correctly) and the onset of WW11.

    I’m no pacifist and have served time in the Royal Navy Reservists to prove it. But the conduct of WW11 by all sides was frequently evil and did not advance the cause of man at all.

    Despite their colossal mistakes over the years and their often unsubtle diplomacy, the United States has been a proud supporter of freedom for nearly a century and long may that continue.

    Guess I’ve strayed off-topic a bit but feel much better with that off my chest. ;-)

  101. Textbook definition of GDP – such big words! – mixed with a little bit of libertarian rhetoric about who and who doesn’t create wealth… all leading to the counterintuitive conclusion that the more money large health insurers make, the better off is the economy…

    I’m dazzled!

    It doesn’t seem quite right. Yet how can one escape they Pythagorean like logic?

  102. Rocky

    I think it is extremely important and not simply rhetorical to ask why we don’t focus on the human cost of our current system rather than the economic cost (though still needs to be considered. I believe that as a civilized society we have at least some duty to one another, even if it means some of us pay more.

    On tort reform I absolutely agree. There are legit suits, but many are simply lottery attempts to see if someone can win, and unfortunately in all industries it creates problems.

    But, just because the problems are extremely complex does not mean we shouldn’t start doing the difficult things.

  103. Wasteland
    well, Pythagoras besides his a+b squared was probably even by ancient standards quite a nut case who believed the souls of the deceased survived in beans and therefore you shouldn’t eat them

  104. Paul
    “I can remember years ago listening to a view that the Allies treatment of Germany after the end of WW1 set up the circumstances that eventually led to the rise of the Nationalist Party (hope I recall this correctly) and the onset of WW11.”

    your own Churchill was more than unhappy with the Versailles treaty considering it doing more harm than good but that is no excuse whatsoever. Besides the Nazis got to power at exactly the moment when Germany was about to wriggle out of the economic stranglehold.

    – just as well one may point to the fact that at least in my reading (Mrs. Dalloway, Howard’s End, Doris Lessing) the Shell-Shocked of WW1 were treated with respect in England while in Germany they were subject of verbal ridicule “Kriegszitterer” (war tremblers)

    For weeks now I am on the look-out for a German translation for “trench-foot”. To date I have only the technical term Wikipedia uses in its translation of the condition. No word suitable for common usage is known to me.

    From all that I conclude that there was a general lack of decent behaviour dominating the society long before they rooted for the Nazis of which the abominable disregard if not sniggering of the plight of the war wounded was only one indicator.

    That’s why I am always very glad to read that the “Anglos” still write about their soldiers in respectful ways.

  105. Steve Har: “And… you want to finger-point lawyers and forget about insurrance stockholders?”
    Ric H: “But, just because the problems are extremely complex does not mean we shouldn’t start doing the difficult things.”

    I am not finger pointing at anyone. My finger is firmly planted in my ear ;)

    Being serious for a moment: in a successful difficult negotiation among parties with conflicting interests, a good settlement is one where EVERY party is unhappy.
    Please correct me if I’m wrong, but the Tort Bar, managed to escape any sort of caps or limits in the current bill…and actually strengthened their hand.

    It also seems to me that the pundits focus on the headline cost of malpractice insurance and litigation settlements (which are substantial). A more insidious cost is the waste of resources for tests and procedures which are prescribed because of “defensive medicine.” It’s difficult to quantify this — but if we are adding 40+ million more consumers of health care to the system, we need to address where the incremental medical resources will come from. (Forget about $$, I’m talking about doctors, nurses, cat scans etc etc etc)

    Steve Har: reducing profits to insurance shareholders will not increase the amount of available resources. Reducing the practice of defensive medicine does reduce current demand — and hence increases the amount of resources which will be available for newly insured. Hence my comment…

    Where is my logic flawed????

  106. Silke, one of the very great benefits of this new, virtual world is the way that people from all corners of the planet can link up and discuss and debate. Your response to mine was a classic example. It educated me, not from the dry pages of a history book, but directly from someone who has their own story to tell. It informed me and became another tiny element that makes up our composite view of the world around us. The more ‘colours’ that we see in that view, the more likely that we make the sensible long-term decisions that society requires, now ever more so.
    Bet you didn’t expect that response. ;-) Not sure, myself, where it came from, Tee, hee!

  107. Rocky Humbert,

    In a comment above you asked about access to Avastin in Canada for the treatment of colorectal cancer. Canada comes way-way-way ahead of the United States on this one.

    Here are some facts:

    – According to a study published in the New England Journal of Medicine, Avastin extended life by — 4.7 months — at a cost of about $50,000. See here.
    – Avastin is covered by universal health care in at least five provinces in Canada (British Columbia, Ontario, Quebec, Newfoundland-Labrador, and Saskatchewan) representing 57% of the total population. See here and here.
    – This means 57% of Canadians have health insurance that will pay for the cost of Avastin treatment.
    – For American health care to equal this, it means 173 million Americans have health insurance that would pay for the cost of Avastin treatment.

    Truly amazing. 57% of the Canadian population has health insurance that will pay for the cost of Avastin. The United States is not even close by a long shot.

  108. Rocky Humbert,

    You ask about access to Avastin in Canada for the treatment of colorectal cancer. Canada comes way-way-way ahead of the United States on this one.

    Here are some facts:

    – According to a study published in the New England Journal of Medicine, Avastin extended life by — 4.7 months — at a cost of about $50,000. See here.
    – Avastin is covered by universal health care in at least five provinces in Canada (British Columbia, Ontario, Quebec, Newfoundland-Labrador, and Saskatchewan) representing 57% of the total population. See here and here.
    – This means 57% of Canadians have health insurance that will pay for the cost of Avastin treatment.
    – For American health care to equal this, it means 173 million Americans have health insurance that would pay for the cost of Avastin treatment.

    Truly amazing. 57% of the Canadian population has health insurance that will pay for the $50,000 cost of Avastin treatment. The United States is not even close by a long shot.

  109. Repeat:

    At least 57% of the Canadian population has health insurance that will cover the $50,000 cost of Avastin treatment. And we spend 10% of GDP on health care.

    The United States is not even close by a long shot.

  110. Tippy:

    What is truly amazing is that you think this is truly amazing. If you happen to live in one of the provinces where this treatment is not covered, what happens then???

    Your comparison with 173 million Americans is a rhetorical device that is irrelevant, as the correct way to analyze this is comparing the 57% number with the % of Americans who CHOOSE to have insurance coverage.

    I can show you reams of studies that prove survival rates for X, Y, or Z are better in the USA than elsewhere; and I’m sure you can dig up studies showing the opposite.

    The bottom line is that whatever your good intentions, the law of supply and demand is a law. If you increase demand (unviversal care) and set price (single payor or limiting choice), you get either shortages or rationing. Americans who want more care for less money are unrealistic; Americans who are willing to have less care for all are pragmatic. Americans who think Canada is the role model should move to Canada.

  111. Rocky Humbert,

    What I find amazing: There is a drug called Avastin that costs about $50,000 to treat one patient with colorectal cancer. Avastin extends life by 4.7 months !!! This explains why politicians on — both sides — of the border say healthcare costs are unsustainable.

    Avastin is — rationed — by the health insurer. Not all health insurance will pay for the cost of Avastin. This is true in Canada and the United States.

    Avastin is also — rationed — by ability to pay. When health insurance does not cover the $50,000 cost of Avastin, rationing is determined by personal ability to pay. This is true for Americans and Canadians.

    You say: “Americans who think Canada is the role model should move to Canada.” These Americans are exercising their — democratic right — to support health care reform in the United States. It goes without saying, you have the democratic right to fight this reform.

    You believe that the free-market is the instrument for achieving those defining American values as expressed in the Declaration of Independence:

    “the enjoyment of life and liberty, with the means of acquiring and possessing property, and pursuing and obtaining happiness and safety.

    Other Americans would disagree that the free-market is the — only — instrument for achieving these defining American values. That’s called democracy.

  112. Rocky you write: “the law of supply and demand is a law. If you increase demand (unviversal care) and set price (single payor or limiting choice), you get either shortages or rationing.

    I don’t agree with your analysis of the law of supply and demand. When demand increases for a product — prices will rise or fall — depending on the volume of production.

    For example, if there was a high demand for Avastin and production increases the cost of Avastin should fall. However, if there is a very high demand for Avastin and no increase in the cost of Avastin will rise.

    In Canada, doctors are free to opt out of the national health care system and bill privately at whatever price the market will bear. Most do not because there is not enough demand for the delivery of for-profit medicine in Canada.

  113. Edit required:

    … if there is a very high demand for Avastin and — no increase in production — the cost of Avastin will rise.

  114. Tippy:
    Please do not tell me “what I believe.” You have no clue what I do or do not believe.

    Furthermore, it is now abundantly clear to eveyrone that you are far more interested in lecturing than in using facts and analysis to be pursuasive —

    If you can show how a single payor system that covers 100% of all Americans can: (1)provide the same or better medical choices and services than roughly 90% of all Americans currently enjoy; (2) costs the same overall; (3) and does not redistribute wealth or income (i.e. making the top 1% of Americans pay even more than the 40% of all income taxes which they are already paying), that would be pursuasive and might even change my opinion.

    And while you are at it, you might address my unanswered questions above to Steve Har and Ric H

    But relying on the same tired, non-economic, moralizing does no good for you, me, or the other readers of this blog. The burden of proof is upon you — since “you believe” the status quo is unacceptable — and you can have the last word too (since you seem to covet that).

  115. Tippy:

    One acknowledgement where you were correct:

    We agree that in certain cases, an increase in demand can lead to mass production which can lead to lower marginal costs. Examples of this would be the decline in cost of MRI scanners, and also mass production drugs that go generic.

    However that will never be the case for exotic and complex drugs with huge investment/R&D/regulatory costs — and it also can not be the case for highly skilled service providers.

  116. Rocky,

    I don’t think your logic is flawed re:
    reducing profits to insurance shareholders will not increase the amount of available resources. Reducing the practice of defensive medicine does reduce current demand — and hence increases the amount of resources which will be available for newly insured. Hence my comment…
    Where is my logic flawed????

    But I do think you missed my point: bare minimum -reduce the # of profit enterprises, increase the # of non-profit enterprises; reduce the number of transaction fee for service payments and the profit overhead and sales flash/bang that goes with them, increase the number of outcome based payments

    I want more like Mayo Clinic which is organized something like a non-profit cooperative, with salaried docs and outcome based health care; less like Blue Cross that -based on market share operates like a profit oligopoly – a market in which control over supply and demand of a commodity is in the hands of a small number of producers etc.

    The comodity is a medical fee for service transaction where more transactions = more profits to stockholders, more sales flash/bang, bigger CEO/worker wage gaps, more rapacious wallstreet financial engineers placing bets on next quarters financials -non of which has much to do with doctor/patient quality medicine.

  117. I always find it interesting that opponents to health care reform argue that it will be the “death to all of us” or “it will restrict our choices” or “medical decisions will be made by bureaucrats”.

    It is the current unregulated capitalistic private insurance companies who are actually fulfilling their worst nightmare right now. “Death to us all” – private insurance companies are literally killing patients right now by denying lifesaving care like in the case of Cigna’s denial of Natalie Sarkisyan’s care.

    “It will restrict our choices” which is exactly what our private insurers are doing. I have private coverage myself as a medical professional through my hospital who employs me. I’m restricted to a list of doctors I can see and also to only 4 hospitals in the local Tampa Bay area and if I seek medical care outside of this my insurer will put a majority of the financial cost on me so if I want somewhat affordable medical care I’m forced into their restrictive measures.

    “Medical decisions will be made by bureaucrats” – in the private insurance market medical decisions aren’t made by myself or my doctor but rather by bureaucrats (executives and internal business analysts) from my private insurers when they decide what is covered and what is not.

    Healthcare reform would put a stop to all this and I’ve actually researched for hours on what the best way to achieve this is. Here’s my solutions – http://bit.ly/9QLV8

  118. Dustin,

    I sincerely wish you were right. What I believe you are overlooking is that when the government runs health care and health insurance, we will have no one to turn to when they make decisions we disagree with. There won’t be any recourse. Now, insurance companies compete. It may be slow and cumbersome, but they provide a service that is valued, and they compete with each other to get our business or the business of our employers.

    Also, there is absolutely nothing about government involvement in health care or health insurance that is going to either improve the quality of medical care or insurance, or magically create more of either: the government will not make doctors work harder or study more, nor will it incent insurance companies to be more efficient. The government is not a business; it was never designed to replace a business; it is supposed to make up the rules and infrastructure within which businesses and consumers can choose to function.

    I’ve thought about this too, and my interest in understanding the impact of regulations on our economy is what drove me to get a Ph.D. in economics. I can tell you that my best educated guess is that the costs of such regulations are significantly underestimated (by a factor of 7 to 8) and the benefits are overestimated. Again, I wish it were different, but the government can’t make it better.

    That’s my two cents.

    Sherry
    http://www.SherryJarrell.com